Reed Smith Client Alerts

As geopolitical risks intensify, the impact of sanctions affecting cross-border transactions has palpably increased.

While the COVID-19 pandemic brought a greater focus into negotiating and crafting force majeure clauses, with sanctions-related risks now taking center stage, it is useful to highlight the nuances in drafting such clauses in light of the recent English Court of Appeal judgment in MUR Shipping v. RTI Ltd [2022] EWCA Civ 1406 (MUR Shipping).

In MUR Shipping:

  • The payor entity RTI was a majority-owned subsidiary of an entity on the SDN List (Specially Designated Nationals and Blocked Persons List), and therefore, it was highly probable that U.S. intermediary banks would have initially stopped any transfer of U.S. dollars to the payee entity MUR Shipping (MUR).
  • The contract contained a customary provision, stating that if there was a “force majeure event” in operation, the parties’ obligation to perform the contract would be suspended. The case turned on the interpretation of the definition of “force majeure event” in the contract.
  • The salient conditions that needed to be met for a situation to constitute a force majeure event were that there needed to be “restrictions on monetary transfers and exchanges” that “cannot be overcome by reasonable endeavours from the Party affected.”