By Helen Ryan, Trainee Solicitor, Duane Morris LLP
On 15 May 2024, the Supreme Court handed down judgment in RTI Ltd v MUR Shipping BV [2024] UKSC 18.
The appeal centred around the issue of whether a force majeure clause which required the affected party to exercise ‘reasonable endeavors’ to overcome the effects of the relevant event or state of affairs meant that the other contracting party had to accept an offer of non-contractual performance.
Background
In 2016, MUR Shipping BV (MUR) and RTI Ltd (RTI) entered into a contractual arrangement which involved MUR making shipments of bauxite to RTI from Guinea to Ukraine. The payments for the shipments were to be made in US dollars.
Clause 36 of the contract stated that, “Subject to the terms of this Clause 36, neither Owners nor Charterers shall be liable to the other for loss, damage, delay or failure in performance caused by a Force Majeure Event as hereinafter defined…”.
Further, “A Force Majeure Event is an event or state of affairs which meets all of the following criteria:…it cannot be overcome by reasonable endeavors from the Party affected.”
In 2018, MUR sought to invoke clause 36 by relying on the fact that RTI would be unable to make payments in US dollars as a result of US sanctions. RTI offered to pay for the shipments in euros and to also bear any of the conversion costs and/or losses. However, MUR rejected the offer and affirmed their contractual right to be paid in US dollars.
At the Court of Appeal, it was held that the force majeure clause could not be relied on by the MUR when faced with an offer to pay in euros. This decision was subsequently appealed to the Supreme Court.
At [24] of the Supreme Court judgment, the Respondent argued that “a reasonable endeavours proviso will require the party invoking the force majeure clause to accept an offer of non-contractual performance if: (i) it involves no detriment or other prejudice to the party seeking to invoke force majeure, and (ii) it achieves the same result as performance of the contractual obligation in question.”
The appeal was allowed, with the court stating (at [65]) that MUR “was not required to give up its contractual entitlement to be paid in US dollars even if it would have been reasonable to accept RTI Ltd’s offer of payment in euros.”
The decision highlights the parameters for which the term ‘reasonable endeavours’ is to be understood and serves as a reminder of the reverence one must hold for the ‘contractual right’. It is also a rare instance of a successful appeal on a point of law under section 69 of the Arbitration Act.