COVID-19 and force majeure clauses:

an examination of arbitral tribunal’s

awards
Ş. Esra Kiraz* and Esra Yıldız Üstün†

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Abstract
The coronavirus (COVID-19) pandemic has taken a toll on people all across the world
in various aspects. The severe consequences of this pandemic can be seen in inter-
national trade and commercial contracts. The underlying principle of contract law is
that the parties are bound by the promises given under an agreement; however, events
such as COVID-19 affect the parties’ performance of contractual duties. The harsh
measures, such as prohibition on importation and exportation of goods or travel bans,
have seriously affected the parties’ performances. In such situations, force majeure
clauses, which serve as an exemption from non-performance, come into play. This art-
icle aims to reveal how COVID-19 will be assessed in terms of force majeure and the
possible attitudes of arbitral tribunals towards these cases. This assessment is under-
taken in light of force majeure clauses laid under the Convention on Contracts for the
International Sales of Goods, the UNIDROIT Principles of International Commercial
Contracts, and the International Chamber of Commerce’s 2020 Force Majeure Clause.

I. Introduction
Since the first quarter of this year, the whole world has been suffering from the
spread of a coronavirus, which is also known as COVID-19.1 The World Health
Organization has announced it as a pandemic, which has become an inter-
national concern as it affects all countries around the world.2 In order to pre-
vent the spread of the virus, a series of measures have been introduced by

* Ş. Esra Kiraz, LLM (QMUL), PhD (University of Leicester), Lecturer, Faculty of Economics and
Administrative Sciences, Aksaray University, 68100 Aksaray, Turkey. Tel: þ90 382 2882425;
Email: [email protected].
† Esra Yıldız Üstün, LLM (QMUL), PhD (University of Exeter), Assist. Prof. Dr. at Atatürk
University, Faculty of Law, 25240 Erzurum, Turkey. Tel: þ90 442 231 1111; E-mail: esra.ustun@
atauni.edu.tr.

1
The World Health Organization (WHO) official website <https://www.who.int/emergencies/dis
eases/novel-coronavirus-2019> accessed 8 September 2020.
2
Ibid. <http://www.euro.who.int/en/health-topics/health-emergencies/coronavirus-covid-19/
news/news/2020/3/who-announces-covid-19-outbreak-a-pandemic> accessed 8 September
2020. (COVID-19 was declared as a pandemic by the Director-General of the WHO, Dr. Tedros

C The Author(s) (2020). Published by Oxford University Press on behalf of UNIDROIT. All rights reserved.
V
For permissions, please email [email protected]
Unif. L. Rev., Vol. 25, 2020, 437–465
doi:10.1093/ulr/unaa027
Advance Access Publication Date: 29 December 2020
438 Ş. Esra Kiraz and Esra YIldız Üstün

governments such as closing borders, imposing prohibitions on exports, and

closing workplaces.3 The impact of these COVID-19 measures on businesses, es-
pecially international trade, appears as another pandemic-related problem that
needs to be sorted out because these measures have been severely affecting com-
mercial contracts and hampering the contractual obligations of the parties.4
Thus, force majeure clauses that enable exclusion of non-performance due to
reasons beyond the control of the parties have attracted attention.
Since the COVID-19 breakout, it is to be expected that an increasing number

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of force majeure claims will be brought before arbitral tribunals. These force
majeure disputes will probably be complex since COVID-19 is a threatening dis-
ease that causes a change of conditions in the business world. Whether COVID-
19 results in triggering the force majeure excuse in international commercial
contracts is a current question that will soon be answered. Force majeure is not a
concept defined in an identical way under every jurisdiction; therefore, each
party’s force majeure clause within its contracts is of importance when dealing
with these particular claims. While considering the force majeure claims, the in-
terpretation of the contractual terms might be more significant than before due
to extensions on the delivery of goods, the responsibility of mitigating the
breakout’s impacts, and, of course, costs. As discussed, this pandemic may last
longer, so it could reduce labour productivity.5 Furthermore, the responsibil-
ities of parties will be hard to define along with the mitigation of costs. Force
majeure claims for COVID-19 cases have not been brought before the arbitral
tribunals yet, but they will soon start to show up. Therefore, it is essential for
parties and lawyers to consider how the arbitral tribunals will approach the issue
of force majeure in pandemic or natural disaster cases.
This article aims to present an examination of force majeure clauses under dif-
ferent international legal instruments—namely, the United Nations Convention
on Contracts for the International Sales of Goods (CISG), the UNIDROIT
Principles of International Commercial Contracts (PICC), and the International
Chamber of Commerce’s (ICC) 2020 Force Majeure Clause (FMC)—and the
decisions given by the different arbitral tribunals in order to provide an answer
Adhanom Ghebreyesus, on 11 March 2020 due to the rapid increase in the number of cases out-
side China since the end of February 2020 that affected a growing number of countries).
3
See European Commission Directorate General Economic and Financial Affairs, ‘Policy meas-
ures taken against the spread and impact of the coronavirus-14 April 2020’ available at <https://
ec.europa.eu/info/sites/info/files/policy_measures_taken_against_the_spread_and_impact_of_
the_ coronavirus_14042020.pdf> accessed 6 September 2020. See also ‘Note of the UNIDROIT
Secretariat on the UNIDROIT Principles of International Commercial Contracts and the COVID-
19 Health Crisis’ Note 15 and footnote 12.
4
See European Commission Directorate General Economic and Financial Affairs (n 3). See UK
Cabinet Office, ‘Guidance on responsible contractual behaviour in the performance and enforce-
ment of contracts impacted by the Covid-19 emergency’ (7 May 2020) at para 10 available at
<https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/
file/899175/__Update_-_Covid-19_and_Responsible_Contractual_Behaviour_-_30_June__
final_for_web_.pdf> accessed 17 September 2020.
5
Bodhisattwa Majumder and Devashish Giri, ‘Coronavirus & Force Majeure: A Critical Study
(Liability of a Party Affected by the Coronavirus Outbreak in a Commercial Transaction)’
(2020) 51 Journal of Maritime Law & Commerce 51.

Unif. L. Rev., Vol. 25, 2020, 437–465

 COVID-19 and force majeure clauses 439

for the problems arising from the current COVID-19 pandemic. The reactions
of the tribunals to force majeure claims are important for ascertaining if
COVID-19 can be acknowledged as a force majeure excuse according to the
requirements of the general concept.

II. The concept of force majeure

The basic principle of contract law is that the parties are bound by their prom-
ises under a contract, which is known as pacta sund servanda. However, it was

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seen as unreasonable to expect parties to perform their duties when the changed
circumstances had occurred. Therefore, the doctrine of rebus sic stantibus was
developed to initiate the possibility of releasing the obligations that become
onerous by changed circumstances.6 In terms of the exemption of non-
performance, it should be noted that force majeure is not a principle applied or
acknowledged by all legal systems. The exemption doctrine is referred to in dif-
ferent concepts under civil and common law systems that do not recognize force
majeure.7 In England, frustration is employed, and under US law, impossibility
is the doctrine applied to changed circumstances.8
Force majeure, which originates from Roman law, gives rise to the exemption
from the liability for non-performance in the case of an unforeseen or unexpect-
ed event beyond the control of the parties.9 The term force majeure is presented
and described in French law as the event that prevents the party from the per-
formance and is irresistible and unforeseeable.10 In terms of the consequences
of force majeure, there is a distinction drawn between temporary and permanent
impediments. If there is a temporary impediment, suspension of obligations is
followed, whereas, in the case of a permanent impediment, the exclusion of the
liabilities appears.11
Common law systems do not recognize force majeure; however, they have
similar concepts for the exemption of liability due to changed circumstances. In
6
Igneborg Schwenzer, ‘Force Majeure and Hardship in International Sales Contract’ (2008–09)
39 VUWLR 709.
7
Marel Katsivela, ‘Contracts: Force Majeure Concept or Force Majeure Clauses?’ (2007) 12 Unif.
L. Rev. 101, 108.
8
A.H. Puelinckx, ‘Frustration, Hardship, Force Majeure, imprévision, Wegfall der
Geschaftsgrundlage, Unmöglichkeit, Changed Circumstances: A Comparative Study in English,
French and Japanese Law’ (1986) J. Int’l Arb. 47, Sukhnam Digwa-Singh, “The Application of
Commercial Impracticability under Article 2-615 of the Uniform Commercial Code” in Ewan
McKendrick, (eds), Force Majeure and Frustration of Contract, (London: Lloyd’s of London
Press, 1995) 305.
9
Peter Mazzacano, ‘Force Majeure, Impossibility, Frustration & the Like: Excuses for Non-
Performance; the Historical Origins and Development of an Autonomous Commercial Norm
in the CISG’ (2011) 2 NJCL 1, Schwenzer (n 6) 709.
10
William Swadling, “The Judicial Construction of Force Majeure Clauses” in Ewan McKendrick,
Force Majeure and Frustration of Contract, (2nd Ed, Informa Law, 1995) p 5, Barry Nicholas,
‘Force Majeure in French Law’ in Ewan McKendrick, Force Majeure and Frustration of Contract,
(2nd Ed, Informa Law, 1995) 24, Puelinckx, (n 8) 55–6.
11
Nicholas (n 10) 26. Klaus Peter Berger and Daniel Behn, ‘Force Majeure and Hardship in the
Age of Corona: A Historical and Comparative Study’ (2020) 6 McGill Journal of Dispute
Resolution 4, 79.

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440 Ş. Esra Kiraz and Esra YIldız Üstün

England, the doctrine of frustration excuses the party from non-performance

when the performance is radically different from the one that was undertaken at
the beginning owing to changed circumstances.12 As a result of the frustrating
event, the performance becomes onerous, and the contract is automatically ter-
minated.13 The frustrating event does not always trigger the excuse of the non-
performing party because whether or not the contract has been frustrated
depends on the court.14
Even though national laws have their concepts for exempting the parties due
to the events that are beyond the control of the parties, unforeseeable at the

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time of the conclusion of the contract, and unavoidable, it does not mean that
the same event creates the same results under all legal systems. In other words,
one event may result in the exemption of liability in a given country, whereas
the other may not acknowledge the same event as a basis for exemption.
Moreover, different exemption concepts provide different solutions for the un-
foreseen event.15
Force majeure is not only the concern of national law systems, but it is also
dealt with in international areas. In particular, the CISG, and the PICC have ex-
emption clauses due to changed circumstances. In addition to these, the ICC
also offers a force majeure clause in both short and long forms. The CISG pro-
vides a force majeure rule for exemption due to changed circumstances under
Article 79, which states that:
[a] party is not liable for a failure to perform any of his obligations if he proves that
the failure was due to an impediment beyond his control and that he could not rea-
sonably be expected to have taken the impediment into account at the time of the
conclusion of the contract or to have avoided or overcome it or its consequences.

