Getting Comfortable with Instability: Commodities Contracts and Disputes in an Evolving Landscape

Briefing

13 October 2025

9 MIN READ

3 AUTHORS

Commodities trading is currently operating against a backdrop of energy transition, regulatory change, geopolitical instability, supply issues and technological revolution.

All these elements combine to make circumstances perhaps more unstable than ever before for the sector, increasing the risk of disputes. Stakeholders must ensure that their contracts are as watertight and future-proof as possible, allowing them scope to operate in the context of instability whilst minimising exposure to risk.

This article considers some of the uncertainties facing the sector and the scope for potential disputes, as well as suggesting contractual options for mitigating and protecting against them.

Geopolitics

Global tensions remain widespread, and with this comes volatility, including in supply chains and shipping routes. Obvious examples include sanctions against Russia; hostilities in the Red Sea and tensions in the Middle East threatening the closure of the Strait of Hormuz; and the scale and spread of global tariffs. At a national level, domestic need may take precedence over international supply, leading to the imposition of export controls. Added to this, political instability in many countries means that it can be difficult for companies to invest in high value, longer term projects in circumstances where a change of government could lead to a change in policy and therefore a change in support for new or even existing projects.

All of this has the potential to impact upon the exploration, production, trading and transportation of commodities, with the risk of supply shortages, price volatility and disputes.

Regulatory impacts

Going forward, parties are likely to be increasingly affected by compliance and regulatory costs, as well as by the impact of emissions regulations such as FuelEU¹ on the costs of transportation.

It is also fair to say that the uncertainty around the scope and timing of new EU regulation impacts the commodities sector in particular, making it difficult to plan. Whilst aimed at simplifying and paring back the impact of sustainability legislation, the European Commission’s first Omnibus package, introduced in February 2025, has also created uncertainty as to the extent and timing of affected legislation, including CBAM², CSDDD³ and CSRD⁴. Another example is the implementation of the EUDR⁵, which affects the import of certain commodities and their derivative products into the EU. This has already been delayed by a year, until 31 December 2025. It is now facing a possible further one year delay.

Where contracts have been negotiated without taking the impact of such legislation into account, or without the flexibility to allow for a delay in implementation, disputes may arise.

Energy transition

In the longer term, decarbonisation and net zero commitments will create a fundamental shift in the supply of and demand for fossil fuels and hydrocarbons for energy use. The shift is well illustrated by a recent report⁶ showing that in the first half of 2025, solar and wind supply grew fast enough to meet the growth in global demand for electricity, concluding that in 88 countries covering 93% of global demand, renewables overtook coal for the first time on record. Much harder to predict is the pace of this change. Factors affecting this include security of supply and political support for the energy transition.

Both the shift itself and its uncertain progress will inevitably bring uncertainty and complexity to existing long-term agreements, as suppliers and buyers reconsider the suitability and flexibility of their bargains. Short-term and spot contracts are not immune here, with the potential for global events and changes in the demand for, or price of, certain commodities to have an immediate and unexpected impact. The global pandemic, Russia’s invasion of Ukraine and “Liberation Day” in the US are all examples of such events.

Interest in securing a reliable supply of the rare earths and critical minerals required for the energy transition against a backdrop of geopolitical instability is high. New market participants are therefore entering this sector, including in the Middle East⁷. In addition, we are seeing an increase in end users contracting directly with producers, in order to ensure security of supply. One result is likely to be agreements between parties new to the sector and with less well-established trading relationships. Where contractual difficulties arise in such circumstances, for example because of export controls or shortage of supply, newer contractual relationships come under particular pressure and this can lead to an increase in disputes.

Technological revolution

As the world enters a new age of Artificial Intelligence (AI), it is unknown how technology will change and shape the way in which the market functions. Feasibly, change could affect the entire commodities supply chain, including pricing. This has the potential to affect existing long-term commitments with fixed or formula-based pricing mechanisms. Looking forward, will parties have confidence in the bases and conditions upon which they have historically set or agree pricing? The advent of AI brings with it a host of opportunities, but also uncertainty.

Disputes

All these circumstances create the potential for disputes, including in relation to a counterparty’s ability (or willingness) to supply or take delivery of goods, to pay or accept payment, to meet regulatory requirements or to comply with contractual terms in circumstances where the bargain struck has become unprofitable.

How can contracts help deal with instability?

Identify the current instabilities and potential future risks to your business. Repeat this process regularly to take account of change.
When negotiating new contracts, decide what options you would like available in light of those risks and address these expressly in your contracts.
If you regularly contract on your standard terms, when did you last review these? Are they fit for purpose in light of current instabilities and future risk?
Conduct a regular contract audit, to find those contracts which are most vulnerable to the risks you have identified.
For new and existing contracts, some key relevant provisions to consider include:

Termination rights: what rights does your contract provide you and your counterparty and are these appropriate to the context? What are the associated notice provisions? Would renegotiation be a better option?

Force Majeure (FM): under English law, there is no common law doctrine of FM. It will only be available to the extent provided for in the contract. Assess the FM events, notice provisions and remedies in the context of the likely challenges to performance that you and your counterparty could face.

Pricing Mechanisms: consider the suitability of any pricing mechanisms. Is price fixed or benchmarked? Can it be reviewed or renegotiated? If so, what are the triggers? Where possible, address the potential need for adjustment (or otherwise) expressly in the contract.

Export/import controls and regulatory costs: allocate responsibility for the cost of any current (and future) export and import controls, tariffs and regulatory costs in the contract.

Dispute Resolution: Speed and agility can be key to recovering your losses. With this in mind, check which law governs the contract and consider whether it is suitable. Consider whether litigation or arbitration is preferable, taking into account the identity and location of your counterpart. This should include ease of enforcement considerations, as well as the availability of precautionary measures.

Insurance: consider whether there is merit in you (and/or your counterpart) having political risk or trade credit insurance.

HFW comment

The commodities sector is familiar with operating in an uncertain environment but nevertheless, the current context is particularly challenging. The best advice is to be prepared:

identify key current and future risks
negotiate contracts with these in mind
assess the suitability and flexibility of standard form contracts
audit existing contracts (particularly long-term) to identify potential areas of concern
seek legal advice early, at the drafting, negotiating and disputes stages.

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