How deep do you need to dive to mitigate against a FM event?
The Russian invasion of Ukraine has turned the spotlight onto two particular types of clause in commodities contracts: sanctions and force majeure (“FM”). The avalanche of global sanctions imposed in response to the invasion created huge challenges for commercial parties and many found themselves having to put sanctions related contractual wording to the test as a result.
In addition, a large number of affected commercial parties triggered the FM clauses in their contracts. Doing so always involves risk: it is difficult successfully to argue that contractual performance has been prevented or delayed by FM, in part because English courts and arbitration tribunals will interpret such clauses strictly and narrowly, against the party seeking to rely on them.
Given all this, a recent decision of the Commercial Court 1 (unrelated to the Ukraine war) has attracted particular interest because it required first the arbitral tribunal and then the Commercial Court to interpret a FM provision in light of the application of sanctions.