Impact Of Force Majeure During Arbitration
Impact of Force Majeure During Arbitration
Force majeure refers to unforeseen events beyond the control of contracting parties—such as natural disasters, pandemics, wars, or government actions—that prevent or delay contractual performance. Its impact during arbitration is significant because it affects liability, procedural timelines, enforceability of awards, and evidentiary burdens.
1. Substantive Impact on Contractual Obligations
Force majeure primarily determines whether a party’s non-performance is excused. Arbitral tribunals examine:
Existence of a force majeure clause
Scope and wording of the clause
Causation between event and non-performance
Mitigation efforts by the affected party
If successfully invoked:
Liability may be suspended or extinguished
Damages may be denied
Contracts may be terminated or renegotiated
Case Laws
Taylor v Caldwell
Established the doctrine of frustration when a music hall burned down, forming the basis of force majeure principles.
Energy Watchdog v CERC
Held that force majeure must be strictly construed; economic hardship alone is insufficient unless explicitly covered.
2. Procedural Impact on Arbitration Proceedings
Force majeure events (e.g., COVID-19 pandemic) can disrupt arbitration proceedings by:
Delaying hearings
Preventing witness attendance
Affecting document production
Tribunals may:
Grant adjournments
Shift to virtual hearings
Extend procedural deadlines
Case Laws
Halliburton Company v Chubb Bermuda Insurance Ltd
Though focused on arbitrator bias, it highlighted procedural adaptability in complex circumstances.
China Machine New Energy Corp v Jaguar Energy Guatemala LLC
Emphasized that procedural irregularities must cause real prejudice; disruptions alone do not invalidate proceedings.
3. Evidentiary Burden and Proof
The party invoking force majeure bears the burden to prove:
Occurrence of the event
Direct impact on performance
Lack of reasonable alternatives
Tribunals require strict documentary and factual evidence, including:
Government orders
Supply chain disruptions
Correspondence showing inability to perform
Case Laws
Classic Maritime Inc v Limbungan Makmur SDN BHD
Held that the party must prove it would have performed “but for” the force majeure event.
4. Impact on Damages and Compensation
If force majeure is established:
No damages for non-performance
Possible cost sharing or loss allocation
Compensation may still arise if clause provides partial relief
Case Laws
Lebanese Canadian Bank v Banque du Liban
Economic sanctions were treated as force majeure affecting contractual obligations and damages.
5. Impact on Enforcement of Arbitral Awards
Force majeure may be raised:
As a defense in enforcement proceedings
Under public policy grounds
However, courts generally:
Respect arbitral findings unless gross injustice or illegality occurs
Case Laws
National Agricultural Cooperative Marketing Federation v Alimenta SA
Recognized foreign public policy and upheld force majeure defense in enforcement context.
6. Interaction with Doctrine of Frustration
Where no force majeure clause exists, tribunals may apply:
Doctrine of frustration (common law)
Impossibility or hardship principles (civil law)
Case Laws
Satyabrata Ghose v Mugneeram Bangur & Co
Clarified that impossibility includes impracticability, not just literal impossibility.
7. COVID-19 and Modern Arbitration Practice
The pandemic significantly shaped force majeure jurisprudence:
Increased reliance on digital arbitration
Expanded interpretation of epidemics as force majeure
Greater emphasis on contractual wording
Tribunals now:
Analyze pandemic-related disruptions case-by-case
Distinguish between temporary delay vs permanent impossibility
Conclusion
Force majeure plays a dual role in arbitration:
Substantive Role: Excuses or modifies contractual liability
Procedural Role: Influences conduct and fairness of arbitration proceedings
Arbitral tribunals adopt a strict, evidence-based, and clause-specific approach, ensuring that force majeure is not misused as a blanket defense. The evolving jurisprudence—especially post-COVID—shows a shift toward flexibility balanced with contractual certainty.
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