The sanctions regimes adopted by the European Union and its allies following the invasion of Ukraine on 22 February 2022 have significantly affected trade in goods, technology and services with Russia by banning the majority of exports and supplies of services. As a result, many exporters or service providers found themselves unable to perform their contracts. Nevertheless, amending Regulations to Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine, have provided for time extensions for the execution of certain contracts concluded before the various dates of entry into force of the sanctions, or ancillary contracts necessary for the execution of such contracts provided that an authorisation be requested from the competent authorities before a date set by the Regulations. However, these derogations are limited to a few types of contracts for well-defined periods. Therefore, when these provisions cannot be used, some contractors have been able to seek relief from performance under “force majeure”. Whether or not force majeure can be claimed depends on the nature of the contract. Indeed, some contracts include force majeure clauses, in which case it is necessary to refer to the letter of said clauses to know under which conditions it is possible to use them. If the contract does not provide for such clauses, it is advisable to consider the possibility of claiming force majeure in the chosen jurisdiction in the event of a dispute concerning the performance of the contract. It should be noted that it is common for contracts with Russia to contain international arbitration clauses, in which case the arbitral tribunal may apply different laws depending on the contractual provisions and the will of the parties. Anyway, the restrictive measures adopted in response to the invasion of Ukraine may constitute force majeure in many jurisdictions.

However, after a certain period of time following the entry into force of the various packages of sanctions, can force majeure still be claimed for ongoing contracts?

We shall focus on force majeure claims in the context of international sanctions under French law (I), before looking at force majeure in the context of international arbitration (II) and analysing the issues relating to the temporality of force majeure claims (III).

I-              Claiming force majeure in the context of sanctions against Russia under French law

Under French law, force majeure is governed by Article 1218 of the Civil Code, which states that ” force majeure is constituted in contractual matters when an event beyond the debtor’s control, which was not reasonably foreseeable at the time of the conclusion of the contract and whose effects cannot be avoided by appropriate measures, prevents the debtor from performing his obligation“. Thus, if the conditions of unforeseeability, exteriority and irresistibility are met, force majeure can be claimed, so that when the impediment is temporary, contractual performance is suspended and when the impediment is definitive, the contract is terminated by law. However, as the French Court of Cassation very recently recalled, ‘whereas, in any event, only an event of an unforeseeable, irresistible and external nature constitutes force majeure; […] these characteristics are assessed in concreto’[1].

Regarding the French co-contractor, at the beginning of the invasion, he found himself facing an unpredictable situation, since no one had foreseen the extent of the international sanctions adopted following the invasion of Ukraine by Russia. He is also confronted with a situation of externality and irresistibility, since the situation exceeds his control, and he is unable to take measures to avoid the effects of the sanctions.

By contrast, the French Court of Cassation, faced with a force majeure claim by an Iranian bank targeted by UN sanctions, ruled in a decision of 10 July, 2020, that “freezing the assets of a person or entity affected by this measure because of its activities does not constitute a case of force majeure for the person who is subject to it, for lack of exteriority”[2]. Consequently, the Russian co-contractor who is nominally targeted by restrictive measures will not be able to claim force majeure, since he will not meet the condition of exteriority.

II-             Claiming force majeure in the context of international sanctions before international arbitration courts

Concerning sales between companies, Article 79 of the United Nations Convention on Contracts for the International Sale of Goods signed in Vienna in 1980, to which both France and Russia are parties, states that “a party is not liable for a failure to perform any of his obligations if he proves that the failure was due to an impediment beyond his control and that he could not reasonably be expected to have taken the impediment into account at the time of the conclusion of the contract or to have avoided or overcome it, or its consequences”.

In particular, this definition has been reproduced in similar terms in Article 7.1.7 of the UNIDROIT Principles of International Commercial Contracts. As explained in the Preamble of the Principles, although the Principles are not binding per se, “they shall be applied when the parties have agreed that their contract be governed by them. They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like”.

Thus, the criteria of force majeure under French law are mirrored at the international level, so that once again, the adoption of sanctions against Russia may, depending on the particular situation, constitute force majeure.

