![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Commercial Court) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> MUR Shipping BV v RTI Ltd [2022] EWHC 467 (Comm) (03 March 2022) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2022/467.html Cite as: [2022] WLR(D) 127, [2022] EWHC 467 (Comm), 201 Con LR 18, [2022] 2 All ER (Comm) 522, [2022] Bus LR 473 |
[New search] [Printable PDF version] [Buy ICLR report: [2022] Bus LR 473] [View ICLR summary: [2022] WLR(D) 127] [Help]
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
MUR Shipping BV |
Claimant |
|
- and – |
||
RTI LTD |
Defendant |
____________________
Vasanti Selvaratnam QC and James Shirley (instructed by Clyde & Co) for the Defendant
Hearing dates: 9th, 10th February 2022
____________________
Crown Copyright ©
Mr Justice Jacobs:
A: The appeal and the issues in outline
"In the event RTI was required, between April 6 and April 23, 2018, to make any U.S. Dollar payments to MUR that passed through an intermediary bank in the U.S. (which is highly likely), it is highly probable that the U.S. intermediary bank would have initially stopped the transfer on the basis of RTI's status as a blocked party until the bank could investigate whether the transaction complied with U.S. sanctions requirements."
i) The COA did not require payment of freight in US$. It was contractually permissible for the Charterers to pay in €. This argument directly challenged the tribunal's conclusion (in paragraph 50 of the Award) that: "RTI could of course not insist as of right on making payments in euros, because their payment obligations in the COA were to pay US dollars". If accepted, the argument would mean that there was no relevant force majeure event which affected the Charterers' payment obligations. This argument had not been identified in the Charterers' Respondent's Notice served prior to the hearing, nor in their skeleton argument. It was addressed comparatively briefly at the hearing itself, principally by reference to the facts set out in paragraph [50] of the Award. It was then further developed in a post-hearing submission after I had invited the parties to address certain issues.
ii) Clause 36 of the COA was not engaged in any event, because any practical difficulty for the Charterers in making US$ payments did not, on the true construction of the COA, amount to a force majeure event. There were various aspects of this argument. They were, however, ultimately directed towards the question of whether there was the necessary causation required by the force majeure clause. The Charterers submitted that the tribunal was wrong to accept the Owners' argument that restrictions on payments, in consequence of sanctions, would result in loading or discharging being prevented or delayed.
iii) The tribunal's conclusion on causation, and hence the applicability of the force majeure clause, was infected by the tribunal's erroneous view that the Owners were entitled to take time to review the position and opt for caution in the period after sanctions were imposed.
iv) Clause 36 identified certain requirements for an effective FM Notice, and these were not complied with by the Owners' notice sent on 6 April 2018.
B: The COA
"Cargo ......
About 280,00 mts 15 pet more or less Charterers option bauxite in bulk per month by lots 30,000 mts up to 40,000 mts 10 pct more or less in Owners' option but always on prevailing port and berth restrictions both ends which Owners have to satisfy themselves. Shipments to be performed between 01st July 2016 and 30th June 2018 (24 months). Loading program to be in accordance with Charterers scheduling."
"95% of freight to be paid within 5 banking days after signing/ releasing Bills of Lading (See Rider Clause 20)"
"The freight at the rate agreed in Box 13 shall be paid in cash calculated on the intaken quantity of cargo. See Rider Clause 20."
"Clause 20. Freight payment
Freight rate USD 12.00 per metric ton FIOT 1/1 basis USD 200 PMT IFO 380 CST in Gibraltar on Bill of Lading date and for each USD +/- 1.00 PMT change in the bunker prices as per Platt's Oilgram on the aforementioned date the freight to be adjusted by a Bunker Adjustment Factor (BAF) of USD 0.013 OMT.
95 per cent of freight to be paid within 5 (five) banking days after completion of loading and signing/releasing Congen Bills of Lading edition 1994 marked "Freight payable as per C/P dated 09th June 2016 to Owners' nominated bank account. Freight to be discountless, non-returnable vessel and/or cargo lost or not lost. Owners to pay disbursements both at loading and discharging ports. Balance of freight to be settled within 20 days upon receipt of all supporting documents together with settlement of demurrage/dispatch.