Article 7.1.7(1) of the PICC reads:

Non-performance by a party is excused if that party proves that the non-
performance was due to an impediment beyond its control and that it could not rea-
sonably be expected to have taken the impediment into account at the time of the
conclusion of the contract or to have avoided or overcome it or its consequences.

The ICC released a long and short form of force majeure and hardship clauses
in March 2020 in response to the COVID-19 outbreak before the ICC’s 2003
FMC had been offered. The ICC’s 2020 FMC illustrates ‘simpler presentation
and expanded options to suit various companies’ needs’.16 Along with the defin-
ition of force majeure, the 2020 FMC also provides a definition for the affected
12
Swadling (n 10) 5.
13
Ewan McKendrick, ‘Frustration and Force Majeure’ in Ewan McKendrick, Force Majeure and
Frustration of Contract, (2nd Ed, Informa Law, 1995) 44, Berger and Behn (n 11) 101, Nicholas
(n 10) 231.
14
Ibid 42. It stated that ‘The second proposition of Bingham L.J. is worthy of note because it
makes the point that it is no easy task to persuade a court that a contract has been frustrated.’
15
Mazzacano (n 9), McKendrick (n 13).
16
ICC Force Majeure and Hardship Clauses available at <https://iccwbo.org/publication/icc-
force-majeure-and-hardship-clauses/> accessed 4 May 2020.

Unif. L. Rev., Vol. 25, 2020, 437–465

 COVID-19 and force majeure clauses 441

party who is ‘the party affected by the impediment’. Although the wording of
the 2020 clause is slightly different from the clause released in 2003, the overall
requirements for force majeure are still the same. However, a change in the listed
events referring to the ones generally accepted as a force majeure event was
introduced by the 2020 FMC. In the ICC’s 2020 FMC revision, the definition of
a force majeure is stated as:
1. Definition. ‘Force majeure’ means the occurrence of an event or circum-
stance (‘Force majeure Event’) that prevents or impedes a party from per-

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forming one or more of its contractual obligations under the contract, if
and to the extent that the party affected by the impediment (‘the Affected
Party’) proves:
a. that such impediment is beyond its reasonable control; and
b. that it could not reasonably have been foreseen at the time of the con-
clusion of the contract; and
c. that the effects of the impediment could not reasonably have been
avoided or overcome by the Affected Party.

The CISG and the PICC are identical in wording for the requirements of force
majeure. The ICC follows a different structure for force majeure clause, and it
also provides a list of events that are presumed to be force majeure events. When
the wording of the articles/clauses provided under these different legal instru-
ments is examined, invoking force majeure provisions requires that there should
be ‘an impediment beyond control’, ‘unforeseeability of the impediment at the
time of the conclusion of the contract’, and ‘impossibility of avoidance and
overcoming it and its consequences’. Whether COVID-19 can be accepted as an
impediment that calls forth force majeure is examined in the light of these
requirements. Therefore, under the headings below, all of these preconditions of
force majeure are analysed according to these international instruments and in
light of different approaches adopted by various arbitral tribunals.

1. Applicable law to a force majeure clause

According to the freedom of the contract, the parties can agree on the force
majeure clause in their commercial agreements. They can widen the force
majeure events and specify their concepts. Thus, if an event impedes the per-
formance one of the parties after entering into the contract, this party can use
the force majeure clause to excuse the non-performance under the contract. It is
rare, but if the parties do not have a force majeure clause in their contract, the
applicable law fills in the contractual gaps to settle the dispute.17 International
commercial contracts generally cover the choice-of-law clause. The parties do
17
Emre Esen, ‘Uluslararası Ticarı̂ Sözleşmelerden Covid-19 Pandemisi Sebebiyle Dogabilecek
_
Uyuşmazlıkların C¸özümüne Ilişkin Genel Bir Degerlendirme’ (LexperaBlog, 17 March 2020)
available at <https://blog.lexpera.com.tr/uluslararasi-ticari-sozlesmelerden-covid-19-pande
misi-sebebiyle-dogabilecek-uyusmazliklarin-cozumune-iliskin-genel-bir-degerlendirme/>
accessed 23 March 2020.

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442 Ş. Esra Kiraz and Esra YIldız Üstün

not have to choose the national law only by the clause; they can refer to non-
State rules in their contract as well. The term ‘non-State rules’ is used for trans-
national commercial law instruments that are developed by international insti-
tutions or the trade associations such as the PICC or general principles of
commercial law and the lex mercatoria.18
If the parties do not have a force majeure clause in their contract, the force
majeure is defined according to the rules of this applicable law, and the dispute
over whether the event paves the way for a force majeure excuse, and what sort

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of consequences its application could bring, is solved according to the particular
force majeure principle laid out under the applicable law.19 The CISG is also
regularly used by courts/tribunals as a transnational commercial law instrument
in practice. The CISG is assumed as a reflection of the lex marcetoria.20
According to Article 1 of the CISG, the CISG governs commercial contracts for
the sale of goods between parties in different countries that are the contracting
States unless the parties have expressly waived their applicability in their con-
tract or when the rules of private international law require the application of the
law of the CISG’s contracting States. It is also possible that the parties of a sales
contract can choose the CISG to govern their contracts. In this case, Article 79
of the CISG can be used, claiming force majeure.
The application of the PICC to the contracts is available if ‘the parties have
agreed that their contract be governed by the [PICC], general principles of law,
the lex mercatoria or the like’ or ‘when the parties have not chosen any law to gov-
ern their contract’.21 The PICC serves ‘to interpret or supplement international
uniform law instruments’.22 If the parties specifically refer to the PICC or another
soft law, the results of the dispute may be predictable, but it must be highlighted
that these types of rules do not cover all aspects of a commercial dispute.
Finally, this might be rare, but if the contract does not cover the appropriate
force majeure clause that covers pandemic and government-announced shut-
downs and applicable law, businesses should explore whether the doctrine of
frustration could offer any resolution. Although, in most common law doc-
trines, frustration is too narrowly interpreted, and courts tend to lean towards
principles as enunciated in the case of Paradine v Jane (1647),23 the obligation
of performance is absolute. While the Taylor v Caldwell (1873) case brought
about a conservative reform that, if an event makes performance impossible,24

18
Johanna Hoekstra, ‘Regulating International Contracts in a Pandemic: Application of the Lex
Mercatoria and Transnational Commercial Law’ (2020) 117–25 <http://repository.essex.ac.uk/
28030/1/016.pdf> accessed 12 September 2020.
19
Ibid.
20
Ibid p. 119.
21
See UPICC Preamble.
22
Ibid.
23
Paradine v Jane, [1647] EWHC KB J5, 82 ER 897.
24
Taylor v Caldwell [1863] EWHC QB J1, 122 E.R. 309.

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 COVID-19 and force majeure clauses 443

then parties could be excused from their respective obligations, in the case of
Canary Wharf (BP4) T1 Ltd v European Medicines Agency (2019),25 the High
Court concluded against the company European Medicines Agency, seeking re-
lief from a 25-year lease on account of Brexit being a frustrating event. Hence, it
is evident that, whereas frustration is practical in principle, its application will
be difficult.26

III. Impediments beyond the control of the parties

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1. Is COVID-19 acceptable as an impediment?
An impediment is defined as ‘[a] change of circumstances that could not rea-
sonably be expected to have been taken into account, rendering performance ex-
cessively onerous’ by the CISG’s Advisory Council.27 The question as to what
kind of impediments may lead to exemption is not answered within the scope
of the CISG; however, it is suggested that the interpretation of the impediment
should be made with reference to international practice.28 Even though the no-
tion of an impediment that triggers force majeure clause is not illustrated within
the relevant articles under the CISG, a war, terrorist acts, riots, blockades, and
acts of God are deemed to be impediments.29
The PICC, like the CISG, neither explains an impediment within its wording
nor illustrates a list of impediments that are deemed as force majeure events.
The impediment is treated as ‘an event which, according to the obligor, is the
cause of its non-performance’.30 Force majeure events under the PICC are inter-
preted by a Russian court as such:
[T]he Court referred to Article 7.1.7 of the UNIDROIT Principles which according to the
Court makes it clear that to be an exemption or ‘force majeure’ the impediment must be

25
Canary Wharf (BP4) T1 Ltd and ors v European Medicines Agency [2019] EWHC 335 (Ch).
26
Nabila Rafique, ‘Business Focus – Force Majeure and Frustration in the New Normal’ (Lexpert,
7 May 2020) <https://lexpertllp.com/2020/05/07/businesses-focus-force-majeure-and-frustra
tion-in-the-new-normal/> accessed 9 September 2020.
27
CISG Advisory Council, Exemption of Liability for Damages under the Article 79 of the CISG
(Cm 07, 2008) note 3.1 available at <http://www.cisg.law.pace.edu/cisg/CISG-AC-op7.html>
accessed 29 March 2020.
28
See Yesim Atamer, ‘Article 79’ in Stefan Kröll, Loukas Mistelis, Pilar Perales Viscasillas (eds),
UN Convention on Contracts for the International Sale of Goods (CISG) (Oxford, 2011) para 46,
John Honnold, Uniform Law for International Sales Under the 1980 United Nations Convention
(4th Edition, Kluwer Law International 2009) para 425.
29
See Fritz Enderlein and Dietrich Maskow, International Sales Law: United Nations Convention
on Contracts for the International Sale of Goods; Convention on the Limitation Period in the
International Sale of Goods (Ocena Publication 1992) 322, Dennis Tallon, ‘Article 79’ in C.M.
Bianca & M.J. Bonell (eds), Commentary on the International Sales Law- The 1980 Vienna Sales
Convention (Giuffré 1987) 583. See Ingeborg Schwenzer, ‘Article 79 in Schlechtriem &
Schwenzer (eds), Commentary on the UN Convention on the International Sales of Goods (CISG)
(3rd Edition, OUP, 2010), Chengwei Liu, Remedies for Non-performance: Perspectives from
CISG, UNIDROIT Principles & PECL (Juris Net, 2007) 522.
30
Pascal Pichonnaz, ‘Ch 7 Non-performance, s1: Non-performance in General, Art. 7.1.7’ in
Stefan Vogenauer eds, Commentary on the UNIDROIT Principles of International Commercial
Contracts (2nd Ed, OUP, 2015) 864, 872.

