Tonzip Maritime Ltd v 2Rivers Pte Ltd (The “Catalan Sea“)
DMC/SandT/25/11
England
Tonzip Maritime Ltd v 2Rivers Pte Ltd (The “Catalan Sea“)
English Commercial Court: Andrew Hochhauser KC (sitting as a Deputy Judge of the High Court): [2025] EWHC 2036 (Comm): 31 July 2025
Judgment Available on BAILII @
https://www.bailii.org/ew/cases/EWHC/Comm/2025/2036.html
Emmet Coldrick (instructed by Wikborg Rein LLP) for Tonzip (Owners)
James Shirley (instructed by HFW Middle East LLP) for 2Rivers (Charterers)
VOYAGE CHARTERPARTY: SANCTIONS CLAUSE: CLAIMS PRESENTATION TIMEBAR CLAUSE: WHETHER OWNERS OR CHARTERERS IN REPUDIATORY BREACH OF CHARTER BECAUSE OF CHARTERERS’ ORDER TO LOAD THEIR NOMINATED OIL CARGO OR OWNERS’ REFUSAL TO LOAD THAT CARGO: WHETHER OWNERS’ CLAIM FOR DAMAGES OTHERWISE TIME-BARRED
DMC Classification: Developed
(N.B. The High Court judgment is being appealed and the Court of Appeal hearing is expected no later than 4 August 2026. A case note on any appeal judgment if handed down will be prepared in due course.)
Summary
The High Court held that:
(1) When refusing to load Charterers’ nominated shippers’ oil cargo, Owners had not made a reasonable objective decision, under sub-clause (C) of the sanctions clause in the charterparty. This was because the speculative evidence relied on by Owners had not shown that the sanctioned person (Mikail Gutseriev) had retained ownership or control of the shippers at the material time. As a result, loading the shippers’ oil cargo did not subject Owners to the risk of sanctions or open them up to the danger of sanctions; and
(2) Owners’ continued refusal to load the shippers’ oil cargo was, accordingly, a repudiatory breach, as a result of which Charterers’ counterclaim for damages of USD233,600, representing their increased expense of obtaining another vessel to perform the voyage, succeeded, and Owners’ claim for damages of USD1,020,099, for their lost profit on the unperformed charter, was dismissed; and
(3) If, contrary to the findings in (1) and (2) above, sub-clause (C) of the sanctions clause had applied, then Owners’ claim would not have been time-barred under clause 2A. The reason for this was that the period after the completion of discharge to present a claim had never begun to run, since no cargo had ever been loaded. Further, while that provision clearly applied to demurrage claims, the language used was ambiguous in relation to non-demurrage claims and was, therefore, insufficient to impose a general timebar against all of Owners’ claims under the charter.
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 Vessel 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 charterparty included, among others, a sanctions clause and a claims presentation timebar 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 Judge added emphasis to the words by making some of the text bold.)
Claims Presentation Timebar – Clause 2A:–
“CHARTERERS SHALL BE DISCHARGED AND RELEASED FROM LIABILITY IN RESPECT OF ANY DEMURRAGE CLAIMS OWNERS MAY HAVE UNDER THIS CHARTERPARTY (SUCH AS; BUT NOT LIMITED TO, CLAIMS FOR DEADFREIGHT, DEMURRAGE, SHIFTING OR PORT EXPENSES) UNLESS A CLAIM HAS BEEN PRESENTED IN WRITING TO CHARTERERS WITH SUPPORTING DOCUMENTATION WITHIN SIXTY (60) DAYS FROM COMPLETION OF DISCHARGE OF THE CARGO UNDER THIS CHARTERPARTY AND 90 DAYS FOR OTHER CLAIMS PROVIDEDSUPPORTING DOCUMENTS ARE AVAILABLE (EXCLUDING B/L CLAIMS).”
(The parties added the underlined words and struck through the deleted words when agreeing clause 2A.)
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).
Owners’ third-party due diligence checks with Refinitiv/World-Check (whose information was last updated in July 2021) suggested Neftisa was 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 Neftisa. If true, Owners would 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. So, Owners refused to load the Neftisa cargo and asked Charterers to nominate an alternative cargo for loading.
In response, Charterers sought to provide evidence (a Russian newspaper article available online, a letter on Neftisa headed paper and three (qualified) opinions from international law firms based on Neftisa corporate documents seen) in an attempt to convince Owners that Neftisa was no longer associated with Mikail Gutseriev, who had reportedly divested his ownership and control of Neftisa to his brother, Sait-Salam Gutseriev, who was said thereafter to have become the new beneficial owner of the shares in and the chairman of Neftisa.
