The Court of Appeal's decision in Tonzip Maritime (Singapore) Pte Ltd v 2 Rivers Pte Ltd (The "Catalan Sea") [2026] EWCA Civ 641 has provided much-needed clarity on one of the most difficult questions facing shipowners in today's sanctions environment: how certain must an owner be before refusing to perform a voyage on sanctions grounds?
Sanctions compliance is rarely black and white. Owners are often required to make decisions quickly, on incomplete information, against the backdrop of severe regulatory, reputational, and insurance consequences if they get it wrong. Recognising these commercial realities, the English Courts have recognised that where a sanctions clause is framed by reference to an owner's "reasonable judgment", proof of an actual sanctions breach is not required.
The industry has awaited finality with interest and, following the Supreme Court's refusal of permission to appeal, the Court of Appeal's judgment now stands as the leading authority on the issue.
Background
The dispute arose from a voyage charterparty concluded in November 2021 for the carriage of crude oil from Primorsk, Russia, to the Mediterranean. The charterparty contained a sanctions clause permitting owners to refuse employment orders which, in their reasonable judgment, were prohibited by sanctions or would expose the owners, vessel, managers, crew, or insurers to sanctions.
Prior to loading, the owners conducted sanctions screening on the shipper, Neftisa, which indicated an association between Neftisa and Mikhail Gutseriev, who had become subject to EU and UK sanctions during 2021 due to his connections with the Belarus regime.
The charterers sought to allay the owners' concerns by producing evidence suggesting that, prior to entering into the charterparty, Mr Gutseriev had transferred control of Neftisa to his brother and had retained only a minority interest. However, questions remained as to whether that restructuring genuinely severed his control of the company or whether it might be viewed by regulators as an attempt to circumvent sanctions.
Faced with that uncertainty, the owners refused to load the cargo, maintaining that the proposed voyage exposed them to a sanctions risk. The resulting stand-off led both parties to allege repudiatory breach and claim damages.
Reasonable apprehension of risk
At first instance, the Commercial Court accepted the owners' construction of the relevant sanctions clause. The court held that the clause did not require owners to establish, on the balance of probabilities, that performance would actually breach sanctions. Rather, the relevant question was whether there was a reasonable apprehension of sanctions risk.
However, despite accepting the owners' interpretation of the clause, the Commercial Court found that the evidence available at the relevant time did not justify the owners' refusal to perform. In the judge's view, the material relied upon did not establish a sufficiently reasonable basis for apprehending sanctions exposure.
The Court of Appeal upheld the Commercial Court's interpretation of the sanctions clause but reached the opposite conclusion on the facts. Giving the leading judgment, Foxton LJ held that the clause was concerned with exposure to sanctions risk rather than proof of an actual sanctions breach. The word "expose" naturally referred to the possibility of becoming subject to sanctions consequences, rather than requiring certainty.
The charterers subsequently sought permission to appeal to the Supreme Court. Permission was refused on 6 October 2026, with the Supreme Court concluding that the application did not raise a point of law of general public importance. The Court of Appeal's judgment accordingly remains the leading authority on the interpretation of sanctions clauses framed in these terms.
Commercial realities
In short, owners did not have to prove that sanctions would in fact be breached; it was enough that they reasonably considered there to be a genuine risk. That distinction may sound technical, but commercially it is critical. The reality of today's complex sanctions environment is that an owner who must prove an actual sanctions breach before acting may find itself forced to perform a voyage despite significant compliance concerns. By the time certainty is proven, it may be too late.
Instead, the Court of Appeal held that the relevant question is whether the owners had a reasonable apprehension of a real risk of sanctions exposure. That conclusion reflects commercial reality. Sanctions assessments are rarely undertaken in ideal circumstances. Ownership structures may be opaque, information may be unreliable, and designated individuals do not always disappear neatly from corporate structures after being sanctioned. In such circumstances, the Court recognised that requiring owners to establish a definitive breach before invoking a sanctions clause would largely deprive the protection of practical value.
Practical implications
Owners seeking to rely on sanctions clauses which refer to reasonable judgment and exposure to risk, such as in this case, may draw comfort from the judgment in terms of the Court of Appeals pragmatic approach to the reasonable judgment threshold.
However, the judgment does not give owners carte blanche to reject problematic cargoes or voyage orders. This decision was very much determined on the facts. In each case, the court will focus on the reasonableness of the owner's assessment and contemporary screening results, compliance reports, intelligence, and other documentary evidence will continue to be crucial.
It is also important to note that this judgment is bespoke to the relevant sanctions clause used in this case and will not offer a guiding principle for all scenarios. The allocation of risk between owners and charterers will depend on the precise wording agreed in the charterparty. In this instance, the wording of the clause offered the owners some leeway, but not all clauses are quite so flexible. The BIMCO sanctions clause for charterparties, for example, adopts a far more black and white approach which, whilst less forgiving, perhaps leaves less scope for contractual uncertainty. Either way, the case demonstrates the growing importance of carefully drafted sanctions clauses.
This judgment will no doubt be welcomed by owners, insurers and compliance teams alike in an era where sanctions concerns have become a routine feature of maritime trade. Where owners are required to make difficult real-time decisions in a rapidly changing regulatory environment, it seems appropriate that the law does not demand perfect foresight but merely a reasonable assessment of the risks actually facing them.
DAC Beachcroft's dedicated shipping and sanctions specialists have extensive experience advising on the issues covered in this article. If you would like to discuss any of the issues raised in this article, or would like further information, please get in touch with Philippa Langton or your usual DAC Beachcroft contact.
Sign up to receive regular updates about International Sanctions here.