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444 Ş. Esra Kiraz and Esra YIldız Üstün

extraordinary and unavoidable under the given circumstances, such as e.g. floods, earth-
quakes, snow debris and other similar natural disasters, acts of war, epidemics, etc.31

On the other hand, the ICC’s 2020 FMC provides a list of presumed force
majeure events:
The Presumed Force Majeure Events commonly qualify as Force Majeure. It is there-
fore presumed that in the presence of one or more of these events the conditions of
Force Majeure are fulfilled, and the Affected Party need not prove the conditions (a)
and (b) of paragraph 1 of this Clause (i.e. that the event was out of its control and

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unforeseeable), leaving to the other party the burden of proving the contrary. The
party invoking Force Majeure must in any case prove the existence of condition (c),
i.e. that the effects of the impediment could not reasonably have been avoided or
overcome.

a. war (whether declared or not), hostilities, invasion, act of foreign enemies,

extensive military mobilisation;
b. civil war, riot, rebellion and revolution, military or usurped power, insur-
rection, act of terrorism, sabotage or piracy;
c. currency and trade restriction, embargo, sanction;
d. act of authority whether lawful or unlawful, compliance with any law or
governmental order, expropriation, seizure of works, requisition,
nationalisation;
e. plague, epidemic, natural disaster or extreme natural event;
f. explosion, fire, destruction of equipment, prolonged break-down of trans-
port, telecommunication, information system or energy;
g. general labour disturbance such as boycott, strike and lock-out, go-slow,
occupation of factories and premises.
In light of the definition of an impediment and the events that trigger a force
majeure clause under these legal instruments, whether COVID-19 can be
accepted as an ‘impediment’ in terms of force majeure should be answered. The
ICC’s 2020 FMC explicitly acknowledges the epidemic as a presumed force
majeure event; therefore, a pandemic, which is much broader than an epidemic,
can easily be recognized as a force majeure event.32 There is no doubt that the
COVID-19 pandemic is an impediment in terms of the ICC’s 2020 FMC. Also,
since the ICC’s 2003 FMC has a similar language and treats an epidemic as an
impediment, there will be no hesitation for accepting COVID-19 as an impedi-
ment under a contract with the ICC’s 2003 FMC.
On the other hand, the CISG and the PICC do not illustrate the impediment
within their wording. The question as to whether COVID-19 will constitute an
31
Arbitrazh Court of Khanty-Mansi Autonomous District Yugra available at <http://www.unilex.
info/principles/case/1776> accessed 28 March 2020. See also Pichonnaz (n 30) 872.
32
See Christian Twigg-Flesner, ‘A Comparative Perspective on Commercial Contracts and the
Impact of COVID-19: Change of Circumstances, Force Majeure, or What?’ in Katharina Pistor
(ed), Law in the Time of COVID-19 (Columbia Law School 2020) available at <https://scholar
ship.law.columbia.edu/books/240/> accessed 17 September 2020.

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 COVID-19 and force majeure clauses 445

impediment under these instruments provokes a debate. Diseases like COVID-

19 may be deemed akin to an act of God, which is generally used to refer to ‘an
event caused by natural forces beyond human control’.33 Luiz Perez and
Alejandro Chevalier claim—with reference to the occurrence of COVID-19 as a
result of wild animal markets in China—that COVID-19 may not be seen as an
act of God.34 On the other hand, if it is accepted that this virus is not a human-
made virus and that it did not emerge as a result of a laboratory process, it can
be accepted that COVID-19 is a part of nature (part of biology), so it becomes

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an impediment in terms of an act of God.
There are different cases being experienced in force majeure events regarding
an ‘act of God’. In an ICC award,35 the seller temporarily suspended the delivery
of the commodity because drought led to a decrease in raw materials.
Therefore, the seller received a certificate from the local Chamber of Commerce.
The certificate stated that drought is beyond human control and prevents the
seller from complying with the contractual obligations. The force majeure clause
under the contract did not specify drought as a force majeure event, but the tri-
bunal concluded that the inclusion of ‘natural catastrophes’ and ‘other circum-
stances outside control’ within the force majeure clause entitled the seller to
invoke force majeure.
Examining the decision, it might be claimed that, if the current contracts do
not cover specific events for force majeure claims, the tribunals could accept the
suspensions or non-compliance of contractual obligations with regard to a nat-
ural disaster that is admitted to be covered under the ‘act of God’ and some
other circumstances beyond one’s control. Similarly, it is also possible that, if
the contract does not cover a pandemic as a force majeure event, COVID-19 can
be interpreted as a force majeure event lying under the Act-of-God clause.
In terms of the CISG’s sphere of application, even if COVID-19 is rejected as
an act of God, the recommendation by commentators to interpret the ‘impedi-
ment’ with reference to international practice should result in accepting
COVID-19 as an impediment under Article 79. As can be seen above, the ICC’s
2020 FMC, which is another international instrument used in international
trade, covers an epidemic as a presumed force majeure event, and the aforemen-
tioned case noted under the PICC highlighted epidemic as a force majeure event;
in this case, the CISG would also approach COVID-19 as a force majeure.
The mere existence of the COVID-19 pandemic alone does not constitute a
force majeure event, but the effects of COVID-19 can also give rise to force
majeure claims. The measures imposed by governments to combat COVID-19

33
See Oxford Advanced Learner’s Dictionary (6th ed, OUP 2000) p 12.
34
Luiz Perez and Alejandro Chevalier, ‘Tackling Uncertainty in Pandemic Related Int’l Disputes’
(Law 360, 27 March 2020) available at <https://www.law360.com/articles/1257759/tackling-un
certainty-in-pandemic-related-int-l-disputes> accessed 28 March 2020. See Andrew A.
Schwartz, ‘Contracts and COVID-19’ (2020) 73 Stan. L. Rev. Online 48, 58.
35
ICC Case No. 8790/2000, p.155.

Rev. dr. unif., Vol. 25, 2020, 437–465

446 Ş. Esra Kiraz and Esra YIldız Üstün

can be alleged as a force majeure event. The State interventions are accepted as
impediments causing force majeure.36 Therefore, a general lockdown in a coun-
try, the closing of the borders, and restricting exportation or importation of spe-
cific goods should be accepted as impediments occurring during COVID-19.37
Within the recent note by the UNIDROIT Secretariat, it is acknowledged that the
measures implemented by governments do lead to the implementation of force
majeure and that the health conditions of employers and employees pose a sig-
nificant risk to the performance of the contract regarding confinement
procedures.38

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Although these measures are deemed to be an impediment, whether these give
rise to the application of force majeure depends on other factors such as delivery
dates, the type of goods, the origin of the parties, and other related things. The
restrictions and measures implemented due to the virus must affect the contrac-
tual obligations. In other words, if COVID-19 does not affect the import-export
of goods or the delay in the delivery of goods under a commercial contract, it
cannot be claimed that COVID-19 itself is not accepted as a force majeure event.

2. Whether COVID-19 was beyond the control of the parties?

To invoke a force majeure clause under these instruments, the existence of an
impediment is not merely enough; it is also required that the impediment must
be ‘beyond the control of the party’. Ingeborg Schwenzer explains this criterion:
‘Only an impediment which lies outside of the promisor’s sphere of control can
lead to exemption under Article 79’.39 In order to determine whether the im-
pediment is beyond one’s control or not, most commentators have recom-
mended seeking the ‘external character’ of the impediment, which means the
obligor has no intervention in the issue.40 The ICC’s 2020 FMC requires that
‘the impediment is beyond its reasonable control,’ which means that the im-
pediment could have been reasonably foreseen by the parties at the time of the
conclusion of the contract.41 As the ICC’s 2020 FMC provides a list of the pre-
sumed events, the parties do not have to have evidence that the event is ‘beyond
the control’ when the force majeure event in the particular situation is the one
listed in the presumed event list.

36
Schwenzer ‘Article 79’ (n 29) 1137.
37
Similarly see Berger and Behn (n 11) 91. Marco Torsello and Matteo M. Winkler, ‘Coronavirus-
infected International Business Transactions: A Preliminary diagnosis’ (2020) 11 European
Journal of Risk Regulation 396.
38
Note of the UNIDROIT Secretariat (n 3) note 15 and footnote 12.
39
Ibid.
40
See Schwenzer, ‘Article 79 (n 29) para 11, Enderlein and Maskow (n 29) 322, Tallon (n 29) 579.
Christoph Brunner, ‘Rules on Force Majeure as Illustrated in Recent Case Law’ in Fabio
Bortolotti and Dorothy Ufot (ed), Hardship and Force Majeure in Commercial Contracts:
Dealing with Unforeseen Events in a Changing World (Kluwer Law International 2019) 82–7,
Pichonnaz (n 30) 873 para 22. Pichonnaz explains that the impediment should be an ‘exogen-
ous’ event.
41
ICC Force Majeure and Hardship Clauses (n 16).

