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US sanctions & freight payments - will '€' work instead of '$'?

To avoid US sanctions, Charterers sometime make payments to owners in currencies other than USD. What if the C/P provides that freight is to be paid in USD then can the owner refuse accepting payment in alternative currencies and claim force majeure to suspend performance? Question came up in MUR Shipping v RTI Ltd. [2022].

One of the charterers’ principals was placed on the OFAC SDN list. The shipowners informed charterers that sanctions will prevent dollar payments required under the C/P, and as a result they claim force majeure. Charterers offered to pay them in Euros instead and insisted that since owners are not US based, they will not be caught by the US sanctions. Lower court had decided against charterers, noting that owners can’t be forced to accept non-contractual performance. Charterers were now appealing.

The Appeal Court placed a lot of emphasis on how the C/P defined the force majeure event. It was defined as one that cannot be overcome by ‘reasonable endeavours’ from the party affected, i.e the shipowner in this case. Exercising ‘reasonable endeavours’ required the shipowner to accept payment in Euros and convert them into dollars. Owners would have suffered no damage as a result. Afterall, as the Appeals Court noted, the purpose of hire / freight payments was that a shipowner should receive the right quantity of the specified currency in its bank account at the right time. It is irrelevant if the payment is made in Euros and then requires to be converted to USD.

2:1 majority in favour of the charterer!

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