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DMC/SandT/22/05
'''England'''
'''MUR Shipping BV v RTI Ltd'''
'''English Commercial Court: Jacobs J: [2022] EWHC 467 (Comm): 3 March 2022'''
Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2022/467.html
Vasanti Selvaratnam QC and James Shirley (instructed by Clyde & Co) for RTI (Charterers)
'''CONTRACT OF AFFREIGHTMENT: FORCE MAJEURE EVENT: US RUSSIAN SANCTIONS PREVENTED PAYMENT OF FREIGHT IN US DOLLARS: WHETHER “REASONABLE ENDEAVOURS” EXTENDED TO ACCEPTING PAYMENT IN (NON-CONTRACTUAL) EUROS INSTEAD OF (CONTRACTUAL) US DOLLARS: ARBITRATION ACT 1996 SECTION 69 APPEAL ON A POINT OF LAW'''
'''Summary'''
The High Court, in allowing Owners’ appeal from a final arbitration award on a point of law, held that the “reasonable endeavours” provision in the contract of affreightment did not require Owners, the party affected by the force majeure event, to agree to vary the terms of the contract or to agree to a non-contractual performance by receiving the payment of freight in a different currency.
Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes
'''Background'''
MUR (“Owners”) of the Netherlands agreed a contract of affreightment (“COA”) with RTI of Jersey (“Charterers”) for the shipment of consignments of bauxite from Conakry, Guinea to Dneprobugsky, Ukraine on vessels nominated by MUR.
MUR obtained leave to appeal under section 69 of the Arbitration Act 1996 on a point of law, namely whether “reasonable endeavours” extended to accepting payment in (non-contractual) Euros instead of (contractual) US dollars.
'''Judgment'''
The Judge first outlined the facts (above), the key terms of the COA (fn.1) and the arbitral tribunal’s award before turning to address the substance of the appeal.
Accordingly, the Judge held, in allowing MUR’s appeal, that “reasonable endeavours” in clause 36.3(d) of the COA did not require MUR to accept a non-contractual payment of freight in Euros contrary to RTI’s obligation to pay and MUR’s right to receive payment of the freight in US dollars.
'''Comment'''
This judgment provides an interesting and timely consideration of the impact of sanctions on shipping contracts that involve Russian and related parties.
Because much of international trade and shipping is transacted in US dollars, US sanctions that block payments through US banks are a potent weapon. This case shows that, unless the contract expressly provides for payment in a different currency, US secondary sanctions (which adversely impact third parties because performance must but cannot be achieved thorugh through US persons who are directly subjected subject to the sanctions) can prevent performance.
That does not stop parties from varying their contract if they wish to do so, although once sanctions are in play, parties will have concerns. There is now also strong reluctance to be seen to be trading with sanctioned parties, and “reasonable endeavours” may not oblige such trading. Indeed, as one oil major recently found out, even if agreeing to and performing a contract is legal, serious reputational consequences can then arise.