Unif. L. Rev., Vol. 25, 2020, 437–465

 COVID-19 and force majeure clauses 447

Regarding COVID-19, not only must it be an impediment in terms of an ex-

emption for non-performance, but it must also be beyond the control of the
parties to be able to claim force majeure. COVID-19 is acknowledged as a pan-
demic; thus, it can be alleged that COVID-19 is far beyond the control of not
only the parties of international trade but also governments, scientists, and doc-
tors.42 However, the point here is if the impediment (COVID-19) is ‘beyond the
promisor’s typical sphere of responsibility [it] shall be considered as impedi-
ments’.43 For example, non-performance due to a flood that destroys all of an

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obligor’s goods is seen as a force majeure impediment. However, in the case of
stocking all of the goods in a warehouse that is located in a flood risk zone,
could it be concluded that the impediment was beyond the control of the obli-
gor? Henceforth, before acknowledging COVID-19 as a force majeure impedi-
ment, there should be a case-by-case analysis to come to the conclusion that it is
beyond the control of the parties.
As a result of the spread of COVID-19, governments have taken serious meas-
ures, such as travel bans, restricting and prohibiting road and rail transporta-
tion, prohibiting the exportation of certain goods and raw materials, and
allocating certain goods or raw materials for the production of specific goods.
All of these measures have led to a failure to produce goods or to hamper the
delivery obligation of the parties. In the case of travel bans due to COVID-19,
whether this will be acknowledged as an impediment beyond control requires
an answer. In an ICC case, the respondent was contracted to deliver trucks and
maintain them in an Arab country.44 However, the respondent cited force
majeure as a basis for the default, claiming that his employees’ origins were
from Israel, so they could not obtain visas. The tribunal refused the force
majeure claim because there was insufficient proof of force majeure, especially
highlighting that the delay in obtaining visas45 could not account for default
over 26 months and that the defaulting party could have hired employees from
different nationalities.46
The impediments occurring as a result of ‘intra-firm’ or production processes
are treated as an internal issue that can be controlled by the parties.47 Under the
CISG, the operation of a business such as providing personnel is within the

42
Berger and Behn (n 11).
43
Dionysios P. Flambouras, ‘The Doctrines of Impossibility of Performance and clausula rebus sic
stantibus in the 1980 Vienna Convention on Contracts for the International Sale of Goods and
the Principles of European Contract Law: A Comparative Analysis’ (2001) 13 Pace International
Law Review 261, p. 267 available at <http://www.cisg.law.pace.edu/cisg/biblio/flambouras1.
html> accessed 13 March 2020, Brunner (n 40) 82.
44
ICC Case No. 1782/1973.
45
Pichonnaz (n 30) para 22.
46
See also National Oil Corp. v. Libyan Sun Oil Co. Case ICC Award No. 4462. The tribunal
rejected the force majeure defense, asserting that the defendant could have found non-U.S. per-
sonnel to perform the contract, so the ban enterıng the U.S passports holders to Libya did not
constitute force majeure.
47
Brunner, ‘Rules on Force Majeure’ (n 40) 82, Pichonnaz (n 30) 873 para 22.

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448 Ş. Esra Kiraz and Esra YIldız Üstün

obligor’s sphere of risk;48 therefore, if a party suffers from a shortage in staff due
to travel restrictions imposed as a measure against COVID-19 and so fails to
produce the goods that he or she contracted for sale, this may not be deemed as
an impediment beyond control.
The UNIDROIT Secretariat’s Note addresses the ‘subjective situation of the obli-
gor’ and states that, in cases of bad faith, the obligors’ illness would not be
accepted as a force majeure.49 On a similar account, Pascal Pichonnaz does not
accept ‘death or severe illness of the obligor or a central person of the firm’ as

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an impediment beyond control. These views could not be easily acceptable for
COVID-19 situations. Since the current death toll from COVID-19 is approach-
ing one million people worldwide,50 business will be adversely affected by the
loss of these people, whether or not they are key personnel.51 Christoph
Brunner holds the view that ‘the obligor may be excused if illnesses, deaths or
vacancies of employees are caused by extraordinary external events as in the
case of an epidemic affecting the obligors entire personnel’.52 Rather than ques-
tioning if the pandemic is affecting all employers, we believe that the death or
illness of either the contract parties or their employers should be examined on a
case-by-case basis. If the deaths and illnesses severely hamper the performance
of the contract, it should be regarded as being ‘beyond control’.
During the COVID-19 crisis, it is also observed that governments either have
restricted the exportation of some goods due to high demand within the coun-
try itself or have employed these goods to produce devices, equipment, or prod-
ucts that have been used for combatting the spread of COVID-19. In this
situation, whether a party can rely on this event as an impediment beyond its
control raises a question. In the ICC’s Case 3740 (unpublished), an interesting
case on force majeure that is about the defendant government’s exportation re-
striction, the Indian defendant refused to deliver a certain quantity of the com-
modity. His reason was that the home country was aiming to meet domestic
demands first rather than export commitments. Thus, the defendant informed
the claimant about the situation and asked the claimant to find a remedy.
However, the sole arbitrator rendered an award that the Indian defendant had
relied on only a personal confidential letter signed by the under-secretary of a
ministry, which means that the State’s decision had not been published in

48
Enderlein and Maskow (n 29), Flambouras (n 43).
49
Note of Secretariat (n 3) para 18.
50
See WHO Coronavirus Disease (COVID-19) Dashboard available at <https://covid19.who.int/
> accessed 17 September 2020.
51
See UK Cabinet Office (n 3). It is stated that: ‘It is recognised that parties to some contracts
may find it difficult or impossible to perform those contracts in accordance with their agreed
terms as a result of the impact of Covid-19 – including through illness in the workforce, the
effects of restrictions on movement of people and goods, revised ways of working necessary to
protect health and safety and the closure of businesses.’
52
Christoph Brunner, Force Majeure and Hardship under General Contract. Principles: Exemption
for Non-performance in International Arbitration (Alphen upon Rhine: Kluwer Law
International, 2009) 168.

Unif. L. Rev., Vol. 25, 2020, 437–465

 COVID-19 and force majeure clauses 449

the official gazette. As a result, the arbitrator said: ‘[I]n the premises, such deci-
sion did not have the force of law, or consequentially, the effect of constituting
force majeure within the meaning of clause. . .of the letter dated’. This conclu-
sion proves that the arbitrator adopted a formal standpoint rather than putting
administrative pressure on the party.53
This case is similar to most countries’ attitudes towards the exportation of
specific types of products, especially medical products. For example, the presi-
dent of the USA, Donald Trump, made the order that medical supplies such as
masks, gloves, and special coveralls would not be exported until COVID-19

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ends.54 This meant that if the American sellers already have a contract for med-
ical products with another country, they cannot deliver the tools until a second
order by President Trump. Thus, the sellers would probably claim a force
majeure clause, but if the arbitrators request the formal act such as the above
case, it can be a difficult situation for the sellers.55
It cannot be denied that COVID-19 causes impediments that, in the first
place, are mandatory orders by the officials related to national/international
trade in many States, especially China and Italy, and then in companies as a nat-
ural outcome. If the impediment were only the borderline issue in the supply
chain, this could be overcome by paying substantially more money. However,
this event is more complex and needs to be resolved. For example, what hap-
pens if workers are required to stay at home and are not allowed to travel
abroad due to the virus for an unknown period of time? Is the company relieved
from exercising precaution?56
Whether governments’ requirements on the reduction of working hours and
their curfew announcement due to COVID-19 cause delays in production can
fall into the parties’ sphere of risk is a question to be answered. In our opinion,
these situations are beyond the parties’ sphere of risk and cannot intervene in
the situation. Thus, if the obliged party fails to perform his obligations, or there
has been no production or less production as a result of the curfew or reduction
53
Werner Melis, ‘Force Majeure and Hardship Clauses in International Commercial Contracts in
View of the Practice of the ICC Court of Arbitration’ available at <https://www.fidic.org/sites/
default/files/10%20Force%20Majeure%20and%20Harship%20Clauses.pdf> accessed 3 May
2020.
54
Ana Swanson, Zolan Kanno-Youngs and Maggie Haberman, ‘Trump Seeks to Block 3M Mask
Exports and Grab Masks From Its Overseas Customers’ <https://www.nytimes.com/2020/04/
03/us/politics/coronavirus-trump-3m-masks.html> accessed 22 September 2020.
55
“President Donald Trump issued an executive order delegating authority under Title III of the
Defense Protection Act to the International Development Finance Corporation to make loans,
make provisions for purchases and commitments to purchase, and take additional actions to
create, maintain, protect, expand, and restore domestic industrial base capabilities, including in
the supply chain in the United States and its territories (the “domestic supply chain”), to re-
spond to the COVID-19 pandemic in May 2020. David F. Dowd Luke Levasseur Marcia G.
Madsen, COVID-19 and the US Defense Production Act: Latest Developments” (15 May 2020)
<https://www.mayerbrown.com/en/perspectives-events/publications/2020/05/covid19-and-the-
us-defense-production-act-latest-developments> accessed 20 September 2020.
56
Lauri Railas, ‘The Coronavirus and Distributorship under the New ICC Force Majeure Clauses
(Helsingin Seudun Kauppakamari 12 March 2020) available at <https://helsinki.chamber.fi/en/
the-coronavirus-and-distributorship-under-the-new-icc-force-majeure-clauses/> accessed 19
March 2020.

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450 Ş. Esra Kiraz and Esra YIldız Üstün

of working hours, this non-performance should be regarded as an impediment

beyond his capacity.

3. Economic impediment
The economic impediments cause the performance to be ‘excessively onerous’
because the cost of the performance increases.57 In general, price fluctuations
such as increases or decreases in market prices of goods, changes in the cur-
rency, and economic crisis are claimed as a basis for economic impediments.58

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Whether COVID-19 can result in an economic impediment also requires fur-
ther attention due to the impact of the pandemic on economies and businesses.
To combat a COVID-19 lockdown that weakens economic activities, the
demands on most of the products, and even petrol prices, have been reduced
significantly.56
While examining if COVID-19 is an economic impediment within the context
of force majeure, it should also be noted that any changes in market prices are
usually assumed to be foreseeable and a part of the business risk that all buyers
and sellers have to consider.59 Even if the economic conditions are regarded
within the sphere of the parties’ risk, a reasonable limit for the parties should be
drawn. Schwenzer explains that ‘exemption under Article 79 should only be
considered where the ultimate “limit of sacrifice” has been exceeded’.60 Thus,
especially in terms of the CISG, the economic impediments should be assessed
based on the reasonable limits of ‘the parties’ sphere of risk’, so it can be decided
if the economic impediments are beyond the control of the parties. The ‘beyond
control’ criterion is also closely related to unavoidability;61 therefore, the assess-
ment should be made together with the parties’ sphere of risk and the unavoid-
ability of these impediments.
As the requirements of being beyond a party’s control and the unavoidability
of economic impediments are closely connected, the extent to which a party is
required to take action to fulfil the contract is also generally determined by con-
tractual risk. According to the ICC’s arbitrations,62 economic impediments
such as currency exchange, an increase or decrease in market price, and so on
57
Christoph Brunner, ‘Force Majeure and Hardship under General Contract Principles’ (n 52) 213,
Jenni Miettinen, ‘Interpreting CISG Article 79 (1): Economic Impediment And The
Reasonability Requirement’ (Master’s thesis, University of Lapland Faculty of Law 2015) avail-
able at <https://lauda.ulapland.fi/bitstream/handle/10024/62487/Miettinen.Jenni.pdf?
sequence¼1&isAllowed¼y> accessed 29 March 2020.
58
Ibid. Carolino Aroya, ‘Change of Circumstances under the CISG’ <http://www.gbv.de/dms/
buls/734889690.pdf> accessed 19 September 2020.
59
Schwenzer ‘Article 79’ (n 29) 1142, Miettinen, ‘Interpreting CISG Article 79 (1): Economic
Impediment and the Reasonability Requirement’ (Master’s thesis, University of Lapland Faculty
of Law 2015) available at <https://lauda.ulapland.fi/bitstream/handle/10024/62487/Miettinen.
Jenni.pdf?sequence¼1&isAllowed¼y> accessed 29 April 2020. Brunner, ‘Force Majeure and
Hardship under General Contract Principles’ (n 52) 215–16.
60
Schwenzer ‘Article 79’ (n 29) 1142.
61
Miettinen (n 57).
62
ICC case 6281/1989. ICC Nos. 3099 and 3100/1979. ICC Case No. 2216/1974. Miettinen (n 57).

