Expert Guide on Force Majeure and Unforeseen Circumstances in the Context of Global Trade War in Sweden

There is no legal definition of force majeure under Swedish law. However, a number of different laws, such as the Sale of Goods Act, the Commissions Act and the Contracts Act, contain provisions that resembles the principle. Force majeure clauses are also widely used in commercial contracts (freedom of contract is a strong principle under Swedish law). Although opinions differ as to whether force majeure is a general principle of Swedish law, a District Court has ruled that if such a clause is not expressly included in the contract, it cannot be invoked as a general principle of Swedish law. In such case, and to the extent possible, recourse should be taken to specific rules in certain acts mentioned before, which resemble force majeure.

It is difficult to make general statements about the circumstances under which a force majeure clause can be invoked. In order to determine whether the imposition of import tariffs can be considered a force majeure event, the potential force majeure clause in the individual contract must be examined.

With respect to force majeure events, it is common for the parties to list the events that are to be considered force majeure. The list can be either exhaustive or non-exhaustive (i.e. consist of examples). It is also common to include a general exemption from contractual obligations if they are prevented by events beyond the control of the parties. Thus, if the parties have listed the events in the contract, the answer depends on whether the imposition of import tariffs is included in the list of events. If the parties have introduced a general exemption, a contractual interpretation is required.

Under Swedish law, there are generally high requirements for the parties to try to overcome the impediment before they can invoke a force majeure clause. In the case of import tariffs, it is a question of economic effects rather than an irresolvable impediment, which is why it under Swedish law may be rather difficult to consider the imposition of import tariffs as a force majeure event. As a general rule, a situation will not be considered to be force majeure merely because a change in circumstances has made the contract economically disadvantageous to a party.

It should be noted that a condition for invoking force majeure is that the event could not have been foreseen at the time of conclusion of the contract. In this context, it can generally be said that it is not uncommon for tariffs to change at a global level, which makes it questionable how unexpected tariff changes, such as the current tariff imports, actually are. Therefore and especially with regard to B2B contracts, Swedish courts may very well conclude that it is the responsibility of a contractual party to include a right to negotiate and/or change prices in case of unexpected tariff changes rather than relying on force majeure, and without such right it is an economic downside that the contractual party must accept (i.e. a “normal” business risk).

Swedish commercial contracts can contain hardship clauses, which allow a party to request negotiations in the event of a change in circumstances, in order to seek a voluntary solution when the economic outcome of a contract has become unfavourable. Usually, hardship clauses contain a list of events that may trigger the application of the clause, but, like force majeure clauses, they may also contain a general exemption that allows the parties to renegotiate if circumstances arise that could not have been foreseen at the time of entering into the contract. Similarly, hardship clauses require interpretation of the contract if the imposition of tariffs is not listed as an event in the clause.

Price adjustment clauses can also be used when the parties wish to protect themselves against economic effects. Such clauses may take into account changes in circumstances such as commodity prices, currency fluctuations, general indexes and other similar circumstances. In general and as in many other jurisdictions, price adjustment clauses are usually more suitable for long-term contractual relationships.

In Swedish law, there are also legal rules that protect the parties against changes in circumstances. However, the parties can agree to waive such provisions, which is why it can be difficult to invoke these protective rules in practice. However, some protective rules apply regardless of what the parties have agreed upon, such as the general clause in Section 36 of the Contracts Act, which allows unfair contract terms to be modified/adjusted or set aside/disregarded by the courts.

Since force majeure clauses, hardship clauses and price adjustment clauses ultimately depend on the interpretation of the contract, it is important to explicitly regulate the events against which the parties wish to protect themselves. It is therefore important not to use a generic form of such clauses, but to look at the risks in the individual contract.

Another way of managing the risks associated with global events such as tariff impositions is of course to conclude contracts for shorter periods of time, as these can be renegotiated more frequently than long-term contracts, but that goes without saying and comes with other disadvantages of course. To summarize, and as an example, Suppliers should for instance try to include price adjustment clauses that gives them the right to increase prices in accordance with the applicable tariff. However, the effectiveness of such a clause will depend on how it is drafted in the individual contract. Nevertheless, a price adjustment clause may provide a more secure foundation than, for example, relying on a force majeure clause.