Miller Magazine Issue: 152 August 2022

74 ARTICLE MILLER / AUGUST 2022 Ivan Kasynyuk Partner AGA Partners Pavlo Lebediev Associate AGA Partners The disputes arising from the drought can be very controversial. Quite often, it is challenging to draw a clear red line between what can be considered a force majeure under the GAFTA contract and what is not. In these circumstances, it is advisable to create a tailor-made solution in your contracts by adapting the force majeure clause to the possible effects of drought in Europe. Drought in Europe and force majeure: Here we go again? Recently the European Commission has raised concerns regarding the continued dry conditions in south-western Europe. It is reported that the drought might lead to a re- duction of the yield potential in the key growing regions in Europe – in particular, Romania, Italy and Hungary. In the cir- cumstances where Ukrainian export experiences unprece- dented challenges due to the blockade of the seaports by Russia, the bad weather conditions in Europe might have a significant effect on importers of grain and the performance of their contracts. The previous experience in such situations shows that bad weather conditions might cause a shortage of goods on the market and lead to a cascade of defaults under forward con- tracts. No doubt, the defaulting companies will rely on the force majeure clause in their contracts to be released from liability. In these circumstances, it is advisable for the traders to analyze potential risks arising from the drought in Europe and in advance develop legal safeguards to minimize them. To help you with this matter, AGA Partners will share their recent experience in commodities arbitration involving a largely similar background – the drought in Romania in 2020. In this article, we will elaborate on the legal consequences of the drought and present specific tips which might help trad- ers to indemnify the risks arising from this situation. DROUGHT IN ROMANIA: BACK TO THE FUTURE The current dry weather is no longer a big surprise for European farmers. In 2018-2020, certain growing regions in Europe also experienced soaring temperatures and intense drought. In particular, the moisture-deficient soil reserve was observed in eastern Romania. Despite these unfavourable conditions, a Romanian grain trader decided to conclude a forward contract on the sale of a large parcel of ‘Romanian origin corn’ to its partner in Turkey. In July 2020, the parties agreed on the shipment of the goods in September 2020 on a CIF Marmara basis. It is important that the GAFTA force majeure clause was incorpo- rated into their contract. To perform the agreement with its Turkish customer, the seller contracted the goods from its regular suppliers in the