Party entitled to rely on force majeure clause where counterparty’s parent company became subject to US sanctions

The Commercial Court has held that a shipowner was entitled to rely on a force majeure clause in a shipping contract where its charterer’s parent company became subject to US sanctions: MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm).

Although set in a non-financial context, the decision is of particular interest as the court allowed reliance on force majeure despite the fact that the sanctions did not directly bite on the shipowners, but rather would be likely to delay US dollar payments which in turn meant that shipowners were not prepared to go ahead with performance of the contract. The two key points arising from the court’s decision are as follows:

1. In exercising reasonable endeavours to overcome the impact of a force majeure event, a party is not obliged to accept anything other than contractual performance. In this case, for example, the shipowners were not required to accept payment in Euros rather than the contractual currency of US dollars.
2. There is no requirement that a force majeure event directly prevents or delays performance, without any intervening decision-making process on the part of the party relying on the clause. A party’s decision, taken in reaction to a force majeure event, will not necessarily break the chain of causation between the force majeure event and the non-performance, at least where the decision is reasonable.

For a more detailed discussion of the decision, please see our litigation blog post.

Note: In April 2022, permission to appeal to the Court of Appeal was granted. The Court of Appeal hearing has been fixed for 26 September 2022.