As featured in Global Trade Review
A wave of force majeure declarations across the Middle East has disrupted oil and LNG supply chains, following attacks on infrastructure and shipping routes.
The immediate reaction in the market has been declarations of force majeure up and down the supply chain, without a correct understanding as to its applicability.
Force majeure is not contagious. The fact that an upstream supplier has declared force majeure does not automatically excuse downstream performance. Each contract must be assessed on its own terms.
“It’s not sufficient to simply say my supplier has declared force majeure… and my supplier’s force majeure is my force majeure. That is a slippery and costly position to take, I think, if it was to go into arbitration.”
Where the Risk Lies
Three issues will define how this plays out:
1. Prevention, not inconvenience
Higher costs, delays or difficulty do not meet the threshold. Performance must be genuinely prevented.
2. Mitigation will be scrutinised
Parties must show they have taken reasonable steps — alternative cargo, vessels, routes. Simply relaying a notice will not suffice.
3. Contract mechanics still apply
Notice requirements, timing and procedural compliance remain critical. Missteps here can invalidate a claim.
Key Takeaway
While supply disruption might fall like dominoes, force majeure claims might not do so. Establishing how the event has affected your performance, and what steps you took to mitigate will be essential.
“A laid-back, nonchalant attitude of ‘my supplier’s passed me a force majeure notice so I’m passing it on’ I don’t think will cut it.”
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