Charterers’ evidence did not, however, allay Owners’ concerns, so they treated Owners’ continued refusal (on 24 November 2021) to load the Neftisa cargo as a repudiatory breach and gave notice terminating 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 charter, and Charterers counter-claimed USD233,600 as damages, for the additional expense they incurred to obtain an alternative vessel to load, carry and discharge the Neftisa cargo.
Judgment
Whether Owners or Charterers in Repudiatory Breach of Charter?
The Judge identified that whether Owners were entitled to refuse to load the Neftisa cargo, or alternatively whether Charterers were obliged to nominate an alternative cargo, depended on:
(1) The meaning and effect of sub-clause (C) of the sanctions clause;
(2) The meaning and effect of the EU and the UK sanctions legislation; and
(3) Whether Mikail Gutseriev (directly or indirectly) owned or controlled Neftisa or Owners had reasonably judged that he did.
As to (1), the Judge held that:
(a) The contra proferentem approach (requiring any ambiguity in a clause to be resolved against the party seeking to rely on the clause) to the interpretation of the sanctions clause applied, because the charterer’s right to direct the vessel was a "key right" and any limitation thereon had to be "clearly expressed".
(b) Owners bore the burden of proof to establish that they were entitled to rely upon their rights under sub-clause (C). To satisfy the “reasonable judgment” test, Owners had to establish that they had made an objectively reasonable decision, in the sense that this was a decision that a reasonable shipowner could reasonably have come to in the circumstances. Where a shipowner makes a judgment that compliance with an order will give rise to an exposure to sanctions and there is also a prima facie (at first sight) objectively reasonable factual basis for that judgment, the evidential burden then shifted to the charterer.
(c) The reference to "SUCH RISK" referred to the "REASONABLE JUDGMENT" that compliance with the order "WILL EXPOSE THE OWNERS … TO SANCTIONS". That meant Owners did not have to show that they would be in breach of sanctions, but only that they had reached a judgment that a reasonable shipowner could reasonably have come to in the circumstances, that they were exposed to sanctions, in that they were subject to the risk of or were open to the danger of sanctions.
(d) The judgment had to be made in good faith and had also to be objectively reasonable; whereas, if the judgment were based on speculation, it would not have been an objectively reasonable judgment.
(e) The court was entitled to have regard to materials that were available to the shipowner at the time the decision was made, even if the shipowner had not considered them when making the decision, if in fact the shipowner’s decision was an objectively reasonable judgment and would have been shown to be so had all necessary enquiries been made.
As to (2), the Judge held that:
(a) The EU sanctions regime required freezing all funds and economic resources belonging to or controlled by designated (sanctioned) persons. The phrase “economic resources” was broadly defined as any assets that could be used to obtain funds, goods or services. The UK sanctions largely continued this EU framework without substantive changes. Under UK regulations, it is a criminal offence to make economic resources available for the benefit of designated persons, with penalties including up to 7 years imprisonment. The prohibition applies not only when someone knowingly assists designated persons, but also when they have “reasonable cause to suspect” they are doing so.
(b) The UK regulations established two conditions for determining when an entity is “owned or controlled directly or indirectly”. The first involved quantitative thresholds (holding more than 50% of shares, voting rights or board appointment rights). The second, more flexible condition, applied when it was reasonable to expect that a person could “achieve the result that affairs of [the entity] are conducted in accordance with [the designated person’s] wishes” by whatever means. This broad language would allow control to be established regardless of formal ownership structures, focusing on practical influence over corporate affairs.
(c) Recent court decisions had clarified the control test’s application. In Mints v PJSC National Bank Trust (fn.1), the Court of Appeal emphasised that the “by whatever means” language made clear that there were no limits on how control could be exercised. However, in Litasco v Der Mond (fn.2), the court distinguished between existing influence and merely theoretical potential for control, rejecting speculation without evidence. The court established that control must involve present means of influence, not merely hypothetical future possibilities that would require cooperation from others or face significant obstacles.
(d) In interpreting the words “reasonable cause to suspect”, the courts apply a standard that requires an objective, fact-based foundation rather than mere speculation. This test demanded that a reasonable person would suspect control based on available information, considering all relevant evidence including potentially contrary materials. However, the courts must guard against unreliable assumptions and avoid treating complex corporate structures alone as grounds for suspicion. The accuracy and credibility of the evidence must be evaluated, though it need not meet courtroom evidentiary standards, and even written declarations by the designated persons denying their control may be insufficient if other evidence suggested otherwise.
