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The contract and the applicable law are the two elements based on which companies can invoke the existence of force majeure, but more importantly, to determine whether the sanctions imposed by the European Union on Russia represent such a situation. Why is this important to know? Force majeure triggers the automatic termination of the validity of signed contracts if there is a total and final impossibility of performance of the obligations entered into, or the suspension of performance of contractual obligations if the impossibility of performance is only temporary. How, then, is force majeure defined and what distinguishes it from fortuitous events or unforeseeable circumstances? What should economic operators do in the event of force majeure?
Force majeure is an exemption clause for civil liability and is a genuine exception to the principle of the binding force of the signed contracts. In other words, the parties are normally bound to perform their obligations to the letter, but in the event of force majeure they are released from all or part of their obligations.
In the Romanian Civil Code, force majeure is defined as "any external, unforeseeable, absolutely invincible and unavoidable event". The Code does not give examples of such events, as they can be established either contractually by the parties, by inserting an extensive force majeure clause in contracts, or, in the absence of a contractual provision, by the court or arbitration court responsible for settling the disputes between the parties in this respect.
When writing a force majeure clause, the parties may draw inspiration from certain standard clauses proposed by various international arbitration forums, the most used being the model clause of the International Chamber of Commerce (ICC) in Paris. Among the situations proposed by the ICC Paris standard clause are situations of war, armed conflict, or acts of authorities, etc.
At the same time, the Romanian Civil Code provides that such a situation of force majeure removes contractual liability as long as the law does not provide otherwise, or the parties do not agree the contrary. In other words, it is important to underline that the parties can agree by their signed agreements to be liable even in situations of force majeure (although it is hard to believe that they will choose to do so). What is important to note is that only total impossibility of performance is sufficient to excuse non-performance of contractual obligations. In other words, the party invoking force majeure must ensure that there are no other possibilities for performance of the obligations undertaken other than those expressly provided for in the contract.
What are the effects of the force majeure? The main effect is to relieve the debtor from having to pay damages and we are referring to interest or late payment penalties. Also, in the event of late performance of the obligation, the debtor is entitled to additional time for performance (suspension of the effects of the contract). If we are talking about a total and definitive impossibility of performance of the undertaken obligations, the effect is the termination of the contract. In addition, it should be noted that force majeure operates by virtue of the law, without the need to be provided for in the contract (Cas., s. com. decision no. 414/2000), but also that, in Romania at least, force majeure cannot apply to contracts where the object of the obligation is a sum of money - such as leasing and rental contracts (I.C.C.J., s. II civ., decision no. 3848/2012).
What is to be done in case of force majeure? First, we check which law applies to our contract. In the case of an international commercial contract, we can speak for example of Romanian law, Ukrainian law, Russian law, or other international law provisions such as the UNIDROIT Principles (International Institute for the Unification of Private Law) or the United Nations Convention on Contracts for the International Sale of Goods, concluded in Vienna in 1980 and known as the Vienna Convention.
Secondly, we will check whether we have a force majeure clause in the contract. In this case, the contractual provisions agreed by the parties will apply, if they are sufficiently comprehensive and if not, they will be supplemented by the applicable rules of law identified in the first step. It is important to note that if the parties have not chosen the applicable law but have referred in the contract to the custom of international trade, lex mercatoria, general principles of law, or other such wording, the UNIDROIT Principles will apply.
The UNIDROIT Principles are also generally applicable when there is an arbitral dispute concerning international commercial contracts where the parties have not chosen the applicable law, this choice being left to the arbitrators entrusted with the resolution of that dispute.
Thirdly, we will need to ensure that we have investigated any other possibility of fulfilling our obligations, even at additional cost.
It is essential to request a force majeure certificate from the institution authorised to issue it and to notify our contractual partners of the case of force majeure preventing us from performing our obligations. If we do not reach an agreement with them, we will have recourse to the competent arbitration court or court of justice.
Are EU sanctions against Russia force majeure? If the applicable law is Romanian law and the contract contains a force majeure clause of the type of the ICC Paris model clause as described above, then the act of the authority, legal or illegal, the adherence to any law or government order, rule, regulation or directive, and therefore also such sanctions are considered force majeure events.
However, according to national regulation, in order to for such an event to be a force majeure event, the act of the authority/the sanction in question must also be an external, unforeseeable, absolutely invincible and unavoidable event. The key word in this context is "unforeseeable". A legitimate question for the agreements concluded after 2014 and before the imposition of the current sanctions would be: to what extent the sanctions imposed on Russia can still be considered unpredictable in the context that sanctions of more or less similar magnitude have been imposed since 2014 (in the context of Russia's annexation of Crimea) and were somehow to be expected in the context of the current conflict in Ukraine?
Leaving aside this rather theoretical discussion, in principle, if we are in the situation of an agreement concluded before the announcement of the sanctions and we can prove that the other conditions mentioned above (an external event, absolutely invincible and unavoidable) are met, we can speak of a case of force majeure. Under no circumstances is there force majeure if the contract was concluded after the sanctions were announced.
In conclusion, I believe that the most important thing is to carefully analyse the contract and the applicable legal provisions in order to be able to correctly and fully assess the existence of a case of force majeure and its applicability to each individual case.