France: Force Majeure - Hardship in relation to Conflict and Sanctions

No, in France there is no general legislation on war or related sanctions. However, French law provides for specific sanctions in defined circumstances such as the freezing of funds or economic resources detained or controlled by natural or legal persons, or any other entity, which perpetrates or attempts to perpetrate, ease or finance acts of terrorism or participates in them (Articles L.562-1 and seq. as well as L.574-3 of the French Monetary and Financial Code and Article 459 of the Customs Code). 

In addition, any EU Regulation that sets up legislation on war and requests member states to define sanctions is automatically applicable under French law. 

From a civil law perspective, French law has no specific legislation addressing the legal consequences of war or related sanctions on commercial contracts. There are, however, different statutory concepts, which could be relevant such as those concerning public order, force majeure or hardship. 

Public Order – Article 6 of the French Civil code: “One may not, by private agreement, derogate from laws that concern public order and good morals.”

Article 1102 of the French Civil code: “Everyone is free to contract or not to contract, to choose the person with whom to contract, and to determine the content and form of the contract within the limits imposed by law. Contractual freedom does not allow derogation from rules, which concern public order.”

Article 1162 of the French Civil code: “The contract cannot derogate from public order either by its stipulations or by its purpose, whether or not such purpose was known by all the parties.”

Force majeure – Article 1218 of the Civil code states: “In contractual matters, there is force majeure when an event beyond the control of the debtor, which could not reasonably have been foreseen at the time of the conclusion of the contract and which effects cannot be avoided by appropriate measures, prevents performance of his obligation by the debtor. If the impediment is temporary, the performance of the obligation is suspended unless the resulting delay would justify termination of the contract. If the impediment is permanent, the contract is automatically terminated, and the parties are free from their obligations pursuant to the conditions laid down in articles 1351 and 1351-1.” 

Hardship/“Imprévision” – Article 1195 of the Civil Code states: “If a change of circumstances that was unforeseeable at the time of the conclusion of the contract renders performance excessively onerous for a party who had not accepted to bear such risk, that party may ask for a renegotiation of the contract to its contracting partner. The second party shall continue to perform his obligations during the renegotiation. In the case of refusal or failure of the renegotiation, the parties may agree to terminate the contract, upon the date and subject to the conditions they determine, or mutually ask a judge to proceed to its adaptation. In the absence of agreement within a reasonable time frame, the judge may, at the request of a party, revise the contract or terminate it upon a date and subject to the conditions he sets”.

Yes, war and/or sanctions may constitute force majeure events under French law if such war and/or sanctions abide by the legal definition of force majeure. Accordingly, for an event to which prevents a party from performing its obligations to qualify as force majeure, three requirements must be met. Specifically, the event must have been (i) reasonably unforeseeable upon conclusion of the contract, (ii) beyond the control of the debtor, and (iii) unavoidable by appropriate measures.

As an example, the French Supreme Court in 2020 (Cour de cassation, Assemblée Plénière, 10 July 2020) issued a ruling in the context of embargo measures taken against an Iranian bank pursuant to an EU Regulation. In this case, French judges considered that the embargo measures, which prevented the Iranian bank from using its frozen assets, could not constitute a force majeure event for the bank since the asset freeze was caused by its activities (i.e. participation in the Iranian nuclear or ballistic missile programme) and therefore could not be construed as exterior to its activities. 

In a B2B relationship and subject to the usual limits imposed by French contract law, parties are free to contractually define the notion of force majeure and its related consequences. 

Thus, to limit discussions regarding the qualification of war and/or related sanctions as force majeure events, it could be useful to include in commercial contracts a definition of force majeure that would expressly refer to or exclude these events. 

Under French law, the concept of “unforeseen circumstances” is used to qualify different situations such as notably force majeure (see above section 3) and hardship.

In case of hardship (“imprévision”), a party may request a contract renegotiation if it can prove that its contractual performance has become excessively onerous and that it did not agree to bear such risk. However, such renegotiation would solely be admissible if the event triggering excessively onerous performance qualifies as a change of circumstances unforeseeable at the time of the conclusion of the contract (art. 1195 of the Civil code). 

As per French case-law, this notion of “unforeseen circumstances” is to be appraised (i) in consideration of the circumstances of the case and of the professional qualities of the party who invokes it; and (ii) at the time of the conclusion of the contract. Indeed, French judges will investigate what the parties intended to cover by their contractual obligations as defined by data that were foreseeable upon the contract-conclusion date. 

If the law of a non-EU member state is applicable, two situations must be distinguished:

1. The courts of a non-EU member state have jurisdiction: the non-EU judge has no obligation to apply EU sanctions, but may do so.
2. The courts of France have jurisdiction: a French judge will apply sanctions imposed by an EU Regulation even if the case at hand is subject to the laws of a non-EU member state.

Assuming French law is applicable and French judges are competent, such a claim should notably be dismissed if:

1. Delivery to the sanctioned or warring counterparty is forbidden as per French and/or EU law;
2. Force majeure is qualified and allows the French party to suspend the performance of its delivery obligations. 

Under French law and depending on the circumstances of the case, war and related sanctions may allow a French party to suspend the performance of its contractual obligations, renegotiate its contract or even terminate it. 

Therefore, in view of the current international situation, all companies must audit their commercial contracts to determine the best legal and business approach to adopt to remain compliant with law, but nonetheless continue to do business.