Please find following banking details for freight payment:
ABM AMRO Bank N.V.
Gustav Mahlerlaan 10, 1082 PP Amsterdam
The Netherlands
Account no: [removed]
IBAN no: [removed]
SWIFT code: [removed]
Correspondent bank: Wells Fargo Bank, New York SWIFT code: PNBPUS3N
Beneficiary: MUR Shipping B.V."
"Charterers to inform owners of the anticipated program of shipments for every next month by-the 16th date of the current month. Owners to propose their respective schedule of shipments latest by the 19th date of the current month to Charterers for Charterers' approval. The schedule must include names of the vessels, their type, flag, estimated intake and date of arrival at Conakry. Charterers have 4 (four) working days to accept such schedule or to propose an alternative schedule to Owners. Both parties should agree on the final schedule latest by the 28th date of the current month and such schedule to be considered as final and binding, otherwise shipments to be performed fairly evenly spread for said month."
"36.1. Subject to the terms of this Clause 36, neither Owners nor Charterers shall be liable to the other for loss, damage, delay or failure in performance caused by a Force Majeure Event as hereinafter defined. While such Force Majeure Event is in operation the obligation of each Party to perform this Charter Party (other than an accrued obligation to pay monies in respect of a previous voyage) shall be suspended.
36.2. Following the end of the Force Majeure Event, the Parties shall consult in good faith to make such adjustments as may be appropriate to the shipment schedule under this Charter Party.
36.3. A Force Majeure Event is an event or state of affairs which meets all of the following criteria:
a) It is outside the immediate control of the Party giving the Force Majeure Notice;
b) It prevents or delays the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port;
c) It is caused by one or more of acts of God, extreme weather conditions, war, lockout, strikes or other labour disturbances, explosions, fire, invasion, insurrection, blockade, embargo, riot, flood, earthquake, including all accidents to piers, shiploaders, and/or mills, factories, barges, or machinery, railway and canal stoppage by ice or frost, any rules or regulations of governments or any interference or acts or directions of governments, the restraint of princes, restrictions on monetary transfers and exchanges;
d) It cannot be overcome by reasonable endeavors from the Party affected.
36.4. A Party wishing to claim force majeure in respect of a Force Majeure Event must give the other Party a Force Majeure Notice within 48 hours (Saturdays, Sundays and holidays excepted) of becoming aware of the Force Majeure Event. Such Force Majeure Notice shall be a notice in writing which:
a) sets out or attaches details of the Force Majeure Event, and
b) states that the Party giving the Force Majeure Notice wishes to claim force majeure in respect of such Force Majeure Event.
c) give reasonable estimated duration of the Force Majeure Event to the extend [sic] it is reasonably possible to do so at the time of giving the Force Majeure Notice.
36.5. A Party which fails to give a Force Majeure Notice upon the occurrence of a Force Majeure Event in accordance with Clause 36.4 shall not be permitted to claim force majeure in respect of such Force Majeure Event.
36.6. Without prejudice to the generality of this Force Majeure Clause, time lost while waiting for berth at or off the loading port or discharge port and/or time lost while at berth at the loading port or discharge port by reason of a Force Majeure Event or one or more of the port authority imposing restrictions in relation to safe navigation in the port, the restraint of Princes, strikes, riots, lockouts of men, accidents, vessel being inoperative or rendered inoperative due to the terms and conditions of employments of the Officers and Crew, shall not count as laytime or time on demurrage."
C: The Award
"MUR were sorry to note that guarantors UC Rusal have been placed on the OFAC SDN list, and that as Charterers RTI are a subsidiary of UC Rusal, Charterers are similarly to be treated as if they are named on the list.
… …
Having reviewed the effect of these sanctions and General License 12 we note that, subject to the terms of that license, it would be a breach of sanctions for Owners to continue with the performance of the COA. For contracts entered into prior to 6 April 2018, General License No. 12 provides that performance until 5 June 2018 is permitted but only to the extent that it is "ordinarily incident to and necessary to the maintenance or wind down of operations, contracts ... " etc, to do so. It is not "necessary" for MUR to load any further cargoes under the COA and it would therefore be a breach of sanctions if MUR were to do so. MUR's present intention is to however continue with the transportation of Charterers' cargoes that have already been loaded as detailed above, provided that this can be done without breaching sanctions.