III-           Validity of the unforeseeability factor several months after the invasion

However, the question of unforeseeability arises in relation to contracts concluded after the invasion of Ukraine concerning areas which were not subject to sanctions at the time of conclusion, but which later became so.

Indeed, several arbitral awards of the International Court of Arbitration of the International Chamber of Commerce (ICC) have held that, as the relevant export controls came into force before the conclusion of the contract, the factor of unforeseeability was lacking for the situation to qualify as force majeure[3].

Consequently, it is then necessary to determine at which point one can consider that one is faced with an unforeseeable situation. In the medical field, for example, it was considered that the dengue epidemic was recurrent and therefore predictable[4] or that the arrival of the H1N1 virus had been widely predicted even before the implementation of health regulations[5]. Regarding the Coronavirus pandemic, it was recognised that it was not a force majeure situation per se but that certain situations arising from it could be considered as force majeure due to their unforeseeability, exteriority and irresistibility[6]. This can partly be explained by the unprecedented scale of restrictions adopted in response to the pandemic.

Therefore, in the context of the war in Ukraine, in the current absence of case law on the matter, it is important to note that such drastic restrictive measures have never been adopted in a similar context. Therefore, in addition to the war itself, the fait du Prince[7] resulting from it can be deemed force majeure, even several months after the entry into force of the first sanctions measures taken following the invasion of Ukraine. Thus, it is possible to consider that even for contracts signed after the invasion of Ukraine relating to areas that a person acting in good faith could not have imagined would be affected by new sanctions, force majeure could be characterised.

Conclusion

  In conclusion, it is essential to recall that the force majeure claim to justify the non-performance of the provisions of a contract requires the presence of factors of exteriority, irresistibility and unforeseeability, which are analysed on a case-by-case basis. In the context of the war in Ukraine, the sanctions adopted against Russia were of such unprecedented magnitude that it would be possible to consider that the different waves of sanctions were all unforeseeable.

            Regardless, it must be stressed that Regulation (EU) 833/2014 establishes an “anti-claims shield”[8] in the event of litigation or arbitration, which as highlighted in the decision of the Quebec Court of Appeal of 15 February 2000 in the case of La Compagnie Nationale Air France v. Libyan Arab Airlines, does not render the dispute non-arbitrable[9]. Accordingly, Article 11(1) of Regulation (EU) 833/2014 specifies that “no claims in connection with any contract or transaction the performance of which has been affected, directly or indirectly, in whole or in part, by the measures imposed under this Regulation […] shall be satisfied”.

            Substantially, companies that continue to do business with Russia are advised to assess the compliance of their current contracts with the various sanctions and to ensure that clauses relating to the impact of international sanctions are included when concluding new contracts.

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[1] Cour de cassation, Chambre civile 3, 7 décembre 2022, n°21-12.604.

[2] Cour de cassation, Ass. Plén., 10 juillet 2020 n° 18-18.542 et 18-21.814.

[3] Recueil des sentences arbitrales de la CCI 2016-2020, Affaires 2216, 3093/3100 et 3740, Kluwer Law International, 15 janvier 2022.

[4] Cour d’appel de Nancy, 1ère chambre, 22 novembre 2010, n° 09/00003.

[5] Cour d’appel de Besançon,  8 janv. 2014, n° 12/02291.

[6] Cour d’appel de Colmar, 6ème chamabre, 16 mars 2020, n° 20/01142 ; n° 20/01143 et n° 20/01206.

[7] French legal concept used in French administrative law to designate a measure taken by the administration which has an impact on a contract to which it is party or more broadly, an arbitrary act by a government, head of state or other public authority.

[8] Pierrick Le Goff, Thierry Titone, Matthieu Dary, Natalia Ivanytska et Thibaut Brenot, « Sanctions contre la Russie : enjeux juridiques et impacts contractuels », Degaullefleurance [en ligne], 18 mars 2022.

[9] Decision of the Québec Court of Appeal [2000] R.J.Q. 717, J.Q. No. 410.