Supreme Court ruling on force majeure

The Supreme 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. It found that the obligation to use reasonable endeavours to overcome or avoid the effect of a force majeure event (which will generally be implied into a force majeure clause if it is not expressly stated) does not require a party to accept anything other than performance in accordance with the strict terms of the contract.

The imposition of sanctions gave rise to difficulties and delays for payments in US dollars. The shipowner relied on this as a force majeure event. The charterer offered to make payment in euros, which could be immediately converted to dollars by the shipowner’s bank, and to bear any additional costs or exchange rate losses. The shipowner, however, rejected the offer and insisted on their right to payment in dollars. The charterer brought a claim for the additional costs incurred in making alternative shipping arrangements.

The question in RTI Ltd v MUR Shipping BV [2024] UKSC 18 was whether, absent express wording, a reasonable endeavours proviso required a party seeking to rely on the force majeure clause to accept non-contractual performance in some circumstances. The High Court had held that the shipowner was not obliged to accept anything other than strict contractual performance; the majority of the Court of Appeal disagreed, finding that the clause required the shipowner to accept a proposal involving payment in an alternative currency.

The Supreme Court has unanimously overturned the Court of Appeal's decision and held that the shipowner was entitled to reject the charterer's offer to pay in euros, for reasons of both principle and authority. For more information on the case, see our litigation notes blog post here.