We further note that the sanctions will prevent dollar payments, which are required under the COA.
Therefore, as a result of the sanctions placed on Charterers and guarantors, we are left with no option but to claim force majeure in accordance with clause 36 of the charterparty and this notice will have to remain effective for as long as the sanctions remain in place, or unless it is possible to obtain relief from sanctions which we will investigate."
"... Freight is specified in US dollars in the recap, and "restrictions on monetary transfers" is listed as a force majeure event which might prevent loading and discharging for the very good reason that if monetary transfers from Charterers to Owners are restricted Owners cannot be expected to load and discharge the cargo without receiving payment in accordance with the COA. For Charterers' guidance we can confirm that the notice was sent within the COA time limits, and Owners' notice remains in effect for the reasons set out above and in that notice."
"However, the position summarised in paragraph 41 above emerged only after the exchange of detailed expert evidence and a careful consideration of all the aspects of the COA. The effect of primary and even secondary sanctions is drastic. Normal commercial counterparties will be frightened of trading with the party that has been sanctioned, bank finance is likely to be frozen and underwriters will be reluctant to insure normal trading activities. Consequently, MUR were perfectly entitled to take time to review the position and opt for caution by only reinstating the COA once General License 14, which allowed the activities to continue beyond the end of the COA period, had been issued."
"With regard to the effect of the sanctions on dollar payments, we preferred the evidence of Mr Smith that no penalties would have been imposed because if the exemption granted by GL 12 applied to the performance of the COA, it would also have permitted US dollar payments under the COA".
"In the event RTI was required, between April 6 and April 23, 2018, to make any U.S. Dollar payments to MUR that passed through an intermediary bank in the U.S. (which is highly likely), it is highly probable that the U.S. intermediary bank would have initially stopped the transfer on the basis of RTI's status as a blocked party until the bank could investigate whether the transaction complied with U.S. sanctions requirements."
"[46] The evidence was that in practice virtually all US dollar transactions are routed through US banks and common sense indicates that any US bank would exercise extreme caution before making a payment that could conceivably fall foul of sanctions legislation.
[47] Clause 36.3(d) of the COA included in the definition of a force majeure event that "It cannot be overcome by reasonable endeavors from the Party affected".
[48] At the hearing RTI criticised MUR for not seeking guidance from OFAC and/or not agreeing to allow payments to be made in euros - something that was proposed at the time by RTI.
[49] There was evidence that OFAC does maintain a "hotline" that parties can call to obtain guidance on the approach that OFAC would adopt towards the circumstances of that specific party. However, we very much doubted that in reality there was a high chance that OFAC would have been prepared to give guidance on which MUR could rely within a meaningfully short timescale.
[50] However, accepting payments in euros was a much more realistic possibility. It would have presented no disadvantages to MUR because their bank in the Netherlands could have credited them with US dollars as soon as the euros were received. RTI could of course not insist as of right on making payments in euros because their payment obligations in the COA were to pay US dollars. However, we were satisfied that it was a completely realistic alternative that MUR could have adopted with no detriment to them because (i) RTI made clear in correspondence that it would bear any additional costs or exchange rate losses in converting euros to US dollars and (ii) a number of payments were in fact made by RTI in euros and converted on receipt by MUR' s bank; there is no evidence that MUR rejected those payments.
[51] Consequently, although MUR's case on force majeure succeeded in all other respects, it failed because it could have been "overcome by reasonable endeavors from the Party affected"."
"Although the issue was academic, for the sake of completeness, we should comment that we considered that the force majeure notice given by MUR would have been effective. Clause 36 merely required the notice to set out details of the force majeure event. The details that mattered were the imposition of sanctions against Rusal. Contrary to the argument advanced on behalf of RTI, we did not consider that the force majeure notice was defective because it did not spell out in detail what specific parts of the COA operation could not be carried out because of the sanctions."