As to (3), the Judge found that:
(a) The foundation on which Owners’ decision was built consisted of third-party due diligence reports on Mikhail Gutseriev and Neftisa. When those reports were examined carefully, they had nothing in them that evidenced Mikhail Gutseriev’s control, direct or indirect, of Netfisa in November 2021.
(b) Whether Mikhail Gutseriev did control Neftisa or not was speculation, which was not evidence of an "existing state of affairs". The evidence showed Owners had not been able to confirm whether Mikhail Gutseriev had de facto (in fact or practice) control over Neftisa when the decision was made. That was insufficient to amount to an objectively reasonable decision that Mikhail Gutseriev had de facto control such as would have entitled Owners to rely on sub-clause (C);
(c) There was also available to Owners another report on an associated company of Neftisa. Mikhail Gutseriev was recorded as having given up his majority shareholding in that associated company because the EU sanctioned him. The rationale for him doing so was “… the likely intention of giving the company the freedom to manoeuver in the manner to which it is accustomed”.
(d) There was therefore no evidence (as opposed to speculation) for Charterers to rebut, but the material that they provided to Owners did seek to do so. While Owners criticised Charterers’ materials, they were consistent. So, Owners could and should have cumulatively taken those materials properly into account when they reached their decision on 24 November 2021.
The Judge, accordingly, held that Owners’ speculation was insufficient to show a reasonable judgment had been made in refusing to comply with Charterers’ order. Owners’ claim, therefore, failed and, instead, Charterers were entitled to be awarded the damages they counter-claimed, for the additional expense incurred to perform the Neftista cargo voyage with another vessel.
Whether Owners’ Claim Otherwise Time-Barred?
The Judge held that Owners’ claim, had it succeeded, would not have been time-barred for two reasons:
(1) There was an ambiguity in sub-clause (C) as to whether the words "OTHER CLAIMS" were intended by the parties to apply to all claims of whatsoever nature, including claims for repudiation of the charter or claims arising in circumstances where nothing was carried under the charter. The sub-clause also did not refer to "any other claims howsoever arising". That ambiguity was to be resolved in Owners’ favour; and
(2) If he were wrong on (1), there was an ambiguity as to from when the 90-day period should start to run, i.e. from the date of completion of the discharge or from the date of the accrual of the cause of action. There was no timebar case which indicated that time ran from the accrual of the cause of action. If time only started from the date of completion of discharge of the cargo, then time never commenced. That rather suggested the parties did not intend the timebar to deal with the present situation. That further ambiguity was also to be resolved in Owners’ favour.
Comment
This judgment demonstrates the difficulties faced in successfully rely on clauses that require a “reasonable judgment” to be made promptly. The Judge indicated that “the assessment of a reasonable commercial person as to whether a real risk or danger is present” was required and suggested that such an assessment was “something that is realistically achievable in a relatively short timeframe”.
The reality, however, is that “shipping is a fast moving commercial environment and decisions need to be made quickly”. This judgment implies third-party due diligence reports alone may not be good enough. So, to rely on such clauses the right answer is required and must be grounded on reliable and current evidence, which is not always immediately to hand and takes time to obtain and assess.
The “Victor 1” (fn.3) is another recent judgment where the registered owners’ managers in fact successfully placed themselves within a “reasonable judgment” sanctions clause. But that example was arguably simpler: loading Iranian oil and discharging oil in Venezuela were both at the time the subject of international sanctions. By comparison, less clear cut cases, such as where current corporate documentation of a company thought to be associated with a sanctioned person is relevant, may require records that are not always publicly available or up to date to be obtained and assessed. That may involve getting many documents translated, for foreign companies, and seeking local legal advice too.
The result is that the potential protection of being able to rely on a sanctions or other type of “reasonable judgment” clause may be illusory in some cases, or at least runs the substantial risk of being found inadequate later, with the benefit of hindsight. This tends to suggest that such clauses preferably need to be drafted more widely despite being a highly sensitive issue commercially, because they commonly impinge or override the primary rights the paying party expects. The alternative is to be more thorough at the outset with due diligence, but that again may cause difficulties and need quick handling when negotiating a charter.
Footnote 1: [2023] EWCA Civ 1132 – see the judgment on BAILII @ https://www.bailii.org/ew/cases/EWCA/Civ/2023/1132.html.
Footnote 2: [2023] EWHC 2866 (Comm) - see the DMC case note @ https://www.onlinedmc.co.uk/index.php/Litasco_SA_v_Der_Mond_Oil_and_Gas_SA
Footnote 3: [2025] EWHC 2033 (Comm) – see the judgment on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2025/2033.
