Tonzip Maritime (Singapore) Pte Ltd (formerly named Tonzip Maritime Ltd) v 2 Rivers Pte Ltd (formerly named Coral Energy Pte Ltd) [2026] EWCA Civ 641

Background

A dispute arose between the owners of the MV CATALAN SEA ("Owners") and the voyage charterers ("Charterers") arising from the Owners' refusal to comply with an order given by the Charterers to lift a cargo of crude oil to be shipped by a Russian oil company.

In November 2021, 2Rivers chartered the “Catalan Sea” for a voyage from the Russian Baltic to Turkey. The shipper was not identified in the Charterparty but by the time the vessel arrived at the load port and the draft bills of lading were produced, it had emerged it was Neftisa.

Whilst Neftisa was not on any sanctions list, it was associated with Mikhail Gutseriev who had been sanctioned by the EU, UK and Switzerland earlier in 2021, due to his connections with the Lukashenko regime in Belarus.

A letter was produced to allay Owners concerns stating Mr Gutseriev had left Neftisa’s Board of Directors and no longer controlled it. A contemporaneous report in a Russian financial newspaper indicated he had transferred most of his shares to his brother, but also noted concerns this could be an attempt to circumvent sanctions.

Charterers also produced letters from international law firms confirming – if various factual assumptions were made - that Mr Gutseriev did not control Neftisa and so Neftisa was not subject to sanctions.

Owners were not persuaded and refused to load the Neftisa cargo. They contended they were entitled to refuse the order by reference to a clause in the charterparty, which was on an amended ExxonMobil VOY2005 ("the Charterparty"), which they referred to as the "EPS Sanctions clause".

Sub-clause C of the sanctions clause, permitted Owners to refuse to comply with an order:

"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".

Charterers purported to terminate the Charterparty, maintaining the Charterparty did not entitle Owners to refuse to load. Owners treated this as a repudiatory breach and themselves purported to terminate.

Owners commenced proceedings claiming damages, on the grounds Charterers had repudiated the Charterparty. The Charterers denied the claim and counterclaimed for damages, maintaining it was Owners who had repudiated the Charterparty.

The relevant issues for determination were:

(i) What was the true construction of the sanctions clause in the Charterparty?

(ii) Applying this interpretation, were Owners entitled to refuse to load?

 

High Court  [2025] EWHC 2036 (Comm)

Mr Andrew Hochhauser KC, sitting as a Deputy Judge of the High Court, agreed with Owners that their entitlement under the last part of the sanctions clause to refuse an order arose where Owners held a reasonable apprehension as to a risk of sanctions.

However, applying this given interpretation to (i) above, the Judge accepted Charterers' submission that no such reasonable apprehension as to the risk of sanctions arose on the facts.

Owners appealed against that decision, with leave of the Judge, to the Court of Appeal.

 

Court of Appeal  [2026] EWCA Civ 641

Foxton LJ provided a reasoned, unanimous judgment – sitting with Zacaroli LJ and Coulson LJ - following a two-day trial on 6 & 7 May 2026.

The Court of Appeal allowed Owners’ appeal.

The Court of Appeal found the key issue was whether the words "expose … to sanctions" was only satisfied by a reasonable judgment by Owners, on the balance of probabilities, that sanctions were more likely than not to be contravened if the Charterers' orders were complied with, or whether it was sufficient that Owners reasonably formed a judgment that there would be a real risk of such a breach of sanctions [33].

The Court accepted the starting point, and in many respects the end point, were the words used in the Charterparty.

Foxton LJ placed great importance on the commercial context in which the sanctions clause operated, stating [41]:

“i) Sub-clause (C) requires the Owners to make a prospective determination of the effect of future compliance (or continued compliance) with an order, and to do so in circumstances in which the Owners are likely to be much less well-informed than the Charterers as to the factual circumstances bearing on the potential application of sanctions: the beneficial ownership or control of the shipper, and the origins and destination of the cargo.

ii) When those issues arise in a sanctions context, they will frequently be hidden from public view, and be eminently contestable.

iii) Sanctions laws are generally broadly phrased and complex, with a view to capturing potential evasion of their application, and the sanctions laws of a number of jurisdictions may be engaged by a single transaction.

iv) The Owners are required to reach a speedy determination, given the commercial significance of delay in the carriage of goods by sea against a background of moving commodity and freight prices. When the second part of sub-clause (C) operates, the vessel will be at sea heading towards its port of destination at the point when the determination must be reached. The speed with which the Owners are required to make a decision, and the limits of the information likely to be available to them, are to be contrasted with the time, and the information-gathering resources, available to sanctions authorities when determining if the carrying out of the voyage had breached applicable sanctions.

v) This is a context in which it is inherently more likely that the Owners are required to reach a reasonable judgment that compliance with the Charterers' orders will give rise to a real risk of liability for sanctions, rather than require a determination that such a liability will arise on the balance of probabilities.”

The Judge accepted the High Court’s judgment as to the application of the sanctions clause to the essentially undisputed facts – so vis-a-vis (ii) above - was an evaluative exercise and one which an appellate court should not lightly interfere [61].

Charterers’ principal criticism of the Judge's reasoning and conclusions were as follows [64]:

“i) The Judge wrongly relied on the decisions in Litasco SA v Der Mond Oil and Gas Africa [2023] EWHC 2866 (Comm) andVneshprombank LLC v Bedzhamov [2024] EWHC 1048 (Ch) in reaching his conclusion, which were addressing different issues and which did not bear the weight which the Judge sought to attach to them.

ii) In his application of sub-clause (C), the Judge wrongly proceeded on the basis that the Owners had to reach a reasonable conclusion that Neftisa was subject to Mr Gutseriev's control (and hence subject to sanctions), rather than a reasonable view that there was a real risk that this was the position.

iii) The Judge wrongly assumed that a determination by the Owners would only satisfy sub-clause (C) if it was arrived at by a reasonable process, as opposed to being an outcome which a reasonable shipowner could have reached.

iv) The Judge erred in failing to take into account the EU Decision in assessing whether the Owners' determination of risk was reasonable.

v) In any event, the Judge's conclusion that a reasonable shipowner could not have arrived at the decision reached by the Owners was not a conclusion reasonably open on the evidence.”

Foxton LJ was satisfied that the Judge had misdirected himself in relying on Litasco to support a conclusion that the Owners could not have formed a reasonable judgment of the existence of a risk of sanctions, without having reached a positive conclusion that Mr Gutseriev's control continued. This error alone required the court to revisit the conclusion.

Further, the Court found 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 rested on assumptions originating from a source which could not have offered an independent perspective on the reality of any transfer of control [86].

In considering the particular circumstances of the case, Foxton LJ was satisfied that the Judge erred in concluding that the determination made by the Owners that complying with the Charterers' voyage orders gave rise to a real risk of liability to sanctions was not a determination which any reasonable shipowner could reach.

Zacaroli LJ and Coulson LJ concurred.

The decision will be a victory for Owners and what one may regard as a commercially sensible judgment. Owners - just like the Master of a Vessel – are often called upon to make quick decisions in difficult circumstances without the benefit of hindsight, such that where those decisions do require a prompt, subjective decision they should not readily be questioned, ex post facto.

Charterers have however not left it there.

 

Supreme Court  [UKSC/2026/0103]

On 21 July 2026 an application for permission to appeal was issued by the Supreme Court.

 

LARA HICKS

BARRISTER

33 BEDFORD ROW