Tonzip Maritime Ltd v 2Rivers Pte Ltd

A contractual sanctions clause permitting a shipowner to refuse orders on the basis of a reasonable judgment is construed as a whole and narrowly. The owner bears the burden of establishing an objectively reasonable decision, but a prima facie objectively reasonable basis may shift the evidential burden to the charterer.

The clause may be engaged by a real risk or danger of sanctions, rather than only an established breach. A decision based on speculation about ownership or control is insufficient. Evidence available at the time may be considered even if not actually used; later material concerning a different state of affairs has little or no evidential value.

An ambiguous contractual time bar is construed in favour of the party seeking to preserve the claim.

The claimant, owner of the vessel CATALAN SEA, chartered it to the defendant for a voyage from Russia to the Mediterranean. The charterparty contained the EPS Sanctions Clause, under which the owner was not obliged to comply with orders which, in its reasonable judgment, were prohibited by sanctions or would expose specified persons to sanctions.

The claimant refused orders to load cargo supplied by Neftisa, believing that Mikhail Gutseriev, a designated person, owned or controlled Neftisa. The defendant cancelled the charterparty. The claimant treated that cancellation as a repudiatory breach and claimed damages. The defendant denied liability and counterclaimed the additional cost of carrying the cargo on another vessel.

The central issues were the construction and operation of the sanctions clause, the relevant sanctions legislation, whether the claimant’s judgment was objectively reasonable, and whether the claimant’s claim was time-barred.

1. Sanctions clause. The claimant had to establish that it was entitled to rely on sub-clause (C). Contractual terms permitting withholding of performance are construed narrowly, and ambiguity is resolved against the party relying on the term. The clause had to be read as a whole, including the charterers’ warranty that performance would not expose the owners or vessel to sanctions.
2. Reasonable judgment. The claimant bore the burden of proving an objectively reasonable decision, namely one that a reasonable shipowner could reasonably have made in the circumstances. Where a shipowner has a prima facie objectively reasonable basis for judging that performance gives rise to sanctions exposure, the evidential burden may shift to the charterer.
3. Meaning of exposure. The words “such risk” were material. The claimant did not have to prove that performance would necessarily breach sanctions. It had to show a reasonable judgment that the listed persons were subject to a real risk or danger of sanctions. The commercial context required decisions to be made quickly.
4. Evidence and application. The judgment had to be made in good faith and objectively reasonably. Evidence available when the decision was made could be considered even if it had not actually been used, provided it would have shown the judgment to be objectively reasonable. Later material concerning a different state of affairs was of little assistance. The claimant’s evidence established only speculation about Mr Gutseriev’s control of Neftisa. The available material, including the Infospectrum report, the newspaper article and the legal opinions, did not establish a reasonable sanctions risk. The claimant therefore could not rely on sub-clause (C), and its refusal to load the cargo was unjustified.
5. Time bar. The claimant’s non-demurrage claim was not time-barred. The wording concerning “other claims” was ambiguous, both as to its scope and, alternatively, as to when time began to run where no cargo was discharged. The ambiguity was resolved in favour of the claimant. Its termination email would not, however, have satisfied the clause if the time bar had applied.
6. The claimant’s claim failed. The defendant’s counterclaim succeeded in the sum of US$233,600 plus statutory interest. The court reserved the effect of the defendant’s subsequent addition to the UK Sanctions List on enforcement and consequential matters.