Those who follow our Blog may recall we discussed the implications of Hochhauser’s decision in The Catalan Sea last year. Click here to read what we said about that case.
Whilst it is always difficult to anticipate what the Court of Appeal might decide, it came as no surprise to us and others that Hochhauser’s decision was overturned by the Court of Appeal (1) . In so doing Foxton LJ (who gave the leading judgment with which the other two Court of Appeal judges agreed) also provided useful guidance on what clients should do in the context of risk clauses in contracts. Those clauses are becoming increasingly relevant in the light of the legal risks that ship owners and others now face.
We won’t repeat the facts as they are set out in our earlier blog. The issues on appeal were simply – what was the true construction of the sanctions clause in the charterparty and, applying that clause, were the Owners right to refuse to load the cargo based on the information available to them at that time?
For context, the sanctions clause itself read as follows:
“Owners shall not be obliged to comply with any orders for the employment of the Vessel … which in the reasonable judgment of the Owners, is prohibited by sanctions or will expose the Owners … 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 …”
Foxton LJ agreed with how Hochhauser framed the issue for decision, namely whether a reasonable judgment had been made regarding exposure to a sanctions risk. However, it was held that he had lost sight of that question and “at least on the specific issue of Mr Gutseriev’s continuing involvement with Neftisa … his analysis was addressed to a different (and contractually irrelevant) question of whether the Owners had made a reasonable determination that such control continued in fact”.
As a result, the Court of Appeal felt that this was a case where it could come to its own conclusion, namely that “The package of information provided by Neftisa through the Charterers would ordinarily have been expected to advance the position that there was no sanctions risk in the transaction to its strongest effect. However, the material provided essentially rests on assumptions originating from a source which could not have offered an independent perspective on the reality of any transfer of control. The [law firm letter] would, if anything, have led a reasonable owner to be even more confident that following the Charterers’ orders involved a real risk of sanctions liability.”
Consequently, the Owners’ appeal was allowed. It was held that Hochhauser was wrong to conclude that the decision made by Owners to refuse to load due to the risk of sanctions was a determination that no reasonable shipowner could reach on the facts. It was also held that he was wrong to hold that the Owner needed positive evidence as to Mr Gutseriv’s control of Neftisa and that he misdirected himself by relying on Litasco SA v Der Mond Oil and Gas (itself a Foxton J decision).
The judgment was a vindication for the decisions taken by the ship owner in this case. However, it also supports all ship owners who are often required to make quick decisions on the basis of limited information. It enables them to form an objective view based on what is available or not available and reach a conclusion that there is a real risk/danger that they may be exposed to sanctions if they comply with voyage orders.
Beyond the issues in this case however there are also other points of interest that reach beyond sanctions. When dealing with risks of exposure, the processes followed by the decision maker are likely to be crucial. Those processes will depend on the relevant facts in each case. There is likely to be an argument in each case as to whether more extensive enquiries could and/or should have been made and, if so, the outcome of those enquiries might have led to a different decision?
These issues also go wider than sanctions. They could apply to the ship owners’ assessment of the risks of being exposed to War Risks in the Persian Gulf scenario, or to pirate attacks off the coast of Somalia or to money laundering or a breach of some other applicable law that might expose the ship owner to a liability.
(1) Tonzip Maritime (Singapore) PTE Ltd v 2 Rivers PTE Ltd (The “Catalan Sea”) [2026] EWCA Civ 641.
Nick Burgess
Partner
