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

In the Italian legal system, there is no framework legislation on sanctions or the effects of war on business relationships. 
With specific reference to civil legislation about which this contribution is limited, the Civil Code contains only one provision on contractual relationships that expressly refers to war and that is a rule on insurance contracts. According to this rule, unless otherwise agreed between the parties, the insurer is not liable for damages caused by earthquakes, war, insurrection or popular uprisings.

Generally speaking, reference should be made to force majeure doctrine and hardship.
Italian laws does not provide a definition of force majeure. However, several provisions of the Italian Civil Code (ICC) on the obligations of parties clearly refer to this doctrine.

• Article 1256 of the ICC states: "The obligation is extinguished when performance becomes impossible for a reason not attributable to the debtor.
  If the impossibility is temporary, the debtor is not responsible for the delay in performance as long as the impossibility lasts. However, the debtor is relieved from its obligation if the impossibility persists until, in relation to the title of the obligation or the nature of its subject, the debtor can no longer be considered to be obliged to perform or the creditor no longer has an interest in performing"; 
• Article 1467 of the ICC states: "In contracts with continuous, periodic or deferred performance, if the performance of one of the parties has become excessively onerous due to the occurrence of extraordinary and unforeseeable events, the party who owes such performance may request termination of the contract, with the effects set out in article 1458. […] The party against whom termination is sought may avoid it by offering to modify the terms of the contract in an equitable manner".

War and/or sanctions may constitute force majeure to the extent they prevent the party from performing its obligations.
In fact, according to relevant case-law. the event of force majeure must be extraordinary, unpredictable and impossible to be neutralised through any actions of the party.     

According to Article 1256 ICC, force majeure doctrine applies irrespective of the stipulation of a specific clause in a contract. 

Notwithstanding the above, it is advisable to negotiate and provide a force majeure clause mentioning examples of applicable events in order to adapt the general concept of force majeure to the specific needs of the parties and to prevent possible disputes on what may be regarded as an event of force majeure.  

Under Italian law, there is no statutory definition of “unforeseen circumstances” as is mentioned in Article 1467 of ICC entitling the party to seek the termination of a contract when its performance has become excessively burdensome.  

According to the relevant case-law, it occurs when an objective, excessive imbalance between the parties’ obligations supervenes with respect to the original agreement. In such an assessment, no account is to be taken of the specific conditions of the party, but only of the intrinsic content of the agreed-upon performance of the parties. 

If the law of a country that is not a member of the European Union governs a contract, sanctions imposed by the EU do not apply. Nevertheless, if an Italian court has jurisdiction on a dispute arising out of such a contract, the judge will apply EU sanctions regardless of the provisions of the applicable law.

Yes. If the party affected by EU sanctions brings such a claim before an Italian court, the defendant could legitimately and successfully argue for the impossibility of its performance due to sanctions, and therefore the judge should dismiss the claim. 

In the light of the foregoing, it is certainly advisable to stipulate a specific force majeure clause providing that war and related sanctions constitute events of force majeure, that the law applicable to the contract is that of a member state of the European Union and that the court of a member state has exclusive jurisdiction to rule on any dispute relating to the contract.