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

Yes, the Sanctions Act from 1977 is framework legislation and forms the basis for implementation of international and domestic rules in the Netherlands. These rules are, in principle, aimed at everyone. Violation of the rules could lead to criminal enforcement. If the EU imposes sanctions and these are based on European Regulations, such sanctions will have direct effect because they carry the force of law. Following on from this, these sanctions may influence on-going commercial contracts and performance thereof.

From a civil law perspective, Dutch law has no specific legislation addressing the legal consequences of war or sanctions on commercial contracts. There are, however, two general statutory concepts, which could be relevant under such circumstances. These are force majeure and unforeseen circumstances. 

Please note that this document will focus on the civil law aspects of the sanctions.

Article 6:75 of the Dutch Civil Code (''DCC'') states: 'A shortcoming cannot be attributed to the debtor if it is not due to his fault, nor is he responsible for it by law, legal act, or prevailing views.

Article 6:258 DCC states: ''The court may, at the request of one of the parties, modify the consequences of a contract or dissolve it partially or entirely on account of unforeseen circumstances of such a nature that, according to standards of reasonableness and fairness, the other party may not expect the contract to be maintained unchanged. 

If performance is impossible due to acts of war and/or the sanctions, it can be argued that it constitutes force majeure under the statutory provision. The general notion is, however, that an assertion of the statutory force majeure is not that easily accepted. 

The ruling of the Rotterdam District Court in 2020 is an example of this. In short, the court held that performance becoming (very) onerous is not enough for force majeure. Performance must be practically impossible to honour an appeal on force majeure. In this case, it meant that the party who was not able to supply a specific product due to sanctions could procure similar products from different countries – not falling within the scope of USA sanctions – to fulfil its obligations with respect to an Iranian party.  

To prevent any discussion on whether an event constitutes force majeure, the parties can define what they consider as force majeure in the contract. The parties can do this because Dutch law endorses one of the key principles of contract law, the freedom of contract. 

For example, the parties could agree that there is force majeure when the buyer is unable to deliver the products to its customer due to governmental measures or restrictions, or that there is force majeure in war situations. 

We recommend including a well-drafted force majeure clause since it will establish a better starting position and prevent discussion. Having a well-drafted clause could, in principle, mean that you can be released from performance when the present situations fall within the clause's stated sphere.

Apart from Force Majeure, Dutch law also includes the doctrine of 'unforeseen circumstances'. This concept could be regarded as an equivalent to 'hardship' (common law) and 'imprévison' (French and civil law). In short, this means that relief of performance may be granted when there is a change in circumstance that was unforeseen and makes performance excessively burdensome for one party. 

Under Dutch law, there must at least be unforeseen circumstances to successfully invoke Article 6:258 of the Civil Code. Whether the circumstances were foreseeable at the time the contract was concluded is not decisive. The relevant question is: what assumptions did the parties make (i.e. have they anticipated the possibility of the occurrence of unforeseen circumstances or at least tacitly included that possibility). 

Therefore, it is not decisive whether the sanctions were foreseeable at the time the contract was concluded. What matters are the assumptions the parties made when entering into the agreement. If the contract does not provide for war and/or sanctions and those circumstances were not foreseeable at the time of conclusion, unforeseen circumstances are involved. 

If it is then established that there are unforeseen circumstances, these circumstances must also be of such a nature that the other party, according to standards of reasonableness and fairness, cannot expect the contractual relationship to remain unchanged. This is a high burden since the principles of reasonableness and fairness first require that one keeps to the given word and only allows deviation in very exceptional cases. The Supreme Court has – in line with this – ruled that the court must exercise restraint in the acceptance of unforeseen circumstances.

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 will reject the claim by invoking force majeure/unforeseen circumstances as a result of war and/or sanctions. If a Dutch judge has jurisdiction over a dispute, he will apply the Regulation even if foreign law has been declared applicable.

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 – shall not be permitted. If such a claim, nevertheless, is brought, the foreign plaintiff must prove that the claim should not be dismissed on the basis of the foregoing. A judge in a European country will have to apply the Regulation and will therefore have to reject the claim.

The possibilities of not having to perform due to war or related sanctions remain a point of attention and uncertainty. The law offers possibilities, but much will depend on the contract terms. The risk that a Russian buyer can successfully sue a supplier in the EU for payment of warranties, damages or compensation for non-delivery are small if a judge in an EU country rules on the matter. It therefore makes sense to look critically at the concept of force majeure defined in the contract. In the case of international agreements, it also makes sense to opt for the absolute jurisdiction of EU courts in order to safeguard the application of any applicable EU sanctions regulations.

The practical consideration parties should make is whether they need to include a specific clause for the current situation in new contracts. We recommend doing this since the past predicts the future. For example, Dutch courts ruled with respect to the COVID-19 crisis that parties who concluded contracts after 15 March 2020 cannot successfully invoke 'unforeseen circumstances' since parties should have foreseen those circumstances as of that time. This may also apply to the current situation in the future.