Hardship Policy

HARDSHIP POLICY

In addition to the prevailing laws and regulations and other policies we present, we follow the practices, conditions and rights presented in this document.

You can download the original version of the “ICC Force Majeure and Hardship Clauses” document published by the International Chamber of Commerce in PDF format via the following LINK

ICC HARDSHIP CLAUSE (“Clause”)

Several domestic laws deal with hardship situations, through rules intended to protect the disadvantaged party in case events have rendered performance more onerous than could reasonably have been anticipated at the time of the conclusion of the contract. However the solutions adopted by national laws may be substantially different from country to country. When the national laws request the parties to renegotiate the contract, and the renegotiation fails, the consequences of such failure may vary: under some laws the disadvantaged party will only be entitled to terminate the contract, while under others the disadvantaged party will have the right to request adaptation of the contract to the changed circumstances by the judge or arbitrator.

In order to increase certainty, parties may wish to regulate this situation in their agreement, independently from the law governing the contract. The ICC Hardship Clause intends to satisfy this need through a standard clause which can be included in an individual contract.

Since one of the most disputed issues is whether it is appropriate to have the contract adapted by a third party (judge, arbitrator) in case the parties are unable to agree on a negotiated solutions, the clause provides two options between which the parties must choose: adaptation or termination.

A party to a contract is bound to perform its contractual duties even if events have rendered performance more onerous than could reasonably have been anticipated at the time of the conclusion of the contract.

Notwithstanding paragraph 1 of this Clause, where a party to a contract proves that:

a) the continued performance of its contractual duties has become excessively onerous due to an event beyond its reasonable control which it could not reasonably have been expected to have taken into account at the time of the conclusion of the contract; and that
b) it could not reasonably have avoided or overcome the event or its consequences, the parties are bound, within a reasonable time of the invocation of this Clause, to negotiate alternative contractual terms which reasonably allow to overcome the consequences of the event.

3A Judge to terminate

Where paragraph 2 of this Clause applies, but where the parties have been unable to agree alternative contractual terms as provided in that paragraph, the party invoking this Clause is entitled to terminate the contract, but cannot request adaptation by the judge or arbitrator without the agreement of the other party.

3B Judge adapt or terminate

Where paragraph 2 of this Clause applies, but where the parties have been unable to agree alternative contractual terms as provided for in that paragraph, either party is entitled to request the judge or arbitrator to adapt the contract with a view to restoring its equilibrium, or to terminate the contract, as appropriate.

3C Judge to terminate

Where paragraph 2 of this Clause applies, but where the parties have been unable to agree alternative contractual terms as provided in that paragraph, either party is entitled to request the judge or arbitrator to declare the termination of the contract.

3 deals with the situation where the parties are unable to agree alternative contract terms. In this case, there are mainly two options: contract termination by one of the parties, or adaptation or termination by the judge or arbitrator having jurisdiction under the contract. Under option A, the party invoking hardship will be entitled to terminate the contract on its initiative.

Under option B, (which is admitted under a number of national laws as well as under the Unidroit Principles), the parties are entitled to request a judge or arbitrator to adapt or terminate the contract. In this case the judge or arbitrator may decide which of the two alternatives is more appropriate, in particular where no adaptation is reasonably possible.

If option B is considered inappropriate by the contractual parties, who fear the adaptation of the contractual balance by a third party (judge or arbitrator), parties can choose option A or C, which do not involve adaptation of the contract by the judge or arbitrator. Under option A, the party invoking hardship will be entitled to terminate the contract on its initiative—and the other party may thereafter claim the unlawfulness of such decision—, whereas under option C, either party may request the judge or arbitrator to declare the termination.

In case the parties opt for adaptation, it may be suggested that the judge or arbitrator invites the parties to submit proposals of the required adjustments, which might be taken as starting point for adapting the contract.