[2025] EWHC 2036 (Comm)

I accept the Defendant’s submission that the contra proferentem approach to construction of the EPS Sanctions Clause does apply here. Applying the approach of Teare J at [37] of the first decision of The Triton Lark, the right of a charterer to direct the chartered ship was a “key right” and any limitation on that right had to be “clearly expressed”. Clauses such as this are not exclusion clauses in the sense that they directly exclude liability for breach, but they are secondary clauses that permit departure from clear and important primary rights established elsewhere in the contract: see Exclusion Clauses and Unfair Contract Terms, 13th Ed, §§1-015-1-016, and The Angelia [1973] 1 WLR 210, at p. 230H per Kerr J (as he then was).

Contractual terms that permit a party to withhold contractual performance are to be construed narrowly, and ambiguity is to be resolved against a party seeking to rely on them: see The Crudesky [2013] EWCA Civ 905 ; [2014] 1 Lloyd’s Rep 1, per Longmore LJ at [25]; RTI v. MUR [2024] UKSC 18; [2024] 2 WLR 1350, at [44]-[46], per Lords Hamblen and Burrows JJSC.

The EPS Sanctions Clause must be construed as a whole. The material part containing the Claimant’s right to withhold contractual performance at sub-clause (C) is obviously key, but regard must also be had to the Defendant’s warranty and representation in sub-clause (A) that it “WILL NOT EXPOSE THE OWNERS, THE VESSEL OR ITS MANAGERS, CREW, THE VESSEL'S INSURERS OR RE-INSURERS TO SANCTIONS”.

In my judgment the Claimant bears the burden of proof in establishing that it is entitled to rely upon its rights under sub-clause (C). In order to satisfy the “reasonable judgment” test, applying the approach of Eder J in the Falkonera Shipping case, it has to establish that it made an objectively reasonable decision, in the sense that it was a decision that a reasonable shipowner could reasonably have come to in the circumstances.

I accept Mr Coldrick’s submission that where a shipowner makes a judgment that compliance with an order will give rise to an exposure to sanctions (the proper construction of which I consider below) and there is a prima facie objectively reasonable basis for that judgment, the evidential burden shifts to the charterer.

Looking at the wording of sub-clause (C), I do not accept Mr Shirley’s submission that the words “SUCH RISK” do not appear to be intended to add anything material. These words are not simply surplus to requirements and, in my judgment, must add something, when determining the reasonableness of the judgment.

I therefore do not accept Mr Shirley’s submission that, properly construed, sub-clause (C) requires the Claimant to establish that:

The reference to “SUCH RISK” refers to the “REASONABLE JUDGMENT” that it “WILL EXPOSE THE OWNERS … TO SANCTIONS”. That means the Claimant does not have to show that any of the listed parties would be in breach of sanctions, but that it had reached a judgment that a reasonable shipowner could reasonably have come to in the circumstances that the listed parties were exposed to sanctions, in that they were subject to the risk of sanctions or were open to the danger of sanctions.

In the course of oral argument, I put an example of making a reasonable judgment as to whether someone will be exposed to COVID. That does not entail establishing that they would catch COVID, but whether there was a real and reasonable danger that they were subjected to the risk of catching COVID.

I am fortified in my conclusion by both decisions of Teare J in The Triton Lark . I accept that the wording of the material clauses in that case was different, in that it referred to “may be exposed” or “may expose” rather than “will expose” . However, the judgments related to the meaning of the words “exposure to acts of piracy” and “exposure to War Risks”. When one reads [3], [5] and [10] of the second decision carefully, I do not find that there is a material departure from his approach at [38] of his first decision, and I accept Mr Coldrick’s submissions in this regard. After hearing further submissions from the parties, at [3] of the second decision, the learned Judge referred back to [38] of his first decision, where he applied the OED definition, which appeared to him to be appropriate, saying “exposure to acts of piracy means that the vessel is subject to the risk of piracy or is laid open to the danger of piracy.” At [5] he set out the rival contentions of the parties and at [10] of the second decision, he said:

“I therefore consider that the phrase “exposed to War Risks” should properly be construed as referring to a situation which is “dangerous”. That is consistent with the OED definition which I sought to paraphrase in my judgment but, more importantly, flows naturally from the wording of the clause and thereby gives effect to the parties’ intentions.”

I did not find the Mamancochet case of great assistance, because, as Mr Shirley frankly admitted, there one was dealing with an ex post facto decision, which was not what faced the Claimant in the present case. Furthermore, Mr Coldrick observed, in that case, in contrast to this one, there was no express mention of being exposed to the ‘risk’ of a sanction, a point noted by Teare J at [46].

Here what is contemplated by sub-clause (C) is the assessment of a reasonable commercial person as to whether a real risk or danger is present, which is something that is realistically achievable in a relatively short timeframe. As Mr Coldrick submitted, correctly in my view, tanker shipping is a fast moving commercial environment and decisions need to be made quickly.

Such a construction is consistent with the contra proferentem rule, because it gives meaning to the words “SUCH RISK”, in the context of “EXPOSE TO SANCTIONS” and when one does so, there is no ambiguity.