Can war be considered a force majeure?
Since the consequences of the war in Ukraine increase, it is important to remember some key points when reviewing the provisions on force majeure. Here are some practice-based recommendations.
Firstly, review the agreements, follow the deadlines and notice requirements specified in them and notify the other party promptly of the force majeure situation. Periodic notification of the relevant event of force majeure may also be required. Compliance with these requirements is often a condition for liability relief. You must also respond if you receive force majeure notifications from your partners, even if the contract does not provide for such an obligation. Otherwise, your silence can be treated as consent or full acceptance. It is also important to determine whether the effects of the force majeure are sufficient to suspend or terminate the contract.
Whether a war may be considered as an event of force majeure depends on the terms of the particular contract. In most cases, hostilities whether or not declared a war are referred to in contracts as force majeure and may be grounds for suspension. If not, assess whether the situation and its effects can be considered as a “circumstance beyond reasonable control of the parties” as set out in the contract. Otherwise, the party to the agreement could dispute the existence of force majeure, as Russia claims to be conducting a military operation but not a war.
Also consider whether the war itself caused the inability to perform the contract, or whether it was the consequences of the war such as sanctions, legislation passed by states, or government decisions. For example, on 24 February 2022, a state of war was declared throughout Ukraine, during which the National Bank of Ukraine imposed a moratorium on cross-border payments in foreign currency, which may also hinder contractual payments to and from Ukraine. Russia has also recently announced it is considering approving a state of war, with all its possible consequences.
In certain cases, the authorities of the countries may issue certificates attesting to the circumstances of force majeure. The purpose of such certificates is to confirm and prove the existence of force majeure. On 28 February 2022, in view of the current situation in Ukraine, the Ukrainian Chamber of Commerce and Industry issued a standard official letter confirming the force majeure situation in Ukraine. Businesses can use it as proof of force majeure. However, in the case law, such certificates do not have a greater probative value (prima facie) and are considered only as written evidence. Force majeure certificates do not exempt entities from proving real force majeure circumstances.
As already said, the imposition of sanctions can be regarded as a case of force majeure. EU restrictive measures can be found here. The United States, Australia, Canada, Japan, the UK and several other countries have also announced or are already imposing sanctions on Russia, certain Russian companies and industries. The current list of sanctions does not seem to be exhaustive, so following changes could be considered.
We at Fondia have expertise in assessing the legal impacts of international sanctions on businesses. We can also help drafting guidance on screening the customers/co-operation partners, checking the sanction clauses in agreements and on a case-by-case basis, also checking the background information of counterparties, the termination terms, force majeure terms and code of conducts.
Read more about the topic: A code of conduct - a reason to terminate a contract? & Trade Sanctions and their effect on contracts when doing business in Russia