The Commercial Court’s decision in the recent case of Tonzip Maritime Ltd v 2Rivers Pte Ltd (The ‘Catalan Sea’) [2025] EWHC 2036 gives valuable guidance on the approach parties may take to assessing the risk that their counterparties are subject to sanctions. Summary by Lucinda Roberts, Senior Associate.

Sanctions are a constantly evolving response to the ever-changing global political landscape. The Commercial Court’s decision in the recent case of Tonzip Maritime Ltd v 2Rivers Pte Ltd (The ‘Catalan Sea’) [2025] EWHC 2036, examines the operation of a sanctions clause, together with the practical steps which parties must take when assessing a potential sanctions risk and reaching a decision on whether or not to continue with the transaction.

The Facts

In November 2021, prior to the Russian invasion of Ukraine, the Claimant Owners (Tonzip Maritime Ltd) (Owners) chartered the "CATALAN SEA" (the Vessel) to the Defendant Charterers (2Rivers Pte Ltd, formerly Coral Energy Pte Ltd) (Charterers) for a voyage from a port in the Ust Luga to Primorsk range (i.e. a Russian Baltic Sea port) to the Mediterranean for a cargo of oil (the CP).

Charterers ordered the Vessel to load at Primorsk and identified the shipper as Neftisa. Although there were no general sanctions on Russian oil at that point, Owners’ own sanctions checks flagged an association between Neftisa Mr Mikhail Gutseriev, a Russian businessman who was designated by the UK and EU in the Summer 2021 under sanctions laws relating to Belarus. Owners’ sanctions checks identified Mr Gutseriev as the indirect owner of Neftisa and the Chairman of its board of directors as of July 2021.

The CP contained the Eastern Pacific Voyage Charter Trade and Economic Compliance Clause (the Sanctions Clause), by which Charterers warranted that the performance of the CP would not expose Owners (including the Vessel, its crew and insurers) to any sanctions risks. This clause entitled Owners to refuse to comply with orders that, in their reasonable judgment, would expose them to such risks.

In reliance on the Sanctions Clause, Owners refused to load the Neftisa cargo and sought alternative voyage orders. Charterers attempted, unsuccessfully, to provide evidential reassurance to Owners that there was no sanctions risk. These included legal opinions from Herbert Smith and Baker McKenzie to the effect that if certain assumptions were made, Neftisa was not owned or controlled by Mr Gutseriev, and therefore there was no exposure under UK or EU sanctions. Charterers then purported to cancel the CP on grounds of Owners’ refusal to load, and fixed another vessel to load the cargo. Owners treated Charterer’s purported cancellation as a renunciation and terminated the CP for repudiatory breach.

Owners claimed USD 1,020,099.80 from Charterers in damages for a repudiatory breach of the CP. Charterers counterclaimed USD 233,600 from Owners for wrongful termination.

The Legal Case

The dispute was heard in the Commercial Court before Mr Andrew Hochhauser KC sitting as a Deputy Judge, who ultimately held that Owners’ decision to refuse to load the Neftisa cargo was not reasonable, such that their claim failed.

In reaching his decision, he considered: i) the terms and effect of the Sanctions Clause, ii) the relevant sanctions legislation and iii) the available evidence.

1. The Sanctions Clause

The Sanctions Clause limited Charterers' fundamental right to provide orders to the Vessel, so it must be interpreted contra proferentem: i.e. it should be interpreted against Owners where there is ambiguity. Given that Owners relied on the Sanctions Clause to refuse Charterers’ voyage orders, the burden was on Owners to show that their refusal to load the Neftisa cargo was an objectively reasonable decision, i.e. one a reasonable owner could have come to in the circumstances.

Charterers’ argument that an actual breach of sanctions was required was rejected: a risk of exposure to sanctions, in Owners’ reasonable and objective judgment, was sufficient. However, subjective belief and speculation was not enough: Owners must act in good faith, make necessary inquiries and rely on available evidence.

