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

In Spain, there is no specific regime regulating the effects of wars or international economic sanctions , although EU Regulations in this respect are directly applicable.

Therefore, economic sanctions imposed by the European Union are directly applicable to Spanish individuals and companies, as regulated under Article 42 of Law 10/2010 of 28 April 2010 on the prevention of money laundering and terrorist financing (“AML Act”), and in Articles 47, 48 and 49 of Royal Decree 304/2014 of 5 May 2014. 

Breaching such obligations may constitute administrative infringements under the terms of Articles 51.2 and 52.4 of the AML Act, which may entail the imposition of penalties as set forth under Articles 56 and 57 of the AML Act.

From a Civil Law standpoint, although there is no specific regulation on the effect of wars or sanctions on contracts, there are statutory concepts that could apply to this type of situation, such as unforeseen events (caso fortuito) and force majeure (fuera mayor) (regulated under the Spanish Civil Code) or the doctrine of rebus sic stantibus (contained in case-law).

In Spain, the regulation of unforeseen events and force majeure is contained in article 1105 of the Spanish Civil Code, which reads as follows: 

“Article 1105: Apart from the cases expressly mentioned in the law, and those in which the obligation so declares, no one shall be liable for those events which could not have been foreseen or which, if foreseen, were unavoidable.”

This regime implies that if an unforeseen event or a force majeure event prevents a party from fulfilling its obligations, it shall not be liable for such lack of fulfilment. This regime does not entitle a party to terminate the contract, unless the event makes the performance of the contract impossible. 

It must be emphasised that this system is not mandatory. The parties may agree to exclude it in the contract, or they may agree on a different specific regime.

In addition, under Spanish case-law, there is a legal concept called rebus sic stantibus, which can be applied by a court when an unforeseeable circumstance causes an exorbitant disproportion between the reciprocal obligations of the parties, causing an important imbalance between the obligations of the parties. However, the courts are very restrictive in the application of this figure, which only takes place in extreme cases.

In general terms, a war might be considered a force majeure event under statutory law. However, Spanish case-law is restrictive in interpreting unforeseen events and force majeure events, so the event (i.e. the war/sanctions) must directly and seriously hinder the ability of a party to fulfil its obligations. A shortfall in supply, a rise in costs or any other indirect consequence of the war, which make it more burdensome to meet contractual obligations, should not be sufficient for the application of the force majeure statutory regime.

In general terms, the application of the statutory regime on force majeure events requires:

1. that the event is entirely independent of the party claiming it, 
2. that the event is beyond all diligent control or foresight at the time of the signing of the contract, taking into account the normal and reasonable foreseeability or capacity for avoidance;
3. that the force majeure event prevents the party from complying with the obligation, making any diligent effort to comply with the obligation useless.

To the extent that the war or sanction has such an effect on the fulfilment of the agreed-upon obligations, the statutory regime of force majeure could be invoked. 

In general terms, it is convenient to include a specific provision regulating the cases and consequences of a force majeure event. 

However, a statutory regulation of force majeure applies in the absence of any specific regulation in this respect in the contract. Hence, in those cases where there is no specific force majeure clause, it would still be possible to invoke its application under statutory law.

The concept “unforeseen events”, a legal concept closely related to force majeure and also regulated in article 1105 of the Spanish Civil Code, is an unforeseeable event within the normal and reasonable foresight required in each specific case. 

The requirements for force majeure (see above) also apply to the statutory regime of “unforeseen events”.

In the event that a Spanish court declares itself competent to hear a claim, it is likely that the court will apply EU regulations concerning the sanctions.

In other words, to the extent that a Spanish judge has jurisdiction to hear the case, a foreign law could not be invoked to circumvent EU sanctions. However, this would have to be analysed on a case-by-case basis.

To the extent that a Spanish court hears the case, it should dismiss the claim if the failure to deliver is strictly due to compliance with EU sanctions. 

If the court of the sanctioned country or an arbitral tribunal not following this criterion hears the case, we believe it could be settled by condemning the defaulting party. However, in this situation, if enforcement of the judgment were to take place in Spain, we believe that there would be a legal basis to oppose enforcement.

In general terms, in order to analyse whether war or sanctions can be invoked as force majeure events, one first must look at the regulation in the contract agreed upon by the parties. In the absence of such a clause, the application of the statutory regime on force majeure and unforeseen events can only be invoked if the war or sanctions directly and seriously hinder the ability of a party to fulfil its obligations under the contract. (It would not be sufficient for the event merely to cause a shortfall in supply, a rise in costs or any other indirect consequence).

On the other hand, in case a Spanish court hears a case involving a sanctioned party, EU sanctions would be applicable in most cases regardless of the applicable law chosen by the parties.