Reed Smith In-depth

Key takeaways

  • Last year, we reported on a judgment of the English Court of Appeal (CoA) in the case of MUR Shipping BV v. RTI Ltd [2022] EWCA Civ 1406
  • In a split decision, the CoA held that the affected party was required to accept non-contractual performance as part of its obligation to exercise reasonable endeavours to overcome force majeure
  • On 15 May 2024, the UK Supreme Court reversed the CoA decision, holding that a party relying on a force majeure provision is not obliged to accept non-contractual performance pursuant to the exercise of reasonable endeavours to overcome a force majeure event or its effects
  • This alert summarises the Supreme Court’s decision and addresses some of its implications

Factual background

The key facts relevant to this case are as follows:

  • MUR Shipping BV and RTI Ltd entered into a contract of affreightment for the carriage of goods each month (the Contract). Payment of freight was expressly to be made by RTI to MUR in U.S. dollars. The Contract contained a force majeure provision. As is standard in many commercial contracts, this included a proviso to the definition of “force majeure” which, in this case, required that it could not be “overcome by reasonable endeavors from the Party affected”.
  • On 6 April 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) applied sanctions to RTI’s parent company. RTI itself was not listed in the sanctions. However, as a majority-owned subsidiary of the listed entity, RTI was subject to the same sanctions as its parent.
  • MUR invoked the force majeure provisions of the Contract by giving notice of force majeure and purported to exercise its contractual right to suspend it performance of the Contract. MUR asserted that it was prevented from receiving payments in U.S. dollars.
  • RTI challenged MUR’s force majeure notice. It offered to pay MUR in euros (instead of dollars) and to bear any and all additional costs and exchange rate losses arising from it doing so.