Sanctions, increasingly deployed as instruments of political and ideological signalling, have risen by 346% since 2017. Commercial parties are increasingly finding themselves unable to perform contractual obligations, not through any fault of their own, but by operation of state-imposed legal prohibitions. The question that follows is as deceptively simple as it is legally complex: can a party invoke force majeure when sanctions render performance impossible?
Force majeure has long served as a contractual safety valve, receiving major airtime during the height of the unprecedented COVID-19 pandemic, excusing non-performance where an extraordinary event beyond a party’s control prevents the discharge of obligations. We now face another unprecedented event: the dramatic and ever-changing escalation of geopolitical tensions, marked by sweeping sanctions regimes, where the application of this doctrine to sanctions-induced impossibility is far from straightforward.
Sanctions do not arrive without warning. They are frequently preceded by political signals, escalating diplomatic tensions, and prior designations. They are also, by design, the deliberate instruments of sovereign policy rather than unpredictable acts of nature or providence. This raises fundamental questions about foreseeability, causation, and the allocation of risk between contracting parties.
In the arbitral arena, these questions take on heightened complexity. Arbitral tribunals, operating across diverse legal systems and institutional frameworks must grapple not only with the governing law of the contract, but also with the applicable law of the seat, considerations of international public policy, and the practical reality that an award touching upon sanctioned conduct may be unenforceable in key jurisdictions. The question of whether a tribunal should, or even can, hear a claim involving a sanctioned party adds yet another layer of procedural difficulty.
Dissecting the anatomy of the force majeure clause
The success or failure of a sanctions-based force majeure claim turns on a constellation of factors: the precise language of the clause; whether sanctions are expressly provided for; whether the applicable threshold is impossibility or mere impracticability; whether foreseeable events are carved out (substantive elements) and whether the invoking party has complied with procedural requirements (procedural elements).
Substantive elements
| Typical clause requirement | Typical analytical approach |
| Performance is genuinely impossible | The party must prove actual impossibility, not mere difficulty or increased cost. |
| Event is beyond the parties’ reasonable control | Targeted sanctions against a specific entity will receive closer scrutiny than broad general prohibitions. |
| Event could not reasonably have been foreseen or avoided | Foreseeability at the time of contracting is a critical threshold question. |
In considering whether a force majeure claim should succeed, tribunals will also examine whether the invoking party took reasonable steps to mitigate the effects of the force majeure event. Where obligations can still be fulfilled, albeit differently, sanctions are unlikely to qualify as a force majeure event, and the affected party bears a duty to actively pursue alternatives. Similarly, a party that could have obtained a licence or exemption from the relevant sanctions authority, but failed to do so, will not be able to rely on force majeure to escape liability.
In this context, the so-called Böckstiegel Rules provide a useful reference point. These criteria, developed by German arbitration scholar professor Karl-Heinz Böckstiegel, are relevant to determining whether a force majeure event should excuse a party from performance in international commercial contracts. The Böckstiegel Rules recognise that a general law or regulation that renders performance impossible may qualify as force majeure. However, where sanctions constitute targeted measures aimed at a specific entity, rather than broad general prohibitions, they will typically not qualify. Targeted retaliatory sanctions therefore present a significantly higher hurdle for invoking parties.
Procedural elements
Procedural compliance is equally critical. Many clauses require prompt notification of the event, its anticipated duration, and supporting evidence. In some cases, certification by a chamber of commerce or government authority may be required, although this does not prevent the other party from disputing the claim. Force majeure clauses generally do not apply retroactively, meaning the defence can only be raised in respect of sanctions imposed after the contract was concluded.
An examination of the governing law
The governing law of a contract determines how the parties agreed contractual provisions will be interpreted and enforced, and whether those provisions will be supplemented or overridden by external rules. Even where parties have carefully negotiated bespoke sanctions clauses, the governing law may impose mandatory rules or public policy requirements that cut across the agreed regime. The governing law may also determine whether sanctions excuse performance, whether through doctrines of illegality, frustration or force majeure.
