21.09.2022

Russia, Sanctions, and Force Majeure: MUR Shipping BV v RTI Ltd

It is common for force majeure clauses to define a “force majeure event” as being one that cannot reasonably be prevented by the parties. The wording may differ among clauses, but the requirement that there be no “reasonable” avoidance of the force majeure event for it to be triggered, is a frequent feature.

MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm) clarifies that what is deemed “reasonable” in respect of overcoming / avoiding a force majeure event does not include an obligation to accept non-contractual performance or a variation to the terms of the contract.

The Decision

The case concerned a Contract of Affreightment (COA) for cargo transported between Guinea and Ukraine. The imposition of US sanctions on RTI Ltd’s (Charterers) parent company restricted its ability to pay MUR Shipping BV (Owners) in US dollars, which was the contractually specified currency for freight.

The Owners invoked the force majeure clause in the COA on the basis it could not be expected to perform without payment under the terms of the COA.

The clause excused performance only where the preventative event was outside of the affected party’s control and could not be overcome by “reasonable endeavours”.

The Charterers argued that force majeure did not apply, as the event could be reasonably overcome by accepting the Charterers’ offer to pay in Euros (including compensation for any additional costs caused by the change in currency).

The English Commercial Court held in favour of the Owners.  It found that the exercise of “reasonable endeavours” is directed at a situation in which the force majeure event can be surmounted in order for the contract to be performed.  It does not extend to varying the terms of the contract to sidestep the force majeure event.

This interpretation is equally applicable to New Zealand parties facing compliance issues because of sanctions, particularly as reliance (or attempted reliance) on force majeure clauses has become increasingly common in the current economic and political climate.   

If you have any questions about force majeure or contracts of affreightment, please get in touch with our Trade & Transport Team or your usual contact at Hesketh Henry.

 

Disclaimer:  The information contained in this article is current at the date of publishing and is of a general nature.  It should be used as a guide only and not as a substitute for obtaining legal advice.  Specific legal advice should be sought where required.

 

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Contact the expert team at Hesketh Henry.
Kerry
Media contact - Kerry Browne
Please contact Kerry with any media enquiries and with any questions related to marketing or sponsorships on +64 9 375 8747 or via email.

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