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Court's decision addresses the construction and operation of sanctions clauses in charterparties

01 October 2025

This case review examines Tonzip Maritime Ltd v 2Rivers Pte Ltd [2025] EWHC 2036 (Comm), a commercial court decision analysing the interpretation and application of sanctions clauses in a charterparty dispute involving Russian oil shipments.

Introduction

The Commercial Court’s decision in Tonzip Maritime Ltd v 2Rivers Pte Ltd [2025] EWHC 2036 (Comm) addresses the construction and operation of sanctions clauses in charterparties, something becoming increasingly problematic for parties in the shipping industry. The case arose from a dispute over the refusal to load cargo in the context of EU and UK sanctions, and the subsequent termination of a charterparty.

Factual background

On 5 November 2021, Tonzip Maritime Ltd (the claimant owners) chartered the vessel Catalan Sea to 2Rivers Pte Ltd (the defendant charterers) for a voyage from Ust Luga/Primorsk (Russia) to Aliaga (Turkey), carrying oil. The charterparty included an “EPS Sanctions Clause”, warranting that the charterers would not expose the owners, vessel, crew or insurers to any sanctions, and that the owners were not obliged to comply with orders which, in their reasonable judgment, would expose them to sanctions.

At the time, there were no sanctions on Russian oil, but EU and UK sanctions targeted a Russian businessman, MG, who was said to be “connected with” the shippers, Neftisa. On 17 November 2021, the vessel arrived at Primorsk. The cargo was to be loaded from Neftisa, with title passing to the charterers at the ship’s intake flange. However, upon discovering MG’s connection to Neftisa, the ownerfs, relying on the EPS Clause, refused to load and requested alternative voyage orders. The parties failed to reach agreement, and on 24 November 2021, the charterers cancelled the charterparty, citing the owner’s refusal as grounds for cancellation. The owners responded by treating the cancellation as a repudiatory breach.  Both parties claimed losses from the other.

Legal issues

The court considered three principal issues:

1. The meaning and effect of the EPS Sanctions Clause.
2. The scope and effect of the relevant sanctions legislation.
3. Whether MG owned or controlled Neftisa, or whether it was reasonable to judge that he did.

Judgment

With respect to the first question, the court held that the right of a charterer to direct a vessel is fundamental, and any limitation must be clearly expressed. Exclusion clauses are construed contra proferentem – that is to say against the party relying on the exclusion if there is ambiguity. Here the owners were seeking to rely on the EPS Sanctions’ Clause to limit the charterers’ voyage orders and so the burden was on them to show that its refusal to load was a decision a reasonable ship owner could have made in the circumstances, following the test in The Falkonera [2013] 1 Lloyd’s Rep 582.

Importantly, the court rejected the argument that an actual breach of sanctions was required; it was sufficient if, in the owner’s reasonable judgment, there was a risk of exposure to sanctions. However, the owner must act in good faith, make necessary inquiries, and base the decision on material available at the time.

As to the second question, this was necessary to determine whether, at the time of the incident,  there was an objective risk that the owners might be exposed to sanctions. The court found that the relevant legislation required that the designated person had direct or indirect ownership of the relevant company, or, as Sir Julian Flaux said in Mints v PJSC National Bank Trust [2023] EWCA Civ 113, “calls the shots”.

Applying the above to the facts, and addressing the third question, the court examined the evidence of MG’s links to Neftisa, including correspondence, media reports and legal opinions. It concluded that there was not sufficient evidence, from an objective point of view, that MG controlled Neftisa in November 2021. The owners had not satisfied the requirements of the sanctions clause and had not made a reasonable, objective decision that there was a risk of sanctions exposure and their claim failed whereas the charterers’ counterclaim succeeded. 

Time bar

There was a further issue for the Court to address which is whether, if the owners had been entitled to refuse the orders, their claims were time-barred. The charterparty contained an ambiguous time bar clause. It imposed a time bar for demurrage claims of 60 days from completion of discharge and 90 days “FOR OTHER CLAIMS”.  The charterers claimed that the 60-day limit applied to demurrage claims and other claims (including the subject claim) were subject to 90 days (and therefore time-barred). 
 
The judge disagreed.  He agreed with the claimant that the whole clause applied to demurrage claims. The reference to ‘other claims’ was ambiguous as to whether it applied where no cargo was loaded or discharged, and whether the 90-day period could run from the accrual of the cause of action.

Conclusion

The judgment provides valuable clarification on the operation of sanctions clauses, particularly in the context of evolving sanctions regimes and the importance of objective, evidence-based decision-making by shipowners. The test applied by the court was how the owners have reached their decision at the time – information coming to light after the decision was not relevant.  From a practical perspective, when in similar situations, owners would be well advised to make sure they keep records of all the checks that they make which might lead them to their decision that a party is sanctioned.  Equally charterers must ensure that their orders do not expose owners to sanctions’ risks. 

The decision also underscores the need for shipowners to act reasonably and in good faith when invoking sanctions clauses.  Owners can find themselves in a precarious position, with little time to make a decision, with a contractual obligation to follow orders, as was found on the facts to be the case here, against the possible wrath of sanctions’ authorities.  

The judgment also highlights the importance of clear drafting in exclusion and time bar clauses, and the need for parties to be aware of the evidential burden when disputes arise.

If you have questions about sanctions clauses, time bar provisions, or need tailored advice for your situation, please contact one of our experts.

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Further Reading