Force Majeure And The Limits Of Reasonableness In MUR Shipping BV v RTI LTD1

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In March 2022, in allowing an appeal under section 69 of the Arbitration Act 1996, the Commercial Court held that a shipowner was entitled to rely on a force majeure clause...
UK International Law
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In March 2022, in allowing an appeal under section 69 of the Arbitration Act 1996, the Commercial Court held that a shipowner was entitled to rely on a force majeure clause in a shipping contract where the Charterers' Russian parent company became subject to sanctions imposed by the United States in 2018.

In doing so, the Commercial Court (Jacobs J) considered that a contractual requirement to exercise "reasonable endeavours" to overcome the impact of a force majeure event did not require the shipowners to accept anything other than contractual performance – being, in this case, their right under the contract to receive payment in USD.


MUR Shipping BV (the "Owners") entered into a Contract of Affreightment ("COA") with RTI Ltd (the "Charterers") in June 2016 to carry Bauxite in an amount of 280,000 metric tons per month from Guinea to Ukraine. The COA contained a force majeure clause which provided that neither the Owners nor the Charterers would be liable to one another for loss, damage, delay or failure in performance caused by a force majeure event.

A "force majeure event" was defined in the COA as an event or state of affairs satisfying each of the following criteria:

"a) It is outside the immediate control of the Party giving the Force Majeure Notice;

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;

c) It is caused by one or more of acts of God, extreme weather conditions ... 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;

d) It cannot be overcome by reasonable endeavours from the Party affected." (emphasis added)

On 6 April 2018, the US applied sanctions to the Charterers' parent company, United Company Rusal plc.

On 10 April 2018 the Owners sent a force majeure notice stating that it would be a breach of sanctions for the Owners to continue with the performance of the COA, and that the sanctions would prevent payments in USD, the currency stipulated for payment under the COA.

In response, the Charterers raised several arguments: firstly, the sanctions would not interfere with cargo operations; secondly, payment could be made in Euros; and, thirdly, that, the Owners were a Dutch company and, accordingly, not a "US person" caught by sanctions.

The Owners remained adamant that there was a force majeure event that limited payment in US dollars. The Owners stated that this limited their ability to load and discharge cargo as they could be expected to do so without payment. The Owners declined to nominate ships under the COA on the basis of force majeure.

The Charterers subsequently obtained alternative tonnage and brought a claim in arbitration for the additional costs incurred as a result.

The Arbitral Award

The arbitral tribunal found in favour of the Charterers, on the basis that the event could have been "overcome by reasonable endeavours from the Party affected". In this instance, the "reasonable endeavours" took the form of the Charterers' proposal to pay in Euros and to bear any extra costs or losses arising from the currency change. The tribunal stated that this was a "completely realistic alternative that [the Owners] could have adopted with no detriment to them".

The tribunal did, however, find that the Owners' case on force majeure would have succeeded in all other respects as a matter of law (save for the requirement to use reasonable endeavours to overcome the event). The tribunal noted that, even though there was only the minimal risk of sanctions being applied to the (Dutch) Owners, the sanctions might still, in practice, have impeded timely payment in USD – payments to the Owners would have been made through an intermediary bank in the United States and would likely have been initially blocked by the bank pending investigations and due diligence.

The Appeal

In May 20221, the Owners were granted leave to appeal on a question of law under section 69 of the Arbitration Act 1996 – being whether reasonable endeavours extended to accepting payment in Euros, in departure from provisions in the contract requiring payment in US dollars.

The Decision

Reasonable endeavours and acceptance of non-contractual performance

The Commercial Court allowed the Owners' appeal, concluding that the Owners' obligation to use "reasonable endeavours" to overcome the event did not require them to accept the Charterers' proposal to effect payment in Euros.

In doing so, Jacobs J rejected the Charterers' argument that the contractual obligations of a party are simply one of several factors to be weighed in the balance of deciding the overall question of reasonableness in a force majeure context.

Jacobs J stated that there is "no authority which supports this broad proposition" and that, to the contrary, the Charterers' position went against the principles laid down in Bulman v Fenwick2 and Vancouver Strikes3.

In Bulman, the court found that, at first instance, the Charterers of a vessel were entitled to rely on a strike clause similar to force majeure in circumstances where they had allowed the vessel to continue to the Regent's Canal, knowing that there was a strike of coal porters at that location (rather than rerouting the vessel to another discharge location). The jury had expressly found that it was not reasonable for the Charterers' representatives to allow the vessel to continue to the Regent's Canal after they knew of the strike. However, the court considered the central question was not the reasonableness of the Charterers' conduct, but what the contract entitled them to do. The Charterers were entitled to rely on the contractual strike clause and there was nothing which, after the order was given to proceed to Regent's Canal, obliged the Charterers to change that order. The court's decision was subsequently affirmed by the Court of Appeal.

Jacobs J held that, in Bulman, the parties' contractual obligations were not simply one factor to be weighed in the balance but were, rather, to be "regarded as paramount and determinative".

Jacobs J also considered the decision of the House of Lords in the Vancouver Strikes4 case, which considered whether a Charterer would be required to ship an alternative cargo to that stipulated in the contract in order to avoid a Force Majeure event. Jacobs J found that (similarly to Bulman) Vancouver Strikes supports the proposition that the nature of a contractual obligation is determinative and not just one factor to be considered in an assessment of reasonableness.

The "causation argument"

The Charterers also advanced what Jacobs J termed the "causation argument". The core argument was that the Owner's failure to load the cargo was self-induced, on the basis that it was caused by the Owner's own decision not to receive payment following the sanctions, rather than the sanctions themselves or any resulting payment difficulty. The Charterers relied on a clause which only required payment to be made 5 days after completion of loading, in the course of arguing that it was extremely difficult to see how difficulty in paying freight could, even theoretically, prevent or delay loading.

Jacobs J rejected each of these arguments, finding that it was not possible to discern any error of law in the tribunal's conclusion that (aside from the finding on reasonable endeavours) the Owners' case on force majeure succeeded in all other respects. The tribunal's construction of the force majeure clause was correct, as the tribunal found that it was highly likely that an intermediary bank in the US would initially stop a transaction of a sanctioned party to carry out investigations. The Charterers' reading of the force majeure provision as only concerning events that physically prevented or delayed loading or discharge was overly narrow. Nor was the force majeure event "self-induced". The restriction imposed by the United States sanctions was causative of prevention or delay in loading or discharge.


Although it relates to US sanctions imposed on Russian entities in 2018, the case may provide useful guidance to parties who are considering invoking force majeure clauses in response to recent sanctions imposed on Russia and Belarus following the invasion of Ukraine.

Jacobs J's decision includes discussion of the practical difficulties faced by parties who have contracted with sanctioned parties in the context of payment obligations.

The case makes it clear that a party's right to invoke force majeure is not constrained by any obligations to accept non-contractual performance. In this regard, the case may give some reassurance to parties in contracts with a sanctioned party, although their right to rely on any force majeure provisions will depend in each case on the specific wording of the force majeure clause.


1 MUR Shipping BV v. RTI LTD [2022] EWHC 467 (Comm)

2 Bulman & Dickson v Fenwick & Co [1894] 1 Q.B. 179

3 Reardon Smith Line Ltd v Ministry of Agriculture, et al. [1963] AC 691

4 Reardon Smith Line v Ministry of Agriculture

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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