top of page

OFAC sanctions and payment of charter hire

What do you do as a shipowner if OFAC applies sanctions to charterers by adding them to the SDN list during the currency of C/P? Do you invoke force majeure or accept hire payments in a currency other than USD? The question came up recently before the English courts in MUR Shipping vs RTI [2022]. Perfect timing given the ongoing hostilities in Ukraine.

Here, parent company of charterers was put on the SDN list sometime after parties had concluded a COA with them. Owners invoked FM saying that continued performance will breach sanctions; owners may be exposed to penalties, and dollar payments can’t be made. Charterers suggested that payment be made in Euros instead, which owners must accept since C/P required owners to exercise reasonable endeavours to overcome such situations; and that shipowner being a Dutch company won’t in any case be in breach of sanctions. Tribunal sided with charterers here because of the ‘reasonable endeavours’ clause. Owners appealed.

Charterers’ payment obligations under the COA were to pay US dollars. The Court noted it to be an important contractual obligation notwithstanding the fact that owners’ bank would have anyway converted Euros to USD; and was "persuaded that the exercise of reasonable endeavours did not require the Owners to sacrifice their contractual right to payment in US$, and with it their right to rely upon the force majeure clause". Also, even though sanctions could not be enforced legally or physically at the load port or discharge port, owners would have suffered such as freezing of bank accounts and difficulty in obtaining insurance.

14 views0 comments


Recent posts

bottom of page