Posted Thursday 23rd May 2024
Last week the Supreme Court of England and Wales overturned the Court of Appeal in RTI Ltd v MUR Shipping BV [2024] UKSC 18, a case which turned on the wording of a force majeure clause following the imposition of US sanctions.
A shipping agreement for monthly shipments of bauxite was entered into between the parties in 2016. In 2018, RTI’s parent company was sanctioned by the US government which made it exceptionally difficult for RTI to pay MUR in US dollars, as was required by the agreement. RTI suggested that it pay MUR in euros instead, which could then be converted by MUR into dollars should it wish and that RTI pay MUR for any other losses that it suffered as a result. MUR rejected this proposal, invoked the force majeure clause and refused to provide further shipments. RTI subsequently commenced arbitration against MUR, which was then appealed all the way through the English courts up to the Supreme Court.
The contract stated – as many force majeure clauses do – that an event was only a force majeure if “it cannot be overcome by reasonable endeavours from the Party affected”. RTI’s argument was that MUR could have accepted RTI’s proposed variation and not doing so amounted to a failure to exercise reasonable endeavours on MUR’s part.
The Supreme Court was having none of it and unanimously sided with MUR, allowing its appeal. The court found that unless there was clear wording within the force majeure clause which would require MUR to accept an offer of non-contractual performance, MUR was within its right to refuse RTI’s offer and insist on RTI’s strict compliance with the terms of the agreement. RTI’s interpretation of the reasonable endeavours proviso would deprive MUR of one of its contractual rights and to overcome this there would have to have been unambiguous wording to that effect.
If you have any questions or if you require any assistance in relation to force majeure clauses or commercial contracts generally, please contact Guy Francis (guy.f@joelsonlaw.com) or a Partner in our Corporate & Commercial team.
This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.
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