Unif. L. Rev., Vol. 25, 2020, 437–465

 COVID-19 and force majeure clauses 451

cannot be accepted as a force majeure because the wave in economic circumstan-

ces must be very exceptional and rapid in effect to become an impediment.63 To
meet a force majeure clause, a party’s performance must become ‘physically or
legally impossible, not merely more difficult or unprofitable’.64
In terms of the CISG, whether economic impediments are within the sphere
of Article 79 has been debated.65 However, there is no uniform solution for this
issue, and divergent opinions have been reached by both national courts and ar-
bitral tribunals.66 In one of the cases, the Court of Appeals of Lamia in Greece

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demonstrated that the high cost of performance under Article 79 of the CISG
cannot be assumed as an impediment. A Bulgarian seller failed to supply sun-
flower seeds to a Greek seller due to the fact that drought had destroyed a large
quantity of sunflower seeds. Also, the Danube river level decrement did not
allow for the loading of goods on a ship in a river port. The alternative way of
delivering the goods in a seaport highly increased transportation costs. Despite
these reasons, the Court rejected exonerating the Bulgarian seller from liability
under Article 79 and stated:
CISG article 79 does not entitle the promisor to be released from his contractual
obligations due to change of the economic background on which the parties relied
for the conclusion of the contract, since, in this case, the commencement of trans-
portation by ship could be performed at a seaport (instead by a river port), although
this would entail higher costs for the seller.67

Considering the above-mentioned fact, if a seller changes his route initially

used in the production of the goods for delivering or receiving them and faces
higher costs during the process due to COVID-19 measures, this situation will
not be within the sphere of force majeure clauses under the CISG. However, the
recent CISG’s Advisory Board opinion holds the view that Article 79 can also be
applicable in the case of economic impediments.68 With regard to this opinion,
economic impediments caused by COVID-19 can trigger the force majeure
clause under the CISG. Even the Advisory Council suggests this view; what will
be the position of arbitral tribunals towards COVID-19-related economic
impediments is not easy to predict.

63
Ibid 12–13. See also Miettinen (n 57).
64
Thames Valley Power v. Total Gas & Power, [2005] EWHC 2208 (Comm).
65
Annex 2 CISG AC Opinion No. 20 Scholarly Writings on the CISG and Hardship <http://cis
gac.com/file/repository/Annex_2_Opinion_No_20_CISG_Scholarship_on_Hardship.pdf>
accessed 19 September 2020.
66
Annex 1 CISG AC Opinion No. 20 Case Law on the CISG and Hardship <http://cisgac.com/
file/repository/Annex_1_Opinion_No_20_Case_Law_CISG_on_Hardship.pdf> accessed 19
September 2020.
67
Greece 2006 Decision 63/2006 of the Court of Appeals of Lamia (Sunflower seed case) available
at <http://cisgw3.law.pace.edu/cases/060001gr.html> accessed 1 May 2020.
68
CISG Advisory Council Opinion No. 20 Hardship under the CISG <http://cisgac.com/opinion-
no20-hardship-under-the-cisg/> accessed 21 September 2020.

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452 Ş. Esra Kiraz and Esra YIldız Üstün

Economic impediments are also regarded as hardship,69 thus the parties can
apply for hardship clauses. The PICC has a hardship clause that specifically deals
with economic impediments; therefore, a party can apply for Articles 6.2.2 and
6.2.3 when there is an economic impediment as a result of COVID-19.70 On a
similar account, the ICC’s 2020 Hardship Clause will serve to solve economic
impediments raised by COVID-19.

IV. Unforeseeability of the impediment

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As a second criterion, it is required that the impediment must be unforeseeable.
The ICC’s 2020 FMC states that ‘it could not reasonably have been foreseen at
the time of the conclusion of the contract’. The PICC and the CISG do not con-
tain the word ‘foreseeable or foreseen’, in particular, like the ICC’s 2020 FMC
does, but both of them refer to the unforeseeability of the impediment by the
wording: ‘[I]t could not reasonably be expected to have taken the impediment
into account at the time of the conclusion of the contract’.
This criterion for force majeure is tested according to the obligor’s sphere of
risk, so it will be decided whether it is reasonable to expect the parties to predict
its occurrence.71 The observation of foreseeability is made according to a ‘rea-
sonable person’; therefore, it can be said that an objective criterion is inserted
by these legal instruments for force majeure application. The reasonable person
who is the focal point for the criterion is defined under Article 8(2) of the CISG
as ‘a reasonable person of the same kind as the other party would have had in
the same circumstances’. Also, the same interpretation of a reasonable person
can be found under Article 4.1(2) of the PICC.72 Hans Stoll suggests that a per-
son between a ‘pessimist who foresees all sorts of disaster’ and an ‘optimist who
never anticipates the least misfortune’ should be regarded as a yardstick of ap-
plication of reasonableness to establish the unforeseeability .73 However, the
way unforeseeability and reasonableness will be assessed is not easy to ascertain.
The Secretariat’s commentary suggests the assessment of unforeseeability on a
case-by-case basis.74

69
Carolina Arroya, Firoozmand, Mahmoud Reza, and Javad Zamani, ‘Force majeure in inter-
national contracts: current trends and how international arbitration practice is responding’
Arbitration International 33.3 (2017) 395–413
70
Secretatriat Note (n 3). Hoekstra (n 18) 117–25.
71
Schwenzer, ‘Article 79’ (n 29) 1134, Flambouras (n 43) 270.
72
UPICC Article 4.1(2): ‘If such an intention cannot be established, the contract shall be inter-
preted according to the meaning that reasonable persons of the same kind as the parties would
give to it in the same circumstances.’ See also Pichonnaz (n 30) 877 para 35.
73
Hans Stoll, ‘Exemptions’ in Peter Schlechtriem (eds.), Geoffrey Thomas (trs.), Commentary on
the U.N: Convention on the International Sale of Goods (CISG) (2nd ed. 1998) para 23, See
China 17 September 2003 China International Economic and Trade Arbitration Commission
(CIETAC) Arbitration proceeding (Australia cotton case) available at <http://cisgw3.law.pace.
edu/cases/030917c1.html> accessed 2 May 2020.
74
Secretariat Commentary, Art 79 note 6 available at <http://www.cisg.law.pace.edu/cisg/text/
secomm/secomm-65.html> accessed 11 March 2020.

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 COVID-19 and force majeure clauses 453

To satisfy the requirement of unforeseeability, the time when the impediment

is possible to occur should also be regarded as being of significance. The criter-
ion in this case is ‘time of the conclusion of the contract’ that leads to the ex-
emption; the defaulting party cannot be expected to assume the risk at the time
of the conclusion of the contract.75

1. Is COVID-19 an unforeseeable impediment?

COVID-19 was first reported in China in December 2019. Since then, China has

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taken serious precautions and measures to prevent the spread of the virus.
Later, in mid-January, COVID-19 started to be seen outside China, and the
World Health Organization (WHO) acknowledged that the reported cases arose
‘in five WHO regions in one month’.76 On 30 January 2020, the WHO declared
COVID-19 a public health emergency of international concern, and, by 11
March 2020, it was accepted as a pandemic.77
Considering the progress of COVID-19, whether it is an unforeseeable im-
pediment and when it can be deemed unforeseeable needs to be examined care-
fully. However, considering the vagueness of the unforeseeability criterion, its
application to the issues in COVID-19 cases also turns out to be problematic.
On this account, the Secretariat’s commentary of the CISG states:
It is this later element [foreseeability] which is the most difficult for the non-
performing party to prove. All potential impediments to the performance of a con-
tract are foreseeable to one degree or another. Such impediments as wars, storms,
fires, government embargoes and the closing of international waterways have all
occurred in the past and can be expected to occur again in the future.78

Similarly, Joseph Perillo claims:

Anyone who has read a bit of history or who has lived for three or more decades of
the twentieth century can foresee, in a general way, the possibility of war, revolution,
embargo, plague, terrorism, hyper-inflation and economic depression, among the
other horrors that have afflicted the human race. If one reads science fiction, one
learns of the possibility of new terrors that have not yet afflicted us, but involve pos-
sibilities that are not pure fantasy.79

75
See the United States 6 July 2004 Federal District Court (Raw Materials Inc. v. Manfred Forberich
GmbH & Co., KG) available at <http://cisgw3.law.pace.edu/cases/040706u1.html> accessed 27
March 2020, United States 20 August 2008 Federal District Court [New York] (Hilaturas Miel,
S.L. v. Republic of Iraq) available at <http://cisgw3.law.pace.edu/cases/080820u1.html> accessed
27 March 2020, Netherlands 2 October 1998 District Court ’s-Hertogenbosch available at
<http://cisgw3.law.pace.edu/cases/981002n1.html> accessed 27 March 2020.
76
WHO, Rolling Updates on Coronavirus Disease (COVID-19) 1 May 2020 <https://www.who.
int/emergencies/diseases/novel-coronavirus-2019/events-as-they-happen> accessed 4 May
2020.
77
See ‘Rolling updates on coronavirus disease (COVID-19)’ <https://www.who.int/emergencies/
diseases/novel-coronavirus-2019/events-as-they-happen> accessed 8 September 2020.
78
Secretariat Commentary, (n 74) Art 65 note 5.
79
Joseph M. Perillo, ‘Force Majeure and Hardship under the UNIDROIT Principles of International
Commercial Contracts’ (1997) 5 Tul. J. Int’l & Comp. L. 5, 17.