"In the paragraphs leading up to paragraph 43, we considered the expert evidence as to whether general licence 12 would have permitted continued performance of the contract of affreightment. In paragraph 43 we concluded that although the view of the experts was that performance of the contract of affreightment would have been permitted, we concluded that given the potentially drastic consequences of not complying with applicable sanctions, MUR were entitled to take time to review the situation. Unfortunately, we failed to qualify the last sentence of paragraph 43 by saying that MUR were "prima facie perfectly entitled, subject to consideration of whether the force majeure event could be overcome by reasonable endeavours". If we had qualified the conclusion at the end of paragraph 43 in terms to that effect, there would have been no inconsistency or ambiguity between that paragraph and paragraph 51."
D: General approach to appeals and to arguments that an award should be upheld on different grounds
"12.6: A respondent who wishes to oppose an application for permission to appeal must file a respondent's notice which –
(2) states whether the respondent wishes to contend that the award should be upheld for reasons not expressed (or not fully expressed) in the award and, if so, states those reasons (but not the argument)".
"Where the grounds on which a respondent to a section 69 appeal relies for upholding an award have not been pronounced upon by the arbitral tribunal, the court will inevitably come to its own conclusions on those grounds which, in my view, must be based on a point or points of law. It does not follow from Vitol SA v Norelf Ltd [1996] AC 800 that because under the 1979 Act neither leave nor a certificate that the point of law was one of general public importance was required that a respondent can rely on grounds that are not points of law. And where, as here, the tribunal has rejected the grounds relied on, the respondent must in my judgment show that in doing so the tribunal erred in law so that, if any of the relevant findings are mixed findings of fact and law, there will only be an error of law if the finding fails the Edwards v Bairstow test that the tribunal misdirected itself or no tribunal properly instructed as to the relevant law could have come to the determination reached. To accept Mr Nolan's submission and decide de novo a question of mixed fact and law decided by the tribunal would be to act contrary to the clear policy of the Act which is to limit severely the grounds on which the reasoning in arbitral awards can be challenged. And it matters not, in my opinion, that it was strictly unnecessary for the tribunal to give the reasons it did for rejecting the ground or grounds sought to be relied on by a respondent to uphold the award."
"What, however, is generally impermissible is to raise a new point of law which requires consideration of factual materials and in relation to which material findings might have been sought and made had the point been raised at the arbitration. Both the appellant and the respondent are confined to the findings made in the award. The respondent can argue new points of law based on those findings. If, however, the failure to argue the point which the respondent wishes to raise has the result that not all potentially relevant findings have been made then it should not be open to it".
"Starting therefore with the proposition that the court is concerned to decide, on the hearing of the appeal, whether the award can be shown to be wrong in law, how is this question to be tackled? In a case such as the present, the answer is to be found by dividing the arbitrator's process of reasoning into three stages: (1) The arbitrator ascertains the facts. This process includes the making of findings on any facts which are in dispute. (2) The arbitrator ascertains the law. This process comprises not only the identification of all material rules of statute and common law, but also the identification and interpretation of the relevant parts of the contract, and the identification of those facts which must be taken into account when the decision is reached. (3) In the light of the facts and the law so ascertained, the arbitrator reaches his decision.
In some cases, stage (3) will be purely mechanical. Once the law is correctly ascertained, the decision follows inevitably from the application of it to the facts found. In other instances, however, stage (3) involves an element of judgment on the part of the arbitrator. There is no uniquely "right" answer to be derived from marrying the facts and the law, merely a choice of answers, none of which can be described as wrong.
Stage (2) of the process is the proper subject matter of an appeal under the Act of 1979. In some cases an error of law can be demonstrated by studying the way in which the arbitrator has stated the law in his reasons. It is, however, also possible to infer an error of law in those cases where a correct application of the law to the facts found would lead inevitably to one answer, whereas the arbitrator has arrived at another; and this can be so even if the arbitrator has stated the law in his reasons in a manner which appears to be correct, for the court is then driven to assume that he did not properly understand the principles which he had stated.
