MUR Shipping BV v RTI Ltd.

Under a force majeure clause requiring that an event or state of affairs cannot be overcome by reasonable endeavours, the question is whether its adverse consequences can be completely avoided. The inquiry is not whether the affected party acted reasonably in the abstract, nor whether it must surrender a contractual right. Payment in a different currency may overcome the relevant state of affairs where it produces the same contractual result without detriment. The clause must be construed according to its own wording, context and purpose.

MUR Shipping BV, the shipowner, and RTI Ltd, the charterer, were parties to a contract of affreightment requiring freight to be paid in United States dollars. Following United States sanctions affecting a company associated with RTI, MUR invoked a force majeure clause and refused to nominate vessels. RTI offered to pay in euros, bear conversion costs and ensure that MUR received dollars.

The arbitrators found that the clause was otherwise engaged but that the difficulty could have been overcome by reasonable endeavours. On MUR’s section 69 appeal, Jacobs J allowed the appeal, holding that reasonable endeavours could not require acceptance of non-contractual performance: [2022] EWHC 467 (Comm). The central issue before the Court of Appeal was whether accepting RTI’s proposal would have overcome the relevant event or state of affairs.

1. Appeal allowed by a 2–1 majority. Males LJ delivered the leading judgment and Newey LJ agreed with his reasons. Arnold LJ dissented. The arbitrators’ award was restored.
2. On the constrained section 69 appeal, the court had to accept the arbitrators’ findings that paragraphs (a) to (c) of clause 36.3 were satisfied. The only issue was paragraph (d): whether the event or state of affairs could have been overcome by reasonable endeavours from MUR.
3. Clause 36.3(d) concerned the specific contractual language, not reasonable endeavours in the abstract. The relevant event or state of affairs could include both the imposition of sanctions and the resulting likelihood of delayed dollar payments. The question was whether the endeavours would overcome that event or state of affairs, not merely whether MUR had acted reasonably.
4. “Overcome” was a broad, non-technical expression. It did not necessarily require strict contractual performance. The contractual purpose of the dollar-payment obligation was that MUR should receive the right quantity of dollars in its account at the right time. RTI’s proposal would have achieved that result, with RTI bearing conversion costs and exchange-rate losses, and without detriment to MUR.
5. The principles concerning mitigation of loss and frustration did not assist. Bulman v Fenwick and the Vancouver Strikes case did not compel a different result because their contracts lacked an equivalent provision and, on their facts, the proposed alternatives would not have delivered the contractual substance.
6. If an alternative arrangement caused detriment or produced something different from what the contract required, it would only partially overcome the event and would not satisfy clause 36.3(d).
7. Arnold LJ considered that MUR could insist on strict contractual performance and that clear express words would be needed before clause 36.3(d) required acceptance of non-contractual performance. That was not the majority view.

• Court of Appeal (Civil Division): Appeal allowed by Males LJ and Newey LJ, with Arnold LJ dissenting; the arbitrators’ award was restored.
• High Court, Commercial Court: Jacobs J allowed MUR’s section 69 appeal and granted permission for a further appeal: [2022] EWHC 467 (Comm).
• Arbitration: The LMAA arbitrators held that MUR could not rely on force majeure because the event could have been overcome by reasonable endeavours, and awarded RTI damages.