View source for Tonzip Maritime Singapore Pte Ltd formerly Tonzip Maritime Ltd v 2Rivers Pte Ltd formerly Coral Energy Pte Ltd The Catalan Sea

DMC/SandT/26/09 

'''England''' 

'''Tonzip Maritime (Singapore) Pte Ltd (formerly Tonzip Maritime Ltd) v 2Rivers Pte Ltd (formerly Coral Energy Pte Ltd) (The “Catalan Sea”)''' 

'''English Court of Appeal: Coulson, Zacaroli and Foxton LJJ: [2026] EWCA Civ 641: 22 May 2026''' 

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWCA/Civ/2026/641.html

Nicholas Vineall KC and Emmet Coldrick (instructed by Wikborg Rein LLP) for Tonzip (Owners) 

James Shirley and Tom Hall (instructed by HFW Middle East LLP) for 2Rivers (Charterers) 

'''VOYAGE CHARTERPARTY: SANCTIONS CLAUSE: WHETHER OWNERS MADE AN OBJECTIVELY “REASONABLE JUDGMENT” THAT THEY WERE “EXPOSED” TO THE “RISK” OF BREAKING SANCTIONS IF CHARTERERS’ NOMINATED OIL CARGO WAS LOADED: WHETHER OWNERS ABLE TO RELY ON SPECULATION WHEN FULLER AND MORE RELIABLE INFORMATION WAS NOT AVAILABLE''' 

'''DMC Classification: Developed''' 

'''Summary''' 

In overturning the factual finding of the High Court Judge, the Court of Appeal held, on the facts and evidence that were placed before the High Court, that: 

(1) When refusing to load Charterers’ nominated Shippers’ oil cargo, where Shippers had at least recently had a known connection to a sanctioned person (Mikhail Gurseriev) and possibly still had such a connection, Owners had made a reasonable objective judgment, under sub-clause (C) of the sanctions clause in the charter, that loading Shippers’ oil cargo would have subjected Owners to a real risk of a breach of sanctions or opened them up to such a real danger; 

(2) This was because (a) the speculative evidence relied on by Owners showed the sanctioned person could have retained ownership or control of Shippers at the material time, whether directly or indirectly (through his younger half-brother’s alleged acquisition of Shippers), even if that evidence did not positively prove there was such a retention, and (b) the evidence presented by Charterers, including that received from Shippers, did not rule out such a real possibility; and 

(3) Owners’ continued refusal to load Shippers’ oil cargo was, accordingly, not a repudiatory breach of the charter, therefore Owners’ claim, for USD1,020,099 in damages, for their lost profit on the unperformed charter succeeded. 

Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and Deputy Editor of DMC’s CaseNotes 

'''Background''' 

Owners and Charterers (on 5 November 2021) agreed a voyage charterparty for the oil tanker “Catalan Sea” to load a cargo of oil in the Ust Luga to Primorsk range (namely, at a Russian Baltic Sea port) for carriage to and discharge at a Mediterranean port (intention Aliaga, Turkey).  The charter included, among others, a sanctions clause, which materially stated: 

Sanctions Clause – Sub-Clause (C):– 

“'''''THE OWNERS SHALL NOT BE OBLIGED TO COMPLY WITH ANY ORDERS FOR THE EMPLOYMENT OF THE VESSEL IN ANY CARRIAGE, TRADE, VOYAGE, SHIP-TO-SHIP TRANSFER OPERATION OR OTHER SERVICE WHICH IN THE REASONABLE JUDGEMENT OF THE OWNERS, IS PROHIBITED BY SANCTIONS OR WILL EXPOSE THE OWNERS, THE VESSEL OR ITS MANAGERS, CREW, THE VESSEL'S INSURERS OR REINSURERS TO SANCTIONS.''''' ''IN THE EVENT THAT '''SUCH RISK''' ARISES IN RELATION TO A VOYAGE THE VESSEL IS PERFORMING, THE OWNERS SHALL BE ENTITLED TO REFUSE FURTHER PERFORMANCE AND THE CHARTERERS SHALL BE OBLIGED TO PROVIDE ALTERNATIVE VOYAGE ORDERS''” 

(The High Court Judge had added emphasis to the words in bold text.) 

