Slovenia: Force Majeure - Hardship in relation to Conflict and Sanctions

Yes, the Act Regulating Restrictive Measures Introduced or Implemented by the Republic of Slovenia in Accordance with Legal Acts and Decisions Adopted by International Organisations (Official Gazette no.: 127/6) governs restrictive measures introduced or implemented by the Republic of Slovenia in accordance with legal acts and decisions adopted by international organisations with a view to establishing or preserving international peace and security, ensuring respect for human rights and fundamental freedoms, developing or consolidating democracy and the rule of law, and achieving other objectives in accordance with international law.

From a civil law perspective, Slovenian law has no specific regulations addressing the legal consequences of war or sanctions on commercial contracts. While certain aspects of these regulations (e.g. in relation to the obligations of insurance agencies and the statute of limitations) are addressed directly, the two general statutory concepts that are most relevant under such circumstances are force majeure and unforeseen circumstances.

For unforeseen circumstances, Art 112 stipulates: “If after the conclusion of a contract circumstances arise that render the performance of obligations by one party more difficult or owing to which the purpose of the contract cannot be achieved, and in both cases to such an extent that the contract clearly no longer complies with the expectations of the contracting parties and in the general opinion it would be unjust to retain it in force as it is, the party whose obligations have been rendered more difficult to perform or the party that owing to the changed circumstances cannot realise the purpose of the contract may request the rescission of the contract.”

For force majeure, Art 153 stipulates force majeure in the context of the exemption from a liability. Therefore, a person is: “free of any liability if it is shown that damage originated from any cause outside the object whose effect could not be foreseen, avoided or averted”.

Yes, but only if the event could not be foreseen, avoided or averted. The decision of the Court in Ljubljana in 2002 provides an indication of when events are not foreseeable. The case raised the question: should additional costs during a transport be considered force majeure due to an outbreak of a war. In the final judgment, the court dismissed the request since there was early evidence that demonstrated the applicant's knowledge of the unreliability and danger of the chosen transport route.

In order to prevent any uncertainties, discussions or even potential disputes regarding the question of what constitutes force majeure, it is recommended that parties define what they consider "force majeure" in their contractual relationship. The parties can include events such as governmental measures or restrictions as force majeure.

The institution of unforeseen circumstances relaxes the excessive strictness of the "pacta sunt servanda" principle in the performance of contractual obligations. It is the basis in the legal approach that changed circumstances may completely defeat the original purpose of a contract or may render a party's contractual obligation so onerous that it would be unjust to insist on its performance.

The following are the assumptions for the modification or termination of a contract:

1.  circumstances must arise after the conclusion of a contract, which affect the contractual obligations in one of the following alternative directions:
   1. they make it more difficult for one party to fulfil its obligations; or
   2. they make it impossible to achieve the purpose of the contract;
2. in either case, the changed circumstances must have such an effect that: 
   1. the change is manifestly no longer in conformity with the expectations of the parties; and
   2. it would be generally unfair to keep it in force as it is;
3. two other negative conditions must be met:
   1. the changed circumstances could not have been taken into account by the party invoking them at the time of conclusion of the contract and could not have been avoided or waived; and
   2. the circumstances have not changed since the expiry of the time-limit for performance.

The first condition for a contracting party to rely on unforeseen circumstances is that the circumstances existing at the time that the contract was concluded have changed. Only such changes as occurred after the conclusion of the contract are taken into account. This condition is set objectively. It is only relevant when the unforeseen circumstances occurred, and not when the contracting parties perceived them.

If the law of another country is declared applicable, the court of that country will also have jurisdiction (in most cases). The foreign country could choose to not impose sanctions or to follow them. In such an event, it is not inconceivable that the foreign court/state could reject the claim by invoking force majeure/unforeseen circumstances as a result of war and/or sanctions.

While in general such actions are possible, the EU Regulations provide that a claim by persons, entities, or bodies from the country against which sanctions have been imposed, who seek performance of a contract, or payment of a fine, guarantee, indemnity or invoke set-off, are not permitted. If such a claim is brought, a judge in a European country will have to apply the Regulation and will likely have to reject the claim.

With the current ever-changing pace from pandemic to war, there is only one constant, which is to attribute great details to drafting the provisions of contractual arrangements. While the impact of war or sanctions could fall under the legal institutions of force majeure and unforeseen circumstances, the lack of appropriate contractual coverage could lead to the situation that the courts will decide objectively in each case if such conditions are met. Therefore, parties should endorse the key principle of contract law – the freedom of contract – and appropriately regulate such scenarios.