Today’s economic reality is a constant storm. International sanctions, countermeasures, and restrictions – all of this creates unprecedented risks for businesses. Companies engaged in foreign economic activities and high-tech sectors feel this particularly acutely. Your business faces colossal threats: deals can become impossible to fulfill, and contracts – useless.
The main task today is not just to conclude a contract, but to make it as resilient as possible to any external shocks. Otherwise, you risk losing not only money but also control over your business.
Main risks for your contracts
In practice, I see that commercial disputes in the current reality often arise due to the impossibility of fulfilling obligations. The reasons can vary, but their consequences are the same: loss of money and nerves. Here are three main threats:
New-generation force majeure: This is no longer just about natural disasters. Now, it can be a direct ban on export/import, the revocation of a partner’s license, or the blocking of an account in a foreign bank. Your obligations become literally impossible to fulfill due to sanctions.
The ‘costly’ risk (Hardship): It may still be formally possible to fulfill the contract, but it results in colossal losses. Material prices have skyrocketed, logistics have become many times more expensive, and fulfilling the deal can lead to bankruptcy.
Blocked payments: Sanctions on banks and payment systems can halt the entire cash flow, paralyzing even the most seemingly profitable deals.
To preserve the legal validity of your agreement and minimize the risks of its termination in court, it is essential to approach its drafting with special strategic precision. Here are the key adaptation mechanisms that I include in my clients’ contracts:
Force Majeure: Maximum Specificity. Forget standard, general wording! I include a clear list of sanction risks, explicitly stating that they constitute force majeure events. I specify concrete consequences: transit bans, license revocation, account blocking. No ambiguity – only protection.
Clause on Fundamental Change of Circumstances (Hardship Clause). This “safety net” allows parties to initiate a review of terms when performance becomes excessively burdensome. I establish a threshold, upon reaching which (e.g., material costs increasing by 30% or more), a review of price or deadlines becomes mandatory. This allows for adaptation, rather than tearing up the contract.
Payment Variations and Currency Clauses. To prevent payments from getting stuck or blocked, I provide for alternative payment routes. This can include specifying a payment currency different from the currency of the obligation, or a mechanism for quickly replacing a correspondent bank. Payment flexibility is the key to deal stability.
Neutral Arbitration Clause and Choice of Law. In international contracts, the choice of a neutral jurisdiction and governing law, which is not subject to hostile sanction risks, is crucial. This is your guarantee of a fair dispute resolution, should one arise.
Judicial practice shows that courts are far more inclined to uphold a contract if they see that the parties have proactively taken steps to adapt it. Smart preventative work – conducting a legal audit of current contracts and meticulously drafting new ones – is not an expense, but an investment in your business’s security.
Preventing commercial disputes and providing legal support during contract conclusion amidst foreign economic restrictions is a key part of my legal practice. Ensure your business’s resilience against sanction risks by exploring my expertise in Commercial (economic) disputes.