Charterers ordered the Vessel to load a cargo at Primorsk (where she arrived on 17 November 2021) from their nominated shippers, Neftyanaya Kompaniya Neftisa, a Russian oil company owned by another Russian oil company called PAO Russneft, which was directly owned and controlled by Mikail Gutseriev. 

Owners’ third-party due diligence checks made with Refinitive/World-Check and Infospectrum (which had not been very recently updated) suggested Charterers’ nominated Shippers, Neftisa, were associated with Mikail Gutseriev, a Russian businessman sanctioned by the EU (on 21 June 2021) and the UK (on 9 August 2021), who was identified as the indirect owner and chairman of Shippers via Russneft.  If true, Owners would, in loading the cargo, enter into contractual relations, by issuing bills of lading, with and facilitate an oil sale for the benefit of a company associated with a sanctioned person.  Therefore, Owners refused to load Shippers’ cargo and asked Charterers to nominate an alternative cargo. 

In response, Charterers sought to provide evidence (a Russian newspaper article, in ''Kommersant'', available online, a letter on Shippers’ headed paper and three heavily caveated legal opinions from international law firms based on Shippers’ corporate documents as seen) in an attempt to convince Owners that Shippers were no longer associated with Mikail Gutseriev, who had reportedly divested his ownership and control of Russneft, and so of Shippers too, to his younger half-brother, Sait-Salam Gutseriev, who was said to have become, indirectly, the new beneficial owner of the shares in, and the chairman of, Shippers. 

Charterers’ evidence did not, however, allay Owners’ concerns, and so Charterers treated Owners’ continued refusal (on 24 November 2021) to load Shippers’ cargo as a repudiatory breach of the charter and gave notice purporting to terminate the charter.  Owners purported to do the same in response. 

Thereafter, Owners sought to claim USD1,020,099 as damages, for their loss of profit on the unperformed charter, and Charterers counter-claimed USD233,600 as damages, for the additional expense they allegedly incurred to obtain an alternative vessel to load, carry and discharge Shippers’ cargo. 

The High Court Judge found that Owners had not discharged the burden on them to prove that they had made an objectively reasonable judgment that they were subjected to the real risk of liability for a breach of sanctions or that they had been opened up to the real danger of sanctions if Shippers’ cargo had been loaded. 

The Judge, therefore, held that Owners were in breach of the charter and also obliged to compensate Charterers for their claimed loss.  Owners appealed to the Court of Appeal against the Judge’s finding of fact and Charterers, in turn, cross-appealed against the Judge’s holding on the interpretation of sub-clause (C). 

'''Judgment''' 

Foxton LJ, with whom Coulson and Zacaroli LJJ agreed, gave the unanimous judgment of the Court of Appeal. 

Charterers’ Cross-Appeal: The True Interpretation of Sub-Clause (C) 

The Court of Appeal agreed with the Judge’s holding on the natural and ordinary meaning (in other words, the true interpretation) of sub-clause (C).  The analysis involved in coming to that conclusion, in effect, started and ended with the interpretation of the words used in sub-clause (C) of the charter. 

The words “''expose … to sanctions''” did not require a “''reasonable judgment''” by Owners which concluded that sanctions were more likely than not to be contravened if Charterers' orders were complied with.  It was sufficient that Owners reasonably formed a judgment that there would be a “''real risk''” of such a breach of sanctions if they did comply with Charterers’ orders. 

Owners’ Appeal: Whether the Judge Erred in the Conclusion on the Facts 

The Court of Appeal noted that the Judge had held that the appropriate test (as discussed above) had not been satisfied for the following reasons: 

(i) The material obtained by Owners did not evidence Mikail Gutseriev's control of Shippers in November 2021; 

(ii) It was a matter of speculation whether or not there was such control, and Owners had been unable to confirm that position and accepted that they did not know whether control continued, as a result of which the Judge held this was insufficient to “''amount to an objectively reasonable decision that Mr'' [''Mikail''] ''Gurseriev had de facto control''” of Shippers; 

(iii) That was “''particularly so''” because the Infospectrum report was available to Owners but had not been made available to all of their decision-makers, and it suggested that the rationale for Mikail Gutseriev stepping down was to give Shippers "''freedom to manoeuver in the manner to which it was accustomed''"; and 

(iv) There was no evidence for Charterers to rebut, but in any event the material presented to Owners and the ''Kommersant'' article “''all spoke with one voice''” and “''should have been properly taken into account''” by Owners’ decision-makers. 

