Skip to content

War, sanctions and force majeure: a trifecta of trouble for an oil supply agreement

The court has looked at a hindrance” on paying a debt in the context of a force majeure clause and whether a sanctions clause or the general law of sanctions excused payment.

Litasco, a Swiss company wholly owned by a Russian company, contracted to sell Der Mond, a Senegalese company, 950,000 barrels of Nigerian crude. Der Mond missed some rescheduled payment obligations. Litasco applied for summary judgment. Der Mond asserted force majeure and sanctions by way of defences.

Force majeure and debts

The court started from the position that an argument that a party owing an accrued debt obligation is relieved of performance because paying the debt has been made more difficult is one which must be approached with particular circumspection. On the evidence, said the court, it was a lack of hard currency rather than the impact of the Russia-Ukraine war on the international banking system that caused late payment.

Even though the clause only required performance to be “hindered”, a significant level of difficulty was required (approaching but falling short of impossibility) and had not been made out.

English sanctions against Russia under contract and general law

The sanctions defences were made both under the contract and under the general law. The contractual defence failed because the provision required a change in sanctions that were “directly or indirectly applicable to one or both of the parties or to the transaction”. There was no evidence that the English sanctions against Russia were.

In relation to the general law defence (and beyond the scope of a contract blog) the court had to consider what “ownership and control” meant under the English sanctions against Russia. The court felt it was concerned with an existing influence of a designated person over a relevant affair of the company”. It could not be said that President Putin controlled Litasco as obiter comments in the Court of Appeal decision in Mints were argued to suggest. 

Judgment: Litasco v Der Mond