- Introduction
The decision of the English Court of Appeal (the “Court”) in Tonzip Maritime (Singapore) Pte Ltd v 2Rivers Pte Ltd (The “Catalan Sea”) [2026] EWCA Civ 641 (the “Catalan Sea”) provides important clarification on sanctions clauses in voyage charterparties, particularly when owners may refuse charterers’ orders on sanctions grounds. Against the backdrop of increasingly complex sanctions regimes and opaque ownership and control structures, the Catalan Sea confirms that owners are not required to establish, on the balance of probabilities, that compliance would result in an actual sanctions breach. Rather, where the clause is framed by reference to the owners’ reasonable judgment and exposure to sanctions, owners may refuse charterers’ orders where they reasonably conclude that compliance would give rise to a real risk of sanctions liability.
- Background
In November 2021, Tonzip Maritime Ltd (the “Owners”) chartered the M/T CATALAN SEA to 2 Rivers Pte Ltd (the “Charterers”) under a voyage charterparty incorporating the EPS Sanctions Clause.
Prior to the fixture, the Charterers agreed to purchase the cargo from the Russian oil company Neftyanaya Kompaniya Neftisa (the “Neftisa”). Before loading, the Owners conducted sanctions screening through Refinitiv World-Check, which identified information suggesting that Neftisa might be associated with Mr Mikhail Gutseriev, a designated person under the UK and EU sanctions regimes.
Although it was asserted that Mr Gutseriev had transferred his shareholding to his brother and stepped down from his management roles, the Owners considered that the available information did not sufficiently dispel the sanctions concerns and declined to proceed with loading.
The Charterers subsequently purported to terminate the Charterparty, which the Owners treated as a repudiatory breach. The High Court found in favour of the Charterers, concluding that the Owners’ refusal was not objectively reasonable on the material available. On appeal, the Court of Appeal reversed that conclusion and held that the Owners were entitled to refuse the loading order.
- Legal Implications: Defining “Real Risk”
The principal significance of the Catalan Sea lies in the Court’s clarification of the meaning of the expression “exposure to sanctions” commonly found in charterparty sanctions clauses.
The Court confirmed that an owner is not required to establish, on the balance of probabilities, that performance would amount to a sanctions breach. Rather, the relevant question is whether, based on the information available at the time, it was objectively reasonable to conclude that performance would expose the owner to a real risk of sanctions liability.
In allowing the Owners’ appeal, the Court of Appeal held that the High Court had applied the wrong question. The issue was not whether Mr Gutseriev’s control of Neftisa had been established as a matter of fact, but whether the Owners could reasonably conclude that there was a real risk of continuing control and consequent sanctions exposure.
The Catalan Sea further indicated that this assessment is prospective rather than retrospective. Accordingly, the reasonableness of the decision falls to be assessed by reference to the information available when the decision was made, rather than by reference to facts emerging subsequently.
More broadly, the decision confirms that a sanctions clause may allocate to owners the commercial judgment of whether a charterers’ order should be followed where sanctions risk arises. The Court will not require owners to prove that a sanctions breach would in fact have occurred before they may rely on such a clause; the question is whether the conclusion that performance presented a real risk of sanctions liability was objectively reasonable at the relevant time.
This is particularly significant in voyage charterparty disputes, where owners may need to respond quickly to loading or voyage orders while information concerning cargo interests, beneficial ownership and control remains incomplete or contested. The decision does not create an automatic right to reject orders whenever sanctions concerns arise. The availability of that right will depend on the wording of the relevant clause and whether, on the material available at the time, a reasonable owner could conclude that performance created a real risk of sanctions liability.
- Conclusion
The Court’s reasoning in The Catalan Sea confirms that sanctions clauses framed by reference to “reasonable judgment” may be engaged even where a sanctions breach cannot ultimately be established. Rather, they provide a contractual framework for time-sensitive commercial decisions where compliance with a charterers’ order may expose the owners, vessel or other relevant parties to sanctions risk; the central question is whether the decision-maker’s assessment was objectively reasonable at the relevant time.
The decision also underlines the importance of the information supporting that assessment. Screening results, ownership and control information, legal advice and counterparty representations should be evaluated as a whole, having regard to their source, scope and factual assumptions. Parties should therefore maintain a clear contemporaneous record of the information considered, the sanctions risk identified and the reasons for the decision reached.
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