The Catalan Sea - Sanctions Clauses And Evidence Of Control - James Shirley & Tom Griffiths

OVERVIEW

Introduction

In Tonzip Maritime Ltd v 2Rivers Pte Ltd (The "Catalan Sea") [2025] EWHC 2036 (Comm), the High Court has provided guidance on the interpretation of charterparty sanctions clauses and demonstrated the critical approach it will adopt when assessing evidence of control. The judgment is of considerable significance to shipowners who will need to ensure that evidence of control is current before relying on sanctions clauses.

Facts

In November 2021, prior to the Russian invasion of Ukraine, the Catalan Sea was on charter for a voyage from the Russian Baltic to the Mediterranean. Prior to the Vessel's arrival at the nominated loading port of Primorsk, Charterers sent draft bills of lading to Owners, identifying Neftisa as the cargo shipper.

Owners conducted sanctions screening on Neftisa using industry-familiar tools such as Refinitiv and World-Check. These tools flagged an association between Neftisa and Mikhail Gutseriev, a Russian businessman subject to EU and UK sanctions for his links to the Lukashenko regime in Belarus. Owners refused to load the cargo, relying on a sanctions clause which provided as follows:

"The Owners shall not be obliged to comply with any orders for the employment of the Vessel in any carriage, trade, voyage, ship-to-ship transfer operation or other service which in the reasonable judgment of the Owners, is prohibited by sanctions or will expose the Owners, the Vessel or its managers, crew, the Vessel's insurers or reinsurers to sanctions. In the event that such risk arises in relation to a voyage the Vessel is performing, the Owners shall be entitled to refuse further performance and the Charterers shall be obliged to provide alternative voyage orders"

Charterers tried to persuade Owners to load the cargo, providing evidence to suggest that Mr Gutseriev had transferred control of the company to his brother following the imposition of EU sanctions several months prior. This included a letter from Neftisa, a newspaper article from a Russian newspaper and three legal opinions drafted by law firms. It is important to note that while the sanctions reports flagged an association, they did not provide any information on the contemporaneous position as of November 2021. Ultimately, the loading stalemate was broken when Charterers purported to terminate the Charterparty. Both parties claimed damages for repudiatory breach.

Sanctions Clause

In construing the sanctions clause, Andrew Hochhauser KC was heavily influenced by the interpretation of an analogous war risks clause in The Triton Lark [2011] EWHC 2862 (Comm). Both clauses involved limiting the "key right" of a charterer to direct a chartered ship and so in principle were to be construed contra proferentem. Despite this, there was no ambiguity to resolve in Charterers' favour. As in The Triton Lark, the reference to "risk" clearly referred to a "real risk" of the event occurring and the words "is prohibited" and "will expose" did not raise the threshold in any way. "Reasonable judgment" imported requirements that the judgment be in good faith and be objectively reasonable based on all the information which would have been acquired if all necessary enquiries had been made. A judgment based on speculation would not suffice. Finally, if there is a prima facie objectively reasonable basis for Owners' judgment, the evidential burden would shift to Charterers.

Evidence

In assessing whether Owners' decision was objectively reasonable, only material available to Owners at the time of the decision was found to be relevant. This meant that the court did not take into account evidence from EU and UK authorities post-dating the refusal to load cargo which suggested that Mr Gutseriev remained in control of Neftisa.

Reviewing the contemporaneous documents, Andrew Hochhauser KC noted that Owners' decision was founded on the screening reports. However, these reports did not evidence any control of Neftisa by Mr Gutseriev in November 2021, only at an earlier date. Further, another screening report on an associated company which was available but had not been seen by decision makers stated that Mr Gutseriev had stepped down from the board as a result of EU sanctions with the likely intention of giving the company the freedom to operate normally. The commercial director of the managers of the Vessel admitted that, had he seen this report, it would have helped Owners conclude that there was "nothing to be concerned about with the Neftisa cargo".

Therefore, absent any evidence of control of Neftisa by Mr Gutseriev in November 2021, Owners had not overcome the evidential burden of showing a prima facie objectively reasonable basis for their judgment that loading the cargo would subject them or the other listed parties to the risk of sanctions. Accordingly, the court did not need to decide the weight to be given to evidence of non-control furnished by Charterers. Charterers' counterclaim succeeded.

Conclusion

The judgment is a powerful indication that the courts will be critical in assessing evidence of control when relied upon in the context of sanctions clauses. Following Litasco SA v Der Mond Oil and Gas Africa [2023] EWHC 2866 (Comm), proof of control requires more than "pure speculation". Where the information is out of date, it may be regarded as speculative. It is therefore vital that shipowners who have contracted to perform charterparties scrutinise the information available to them before taking the serious decision to renounce their commitment.

James Shirley, acting on behalf of the Defendant, was instructed by HFW Middle East LLP.

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