The Court of Appeal acknowledged that the Judge’s application of sub-clause (C) to the (essentially undisputed) primary facts of the case was an evaluative exercise. That decision was one with which an appellate court should not lightly interfere and should only be overturned if the appellate court is satisfied that the decision of the trial judge cannot reasonably be explained or justified (fn.1). 

Owners had advanced nine grounds of appeal, but the principal criticisms of the Judge’s reasoning and conclusion materially boiled down to the following: 

(i) He wrongly relied on the decisions in ''Litasco SA v Der Mond Oil and Gas Africa'' (fn.2) and ''Vneshprombank LLC v Bedzhamov'' (fn.3) in reaching his conclusion, which were addressing different issues and which did not bear the weight which the Judge had sought to attach to them; 

(ii) In his application of sub-clause (C), he wrongly proceeded on the basis that Owners had to reach a reasonable conclusion that Shippers were subject to Mikail Gutseriev's control (and hence subject to sanctions), rather than a reasonable view that there was a real risk that this was the position; and 

(iii) In any event, his conclusion, that a reasonable shipowner could not have arrived at the decision reached by Owners, was not a conclusion reasonably open to him to make on the evidence before him. 

In allowing the appeal, the Court of Appeal considered the above summarised grounds of appeal and held as follows: 

As to (i), the Judge had incorrectly treated and misdirected himself on ''Litasco v Der Mond'' as legal authority for the proposition that a determination by a contractual decision-maker which involved “speculation” could not be a reasonable determination for the purposes of the clause.  Further, the issue that had to be decided in ''Vneshprombank v Bedzhamov'' – what was required before a party would have “''reasonable cause to suspect''” in penal legislation – was also very different to the issue which arose in this case.  That, in the Court of Appeal’s view, amounted to a material error of law. 

As to (ii), while the Judge correctly and accurately recorded the issue he had to decide, his reasoning in the relevant paragraphs of his judgment suggested that, at least in part, his analysis had addressed a different, and also contractually irrelevant, question of whether Owners had made a reasonable determination that Mikail Gutseriev’s control of Shippers had in fact continued.  That error, in combination with the error in (i), justified the Court of Appeal reaching its own conclusion on the issue of the reasonableness of Owners’ determination. 

As to (iii), the Court of Appeal accepted that the undisputed facts on their own arguably entitled a reasonable owner to conclude that following Charterers’ orders to load Shippers’ cargo involved a real risk of liability for a breach of sanctions.  However, matters did not rest alone with those undisputed facts. 

The package of information provided by Shippers through Charterers would ordinarily have been expected to advance the position that there was no sanctions risk in the transaction to its strongest effect.  However, the material provided essentially rested on assumptions originating from sources (Shippers and the international law firms instructed to provide opinions) that could not have offered an independent perspective on the reality of any transfer of control. 

There were also two other documents that had not been taken into account, or at least, for the Infospectrum report, not known to all of Owners’ decision-makers.  The first document, the ''Kommersant'' article, itself clearly contemplated that some potential counterparties may form the view that transacting with Shippers would involve a risk of sanctions.  The second document, the Infospectrum report, offered no view on whether Mikail Gutseriev’s “''purported''” action, in stepping down as chairman of Russneft (which owned Shippers), “''possibly''” to limit the impact on Russneft of him being listed as a sanctioned person, involved a genuine cessation of control and influence or merely a change of external appearance.  The relevant statement was not attributed to an identified source and the question remained whether there had been a genuine transfer of control, or simply steps designed and taken to create a more favourable appearance to the outside world. 

