Hardship and Force Majeure in International Commercial Contracts

Hardship and Force Majeure in International Commercial Contracts

The arbitrators decided that the element of unpredictability was missing. The relevant exchange control laws were already in force prior to the conclusion of the 220 contracts, and it was considered an obligation for buyers to take the necessary steps to obtain currency transfer permits. As this was not the case, they were held responsible for the breach of contract. With regard to the legal consequences of the hardship clause, it should be noted that the hardship provisions recognize that the parties must fulfil their contractual obligations even if the events complicate the performance of what was reasonably foreseeable at the time of the conclusion of the contract. The legal consequence of the difficulty is that the participant, whose underlying circumstances have changed considerably, can still perform the contract and fulfill its contractual obligations, but the service has lost its economic value. Recognition or enforcement of the award would be contrary to public policy in that country. The consequences of hardship are described in Article 6.2.3, which states that the same attitude is reflected in decisions over the duration of a force majeure situation. In the case 170317, it had been established that the party, which was to build a turnkey factory, had to stop the work due to the outbreak of hostilities. After the end of hostilities, that party refused to continue and complete the work on the grounds that its Government had withdrawn the necessary export financing facilities, that it was not possible to obtain the necessary visas for its personnel and that its security could not be maintained. After examining the principle of force majeure and the theory of frustration, it is important to understand the relevance of the term “hardness” in a contractual balance in order to fully understand the details associated with international trade agreements. In both cases, it was established during the proceedings that the relevant exchange control laws were already in force prior to the conclusion of the contracts. Buyers were therefore aware that approvals may not have been granted for a particular transaction.

In Case 2216, it was also shown that the buyer probably did not even take the necessary steps to obtain the necessary authorizations. It is hoped that once the new ICC rules have been finalized and recommended for implementation, they will have a beneficial unifying effect in the area of force majeure and hardship clauses, thus helping to increase the predictability of the consequences they face when a party invokes force majeure or hardship for the parties. An overview of the principle of force majeure and the doctrine of frustration in the face of the ongoing Covid-19 pandemic Parties withdrawing from their contracts have often invoked this doctrine in international relations. This term may be used by a state in the following situations: 1 “Force Majeure,” Black`s Law Dictionary (8th ed., West Publishing Co. 2015). The same principle applies in any event to foreign arbitral awards to be enforced under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.3 Article V(2) of the Convention restricts the possibility for a Member State to enforce a foreign arbitral award falling within the scope of the Convention only by providing that: that recognition and enforcement of an arbitral award may be refused if, finally, a party seeking compensation under the clausula rebus sic stantibus must prove that extraordinary and unforeseeable events have rendered the performance of its obligations unduly burdensome. To the point where they have substantially and completely altered the balance of trade under the treaty (counterpart), which has led to an undue imbalance of mutual responsibilities.7 In addition, an understanding of the principle pacta sunt servanda is essential to assess the interaction associated with the simultaneous application of rebus sic stantibus and pacta sunt servanda in relation to international trade treaties. ==References==Werner Melis is Secretary of the Arbitration Board of the Austrian Federal Economic Chamber. Member of the International Council for Commercial Arbitration (ICCA). This article is an adapted version of the report presented by the author at an ICC seminar on East-West arbitration in Paris from 6 to 9 December 1983. .

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