Posted: 06/08/2025
A recent Commercial Court decision in Tonzip Maritime Ltd v 2Rivers PTE Ltd [2025] EWHC 2036 (Comm) provides important guidance on the use of sanctions screening tools in commercial transactions and the legal threshold for terminating contracts on sanctions-related grounds.
It was decided by the Commercial Court that the owner's decision to refuse to load the cargo based on a report from Refinitiv/World-Check (a common sanctions screening software) which said the shipper was both associated to a sanctioned individual and indirectly owned by a sanctioned individual until very recently was not reasonable.
Confirming a recent decision of Foxton J in Litasco v. Der Mond Oil [2023] EWHC 2866 (Comm), if a judgment is based on 'speculation' it will not be an objectively reasonable judgment and that there must be evidence and/ or documents to support such a judgment for it to be considered reasonable. The judgment will no doubt spark concerns for shipowners, charterers and insurers alike.
The claimant, Tonzip Maritime Ltd, chartered the vessel Catalan Sea to the defendant, 2Rivers PTE Ltd (formerly Coral Energy Pte Ltd) for a voyage from a port in the Ust Luga to Primorsk range to the Mediterranean to carry a cargo of oil.
The defendant ordered the vessel to load at Primorsk where the shipper of that cargo was identified as Neftisa. It was agreed that performance of these orders would have required, among other things, making funds in the form of the bill of lading available to or for the benefit of Neftisa.
Based on results from its internal sanctions checks revealing that Neftisa was associated with Mr Gutseriev, who was sanctioned by the EU and UK, the claimant refused to load the Neftisa cargo and instead requested alternative voyage orders.
After trying to convince the claimant that there was no risk of exposure to sanctions, the defendant purported to cancel the charterparty on grounds of the claimant's refusal to load the Neftisa cargo. The claimant replied that the defendant's purported cancellation amounted to renunciation of the charterparty and terminated the charterparty for repudiatory breach.
A key clause in the charterparty was the Eastern Pacific Voyage Charter Trade and Economic Compliance Clause (the EPS Sanctions Clause) which provided that:
Sanctions screening checks were carried out by the claimant using Refinitiv/World-Check which confirmed that Neftisa was associated with Mr Gutseriev, who was sanctioned by the EU and UK, and identified him as the indirect owner of Neftisa and the chairman of its board of directors. This was reported between July 2015 and July 2021 and no further information was reported after August 2021.
Although it was not seen by the claimant's manager at the time, the claimant had possession of an Infospectrum report - another sanctions screening software - which indicated that Mr Gutseriev had apparently stood down from PAO Russneft, which was described as 'an associated company of Neftisa', because of his designation by the EU.
The defendant relied on certain documents either available to the claimant or provided by the defendant to the claimant, from which it is said that it should have concluded that Mr Gutseriev did not own or control Neftisa.
These included:
In coming to a decision, the judge decided that he was entitled to consider all the evidence that was available to the claimant at the time that the decision was made, even though it may not have been considered when making the decision.
The claimant argued that its internal compliance procedures, which included the use of Refinitiv/World-Check, revealed potential links between the Neftisa and Mr Gutseriev. The claimant contended that Neftisa, the entity allegedly involved in the transaction, may have been under Mr Gutseriev’s control, thereby exposing the transaction to sanctions risk.
Mr Tay, a key witness for the claimant, testified that the claimant routinely used Refinitiv/World-Check as part of its due diligence process. He maintained that the decision to terminate was made in good faith and in line with standard compliance protocols.
Ultimately, the claimant could not confirm whether Mr Gutseriev had de facto control over Neftisa and it was on this basis that the claimant considered it would have been exposed to the risk of sanctions.
Conversely, the defendant argued that the claimant had failed to conduct a balanced and objective assessment of the available information. The defendant maintained that, on the basis of the available information to the claimant, it should have concluded that Mr Gutseriev did not own or control Neftisa.
The court ultimately found in favour of the defendant. The judge held that it was for the shipowner to prove its decision was one which, objectively viewed, a reasonable shipowner could reasonably have come to, after which it is for the charterer to prove otherwise.
Notwithstanding the concerns the claimant held, the judge decided that the claimant had not made a reasonable or objective decision in concluding that there was a risk of exposure to sanctions. The key findings were as follows:
Emphasis was placed on the fact that, while sanctions compliance is a legitimate concern, it must be approached with rigour and objectivity. A party cannot rely exclusively on automated or third-party screening tools without critically assessing the underlying evidence.
Commercial parties involved in maritime trade will be acutely aware of the sanctions risks involved in certain trades but following this judgment there are numerous factors that should be considered on each occasion:
Limitations of screening tools
Automated sanctions screening tools like Refinitiv/World-Check are not foolproof. While useful for flagging potential risks, they must be supplemented by a critical review of the facts and available evidence.
Objective assessment required
Parties must make a reasonable and objective assessment of sanctions risk which includes:
Risk of wrongful termination
Where a party terminates a contract based on an unsubstantiated or poorly reasoned sanctions concern, they risk a finding of wrongful termination and exposure to damages. This factual basis for such decisions, especially where they have significant commercial consequences, must be arrived at reasonably and not speculatively on the basis of all the evidence.
Importance of contemporaneous evidence
The key was the availability of the documents and evidence at the time of the decision as they will be used to assess whether the claimant’s concerns were reasonable or speculative. Parties should therefore ensure that their internal compliance processes are well-documented and reflect a balanced approach.
For legal and compliance teams, this case offers several practical lessons:
Tonzip Maritime v 2Rivers is a timely reminder that sanctions compliance must be grounded in careful, evidence-based decision-making. While third-party tools can be valuable, they are not a substitute for legal judgment and critical analysis.
In the interim, a further complication has arisen in this case. The defendant was added to the UK Sanctions List on 17 December 2024 and a further hearing was scheduled for 31 July 2025 to deal with the effect of this. That judgment is awaited.
Given the judge's findings, an application for permission to appeal the decision to the Court of Appeal looks likely to be on the cards.
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