Whether stage (3) can ever be the proper subject of an appeal, in those cases where the making of the decision does not follow automatically from the ascertainment of the facts and the law, is not a matter upon which it is necessary to express a view in the present case. Pioneer Shipping Ltd. v. B.T.P. Tioxide Ltd. [1982] A.C. 724 and Kodros Shipping F Corporation v. Empresa Cubana de Fletes (No. 2) [1983] 1 A.C. 736, show that where the issue is one of commercial frustration, the court will not intervene, save only to the extent that it will have to form its own view, in order to see whether the arbitrator's decision is out of conformity with the only correct answer or (as the case may be) lies outside the range of correct answers. This is part of the process of investigating whether the arbitrator has gone wrong at the second stage. But once the court has concluded that a tribunal which correctly understood the law could have arrived at the same answer as the one reached by the arbitrator, the fact that the individual judge himself would have come to a different conclusion is no ground for disturbing the award."
"As a matter of general approach, the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the object of upsetting or frustrating the process of arbitration. Far from it. The approach is to read an arbitration award in a reasonable and commercial way, expecting as is usually the case, that there will be no substantial fault that can be found with it."
In the end, however, there was no material dispute as to how the award was to be read, and in particular as to how to read the tribunal's conclusion as to causation (relevant to the first point taken in the respondent's notice).
E: The appeal – the parties' arguments
The Owners' case
The Charterers' submissions
E: The appeal – discussion
The payment obligation
(1) Irrespective of the currency in which a debt is expressed or damages are calculated (money of account), regard shall be had to the law of the country in which the debt or liability is payable in order to determine the currency in which it may, or must, be discharged (money of payment), but (semble) the rate of exchange at which the money of account must be converted into the money of payment is determined by the law applicable to the contract or other law governing the liability.
(2) If a sum of money expressed in a foreign currency is payable in England, it may be paid either in units of the money of account or in sterling at the rate of exchange at which units of the foreign legal tender can, on the day when the money is paid, be bought in London in a recognised and accessible market, irrespective of any official rate of exchange between that currency and sterling. Quaere, whether this rate of exchange also applies if English law is not the law applicable to the contract.
"If a debt, expressed in whatever currency, pounds, dollars or francs, is governed by English law and payable in Switzerland, Swiss law should determine whether it can be discharged by tendering Swiss francs".
The Charterers' broad argument
"I therefore asked the jury whether, it being reasonable, as they had found, to order the ship to the Regent's Canal, it was reasonable to allow her to continue her course and go there after the defendants' representatives knew of the strike. The jury found that it was not reasonable; and they also found that if the vessel had been stopped at Gravesend, and ordered to some other place of discharge named in the charterparty, she could have been discharged within the period allowed by the charterparty …"
"Even although it turns out that, when the vessel arrived at the port to which she was ordered, there was a strike of workmen there, the plaintiffs are not entitled to say to the defendant, because there was a strike there you ought not to have allowed the vessel to go there because it was not reasonable to do so. It is not a question between the plaintiffs and the defendants as to what is reasonable or unreasonable, it is a question of contract between the parties".
"It is true that when the vessel arrived at the Regent's Canal there was a difficulty in taking delivery because of a strike of workmen; but a strike would in itself not be sufficient to exonerate the charterers from doing the best they could to accept delivery, and would not entitle them to fold their arms and do nothing. If, notwithstanding the strike, they could by reasonable exertion have taken delivery of the cargo within the proper time, the strike would not have afforded them any defence. But the jury have found that they could not, by any reasonable effort, have taken delivery. The delay, therefore, was caused entirely by the strike, and was within the exception in the charterparty."
"Charterparties contain an undertaking by the shipowner and charterer to perform their respective parts of the contract, unless prevented by certain perils excepted in the contract, provided that such perils could not have been avoided by reasonable care and diligence on the part of the person prevented by them from performing the contract and of his servants. Bills of lading contain an undertaking by the shipowner or carrier to deliver safely the goods set forth in them, unless prevented by certain perils known as "excepted perils" or exceptions, provided that such perils and their consequences could not have been avoided by reasonable care and diligence on the part of the shipowner or carrier and his servants."