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454 Ş. Esra Kiraz and Esra YIldız Üstün

Even though it can be accepted that most of the events may occur within the
usual flux of life, one critical point not to be disregarded is the time of the fore-
seeability of the event. Such impediments must not be assumed once the con-
tract has been concluded.
As indicated by the above heading,80 foreseeability is tested objectively by
examining if a reasonable person under similar circumstances can take the event
into account at the time of the contract.81 In one case by the ICC,82 the State
partner of a joint venture had a contract related to cultivating agricultural prod-

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ucts. However, the State party did not perform the contractual obligation be-
cause the land was not available, as a result of which the State let the refugees
from the neighbouring country accommodate the land. The tribunal concluded
that the State partner was a public entity, and it must have known of the State
action before entering into the contract. The tribunal stated that ‘[b]efore enter-
ing an obligation, everyone must, before, be certain that he has the ability to
perform it. If he/she has or must have the slightest doubt about his/her ability
to perform at the given time, he/she must make all necessary verifications before
promising performance’. Considering the statement in this case, being a State
entity as a party in a contract is important in deciding whether or not the event
is foreseeable because the tribunal stated that the public entity had known the
State’s next step in advance.
Governments took harsh measures against COVID-19, such as lockdowns and
import/export bans, and, thus, where a public authority or entity is a party to a
contract, the question of whether non-performance due to these measures
imposed by the government would be deemed to be foreseeable is open for dis-
cussion. In this regard, the Secretariat’s Note holds the idea that the measures
imposed were beyond the control of the public entities.83 Most of these meas-
ures were adopted quickly, and these measures have been changed on a daily
basis with regard to the spread of COVID-19. Thus, even though there has been
a risk of imposing harsh measures, when these will be imposed or how strictly
they will be applied could not have been known by all of the public entities or
authorities.
Another ICC case highlights the time of the occurring impediment.84
According to the case, two companies signed the contract for the sale of
petroleum-based products. The respondent’s government started to control the
currency exchange; thus, the respondent could not make a payment.
Additionally, the contract covered a clause that listed force majeure events as
impediments caused from legislation or regulation by Algeria (Algeria was not
the respondent’s government). The tribunal found that when the contract was
80
See Heading ‘IV. Unforeeseability of Impediment’
81
Pichonnaz (n 30) 877 para 35.
82
ICC No. 12112/2009 in Albert Jan van den Berg (ed.), XXXIV Yearbook Commercial
Arbitration 77–110 (2009).
83
Note of Secretariat (n 3) footnote 14.
84
ICC Nos. 3099 and 3100/1979.

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 COVID-19 and force majeure clauses 455

issued, the regulations were already in force, so it could not be assumed to be a

force majeure. In terms of COVID-19, whether or not the parties were aware of
the measures imposed by the government to prevent the spread of COVID-19
will come into consideration. Their awareness may lead to a rejection of their
force majeure claims on COVID-19.85
In ICC Case no. 2216/1974,86 force majeure was an issue due to the falling of
the market price for petrol. After entering a contract, there was a significant de-
crease in the price of petrol. Therefore, the respondent refused to take delivery,
arguing that the fall in price was considerable, so it excused the respondent’s

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performance. Plus, he or she was claiming that the intervention of government
financial authorities to prevent currency losses constituted force majeure.
However, the ICC tribunal considered that the change in market price risk was
foreseeable and that its risk could have been allocated. Also, the respondent had
already received a letter from the relevant authority, so the change in circum-
stances was obviously foreseeable. The tribunal concluded that there is no doc-
trine or case law precedent that proves such legislation could be accepted as
force majeure.
On a similar account, there has been a remarkable decrease in petrol prices
after COVID-19 issues.87 Because people have to stay at home, and national and
international travel was banned, the need for petrol was reduced.88 As noted
above,89 covering these economic impediments under Article 79, based on the
Advisory Board’s suggestion, all of the requirements set by the article should be
fulfilled. Thus, it is important to reveal whether these price fluctuations can be
deemed to be foreseeable or not. Here, the tribunal believed that the risk of
these impediments lay in the sphere of the obliged party. Economic conditions
generally are seen as the risk that the parties have undertaken while concluding
a contract; however, COVID-19 has been affecting economies beyond all pos-
sible predictions. For example, the losses that airlines experienced exceeded the
expectations made at the beginning of the pandemic.90 Even these sectors could
not have foreseen the worst scenario in the middle of the pandemic: how can
85
Algerian v African State enterprise, ICC Case Nos. 3099 and 3100, 30 May 1979. See also Sigvard
Jarvin and Yves Derains Collection of ICC Arbitral Awards 1974-1985/Recueil des Sentences
Arbitrales de la CCI Vol. I (Kluwer Law and Taxation Publishers 1994) 67.
86
ICC Case No. 2216/1974, Award Abstract and Commentary, Digest of ICC Awards.
87
Farhad Taghizadeh-Hesary, Economic impacts of the COVID-19 pandemic and oil price col-
lapse (18 May 2020) <https://www.asiapathways-adbi.org/2020/05/economic-impacts-covid-
19-pandemic-and-oil-price-collapse/> accessed 10 September 2020.
88
Ibid. See also ‘OPEC trims 2020 oil demand, sees doubts about 2021 on virus fallout’ <https://
economictimes.indiatimes.com/markets/commodities/news/opec-trims-2020-oil-demand-sees-
doubts-about-2021-on-virus-fallout/articleshow/77511946.cms> accessed 10 September 2020.
89
See Heading ‘3. Economic Impediment’.
90
‘Covid-19: Air France-KLM reports e815 million first-quarter operating loss’ (France 24, 7 May
2020) <https://www.france24.com/en/20200507-covid-19-air-france-klm-reports-e815-mil
lion-first-quarter-operating-loss> accessed 21 September 2020, ‘IATA Updates COVID-19
Financial Impacts- Relief Measures Needed-’ (IATA, 5 March 2020) <https://www.iata.org/en/
pressroom/pr/2020-03-05-01/> accessed 21 September 2020, ‘European COVID-19 Impacts
Continue to Worsen as Border Restrictions Remain’ (IATA, 13 August 2020) <https://www.
iata.org/en/pressroom/pr/2020-08-13-01/> accessed 21 September 2020.

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456 Ş. Esra Kiraz and Esra YIldız Üstün

these price fluctuations be deemed to be ‘foreseeable’ and all of the risk laid on the
obligor? These economic conditions should be carefully examined case by case.
Another ICC case discussed the foreseeability of force majeure claims.
According to this case, a Romanian company signed a contract to sell scrap
metal to a German company. The contract had a provision for the seller to get
an export license, but the seller failed to do so. Also, the contract included that
force majeure was to be considered as described in the 1990 Incoterms—pre-
determined contract terms published by the ICC.91 The tribunal stated that

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Incoterms defined force majeure as ‘non-performance arising out of causes be-
yond either party’s control and without any fault or negligence by the non-
performing party’. Even though the seller defended himself, claiming that the
failure of obtaining the license was beyond his control, the tribunal concluded
that the fact that the seller already had four years to get the license could not be
a sudden event in the economic or political situation of Romania. Therefore,
the seller should have known his country’s export regulations and procedures.
Finally, the seller had full responsibility for not obtaining the license.92
In terms of foreseeability, when the impediment exists is significant. Thus, it
is said that the foreseeability of the impediment depends upon the time of the
conclusion of the contract. It might be asserted that for all of the contracts con-
cluded before COVID-19, it was reported that the parties could not have esti-
mated the potential consequences. For the contracts concluded after the
announcement of COVID-19 cases in China, a case-by-case analysis should be
made. The Secretariat’s Note suggests assessing the foreseeability according to
the times of the conclusion of the contract:
1) before 31 December 2019; (ii) on or after 31 December 2019 but before 13 March
2020 (pandemic declared by WHO) or when the health crisis was in the public do-
main in the relevant country, whichever happened first; (iii) during the state of
emergency of the relevant jurisdiction (i.e., the period during which extraordinary
measures were implemented in the jurisdiction); and (iv) after the state of emer-
gency has ended.93

This suggestion seems reasonable to test the foreseeability of COVID-19.

The first cases were reported in Wuhan, China, and, soon after, the Chinese
government imposed travel bans and a general lockdown within this area. If a
contract was concluded after the imposition of these measures with a Chinese
party that was located in Wuhan, and his undertakings were related to Wuhan,
it is acceptable that the impediment was foreseeable. UNIDROIT’s Note assesses
the foreseeability regarding the place of business of the parties and States and,
similar to our view, agrees that if COVID-19 had reached the parties’ place of
business, the foreseeability of the impediment would have been found.94
91
ICC Case No. 112253/2002, See from 21 ICC Bull. 66 (2010).
92
Ibid.
93
Note of Secretariat (n 3) footnote 11.
94
Ibid.

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 COVID-19 and force majeure clauses 457

If the contract was concluded after COVID-19 with a Chinese party located
outside a place where strict measures were taken (for example, outside of
Wuhan), was the impediment still foreseeable? On this occasion, a distinction
can be drawn between the contracts made after COVID-19 was declared in
China and those made after the declaration of the pandemic by the WHO. If the
contract was concluded before the declaration of the pandemic with a Chinese
party located in the area that had not been hit by COVID-19, whether the par-
ties can foresee the impediment could be analysed case by case and in consider-
ation of the general situation within the country. But if the contract was

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concluded after the declaration of the pandemic, considering the professional
capacity of the parties, the parties should analyse the situation and take into ac-
count the contagious nature of the virus and the additional measures taken by
the government day by day. Therefore, for any contract made after the report of
COVID-19 in China with a Chinese party or any involvement with China-
related parties or goods, COVID-19 might have been deemed to be a foreseeable
impediment. Akin to our view, the Secretariat’s Note states that ‘the closer the
jurisdiction of the places of business of the parties to a country where the health
crisis is already present, the more reasonable it would have been to expect them
to foresee the pandemic and its consequences on the performance of
contracts’.95
It can be seen from this analysis that the time of the conclusion of the con-
tract, the parties’ place of business where the virus had reached, and the rela-
tionship between the contracting parties and the other parties located in the
areas affected by the pandemic are of significance. In order to offer a general
foreseeability test, it must be examined when the parties had concluded their
contracts, whether the countries they are located in, or connected to, had been
contaminated by the virus, whether the governments in these contract-related
locations had implemented measures, and what these measures were. According
to the answers given to these questions, the tribunals should reach a decision on
the foreseeability of the force majeure event.
Hence, a contract concluded with the parties located in States that were not
hit by the virus or where the contract does not have any connection with States
contaminated by the virus (for example, where the performance of the contract
is not dependent on some materials produced in a contaminated State) after
COVID-19 was reported should be treated as unforeseeable. In the case of the
conclusion of the contract after the declaration of the pandemic by parties who
were located in COVID-free States, the foreseeability should be assessed with re-
gard to the facts of the situation and the professional capacity of the parties. By
professional capacity, we refer to a reasonable merchant who acts diligently.96
For contracts concluded after the outbreak by parties located in States hit by the

95
Note of Secretariat (n 3) para 21.
96
Pichinnoz (n 30) 877 para 34.

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458 Ş. Esra Kiraz and Esra YIldız Üstün

virus, the foreseeability will be decided based upon the measures implemented
by the government.
All of the views presented to clarify foreseeability within the context of
COVID-19 are our suggestions, so it is not clear whether these suggestions will
be applied by arbitral tribunals or courts. For example, in respect of a failure to
deliver the goods allegedly connected to the 2002–3 Severe Acute Respiratory
Syndrome (SARS) epidemic, a tribunal constituted under the rules of the China
International Economic and Trade Arbitration Commission rejected a plea of
force majeure under Article 79 of the CISG, asserting that the impediment was

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foreseeable because the outbreak of SARS happened two months prior to the
signing of that contract.97 Therefore, the question of the foreseeability test for
COVID-19 will be answered by arbitral tribunals and courts.

