Can the Russian-Ukrainian conflict be qualified as force majeure?
March 9, 2022 2:00 p.m. (UTC+04:00)
As is known, many political and economic sanctions have been imposed on the Russian Federation related to the current situation in Ukraine by international organizations, states and transmission companies. For example, the banning of the global interbank payment system “SWIFT” aimed at hampering the operation of some Russian banks, the termination of the activities of branded companies in this country, etc.
In this case, it should be considered whether such a conflict affects the performance of the contract. If so, will liability be incurred in the event of non-compliance with a contractual obligation?
The party cannot bear liability if it proves that it does not foresee or is unable to foresee the event which prevents it from performing its contractual obligation. Additionally, the event must be outside of the party’s control.
In the meantime, such events are defined as “force majeure events” and are primarily defined in the “Force-Majeure” clause of the contract.
Can the Ukraine-Russia conflict be considered a “force majeure” event?
In answering the question above, the party should bear in mind the following points:
1. Is there a force majeure clause in the contract? If so, does a force majeure clause cover an event that is a real cause of non-performance of an obligation?
It depends on the terms and conditions of the contract. In common practice, the parties state a force majeure clause in the contract. For the avoidance of doubt, it is best to list all events relevant to the conflict mentioned in the contract, such as “an armed conflict”, “war” and “trade penalty”. In addition, it is necessary to check whether the respective events are stated in the contract.
2. Does this event actually hinder the performance of the contractual obligation?
If this is the case, the party must specify that there is no other possibility of performing the contractual obligation. For example:
– can the payment obligation be fulfilled in an alternative transaction instead of a bank transfer?
-Does the buyer have the right to offset the seller’s amount under other contracts instead of making a payment?
– is the supplier able to provide the goods in an alternative source by anticipating the event?
3. Obligation to inform the counterparty
If so, when the party realizes that it is unable to perform its obligation, it shall notify the other party without delay.
In general, the deadline for performance of the obligation is postponed until the date of the end of the event. Failing this, the contract may be terminated early. In any case, it is imperative to review all the terms and conditions of the contract to prevent potential risks.
About the Author: Imamverdi Novruzlu is a lawyer with more than 2 years of experience in the field of law. He specializes in dispute resolution, companies, contracts, intellectual property and more particularly customs law. He is currently an attorney at Legalize Law Firm. For more information about the author, please see the following link: https://legalize.az/en/team/imamverdi-novruzlu
Follow us on twitter @AzerNewsAz