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International sanctions as force majeure

International sanctions as force majeure

Russian legislation practically does not use the term "force majeure", mentioning it only in. 3 Art. 15 Law of the Russian Federation dated 07.07.1993 № 5340-1 "On Chambers of Commerce and Industry in the Russian Federation", which, as one of the powers of the Chamber of Commerce and Industry of the Russian Federation (TPP RF) provides for its right to testify to the circumstances of force majeure in accordance with the terms of foreign trade transactions and international treaties of the Russian Federation. At the same time, the Law itself does not disclose the concept of force majeure.. It is contained in. 1.3 “Regulations on the procedure for witnessing force majeure circumstances by the Chamber of Commerce and Industry of the Russian Federation (Force Majeure)» (appendix to the resolution of the Board of the Chamber of Commerce and Industry of the Russian Federation dated 23.12.2015 N 173-14), which is not a legal act.

Under the circumstances of force majeure in the specified paragraph are understood - extraordinary, unforeseen and unavoidable circumstances, arising during the implementation of contractual (contract) obligations, which could not reasonably have been expected at the conclusion of the contract (contract), either avoid or overcome, as well as beyond the control of the parties to such an agreement (contract).

Analysis of judicial practice shows, that economic sanctions in most cases are not regarded by the courts as force majeure circumstances, unless they are entered in relation to a specific party to the transaction. The courts are considering financial difficulties or other difficulties in the performance of obligations due to the imposed sanctions, experienced by the party to the obligation, as one of the business risk factors, which cannot be regarded as a force majeure. So, Ninth Arbitration Court of Appeal 2015 year, a case was considered under a supply agreement. The supplier delivered the goods in violation of the delivery time. The respondent referred to, that the delay was due to the fault of a third party in connection with the introduction of economic sanctions against the Russian Federation, while the country of manufacture of the disputed product is the United States. Economic sanctions in this regard can be regarded as a force majeure event., exonerating. However, the court disagreed with this argument.. (Resolution of the Ninth Arbitration Court of Appeal dated 10.09.2015 N 09AP-34395/2015 according to part N A40-40707/15).

However, it is worth noting, that the practice is now gradually changing. The courts began to identify some conditions, in which international sanctions should still be recognized as force majeure. However, the party to the contract, hit by sanctions, must prove, that such measures affected the fulfillment of its obligations and that this party took all measures for the proper performance of the contract with that degree of care and diligence, which was required by the nature of the obligation (Resolution of the Arbitration Court of the North-Western District dated 14.10.2021 in case No. А56-45960/2020).

In March 2022 of the year, the Chamber of Commerce and Industry came up with an initiative to recognize international sanctions as force majeure circumstances, that release the party to the contract from liability for failure to fulfill obligations under it (Letter from the Chamber of Commerce and Industry of the Russian Federation dated 22.03.2022 No. PR/0181B). CCI noted, that due to the introduced restrictive measures, many suppliers have lost the opportunity to fulfill their obligations to customers. For iexample, they cannot supply goods produced abroad due to the termination of their supplies to Russia, while domestically such goods are not produced. In this regard, the CCI proposed to amend the Civil Code of the Russian Federation, which would recognize sanctions as force majeure.

A special draft law on the settlement of "force majeure sanctions" was submitted to the State Duma 22 March. It provides for a "freeze" of obligations in a situation, when their execution becomes impossible due to "unfriendly actions of foreign states and international organizations". The executor who proved such circumstances (debtor) released from liability. If the implementation of the contract "objectively becomes completely impossible" - the obligations are terminated (canceled).

As seen, with the adoption of this bill, legal relations with the participation of consumers will be normalized, serious support will be provided to Russian business during the period of international sanctions, introduced against Russia. A decrease in the number of controversial and unresolved situations is predicted, including those related to the possibility of bankruptcy of Russian entrepreneurs.

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