The “CATALAN SEA” – Court of Appeal Clarifies the Sanctions Risk Threshold for Shipowners
The English Court of Appeal has handed down an important judgment on sanctions clauses in voyage charterparties:
Tonzip Maritime (Singapore) Pte Ltd v 2 Rivers Pte Ltd, The "CATALAN SEA" [2026] EWCA Civ 641.
The decision confirms that where a charterparty sanctions clause is engaged by a shipowner’s “reasonable judgment”, the relevant threshold is a reasonable apprehension of a real risk of sanctions exposure not proof, on the balance of probabilities, that sanctions would in fact be breached.
Background
In November 2021, the "CATALAN SEA" was fixed for a voyage from Primorsk, Russia, to the Mediterranean. When the vessel arrived at the load port, sanctions screening using Refinitiv World-Check flagged the nominated cargo shipper, Neftisa, as associated with Mr Mikhail Gutseriev, designated under EU and UK sanctions in 2021. The complication was that Mr Gutseriev had reportedly transferred his beneficial interest in Neftisa to his half-brother after his designation, retaining only a seven per cent shareholding leaving genuine uncertainty as to whether any residual control might expose owners and their insurers to sanctions risk.
Owners refused to load, relying on the charterparty sanctions clause, which permitted refusal of any order which, in their reasonable judgment, was prohibited by sanctions or would expose owners, the vessel, its managers, crew, or insurers to sanctions. Charterers provided legal opinions in an attempt to reassure owners, but owners maintained their position. Both parties treated the other’s conduct as a repudiatory breach and claimed damages.
The Decisions
At first instance, the Commercial Court accepted owners’ construction of the clause - the threshold was a real risk of sanctions exposure, not a requirement to prove breach was more likely than not - but found against owners on the facts, concluding the material available did not establish a sufficiently reasonable apprehension to justify refusal.
The Court of Appeal, in a judgment given by Foxton LJ, upheld that construction but allowed the appeal on the facts. The Court found that the word “exposure” in the clause means being put at risk of sanctions, not certainty or even likelihood of breach. The commercial context reinforced that reading: owners are routinely required to make urgent judgments on incomplete information, where ownership structures may be deliberately obscured and the consequences of error are severe. Legal opinions provided by charterers, sourced from parties closely connected to Mr Gutseriev, carried limited weight and if anything reinforced the grounds for caution.
The Correct Test
The judgment establishes a clear and practical framework:
- Owners need not prove that performance would in fact breach sanctions, or that breach is more probable than not.
- It is sufficient that owners form an objectively reasonable judgment that performance would give rise to a real risk of sanctions exposure.
- In cases turning on ownership or control, owners are not required to establish actual control a reasonable basis for concluding there is a real risk of such control will suffice.
- Reasonable judgment requires good faith and appropriate enquiries. A judgment based on inadequate or stale information will not withstand scrutiny.
For a detailed analysis of the judgment, we recommend the Wikborg Rein article here. Members with specific questions should contact their usual Club contact.
With thanks to Wikborg Rein for their permission to link to their article.