United Kingdom: Force Majeure - Hardship in relation to Conflict and Sanctions

The Sanctions and Anti-Money Laundering Act 2018 (“SAMLA")  enables the UK to impose economic and other sanctions that restrict or limit the financial activity of a sanctioned entity and those individuals or businesses that interact with them. 

Whilst the UK does exercise ‘universal jurisdiction’ over war crimes, torture and hostage taking, which means a foreign person accused of committing these crimes in another country can be brought to justice in UK courts, those laws do not apply to sanctions per se. 

Notwithstanding the absence of the term “war” in sanctions legislation itself the UK sanctions regime can be applied on either a ‘thematic’ (relating to a particular issue), or ‘geographic’ (relating to a particular country or region) basis. More information on UK sanctions regimes currently in force is available https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1062452/General_Guidance_-_UK_Financial_Sanctions.pdf 
 
The UK's sanctions regime under SAMLA has historically been implemented through country or region-specific provisions enacted through secondary legislation in the form of statutory instruments. 

By way of example, in the case of the sanctions imposed on Russia following the occupation of the Donbas in 2014, and subsequent further invasion to the west of Ukraine in 2022, the relevant secondary legislation is the Russia (Sanctions) (EU Exit) Regulations 2019. 

The UK does not have a civil code. Rather, civil law rules are established by a combination of statutory provisions created by Parliament, and precedents set by the Courts of England and Wales, known as “common law”.

Within those statutory provisions and common law precedents, there is no set English legal definition of “force majeure”. The phrase is derived from French law, a civil law system, and has no recognised status as a concept in English law.

The term may, however, be deployed as a contractual term that arises solely on the basis of an express provision included in a contract (typically as a boilerplate provision). The term cannot be implied. Clear definition of the term within a contract subject to UK law is therefore critical.

Please see the answer above. 

In limited circumstances, such as in standard terms and conditions and consumer contracts, statutory controls may apply indirectly. However, war and/or sanctions would not constitute force majeure under statutory law. 

Parties may seek to rely on the common law doctrine of frustration, which applies where performance of a contract has become legally or physically impossible through no fault of the parties (e.g. during WWII, a number of contracts were frustrated when it became legally impossible to trade with the enemy).  However, in practice, the doctrine of frustration is rarely applicable, and is also unlikely to apply where performance of the contract is delayed but not “impossible” to perform.  

Absent any other contractual termination rights (e.g. termination for convenience), a party could also seek to terminate the contract by relying on the common law doctrine of repudiatory breach.

As a note of caution, in the Government’s guidance on “Unfair Contract Terms”, force majeure is described as “legal jargon and best avoided, and should never be used without clear explanation. Plain language is required for terms”. Guidance is given as to alternative terms to use within Annex A of the document.

See: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/450440/Unfair_Terms_Main_Guidance.pdf 

Parties intending to have a force majeure provision must include it in their agreements. 

The clause should be exhaustive, using this term alone in an agreement, with no definition, is unlikely to be effective. 

It has long been established in English law that a clause which merely stated that the "usual 'force majeure' clauses shall apply" would be void for uncertainty.  

Alternatively, parties may wish to consult current government guidance as to the terms most likely to allow for the withdrawal of contractual obligations in unforeseen, unavoidable circumstances.

There is no definition of “unforeseen circumstances” under English law. 

However, in case law,  the force majeure clause referring to an “unforeseeable act or event which was beyond the reasonable control of either party” has been analysed by the Court of Appeal. 

In its analysis, the Court said that the word “unforeseeable” did not add anything to the existing concept of reasonable control: if an act was within a party’s control, it was very likely that it was also foreseeable.

As the UK is no longer an EU member state, it has its own sanctions regime, which is broadly aligned to that of the EU.   The UK will apply its own regime, rather than that of the EU.

Please see here for a here, for a Q&A published by the European Commission on restrictive measures, which includes an answer regarding obligations for non-EU persons or entities. 

If the performance of the contract is made illegal as result of any sanctions, it may be possible to claim that the contract has been frustrated. 

A party which fails to fulfil its obligations under the contract should give thought as to how it will be possible to demonstrate that it is legally or physically impossible for it to perform its contractual obligations, and not simply unprofitable or more difficult to do so. 

When drafting force majeure clauses, parties should consider:

• Incorporating a clear definition of what will constitute “force majeure”, circumscribing that definition to the types of events that the parties agree should be covered by the “force majeure” clause;
• Including an interpretative “catch all” provision which would allow parties to apply the clause to other, similar events, which whilst not specifically envisaged at the time of drafting the contract, do fall into the type of situation envisaged in the main clause;
• Without such interpretive leeway, it could become impossible to invoke a force majeure clause when it is most needed: in the case of the unforeseeable, or the unavoidable;
• Whether a party could ever rely on such a provision in the event that sanctions are imposed would likely depend on the quality of each party’s due diligence exercise. Where, for example, services were bought by Entity A from engineering company B with exposure to markets in Eurasia, the possibility of sanctions frustrating their performance as a company would be eminently foreseeable in the current circumstances.