Parties should therefore carefully consider how their chosen governing law interacts with the wider sanctions landscape, both at the time of contracting and as the regulatory environment evolves.
The tribunal’s operating table: procedural and public policy framework
Tribunals do not adjudicate in a vacuum; they function within a web of institutional rules, seat-based mandatory norms, and overarching public policy constraints that may directly govern the admissibility and adjudication of sanctions-related claims.
Where entertaining a force majeure claim would require a tribunal to give effect to, or circumvent, an applicable sanctions regime, complex questions arise that transcend ordinary contractual interpretation. A tribunal seated in a jurisdiction that has enacted the relevant sanctions may be precluded, as a matter of mandatory law or public policy, from issuing an award that legitimises prohibited conduct. Conversely, a tribunal that dismisses a force majeure defence without proper engagement may inadvertently compel performance of obligations that have become unlawful under the same sanctions regime the seat state is bound to enforce.
This tension is compounded where the governing law of the contract, the law of the seat and the law of the place of enforcement diverge in their treatment of the relevant sanctions, a common scenario in cross-border disputes involving multilateral or extraterritorial regimes.
Tribunals must carefully analyse whether adjudicating the claim advances, undermines, or remains neutral as to the objectives of the applicable sanctions’ framework. An award that is unenforceable at the place of enforcement because it is seen to circumvent sanctions may render the arbitral process ineffective for the prevailing party.
A dose of prevention: the only reliable cure
Effective risk mitigation is available at every stage of the contractual and arbitral lifecycle. The following measures, applied deliberately, can substantially reduce sanctions-related exposure.
At the drafting stage:
- Use bespoke, sanctions-specific force majeure clauses that expressly identify relevant sanctions regimes, distinguish between impossibility and illegality, specify the applicable nexus and include a “change in sanctions law” trigger.
- Include a parallel hardship clause requiring good faith renegotiation where performance becomes commercially impracticable.
- Choose arbitral seats with developed, sanctions-aware jurisprudence and institutional rules permitting expedited or emergency procedures. The choice of an arbitral seat can significantly shape the practical options available at the enforcement stage.
During arbitral proceedings:
- Raise jurisdiction and admissibility objections early and address the public policy dimension from the outset.
- Engage specialist sanctions counsel, as sanctions compliance is a distinct field from general commercial or public international law.
- Consider applying for a general licence from the relevant sanctions authority, as some regimes permit licenced arbitration-related proceedings.
At the enforcement stage:
- Map enforcement jurisdictions in advance and obtain a sanctions compliance opinion before commencing enforcement proceedings.
Treating the condition before it becomes terminal
The doctrine of force majeure was not designed with sanctions in mind. Conceived to address the extraordinary and the unforeseeable, the storm that sinks the ship, the war that closes the border, the epidemic that shuts the factory, it now finds itself pressed into service in disputes where the supervening event is not the random hand of fate, but the calculated hand of sovereign power.
As geopolitical volatility continues to reshape the regulatory landscape, force majeure can no longer be treated as a boilerplate clause. Whether a party can successfully invoke it depends on the precision of its contractual language, the disposition of the governing law and the procedural and public policy constraints of the arbitral seat, none of which operate in isolation.
Theory has given way to reality. The sanctions-related challenges outlined above are actively reshaping global arbitral practice, as reflected in discussions at forums such as Johannesburg Arbitration Week, underscoring the need for direct and deliberate engagement by the profession.
Do not be sanctioned into impossibility. A deliberate approach, combining precise contractual architecture, dispute-readiness and a c
[1] CoinLaw “Financial Sanctions Statistics 2025: Hidden Numbers Exposed“, accessed at https://coinlaw.io/financial-sanctions-statistics/#:~:text=41%25%20were%20unable%20to%20implement,sanctions%20as%20of%20March%202025.
