Armed conflicts and geopolitical instability can fundamentally alter the conditions under which contractual obligations are performed, disrupting established international logistics routes, delivery schedules, and the parties’ economic calculations. A notable example is the restriction of navigation through the Strait of Hormuz resulting from escalating military and political tensions, which creates obstacles to international transportation, necessitates alternative logistics solutions, and may lead to substantial increases in the costs of contractual performance.
Under such circumstances, parties to contractual relationships face a fundamental question: do the consequences of a geopolitical crisis constitute grounds for exemption from liability for breach of contractual obligations, or do they justify the need to revise contractual terms? Answering this question requires a proper distinction between two independent legal mechanisms: force majeure and a fundamental change of circumstances.
The fundamental distinction between these mechanisms lies in the subject matter of their legal assessment and the legal consequences of their application. Under Article 617 of the Civil Code of Ukraine, force majeure may constitute grounds for exemption from liability for breach of an obligation, provided that the impact of extraordinary and unavoidable circumstances on the ability to perform that obligation properly is demonstrated. By contrast, Article 652 of the Civil Code of Ukraine provides for the possibility of modifying or terminating a contract due to a fundamental change in the circumstances on which the parties relied when entering into the contract, subject to the conditions prescribed by law.
Therefore, the decisive factor is not merely the nature of the external event, but, above all, the nature, intensity, and duration of its impact on a particular contractual obligation.
A distinctive feature of the situation involving the Strait of Hormuz is that the nature of this impact may change over time. At a certain stage, restrictions on navigation may create objective obstacles to the performance of contractual obligations, requiring an assessment of whether force majeure circumstances exist. However, the subsequent availability of alternative transportation routes does not necessarily mean that the original conditions of contractual performance have been restored. Extended delivery times, increased transportation costs, higher insurance premiums, and other economic burdens may substantially alter the balance of the parties’ economic interests and necessitate an assessment of the conditions for applying Article 652 of the Civil Code of Ukraine.
At the same time, an increase in the cost of contractual performance does not, in itself, constitute sufficient grounds for revising a contract. It is necessary to establish whether the relevant consequences exceed the limits of ordinary commercial risk, whether the parties could reasonably have foreseen them at the time of entering into the contract, and whether all the statutory conditions for modifying or terminating contractual obligations are satisfied
Additional legal complications may arise where a contract establishes a specific procedure for documentary confirmation of force majeure circumstances, but obtaining the required document in a foreign jurisdiction is impossible or substantially impeded. Such a situation requires a separate assessment of the contractual provisions, applicable law, and available means of evidence. However, it does not, in itself, preclude an examination of the grounds for establishing a fundamental change of circumstances.
In such contractual relationships, Independent Professional Expertise in the Form of Conformity Assessment assumes particular importance. It enables comprehensive scientific and juridical research into legally significant circumstances, the establishment of causal relationships between an external event and changes in the conditions of contractual performance, an assessment of the limits of commercial risk, and the formulation of substantiated conclusions as to whether the established circumstances meet the statutory criteria for applying the relevant legal mechanism.
The practical significance of properly distinguishing between force majeure and a fundamental change of circumstances is demonstrated by the experience of IPE LLC. The consequences of restrictions on navigation through the Strait of Hormuz for the performance of contractual obligations have been the subject of three orders for Independent Professional Expertise in the Form of Conformity Assessment.
The expertise conducted by IPE LLC established that the circumstances under examination met the legal criteria for a fundamental change in the circumstances on which the parties relied when entering into their contracts and determining the suppliers’ contractual obligations. This change resulted from substantial disruptions to international cargo transportation routes, the loss of transport and logistics connections with carrier vessels, and the inability to service container ships due to their being stranded at the anchorage of Jebel Ali Port. These circumstances arose in connection with the closure of and restrictions on navigation through the Strait of Hormuz against the backdrop of prolonged military attacks by the Islamic Republic of Iran against the United Arab Emirates.
Thus, the situation involving restrictions on navigation through the Strait of Hormuz demonstrates that force majeure and a fundamental change of circumstances should not be regarded as universal or interchangeable mechanisms for protecting contractual interests. Depending on how the factual circumstances develop, these mechanisms may become relevant at different stages of contractual performance. However, each requires its own independent legal justification.
Proper legal qualification of the circumstances, supported by the results of Independent Professional Expertise in the Form of Conformity Assessment, establishes an evidentiary basis for the well-founded resolution of contractual matters, preservation of the balance of the parties’ interests, and minimization of the risk of legal disputes.
