MUR Shipping BV v RTI Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Males,Lord Justice Arnold,Lord Justice Newey |
| Judgment Date | 27 October 2022 |
| Neutral Citation | [2022] EWCA Civ 1406 |
| Docket Number | Case No: CA-2022-000611 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 1406
Lord Justice Newey
Lord Justice Males
and
Lord Justice Arnold
Case No: CA-2022-000611
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Mr Justice Jacobs
Royal Courts of Justice
Strand, London, WC2A 2LL
Vasanti Selvaratnam KC & James Shirley (instructed by Clyde & Co LLP) for the Appellant
Nigel Eaton KC & Adam Woolnough (instructed by Rosling King LLP) for the Respondent
Hearing dates: 26 & 27 September 2022
Approved Judgment
This judgment was handed down remotely at 10.30am on Thursday 27 th October 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The issue in this appeal is whether the shipowner under a contract of affreightment was entitled to rely on a force majeure clause as suspending its obligation to load seven cargoes of bauxite in April 2018. LMAA arbitrators held that it was not and that the charterer was therefore entitled to recover the cost of chartering in replacement vessels, but that decision was reversed by Mr Justice Jacobs on an appeal to the court under section 69 of the Arbitration Act 1996.
This aspect of the parties' dispute (there were many other issues with which the arbitrators had to deal, with which we are not concerned) arose out of the imposition of sanctions by the United States on a company associated with the charterer. That led to prospective difficulties and delays for the charterer in paying freight in United States dollars, as it was required to do. It proposed as an alternative that it should make payment in euros which could be converted into dollars as soon as they were received by the owner's bank, and agreed to bear any additional costs or exchange rate losses in converting the euros into dollars. However, the owner rejected this proposal, insisting on its right to receive payment in dollars.
As I shall explain, the critical issue for decision is whether acceptance of the charterer's proposal would have overcome the state of affairs caused by the difficulty of making timely payments of United States dollars resulting from the sanctions imposed on the charterer's associated company.
The contract of affreightment
The contract of affreightment was between MUR Shipping BV, a Dutch company, as the owner and RTI Ltd, a Jersey company, as the charterer. RTI was the claimant in the arbitration and the respondent in the court below. It is now the appellant in this court. I shall refer to the parties as MUR and RTI.
The contract of affreightment was dated 9 th June 2016 and provided for the carriage of about 280,000 metric tons per month, 15% more or less in charterer's option, of bauxite in bulk in lots of 30,000 metric tons up to 40,000 metric tons, 10% more or less in owner's option, from Conakry, Guinea to Dneprobugsky, Ukraine between July 2016 and June 2018. The quantities involved meant that in practice there would be a continuous flow of vessels loading at the load port and a corresponding flow of payments of freight due to the owner, 95% of freight being payable on each cargo within five banking days after signing or releasing of bills of lading.
The contract contained a force majeure clause in the following terms:
“36.1. Subject to the terms of this Clause 36, neither Owners nor Charterers shall be liable to the other for loss, damage, delay or failure in performance caused by a Force Majeure Event as hereinafter defined. While such Force Majeure Event is in operation the obligation of each Party to perform this Charter Party (other than an accrued obligation to pay monies in respect of a previous voyage) shall be suspended.
36.2. Following the end of the Force Majeure Event, the Parties shall consult in good faith to make such adjustments as may be appropriate to the shipment schedule under this Charter Party.
36.3. A Force Majeure Event is an event or state of affairs which meets all 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, 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;
d) It cannot be overcome by reasonable endeavors from the Party affected.
36.4. A Party wishing to claim force majeure in respect of a Force Majeure Event must give the other Party a Force Majeure Notice within 48 hours (Saturdays, Sundays and holidays excepted) of becoming aware of the Force Majeure Event. Such Force Majeure Notice shall be a notice in writing which:
a) sets out or attaches details of the Force Majeure Event, and
b) states that the Party giving the Force Majeure Notice wishes to claim force majeure in respect of such Force Majeure Event.
c) give reasonable estimated duration of the Force Majeure Event to the extend [ sic] it is reasonably possible to do so at the time of giving the Force Majeure Notice.
36.5. A Party which fails to give a Force Majeure Notice upon the occurrence of a Force Majeure Event in accordance with Clause 36.4 shall not be permitted to claim force majeure in respect of such Force Majeure Event.
36.6. Without prejudice to the generality of this Force Majeure Clause, time lost while waiting for berth at or off the loading port or discharge port and/or time lost while at berth at the loading port or discharge port by reason of a Force Majeure Event or one or more of the port authority imposing restrictions in relation to safe navigation in the port, the restraint of Princes, strikes, riots, lockouts of men, accidents, vessel being inoperative or rendered inoperative due to the terms and conditions of employments of the Officers and Crew, shall not count as laytime or time on demurrage.”
The facts
On 6 th April 2018 the US Department of the Treasury's Office of Foreign Assets Control (“OFAC”) imposed sanctions on Mr Oleg Deripaska and various companies which he controlled, either directly or indirectly. One such company was United Company Rusal Plc (“Rusal”), which was added to OFAC's Specially Designated Nationals and Blocked Persons List (“the SDN List”). Rusal, a Jersey company, was the majority owner of RTI. However, RTI was not itself added to the SDN List.
On 10 th April 2018 MUR sent a force majeure notice to RTI which read in part as follows:
“MUR were sorry to note that guarantors UC Rusal have been placed on the OFAC SDN list, and that as Charterers RTI are a subsidiary of UC Rusal, Charterers are similarly to be treated as if they are named on the list. …
Having reviewed the effect of these sanctions and General License 12 we note that, subject to the terms of that license, it would be a breach of sanctions for Owners to continue with the performance of the COA. For contracts entered into prior to 6 April 2018, General License No. 12 provides that performance until 5 June 2018 is permitted but only to the extent that it is ‘ordinarily incident to and necessary to the maintenance or wind down of operations, contracts …’ etc, to do so. It is not ‘necessary’ for MUR to load any further cargoes under the COA and it would therefore be a breach of sanctions if MUR were to do so. MUR's present intention is to however continue with the transportation of Charterers' cargoes that have already been loaded as detailed above, provided that this can be done without breaching sanctions.
We further note that the sanctions will prevent dollar payments, which are required under the COA.
Therefore, as a result of the sanctions placed on Charterers and guarantors, we are left with no option but to claim force majeure in accordance with clause 36 of the charterparty and this notice will have to remain effective for as long as the sanctions remain in place, or unless it is possible to obtain relief from sanctions which we will investigate.”
On 14th April 2018 RTI sent an email to MUR rejecting the force majeure notice. It said that the sanctions would not interfere with cargo operations, that payment could be made in euros, and that MUR, as a Dutch company, was not a “US person” caught by the sanctions. RTI also put MUR to proof of the time at which it learned of the events set out in the force majeure notice and reserved its position as to whether the notice had been sent within 48 hours of MUR becoming aware of the force majeure event. It called upon MUR to withdraw the notice.
On 17th April 2018 MUR emailed its disagreement with RTI's message, saying (among other things):
“… Freight is specified in US dollars in the recap, and ‘restrictions on monetary transfers’ is listed as a force majeure event which might prevent loading and discharging for the very good reason that if monetary transfers from Charterers to Owners are restricted Owners cannot be expected to load and discharge the cargo without receiving payment in accordance with the COA. For Charterers' guidance we can confirm that the notice was sent within the COA time limits, and Owners' notice remains in effect for the reasons set out above and in that notice.”
RTI continued to protest that the sanctions against Rusal did not preclude performance of the contract of affreightment. There were also exchanges about...
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