The English Court Of Appeal Finds That Accepting Non-contractual Performance Would Have Overcome A Force Majeure Event

• Published date: 14 November 2022
• Law Firm: Mayer Brown
• Author: Mr Miles Robinson, Mark Stefanini, Jonathan Cohen and Hormis Kallarackel

In this update we discuss the English Court of Appeal's judgment in MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm), which was handed down on 27 October 2022. The judgment addresses the issue of what a party is required to do in the context of a force majeure clause which stipulates that the affected party must use its "reasonable endeavours" to overcome the relevant force majeure event. In particular, the Court was asked to determine whether the requirement to use "reasonable endeavours" (to overcome the force majeure event) included the affected party having to accept performance of a contractual obligation in a manner which differed from that contemplated by the contact.

The judgment is a useful illustration of how the words used in a force majeure clause can significantly broaden or narrow the effect of the clause, and is particularly relevant in the context of current geopolitical events and evolving sanctions regimes which have led to parties increasingly seeking to rely on force majeure clauses to excuse non-performance.

Background

In 2016, MUR Shipping BV ("MUR") and RTI Ltd ("RTI") entered into a contract of affreightment, pursuant to which MUR agreed to ship bauxite between Guinea and Ukraine between 2016 and 2018 (the "COA"). The quantities of bauxite involved meant that in practice, there would be a continuous flow of shipping activity. 95% of the payments on each cargo became payable in US dollars within five banking days after signing or releasing bills of lading.

The COA contained a force majeure clause, which included in its definition of "Force Majeure Event" a requirement that the relevant event "...cannot be overcome by reasonable endeavours from the Party affected". This wording was central to the present dispute.

On 6 April 2018, the US government imposed sanctions on United Stock Company Rusal Plc ("Rusal"), which was RTI's majority shareholder. RTI itself was not, however, added to the US sanctions list. On 10 April 2018, MUR issued a force majeure notice to RTI suspending its obligation to load seven cargoes. The notice explained that, as a subsidiary of Rusal, RTI was to be treated as if it were named on the US sanctions list. Therefore, there was a risk that further performance of the COA would constitute a breach of US sanctions.

RTI rejected the force majeure notice, contending that the sanctions would not interfere with cargo operations, that payment could be made in Euros, and that MUR (as a Dutch company) was not a "US...