{"id":1884,"date":"2022-11-23T09:22:16","date_gmt":"2022-11-23T09:22:16","guid":{"rendered":"https:\/\/elbornes.com\/?post_type=insight&p=1884"},"modified":"2022-11-23T09:22:16","modified_gmt":"2022-11-23T09:22:16","slug":"mur-shipping-bv-v-rti-ltd","status":"publish","type":"insight","link":"https:\/\/elbornes.com\/insight\/mur-shipping-bv-v-rti-ltd\/","title":{"rendered":"MUR Shipping BV v. RTI Ltd"},"content":{"rendered":"

The case of MUR Shipping BV v RTI Ltd [2022] EWCA Civ 1406, <\/em>heard in the Court of Appeal, centred around whether it was possible for MUR to rely on a force majeure <\/em>clause to reject RTI\u2019s proposal to pay for the cargo freight in Euros, as opposed to the specified currency of US Dollars. RTI had proposed using Euros in order not to breach US Sanctions. MUR had refused and invoked the force majeure<\/em> clause.<\/p>\n

The Court allowed the appeal, finding in favour of RTI, ruling that the payment by RTI in Euros would have overcome the force majeure <\/em>event, despite it being non-contractual performance of the contract.<\/p>\n

This was an appeal against a Commercial Court decision which had ruled in favour of MUR. That in itself was an appeal against a previous arbitration which had found in RTI\u2019s favour.<\/p>\n

Background<\/u><\/p>\n

A contract of affreightment (\u201cCOA\u201d) of bauxite from Guinea to Ukraine was signed between MUR Shipping BV as the owner and RTI Ltd, as the charterer.\u00a0The COA contained the following force majeure<\/em> clause:<\/p>\n

\u201c36.3. A Force Majeure Event is an event or state of affairs which meets all of the following criteria:<\/p>\n

    \n
  1. a) It is outside the immediate control of the Party giving the Force Majeure Notice;<\/li>\n
  2. b) It prevents or delays the loading of the cargo at the loading port and\/or the discharge of the cargo at the discharging port;<\/li>\n
  3. c) It is caused by one or more of acts of God, extreme weather conditions, war, lockout, strikes or other labour disturbances, explosions, fire, invasion, insurrection, blockade, embargo, riot, flood, earthquake, including all accidents to piers, shiploaders, and\/or mills, factories, barges, or machinery, railway and canal stoppage by ice or frost, any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;<\/li>\n
  4. d) It cannot be overcome by reasonable endeavours from the Party affected.\u201d<\/li>\n<\/ol>\n

    On 6 April 2018 the US Treasury’s Office of Foreign Assets Control (“OFAC”) imposed sanctions on Mr Oleg Deripaska and various companies he controlled, including United Company Rusal Plc (“Rusal”). Rusal was the majority owner of RTI. However, RTI was not itself sanctioned.<\/p>\n

    On 10 April 2018 MUR sent a force majeure notice to RTI stating that, due to sanctions on Rusal, MUR considered it would be a breach of sanctions to continue with the performance of the COA. In particular, it said that the sanctions would prevent payment to be made in US Dollars, as specified in the COA.<\/p>\n

    RTI rejected MUR\u2019s force majeure notice saying the sanctions would not have an impact on cargo operations and that payment could be made in Euros instead. MUR disagreed. On 23 April 2018 OFAC issued a General License which allowed for a wind down activities concerning Mr Deripaska\u2019s businesses until 23 October 2018. Following this, MUR accepted payments of Euros from RTI.<\/p>\n

    RTI brought arbitration proceedings against MUR seeking compensation for the expense they had incurred in finding alternative tonnage for the period when MUR relied upon force majeure. <\/em>\u00a0The arbitrators found that MUR was not able to rely on the clause as the event could be overcome by accepting the payments in Euros, commenting that it would have presented \u201cno disadvantages\u201d to them.<\/p>\n

