[2025] EWHC 2036 (Comm)

The Claimant submitted that the EPS Sanctions Clause expresses the limits of the scope of the service that the shipowner is willing to have its ship perform. The clause should be construed in accordance with the generally applicable principles of contractual construction. The contra proferentem approach to construction does not apply.

The clause must be construed as a whole. This means that in sub-clause C the subsequent words “SUCH RISK” inform the meaning of the words “EXPOSE ... TO SANCTIONS”. The inclusion of the words “SUCH RISK” is a strong indication that the parties, when they used the phrase “EXPOSE ... TO SANCTIONS ”, intended to refer to the risk of sanctions. In the course of oral argument Mr Coldrick advanced his submission in two ways. Initially he submitted that the proper construction of the wording was a risk of exposure to sanctions and then agreed that it was the exposure to a risk of sanctions [See Transcript Day 1, page 17 line 1 to page 18 line 7].

Mr Coldrick relied upon the decision of Teare J in The Triton Lark [2011] EWHC 2862 (Comm); [2012] 1 All ER (Comm) 639. There Teare J considered a war risks clause in a time charter which permitted the owners to reject orders where “it appears that the Vessel, her cargo, crew or other persons on board the Vessel, in the reasonable judgement of the Master and/or the Owners, may be, or are likely to be, exposed to War Risks” The clauses are set out in the judgment at [6].

Teare J had to decide the meaning of “may be, or are likely to be, exposed to War Risks” [35]-[48], and specifically what degree of risk of war risks (in that case, piracy) had to be apparent [36].

The judge did not think that “may be, or are likely to be” could plausibly be construed as identifying two alternative degrees of likelihood, because that would have been confusing [38], so he proceeded to consider the meaning of “likely to be” [39]. The judge rejected the submission that it meant “more likely than not” that the ship would be exposed to piracy, in favour of a requirement that there be a “reallikelihood” of exposure, the word “real” reflecting the need for the conclusion to be based on evidence rather than speculation; a “bare possibility” would not have been enough [40].

At [38] of his judgment, Teare J stated:

“Sub-clause (2) does not require the master or owner to form a reasonable judgment that the vessel may be or is likely to be attacked by pirates.

It requires the master or owner to form a reasonable judgment that the vessel may be or is likely to be exposed to acts of piracy. 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…” [emphasis added]

By analogy, Mr Coldrick submitted that ‘exposure to sanctions’ meant that the owners (or any of the others referred to in the clause) are subject to the risk of sanctions or are open to the danger of sanctions.

Contrary to the Defendant’s assertion, nothing in his second judgment in The Triton Lark [2012] EWHC 70 (Comm); [2012] 1 Lloyd’s Rep 457 amounted to an abandonment by Teare J of what he said in [38] of his first judgment cited above. At [3] of the second judgment he said:

“In my judgment at para 38 I said that: “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”. This followed (or attempted to follow) an extract from the OED which had been put before me and appeared to be an appropriate definition.” [emphasis added]

At [10] of the second judgment, Teare J 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 read as a whole and thereby gives effect to the parties’ intentions.”

As regards “a situation which is “dangerous””, plainly a situation can be dangerous without there being any certainty or inevitability that one will come to harm. In [12] of his second judgment, he said: “What is dangerous will depend upon the facts of the particular case. It will depend upon both the degree of likelihood that a particular peril might occur, in this case acts of piracy, and the gravity or otherwise of the consequences to the vessel, cargo and crew should that peril occur.”

Further Mr Coldrick emphasised that it was important that the EPS Sanctions Clause be understood in its commercial context. Tanker shipping is a fast moving commercial environment and decisions need to be made quickly, for both financial and operational reasons, and without the luxury of time to investigate the sanctions issues in great detail.

This context supports the reading of the clause whereby “exposure … to sanctions” refers to a risk or danger of contravening the relevant sanctions laws, rather than the certainty of an “actual breach”. What is contemplated 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 – not a quasi-judicial assessment on the balance of probabilities – which is not. If a charterer disagrees on the issue of exposure to sanctions and can find some other ship willing to take the cargo, it will quickly seek to do that. Here the Defendant was able to agree the Zuma fixture on 17 November 2021.