In view of the undisputed facts and an analysis of the other materials discussed above, the Court of Appeal was not persuaded that the latter two documents would have altered the position as it would have appeared to a reasonable owner as compared with the material in fact available to Owners’ decision-makers, still less to such an effect that they must have led a reasonable owner to conclude that there was no real risk of liability for a breach of sanctions if they complied with Charterers’ order to load Shippers’ cargo.  That reflected the plain acknowledgment of the perception of such a risk existing in the ''Kommersant'' article and the tentative and unsourced terms used in the Infospectrum report, despite that report offering a potentially more positive spin. 

Accordingly, the Court of Appeal decided that the Judge had come to the wrong determination on the facts, and so allowed the appeal.  Therefore, Owners were, as the Judge had held (in case he were wrong on liability), entitled to the damages they claimed for their loss of profit on the unperformed charter. 

'''Comment''' 

This judgment has, thankfully, allayed concerns, flowing from the High Court decision, that success in relying on clauses requiring a “''reasonable judgment''” to be made promptly is very hard to achieve in practice.  The High Court Judge indicated that “''the assessment of a reasonable commercial person as to whether a real risk or danger is present''” is required and also suggested such an assessment was “''something that is realistically achievable in a relatively short timeframe''”.  Yet, his decision on the facts and evidence in this case suggested otherwise. 

The reality, however, is that, as the Judge had also recognised, “''shipping is a fast moving commercial environment and decisions need to be made quickly''”, and that is so despite sufficiently reliable, current and complete evidence not always being something that can be obtained quickly or at all to make a snap decision.  The Court of Appeal, therefore, has carefully recalibrated the assessment and brought a greater air of realism to what is to be expected, in acknowledging that sub-clause (C) catered for cases both where a likely breach of sanctions is knowable when making the decision and where, at best, something less certain could be surmised in deciding that there is a real (even if not probable) risk. 

In reaching a different conclusion on the facts to the Judge, the Court of Appeal agreed with the decision of Cockerill J (as she then was – now LJ), in ''The “Victor 1”'' (fn.4), because her conclusion that “''a serious possibility of sanctions resulting would entitle'' [''owners’ managers''] ''to reasonably form the view that the vessel was exposed to sanctions''” was consistent with the interpretation of sub-clause (C) in the present case, as was her (“''more apt''”) view of when a requirement of this kind triggers the clause’s application in the commercial context faced. 

Even so, such clauses would preferably be drafted with far greater clarity, despite this being commercially sensitive, because it impinges or overrides the primary rights the paying party expects.  Alternatively, being more thorough at the outset with due diligence is preferable, but that may be difficulty to do as it too requires prompt steps, when negotiating a charter, so allowing for the possibility of a real but less than likely sanctions risk remains desirable. 


Footnote 1: ''Subesh v SSHD'' [2004] EWCA Civ 56, [44] – see https://www.bailii.org/ew/cases/EWCA/Civ/2004/56.html – and ''Henderson v Foxworth'' [2014] UKSC 41, [67] – see https://www.bailii.org/uk/cases/UKSC/2014/41.html 

Footnote 2: [2023] EWHC 2866 (Comm) – see [https://www.onlinedmc.co.uk/index.php/Litasco_SA_v_Der_Mond_Oil_and_Gas_SA https://www.onlinedmc.co.uk/index.php/Litasco_SA_v_Der_M] 


Footnote 3: [2024] EWHC 1048 (Ch) – see https://www.bailii.org/ew/cases/EWHC/Ch/2024/1048.html

Footnote 4: [2025] EWHC 2033 (Comm) – see https://www.bailii.org/ew/cases/EWHC/Comm/2025/2033.html and [[Ceto Shipping Corporation v Savoy Shipping Inc (The “Victor 1”X)X|https://www.onlinedmc.co.uk/index.p]]

[[Ceto Shipping Corporation v Savoy Shipping Inc (The “Victor 1”X)X|hp?title=Ceto_Shipping_Corporation_v_Savoy_Shipping_Inc_(The_%E2%80%9CVictor_1%E2%80%9DX)X]]