Miller Magazine Issue: 152 August 2022

77 ARTICLE MILLER / AUGUST 2022 The tribunal also agreed with the seller that the said clause generally does not require a force majeure event to be unforeseeable. They noted that this condition is men- tioned only for the event called ‘impediments to transpor- tation and navigation’ and thus evidenced the intention of the draftsmen to exclude the requirement of foreseeability for other events. In the arbitrators’ opinion, the existence of precursors of the drought at the time of the contract conclu- sion could not prevent the seller from relying on the force majeure defence. In the light of the above conclusions, it appeared at first glance that the arbitrators were pretty sympathetic towards the difficulties the seller faced due to the bad weather con- ditions in Romania. DIFFICULTIES ≠ PREVENTION OF SHIPMENT Despite this sympathy, the tribunal eventually held that the filed evidence did not allow it to excuse the seller from liabil- ity for the non-delivery of the goods. In making this decision, the arbitrators relied on the following reasoning. 1. The contract performance was not really prevented The seller had to demonstrate that corn of Romanian or- igin was not available for supply to the buyer. The seller’s reports did not prove that as their scope was very limited – these documents related only to the land in five locali- ties in eastern Romania. They merely showed a sharp re- duction in the crop in those particular regions. At the same time, western Romania was not affected by the bad weather. These facts led the tribunal to the conclusion that the seller could have procured Romanian corn on the market, albeit at a higher price. The effect of the drought, hence, was not unavoidable for the seller. 2. The seller failed to send a force majeure notice The tribunal stated in the award that seller’s obligation to serve a force majeure notice within 7 days after its occur- rence represented a condition of the contract. This means that the seller could be released from the liability only if this requirement was strictly complied with. It is essential that the force majeure notice must be sent in writing – a mere refer- ence to the drought during the call was not accepted by the arbitrators as a ‘notice’. Thus, the timely service of the notice was declared essential for the force majeure defence. In the case of the drought, there is also a tricky question of when exactly this 7-days period starts and ends. The dis- cussed arbitration is an illustrative example of that: the tri- bunal was puzzled by this question because drought does not occur on a single day like, for instance, an earthquake; rather its impact is cumulative over a protracted period. In this case, the arbitrators held that the impact of drought on crops became evident only at the end of August 2020 and regarded this period as the last opportunity to serve a force majeure notice. Since the seller did not send the notice at all, he could not in principle be excused from the liability based on the force majeure clause. As a result, the arbitrators supported the buyer’s position and held that the seller was fully liable for the non-delivery of the goods. IT IS HIGH TIME TO CHANGE YOUR CONTRACT! As it can be seen from the analyzed case, 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 tai- lor-made solution in your contracts by adapting the force majeure clause to the possible effects of drought in Europe. In particular, the importers of the goods from the EU can in- demnify potential risks through the following amendments. 1. Limit the force majeure events only to those truly excep- tional. Consider excluding drought expressly from the scope of the force majeure clause. 2. Specify that time limits for invoking force majeure must be complied with strictly. Indicate precisely when this period starts and ends. 3. Determine that force majeure must be proven by the certificate of the chamber of commerce. 4. Designate clear consequences of force majeure (initial suspension of the shipping period / subsequent cancella- tion of contract). In addition, it is also important to avoid concluding con- tracts which require goods to be grown in specific fields or originate from a specific region of the country. If drought af- fects this particular region or field, the seller will have better grounds to invoke force majeure. Instead, importers should consider stipulating the origin of the goods widely – for ex- ample, EU corn instead of Romanian corn (if possible from a commercial point of view). This amendment will create a leeway for you to demand the supply of the commodi- ty of alternative origin in case the planned goods become non-available for supply. These simple steps might minimize the risks caused by the dry weather in Europe and contribute to the smooth per- formance of your contracts!