Commercial Disputes Weekly – Issue 20621 May 2024

Force Majeure – Sanctions
In a debate as to the interpretation of a force majeure clause, the UK Supreme Court has held that where the innocent party should use ‘reasonable endeavours’ to avoid the impact of the force majeure event, it does not require them to accept an offer of non-contractual performance. MUR as shipowner and RTI as charterer entered into a contract of affreightment. In April 2018, RTI’s parent company was sanctioned by the US government. This resulted in RTI being unable to make payments in US dollars (as required by the contract). MUR declared force majeure and ceased the monthly shipments. RTI offered to make payments in Euros and cover the cost of converting the currency to US dollars. The Supreme Court held that MUR was entitled to reject this offer (agreeing with the High Court but disagreeing with the arbitral tribunal and the Court of Appeal) and had not failed to exercise reasonable endeavours. The issue was a general one and should be dealt with as a matter of principle rather than focussing on the words of the particular clause. The reasonable endeavours inquiry required consideration of what steps could reasonably be taken to ensure contractual performance, within the limits of the contract. Further, clear words would have been required if MUR were required to forego valuable contractual rights.
RTI Ltd v MUR Shipping BV  [2024] UKSC 18, 15 May 2024 

Tort – Accessory Liability
The UK Supreme Court concluded that where a company had been found liable for the infringement of trademarks, the company directors were not jointly liable unless they knew the essential facts that made the company’s use of the signs wrongful. There was strict liability for trademark infringement and no need to prove any mental element or fault, but the directors had not personally infringed the trademarks. They were said to be liable as accessories by authorising or procuring the infringements. It was not logical that the mental element of liability as an accessory in tort was the same as that required for the primary liability. The directors had procured the infringing acts by the company but had done so in good faith without knowledge that the acts were wrongful. As they had not personally infringed the rights, they were not required to account for profits they had made.
Lifestyle Equities CV v Ahmed [2024] UKSC 17, 15 May 2024

Landlord and Tenant
The High Court has awarded a business tenant damages following misrepresentation by the landlord which resulted in the refusal of a new tenancy. McDonald’s were refused a new tenancy on the basis that the landlord asserted that they intended to open a restaurant called Zen Bento (grounds for opposition in section 30(1)(g) Landlord and Tenant Act 1954). It subsequently transpired that at the time the landlord had given an undertaking to commence trading as Zen Bento as soon as practicable, in fact they had not decided what business they would operate from those premises and ultimately opened a different business. This was illustrated by a number of emails written after the decision refusing the new tenancy. The landlord had misled the court and induced it to make the termination order by misrepresentation as required by section 37A Landlord and Tenant Act 1954. The court held the landlord to be liable under section 37A for damages, the amount of which would be determined at a further hearing.
McDonald’s Restaurants Ltd v Shirayama Shokusan Company Ltd [2024] EWHC 1133 (Ch), 13 May 2024

Jurisdiction
The Commercial Court has continued an injunction against a Russian sanctioned entity, VEB, who commenced proceedings against Barclays in Russia in breach of a clause agreeing to London LCIA arbitration. The arbitration agreement was contained in a contract between Barclays and VEB for currency swap transactions. VEB is the state development bank of the Russian Federation and was sanctioned in February 2022. As a result, Barclays served a notice of early termination of the agreement. Barclays owed VEB a final payment but was unable to transfer the funds due to the sanctions. VEB commenced proceedings in Russia claiming the payment and default interest and asserted that Russian law allowed the arbitration clause to be overridden. The court rejected VEB’s arguments against continuation of the injunction asserting frustration of the contract and delay by Barclays. Conducting LCIA arbitration as a sanctioned entity was likely more inconvenient but the additional administration was not such that the arbitration agreement was frustrated. Although there had been some delay by Barclays, the judge accepted that some commercial sensitivity would be allowed for Barclays to consider the complex task of assessing its exposure and what steps to take.
Barclays Bank plc v VEB.RF [2024] EWHC 1074 (Comm), 10 May 2024

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