Law report: Cargo refusal on basis of 'real risk' of sanctions

The Court of Appeal has clarified that shipowners may refuse to follow a cargo order under a sanctions clause if they reasonably judge there is a real risk of sanctions exposure, even if they cannot prove that a breach is more likely than not.

In Tonzip Maritime (Singapore) Pte Ltd v 2 Rivers Pte Ltd (The Catalan Sea), the court allowed the owners' appeal and dismissed the charterers' cross-appeal. The judgment, cited as [2026] EWCA Civ 641, was published on June 24, 2026. The Court of Appeal heard the case on May 22, 2026.

The charterparty and the clause

The dispute arose from a voyage charterparty signed on November 5, 2021, for the vessel Catalan Sea to carry crude oil from Primorsk, in Russia, to the Mediterranean.

The contract included a sanctions clause allowing the owners not to comply with an order that, in their reasonable judgment, was prohibited by sanctions or would expose them to sanctions. That wording was the focus of the appeal.

The court said the phrase about exposure to sanctions called for a practical commercial assessment. It did not require the owners to prove, on the balance of probabilities, that sanctions would in fact be imposed.

Why the owners refused to load

The owners refused to load the cargo because of concerns about the ownership structure of Neftisa and the possibility that Mikhail Gutseriev still exercised influence over it.

The Court of Appeal said the lower court had asked the wrong factual question. Instead of concentrating on whether Gutseriev actually retained control of Neftisa, the issue was whether the owners could reasonably judge that there was a real risk that he still did.

The judges said the reported transfer of Gutseriev's majority interest to his brother and longtime business partner could reasonably be seen as creating that risk. On that basis, the owners were entitled to treat the sanctions exposure as real rather than speculative.

The case was set against UK and EU sanctions measures concerning Belarus, which formed part of the commercial backdrop to the owners' decision.

What the Court of Appeal decided

The Court of Appeal held that a sanctions clause framed in this way can turn on a reasonable view of real risk, not proof of likely breach. That makes the test forward-looking and commercially workable in a market where ownership and control can be opaque.

The court's reasoning matters because sanctions issues often arise before the underlying facts can be established with certainty. In that setting, a shipowner may have to decide whether the risk is enough to justify refusing performance.

The appeal was allowed and the charterers' cross-appeal was dismissed.

Commercial significance

The ruling is likely to be important for charterparty drafting and freight disputes involving sanctions exposure. It gives shipowners a clearer basis for acting where they reasonably conclude there is a real risk of sanctions, rather than waiting for proof of an actual breach.

For charterers and cargo interests, the decision underlines how commercial risk can shift quickly when ownership, control or indirect influence is uncertain. The court's approach also highlights the need for sanctions clauses to be read against the practical realities of maritime trade.

Lawyers and traders are likely to focus on the decision's treatment of ownership and control, especially in disputes where sanctions exposure turns on indirect influence rather than direct control.

No further immediate court step is indicated in the reporting, but commentary on sanctions clauses and contract drafting is likely to follow.