V. Impossibility to avoid or overcome

In order to apply for a force majeure clause, there must also be no possibility of
avoiding or overcoming it or its consequences. The ICC’s 2020 FMC reads:
‘[T]hat the effects of the impediment could not reasonably have been avoided
or overcome by the Affected Party’. The CISG and the PICC have a similar em-
phasis for the parties ‘to have avoided or overcome it or its consequences’. The
main difference between the languages of these instruments is that, while the
ICC FMC only considers the avoidance and overcoming of ‘the effect of the im-
pediment’, the CISG and the PICC clauses require one to overcome or avoid
‘the impediment itself’ and its effects.98
For all of these legal instruments, the impossibility of avoiding or overcoming
the impediment or its effects must be observed along with other criteria dis-
cussed above. However, when the wording of the CISG and the PICC are exam-
ined, they both use ‘or’ after their two requirements, contrary to the wording of
the ICC’s 2020 FMC, which employs ‘and’ before imposing the third criterion.
The preference for the word ‘or’ gives the idea that the defaulting party should
either prove that they could not reasonably foresee the impediment or he or she
could not have avoided or overcome the impediment and its consequences, so
he or she should not prove both situations. Despite this wording, proving the
unforeseeability of the impediment does not merely suffice to trigger force
majeure according to the literature and the case law.99
Along with the unforeseeability, this criterion is also hard to ascertain since it
is necessary to decide whether the impediment or its consequences are unavoid-
able or insurmountable. This criterion is also examined in accordance with rea-
sonability, which does not give a precise threshold for determining the
97
China 5 March 2005 CIETAC Arbitration proceeding (L-Lysine case) <http://cisgw3.law.pace.
edu/cases/050305c1.html> accessed 13 September 2020.
98
Filip De Ly, ‘Analysing the ICC Force Majeure Clause 2003’ in Fabio Bortolotti and Dorothy
Ufot (ed), Hardship and Force Majeure in Commercial Contracts: Dealing with Unforeseen Events
in a Changing World (Kluwer Law International 2019). Also, Pichinnoz (n 30) 874 para 25.
99
See Secretariat Commentary (n 74).

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 COVID-19 and force majeure clauses 459

unavoidability. The avoidance is interpreted as precautions being taken

‘before’ the occurrence of the event,100 whereas it is stated that the defaulting
party can offer substitutes to enable performance in order to overcome the
impediment.101

1. Whether the effects of COVID-19 could be avoided or overcome

by reasonable steps?
As discussed above, the CISG and the PICC examine the unavoidability of the

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impediment itself. In the case of COVID-19, the avoidability of the occurrence
of this outbreak should not be expected or imposed on the parties. It is also not
reasonable to anticipate that a party can avoid the impositions of rough meas-
ures by governments. Therefore, COVID-19 cases should investigate if the non-
performing party could have avoided or overcome ‘the effects of the impedi-
ment’. Whether the consequences could have been avoided or overcome must
be examined on a case-by-case basis.
For example, if the seller failed to deliver the goods due to the restrictions or
prohibitions on transportation, the question as to the possibility of following an
alternative route should be asked. The Macromex Srl v Globex Int’l Inc case dis-
plays similar features to the situation with COVID-19.102 The contract was
about the purchase of chicken legs to be delivered to Romania. But, after the
contract, an avian flu breakout started, so the Romanian government banned all
chicken imports that were not certificated by a certain date. The seller claimed
that the contract had no force majeure clause; therefore, the tribunal applied the
CISG’s Article 79 to fill the ‘gap’. According to the tribunal decision, the seller
satisfied the first, second, and fourth elements of force majeure under the CISG
(there was an impediment beyond a party’s control that was unforeseeable by
that party and the party’s non-performance was due to that impediment).
However, the tribunal found that the seller did not meet the third element and
that the impediment could not be reasonably overcome. Therefore, the tribunal
concluded that the seller could have shipped to another port in a neighbouring
country, as the buyer had proposed.103

100
Atamer (n 28) para 54, Tallon (n 29).
101
Schwenzer, ‘Article 79’ (n 29) para 14. See Secretariat Commentary (n 74), American
Arbitration Association 23 October 2007 (Macromex Srl. v. Globex International Inc.) Interim
Award <http://cisgw3.law.pace.edu/cases/071023a5.html> accessed 22 March 2020.
102
Ibid. 2008 U.S. Dist. LEXIS 31442 (S.D.N.Y. 2008) (award enforced in the U.S.). See also
Turkish law accepted epidemic diseases as one of the force majeure events. The Supreme Court
Assembly of Civil Chambers judgment (2017 /11-90 and 2018/1259, 27.06.2018) addressed;
‘Force majeure is an extraordinary incident that occurs outside the activity and operation of
the responsible debtor, which leads to the violation of a general norm of behaviour or debt in
an absolute and inevitable manner, which cannot be foreseen and resisted. Natural disasters
such as earthquake, flood, fire, and epidemic diseases are considered as force majeure.’
103
Mark Augenblick & Alison B. Rousseau, “Force Majeure in Tumultuous Times:
Impracticability as the New Impossibility It’s Not as Easy to Prove as You Might Believe’’ The
Journal of World Investment & Trade 13 (2012) 59.

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460 Ş. Esra Kiraz and Esra YIldız Üstün

Since the beginning of the coronavirus outbreak, countries have started to

ban flights to several other countries. Road and rail transportation have also
been affected; thus, they are either prohibited or restricted.104 In this situation,
although the seller changed the route for delivery, it was also possible that this
new route was closed due to the countries’ restrictions. It is observed that every
day a new case of the virus is found in a different country; thus, it is impossible
to predict where COVID-19 has occurred and when these countries will an-
nounce restrictions to transport. The seller might have wanted to deliver the

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goods even in a different port or follow a different route; however, after arrang-
ing the delivery according to these changes, there was a risk that the measures
could have been imposed on these places and routes. Therefore, tribunals
should observe if the non-performing party would still have failed to perform
his obligations once all of the precautions had been taken in a reasonable and
timely manner. If the answer is yes, then the tribunal should acknowledge that
the impediment was unavoidable or insurmountable.
On a similar account, Bodhisattwa Majumder and Devashish Giri believe that
the effects of COVID-19 have been ‘far more severe’ than epidemics experienced
so far; therefore, the parties could not have avoided or overcome its results.105
In our view, until 11 March 2020, when the WHO acknowledged COVID-19 as
a pandemic, nobody considered that COVID-19 would last more than six
months and that the measures imposed by States would be harsher day by day.
Therefore, mitigation of the effects for COVID-19 should be carefully
considered.
‘According to a case that was claimed force majeure by the buyer regarding an
impediment, a Chinese buyer and a seller from Singapore entered into a con-
tract for the purchase of screw-thread steel. According to their contract, the
bulk of the payment for the goods would be made with a letter of credit, and a
small portion of the money would be paid by direct transfer into an account
designated by the seller. The seller would start loading the ship once the buyer
transferred the money. Following the signing of the contract, a letter of credit
was issued in a timely manner, but the money transfer by the buyer to the seller
was delayed. At the same time, the seller made repeated requests to amend the
letter of credit to extend the time for the loading of the ship and the term of the
validity of credit itself. On two occasions, the buyer agreed to amend it, but, on
the third occasion, the buyer wanted to delay the shipping until further no-
tice.’106 Afterwards, the buyer refused to accept the delivery of the goods on the
pretext that no import licence was obtained. The buyer submitted to the arbitral
tribunal a certification issued by the Economic Committee of Shantou on 12
104
IRU, Impact on freight and passenger transport of the global Coronavirus (COVID-19) out-
break <https://www.iru.org/apps/flash-getfile-action?id¼889&file¼coronavirus-covid-19-
0104.pdf> accessed 4 March 2020.
105
Majumder and Giri (n 5) 59.
106
China 4 February 2002 CIETAC Arbitration proceeding (Steel bar case) < http://cisgw3.law.pa-
ce.edu/cases/020204c2.html> accessed 10 September 2020.

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 COVID-19 and force majeure clauses 461

June 2001. The seller had to sell the goods to another buyer. The buyer claimed
that the seller delayed the booking of a ship to deliver the goods, while the seller
claimed that the buyer delayed making payments and receiving the goods.
The tribunal argued that the inability to use the import license was not a ‘force
majeure’ event that would exempt the buyer from liability. According to Article
79 of the CISG, if the buyer claims exemption for force majeure-type reasons,
certain conditions must be satisfied. However, the buyer did not inform the sell-
er of the impediment in a timely manner. Therefore, the tribunal concluded
that the buyer’s situation was not unavoidable and that the buyer should be re-

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sponsible for the whole loss that occurred because the buyer did not send clear
information to the seller about the occurrence of the force majeure event in time
and provide a valid certification of force majeure.107
To summarise briefly, the Chinese buyer had an import license (which expired
on 31 March 1999) to receive the goods when he concluded the contract. On
the delivery date, the buyer could not receive the goods from the seller due to
the invalid import license. Also, the buyer had not informed the seller about the
expired import license. However, since the buyer was not accepting the goods,
he did not declare the force majeure event regarding the invalid license. Instead,
the buyer claimed the deformation of the goods because their contract said that:
the [Seller] is not responsible for the delay on delivery or shipment because of com-
mon acceptable events of force majeure, but the [Seller] must inform the [Buyer] of
the event by phone immediately and airmail to the [Buyer] the certification issued
by the official government or chamber of commerce at the place where the disaster
occurs to the [Buyer] within fifteen days after the disaster occurs.108

The seller also suffered from the buyer’s action because, if the buyer had
informed the seller, the seller could have informed its supplier as well. Also, the
seller could have renewed the certificate but he did not. Thus, the seller would
not have had any loss. Therefore, the tribunal concluded that the buyer’s situ-
ation was not unavoidable, and so he should be responsible for the whole loss of
the seller. As seen from this case, if the result of the event is avoidable, the tribu-
nal’s approach is generally that the event is not force majeure.
As for the coronavirus cases, possible force majeure claims might be consid-
ered based on whether there is an option or not to overcome in practice.
Indeed, the very existence of COVID-19 is not enough for a cause of force
majeure, but the tribunal will examine it case by case in detail.

