jurisdiction
1. Can the imposition of import tariffs, be considered a force majeure event in commercial contracts?
In Serbia, the Law on Obligations (the “LO”) is the general law governing all contracts (including commercial contracts), except in cases where special laws provide specific rules for certain types of agreements (such as finance leases, various modalities of transport agreements, etc.). The LO does not provide an explicit definition of force majeure, but it is implied that force majeure represents an external and extraordinary event or circumstance beyond the control of contracting parties which could not have been predicted, avoided or eliminated. Bearing that definition in mind, it could easily be argued that the imposition of import tariffs represents an event of force majeure.
However, it should also be borne in mind that, according to Article 263 of the LO, it is not necessary for the contracting party that failed to duly perform its contract obligation to prove that its failure stems from an event that could be characterized as force majeure. Namely, it is sufficient to prove that the party omitted to duly perform its obligation due to circumstances that arose after the conclusion of the contract that could not have been prevented, eliminated or avoided. Therefore, when it comes to release from liability for damages arising from non-performance or late fulfilment of contract obligations, it is irrelevant whether the imposition of import tariffs represents an event of force majeure – it is much more important to prove that such a circumstance could not have been prevented, eliminated or avoided.
2. If the imposition of an import tariff does not qualify as a force majeure event, what legal options are there for parties to address the impact of these tariffs within their contractual relationships?
Article 133 of the LO states that, in case of emergence of circumstances (subsequent to the conclusion of a contract) which hinder the performance of an obligation of one party, or if due to them the purpose of the contract cannot be realized, while in both cases this is expressed to such a degree that it becomes evident that the contract does not meet the expectations of contracting parties anymore, and that, generally speaking, it would be unjust to maintain its validity as it stands – the party having difficulties in performing the obligation, i.e. the party being unable, due to changed circumstances, to realize the purpose of the contract, may request its termination (from the competent court).
However, termination may not be requested if the party claiming that the circumstances have changed, had a duty (at the time of entering into the contract) to take into account such circumstances, or if it could have avoided or surmounted them. Also, the party requesting termination may not refer to the change of circumstances that emerged after its obligation became due.
On the other hand, in case the opposing party offers or accepts a proposal for fair amendments, the court would not allow the termination of the contract.
Finally, if the contract is terminated by virtue of the court’s decision, the court would obligate the party that demanded the termination to compensate the other party for a fair part of the damages incurred (of course, only upon the request of the party suffering the damages).
Therefore, this mechanism could very well be employed in case of imposition of sudden import tariffs.
3. What specific contractual provisions should a party consider including in future agreements to better manage the risk of sudden import tariffs and similar trade barriers?
Having in mind the answers to questions no. 1 and 2, it is evident that the statutory regime of the LO provides appropriate mechanisms for dealing with risks of sudden import tariffs and similar trade barriers.
Of course, if the parties wish to ensure a higher level of legal security than the one provided by the LO, the principle of the autonomy of will authorizes them to do so, as long as they behave in good faith during negotiations, entering into the contract and performance of their obligations.
For example, the parties could include the following clause:
“In case of subsequent imposition of sudden import tariffs and/or similar trade barriers that hinder the performance of obligations of one party to such a degree that the hindered party would not even enter into the contract had the import tariffs and/or trade barriers been in force at the moment the contract was entered into, the hindered party may offer fair amendments to the contract. In case the other party refuses such a fair proposal without a justified reason, the hindered party may unilaterally terminate the contract, free of liability for the damages incurred by the other party.”.