Bulman is one of the authorities cited in this connection.
"…the consequence of damming one channel is simply that the flow of duty is diverted into the others and the freedom of choice thus restricted. If then a shipper cannot ship wheat, he must ship either barley or flour. The width of the alternatives is in the contract for the benefit of both parties and it can be a liability as well as a benefit for the shipper."
"But where there is a " business option " the legal position is quite different. There is not then one contractual obligation to be performed in alternative ways, but one obligation to be performed in one way, unless the option holder chooses to substitute another way and does so by the effective exercise of his option. In exercising the option, which he has acquired solely for his own advantage, the holder is not bound to consider the convenience or the interest of the other party. If the obligation is to ship a full and complete cargo of wheat with the option to change to barley or flour and the shipment of wheat is impeded, he is not obliged to change to barley or flour simply because that is the only way in which he could ship a full and complete cargo. So the question here is whether the contractual obligation on the charterer is correctly expressed as an obligation to ship a full and complete cargo of wheat, barley or flour in proportions which can, subject to the specified limits, be selected by the charterer; or whether it is an obligation to ship a full and complete cargo of wheat with an option to the charterer to substitute for that cargo a mixed one."
The Charterers' narrower argument
Authorities relied upon by the Charterers
"Thus even the failure of an expressly or impliedly stipulated method of performance will not discharge a contract if that method is not of fundamental importance, unless the parties make it clear that they intend the stipulated method to be exclusive."
Conclusion
F: The Respondent's Notice to uphold the Award on other grounds
F1: The causation argument
Introduction
i) was outside the immediate control of the Owners (clause 36.3 (a))
ii) prevented or delayed the loading of the cargo at the loading port and/or the discharge of the cargo at the discharging port (clause 36.3 (b)); and
iii) was caused by one or more of the matters set out in clause 36.3 (c).
"... Freight is specified in US dollars in the recap, and "restrictions on monetary transfers" is listed as a force majeure event which might prevent loading and discharging for the very good reason that if monetary transfers from Charterers to Owners are restricted Owners cannot be expected to load and discharge the cargo without receiving payment in accordance with the COA. For Charterers' guidance we can confirm that the notice was sent within the COA time limits, and Owners' notice remains in effect for the reasons set out above and in that notice."
The Charterers' arguments
The Owners' submissions
Discussion
F2: The argument that the Owners were not entitled to "take time to review the position and opt for caution"
The parties' arguments
Discussion
"I am unable to accept that the right, or indeed the duty, to pause can safely be confined to specific categories of cases. I consider that it is necessary to take a broad and comprehensive view of the duties and responsibilities of the owners and the master and to ask, as was suggested in The San Roman (sup.): How would a man of reasonable prudence have acted in the circumstances? Thus, for example, the delivery of a cargo pursuant to an order given by the agent of an invading army may pose just as much a threat to cargo and those who have legitimate rights to it as an iceberg or a foreign frigate. It will depend on the circumstances.
…
The orders which from the basis of the charterers' case in these proceedings emanated from London. It is not of course for this Court to decide whether on the facts the owners had reasonable grounds to pause, but I am satisfied that in a war situation there may well be circumstances where the right, and indeed the duty, to pause in order to seek further information about the source of and the validity of any orders which may be received is capable of arising even if there may be no immediate physical threat to the cargo or the ship."
"In my judgment the authorities establish two propositions of general application: (1) the master's obligation on receipt of an order is not one of instant obedience but of reasonable conduct; and (2) not every delay constitutes a refusal to obey an order; only an unreasonable delay does so"
F3: The terms of the notice
"The reason for requiring notice to be given must be that the "other party" can then investigate the alleged force majeure at the time. It can challenge whether it does prevent performance or delay in performance by the party invoking force majeure. Alternatively it can see if there are other means of enabling performance to be continued."
Conclusion
Note 1 The tribunal must have been satisfied on this point, since they held that the Owners’ case on force majeure “succeeded in all other respects”; ie other than on the “reasonable endeavours” point. [Back]