VI. Causality
It is required that the impediment must be ‘due to’ the impediment. Dennis
Tallon’s view is that ‘impediment must be the exclusive cause of the failure to

107
Steel bar case (n 106).
108
Ibid.

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462 Ş. Esra Kiraz and Esra YIldız Üstün

perform’.109 In Russia’s Arbitration Proceeding 406/1998 of 6 June 2000, the

seller avoided delivering the goods due to a rise in taxes. Although the seller
believed that the increasing taxes caused a force majeure, he did not inform the
buyer about the circumstances. The tribunal held that:
the [seller] failed to prove presence of the causal connection between the alleged
force majeure and its failure to [perform its obligations]. In addition to that, the
[seller] failed to provide sufficient documentary evidence which, in this case ought
to have been certificates of Chamber of Commerce either in the buyer’s or seller’s
country.110

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In terms of COVID-19, although it is accepted as an impediment beyond the
control of the parties that was unforeseeable and unavoidable, the parties’ fail-
ure to perform must be a cause of COVID-19. The mere existence of COVID-19
will not trigger the force majeure clause, but there should be a direct link be-
tween COVID-19 and the non-performance.111

VII. Force majeure due to third parties

Article 79(2) of the CISG sets a rule for exemption from liability when non-
performance is caused by a third party, stating that:
(2) If the party’s failure is due to the failure by a third person whom he has engaged to
perform the whole or a part of the contract, that party is exempt from liability only if:

a. he is exempt under the preceding paragraph; and

b. the person whom he has so engaged would be so exempt if the provisions of that
paragraph were applied to him.

Whereas the PICC has no similar provision within the scope of Article 7.1.7,
the ICC’s 2020 FMC also has a clause related to third parties. It states:
2. Non-performance by third parties. Where a contracting party fails to perform one
or more of its contractual obligations because of default by a third party whom it
has engaged to perform the whole or part of the contract, the contracting party may
invoke Force majeure only to the extent that the requirements under paragraph 1 of
this Clause are established both for the contracting party and for the third party.

The CISG and the ICC’s 2020 FMC allow the contractual parties to claim force
majeure due to a third party’s non-performance. But this is available only if the
third party’s non-performance is acknowledged as a force majeure by applying
the requirements of force majeure defined under them.

109
Tallon (n 29) 584, United States 16 April 2008 Federal District Court [New York] available at
<http://cisgw3.law.pace.edu/cases/080416u1.html>, Russia 21 November 2005 Arbitration pro-
ceeding 42/2005 (Equipment case) available at <http://cisgw3.law.pace.edu/cases/051121r1.
html> accessed 23 March 2020.
110
Russia 6 June 2000 Arbitration proceeding 406/1998 available at <http://cisgw3.law.pace.edu/
cases/000606r1.html> accessed 2 May 2020.
111
See Note of the UNIDROIT Secretariat (n 3) note 11, Pichinnoz (n 30) 873, para 21.

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 COVID-19 and force majeure clauses 463

Within the context of paragraph (2), ‘a third person whom the party has
engaged to perform the whole or a part of the contract’ is not clarified.
According to Tallon, this provision is a response to the increasing engagement
of a sub-contractor.112 The third person covered under this paragraph is inde-
pendent and not under the control of the contractual parties.113 There must be
an ‘organic link’ between the main person and this third person who is under
the duty to perform either the whole or a part of the main contact.114 Brunner
suggests including ‘any third party’ within the scope of this paragraph with re-
gard to the recent economic conditions.115 Variation of the interpretations

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made in order to define the scope of the third person should not contribute to
acquiring different decisions given by courts and arbitrators.116
The CISG and the ICC’s 2020 FMC require that not only the third party but
also the main party must be exempt under the paragraph. Therefore, the para-
graph seems to set a strict rule for this exemption.117 When a third party is ex-
empt from its failure, the main party cannot be excused vis-à-vis the fact that he
is under a separate obligation to avoid or overcome the impediment.118 When a
case is related to the failure of the third party, how the exemption for non-
performance by the parties of the main contract cannot be available requires at-
tention. After the bank of Russia had gone bankrupt, the buyer did not perform
an advance payment as a contractual obligation. After the respondent claimed
that the opposite party should have been liable because he did not have the offi-
cial license of the bank of Russia, the tribunal rejected his argument by stating
that the respondent should have foreseen that it was necessary to have a license
to perform the contract. In sum, the tribunal did not recognize the third party
failure, which was not included in the list of force majeure events in the contract,
as a reason for exemption from liability provided force majeure events in the
contract as grounds from exemption from liability.119
COVID-19 and its impacts on the economy are more enormous than has
been expected. It has created a domino effect in every aspect of trade and
112
Tallon (n 29) 584 (emphasis added).
113
Schewenzer, ‘Article 79’ (n 29) para 34, Enderlein and Maskow (n 29) 326–7.
114
Tallon (n 29) 585.
115
Bruno Zeller, Damages under the Convention for the International Sale of Goods (2nd edn,
Oceana Publications 2009) 176, Germany 24 March 1999 Supreme Court available at <http://
cisgw3.law.pace.edu/cases/990324g1.html> accessed 12 March 2020.
116
Joseph Lookofsky, ‘The 1980 United Nations Convention on Contracts for the International
Sale of Goods’, in J. Herbotsand R. Blanpain (eds), International Encyclopedia of Laws,
Contracts (Suppl. 29, Kluwer Law International 2000) 165.
117
Liu (n 29) 527, Cf Enderlein and Maskow (n 29) 527.
118
Alejandro M. Garro, ‘Exemption of liability for damages: Comparison between provisions of
the CISG (Art. 79) and the counterpart provisions of the UNIDROIT Principles (Art. 7.1.7)’, in
Felemegas (ed.), An International Approach to the Interpretation of the United Nations
Convention on Contracts for the International Sale of Goods (1980) as Uniform Sales Law, (
Cambridge University Press, 2007) 293.
119
Case No 96/1998 decision dated 24 November 1998. See M. G. Rozenberg, Practice of the
International Commercial Arbitration Court: Scientific-Practical Commentary (International
Center of Financial-Economic Development, 1998) pp. 92–3.

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464 Ş. Esra Kiraz and Esra YIldız Üstün

business. Most of the parties have failed to produce products that they have
promised to sell and deliver, since acquiring and receiving the raw materials
from their suppliers has become an obstacle.120 The supply chains have been
broken, which has affected all contracts around the world. In our opinion, there
will be a lot of force majeure applications due to a third party’s non-
performance. These claims will be examined on the ground to determine if the
third party’s situation rests on force majeure; then the contractual party’s non-
performance will be assessed to find out if he or she could have avoided the im-
pact of this third party non-performance and could have foreseen the impedi-

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ment; there will also be a considerable amount of force majeure confirmation
based on a third party’s non-performance.

VIII. Conclusion
There is always the possibility of a hindrance that prevents the performance of
an obligation undertaken by a contract. As a consequence of such a hindrance
after the conclusion of a contract, non-performance may occur. In such cases, a
force majeure doctrine that covers events such as wars, State interventions, acts
of God, and the like appeals to an excuse for the party who fails to perform.
After the spread of COVID-19 around the world and its huge impact causing
unique challenges in international trade, the applicability of force majeure
clauses for a party who fails to perform due to COVID-19 has drawn the atten-
tion of lawyers and the contractual parties of international trade.
COVID-19 is far more contagious compared to other viruses, such as SARS,
Middle East Respiratory Syndrome, or Ebola, which have previously spread and
affected the whole world in an unpredictable way. The world has not experi-
enced such a destructive event recently, and we believe that no one could have
foreseen either the duration of its existence or its effects on every level of busi-
ness, economy, health, and other areas. This situation will cause the process to
be unpredictable to dispute the resolution part. Although arbitral tribunals pre-
viously have dealt with several cases regarding epidemics, such as the bird flu
and SARS, COVID-19 has affected things in the world on a different level;
hence, it is crucial to predict the arbitral tribunals’ attitudes towards force
majeure events claimed due to COVID-19.
Whether COVID-19 triggers force majeure clauses depends upon the wording
of the parties’ contract, according to which the parties might have agreed to
cover epidemic or pandemic as a force majeure event. When examining the
CISG, the PICC, and the ICC’s 2020 FMC, it is possible to claim force majeure
because COVID-19 can be deemed to be an act of God, and the harsh measures
imposed by governments to deal with COVID-19 are an impediment within the
sphere of force majeure.
120
United Nations Industrial Development Organization, ‘Managing COVID-19: How the pan-
demic disrupts global value chains’ (World Economic Forum, 27 April 2020) <https://www.
weforum.org/agenda/2020/04/covid-19-pandemic-disrupts-global-value-chains/> accessed 22
September 2020.

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 COVID-19 and force majeure clauses 465

However, to apply the force majeure clause, it is also necessary that the event
must be unforeseeable and unavoidable or insurmountable. It is not possible to
determine a specific time for foreseeability of COVID-19 because each dispute
has special characteristics. Also, it is problematic to decide if a party could have
avoided the impacts of COVID-19. Yet this article argues that, whether the occur-
rence of COVID-19 or its impact is foreseeable or avoidable for the parties, its ad-
verse effects are being felt more and more in all areas of society and the world. In
our view, the tribunals might take a case by case approach for COVID-19-related
force majeure claims, excluding, though, certain provisions in the disputing par-

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ties’ agreements such as specific events, notices, or termination requirements.

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