    MUR appealed this decision to the Commercial Court, which reversed the finding on the basis that the contract between MUR and RTI required payment in US dollars and that “a party is not required, by the exercise of reasonable endeavours, to accept non-contractual performance in order to circumvent the effect of a force majeure or similar clause”.<\/p>\n

    And so, this sequence of events then brings us to the decision in the Court of Appeal. The only issue which concerned the Court was paragraph 36.3(d) and whether the force majeure event could (or could not) be overcome by reasonable endeavours from MUR.<\/p>\n

    Appeal to the Court of Appeal<\/u><\/p>\n

    Males J handed down the leading judgement in favour of RTI, taking a pragmatic approach.<\/p>\n

    He believed the material question is would acceptance of RTI’s proposal to pay freight in Euros overcome the state of affairs caused by the sanctions?\u00a0 Put another way, was it necessary for the contract to be performed by strictly following its written terms and could the \u201cstate of affairs\u201d only be \u201covercome\u201d if RTI made payment on time in US Dollars? Males J rejected this interpretation of the clause as being too narrow, with the payment of the contract in Euros achieving the purpose underlying the parties’ obligations and could be regarded as an option which overcame the difficulties that resulted from the imposition of sanctions. He stated that it \u201cis an ordinary and acceptable use of language to say that a problem or state of affairs is overcome if its adverse consequences are completely avoided.\u201d<\/p>\n

    Males J also looked to the wording used in clause 36.3 in discussing the flexibility allowed in the drafting of a force majeure event as being either \u201can event or state of affairs\u201d. Applying this, he held that it is relevant to consider the occurrence of the event (the imposition of sanctions) but also to the state of affairs occurring after the event (delay of making payment in US Dollars).<\/p>\n

    He considered clause 36.3(d) to not be concerned with the exercise of reasonable endeavours in the abstract but that the key issue is whether the relevant event or state of affairs can be overcome by reasonable endeavours from the party affected. Ultimately, he held (and Lord Justice Newey agreed) that, had MUR accepted RTI’s proposal, it would have overcome the force majeure<\/em> event.<\/p>\n

    There was a dissenting opinion (by Lord Justice Arnold) who warned of a \u2018potential Schr\u00f6dinger\u2019s contract\u2019, where the terms exist, or cease to exist, at a whim.<\/p>\n

    Comment<\/u><\/p>\n

    Sanctions commonly create a scenario where one party refuses to carry on with the contract in its original form (usually fearing the severe civil or criminal consequences of a breach of the regulations) and the counterparty proposes alternatives which it says will avoid such any breach and allow the contract to continue. Increased Russian sanctions since February 2022 by the US, EU, UK and others makes it likely there will be many more such disputes. The takeaway from this case could be that parties should consider whether sensible alternatives can be proposed and actioned to fulfil contractual obligations rather than have one party claim a force majeure event.<\/p>\n

    On the other hand this case may, going forward, be distinguishable on its facts. Males J took a pragmatic approach to the interpretation, but to do this in every case ultimately creates considerable uncertainty for commercial parties as to whether contracts mean what they say. Where does one draw the line in making alterations to the contractual terms of a contract?<\/p>\n

    Sanctions are, and will continue to be, an area where pragmatic solutions are possible, but great care needs to be taken by all concerned.<\/p>\n

    Sasha Rusakova, Assistant Solicitor \/ November 2022<\/strong><\/p>\n","protected":false},"featured_media":1885,"parent":0,"template":"","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}}},"subject-area":[40],"_links":{"self":[{"href":"https:\/\/elbornes.com\/wp-json\/wp\/v2\/insight\/1884"}],"collection":[{"href":"https:\/\/elbornes.com\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/elbornes.com\/wp-json\/wp\/v2\/types\/insight"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/elbornes.com\/wp-json\/wp\/v2\/media\/1885"}],"wp:attachment":[{"href":"https:\/\/elbornes.com\/wp-json\/wp\/v2\/media?parent=1884"}],"wp:term":[{"taxonomy":"subject-area","embeddable":true,"href":"https:\/\/elbornes.com\/wp-json\/wp\/v2\/subject-area?post=1884"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}