2. The Relevant Sanctions Legislation

Determination of whether, at the relevant time (i.e. when Owners refused Charterers’ orders), there was an objective risk that Owners might be exposed to sanctions, was required. The relevant legislation required that the designated sanctioned person (Mr Gutseriev) had direct or indirect ownership of the relevant company (Neftisa), i.e. whether he “calls the shots”.

3. The Evidence

Evidence of the alleged links between Mr Gutseriev and Neftisa was examined. The Judge decided he was entitled to consider all the evidence available to Owners at the time of their decision, even though they may not have actually considered it when they made the decision.

1. Owners carried out their sanctions checks using Refinitiv/World-Check, which (based on reports dated between July 2015 and July 2021) confirmed the association between Neftisa and Mr Gutseriev, who was sanctioned by the EU and UK. Mr Gutseriev was identified as the indirect owner of Neftisa and the chairman of its board of directors.

2. Owners possessed a July 2021 Infospectrum report which indicated that, due to his designation by the EU, Mr Gutseriev had stood down from a Neftisa “associated company” (PAO Russneft). However, the report was not made available to all the relevant decision makers at the material time.

3. Charterers provided written confirmation on Neftisa letterhead dated November 2021 that Mr Gutseriev was neither on the board nor the “controlling person”, which was “based on information provided by the sole shareholder” of Neftisa. The nature of that information was not given, no resignation or other document was provided to show that Mr Gutseriev had resigned from the board, and no documentation from the Russian equivalent of Companies House was referenced or provided.

4. Charterers relied on a Kommersant Newspaper article dating from July 2021, which stated that Mr Gutseriev had stepped down as chairman and had transferred control of Neftisa to his brother.

5. Charterers provided three Russian legal opinions from international law firms (two dating from July 2021 and the third from November 2021), that Neftisa was not owned or controlled by Mr Gutseriev and so was not subject to EU or UK sanctions (albeit they were subject to several assumptions and contained numerous caveats).

Judgment

Following his review of the evidence, the Judge concluded that there was insufficient evidence to show that Mr Gutseriev controlled Neftisa in November 2021. He held that Owners had relied on historic rather than contemporaneous reports and had failed to take account of all the available evidence.

As such, Owners had failed to satisfy the requirements of the Sanctions Clause, and therefore had not made a reasonable, objective decision that there was a risk of sanctions exposure. This meant that Owners’ claim failed, and Charterers’ counterclaim succeeded. 

Comment

The various sanctions regimes contracting parties are required to comply with are constantly evolving in response to the global political landscape. Parties are reliant on the evidence available at the time to make an informed decision to protect their position, and tools such as Refinitiv/World-Check are widely used in this regard.

While this judgment does not invalidate the reliability and effectiveness of such resources, it does emphasise that, in reaching a decision as to a potential sanctions risk, regard must be had to all the evidence available at the time, which requires objective critical analysis rather than pure speculation. That said, it neither offers definitive guidance as to exactly what documents should be sought when conducting a sanctions risk assessment, nor does it take account of the reality that certain parties may seek to deliberately circumvent sanctions legislation.

The decision reinforces the importance of due diligence checks on counterparties in contractual chains, particularly where there is a potential sanctions risk, particularly in time-critical situations. The practical recommendation arising from this decision is for parties to ensure that they use multiple sources of information, raise further enquiries where inconsistencies and/or ambiguities arise, and keep thorough records of both the evidence they collect and their decision-making process.

The importance of clear drafting in exclusion clauses, and an awareness of the evidential burden when disputes arise is underscored. Given the complexity of these issues and the potential ramifications of sanctions breaches on the one hand and a liability for wrongful termination of a contract on the other, specialist legal advice should be sought i) to ensure that contractual provisions concerning sanctions are appropriate, and ii) where there is any ambiguity over a potential sanctions risk.

Owners have been granted permission to appeal the decision, and the case is now pending before the Court of Appeal, so it remains to be seen whether this first instance decision will be approved or overturned.