Abstract

Economic sanctions cast a shadow of uncertainty over international commercial transactions by disrupting predictability and potentially hindering the fulfillment of contractual obligations. This article examines how economic sanctions affect contractual performance, with a specific focus on the applicability of force majeure under Chinese law in addressing these obstacles caused by sanctions. Through an analysis of key judicial documents, cases, and interpretations of the Chinese Civil Code by Chinese courts, this article provides an assessment of different types of impediments to performance amid sanctions, and an analysis of whether sanctions fulfill the requirement of a force majeure event. This article recommends that parties should consider allocating risks of performance obstacles through carefully drafted force majeure clauses in their contract or, alternatively, consider applying the doctrine of change of circumstances which is more flexible. This is particularly important as Chinese courts tend to interpret force majeure narrowly in the foreseeability test and the "cannot perform" test.

This paper will be part of the second TDM Special Issue on "Sanctions and International Arbitration: Impact on Substantive and Procedural Issues". More information here www.transnational-dispute-management.com/news.asp?key=1960