MARITIME LAW SANCTIONS RISK AND THE RIGHT TO REFUSE CARGO
Following the UK Supreme Court's refusal to hear a final appeal in October 2026, a landmark Court of Appeal ruling clarifies when shipowners can lawfully refuse cargo orders due to sanctions risks. The court established that a shipowner does not need to prove a breach is more likely than not, but must form a reasonable judgment of a real risk of sanctions exposure.
When can a shipowner lawfully refuse an order to load cargo because of a potential sanctions risk?
In a judgment delivered by the Court of Appeal of England and Wales on 22 May 2026, the court considered the interpretation of a sanctions clause in a voyage charterparty involving the carriage of oil from Russia to Turkey.
The dispute arose after the shipowner refused to load the cargo, citing a potential connection between the cargo supplier and a sanctioned individual. The charterers subsequently cancelled the charterparty, leading to a dispute over contractual liability.
The legal significance
The Court of Appeal held that, under the specific wording of the clause, the shipowner did not have to conclude that a sanctions breach was more likely than not to occur. It was sufficient to form a reasonable judgment that compliance with the loading orders would expose the relevant parties to a real risk of sanctions liability.
Importantly, the right to refuse performance was not automatic, the assessment had to be reasonable in the circumstances.
On 6 October 2026, the UK Supreme Court refused permission to appeal, stating that the application did not raise a point of law of general public importance. This was a refusal of permission to appeal, not a new Supreme Court ruling on the merits.
Why is this decision important?
1. Contract drafting: The precise wording of sanctions clauses can determine when a shipowner is entitled to refuse loading orders.
2. Commercial decision-making: Companies may need to assess sanctions exposure before proceeding with a cargo operation.
3. Contractual liability: Refusing performance without a sufficiently reasonable basis may lead to a dispute over breach of contract.
For shipowners, charterers and commodities traders, the key lesson is that sanctions clauses should clearly define the relevant risk threshold and the contractual consequences of refusing performance.
In international shipping, the distinction between a real risk and a probability of breach can have significant contractual consequences.
