Cross-Border Transactions Caught at the Crossroads: Navigating The Global COVID-19 Crisis Through Force Majeure Provisions

July 2020

The coronavirus (COVID-19) pandemic has had sweeping effects around the world, and in this era of globalization, business transactions that span multiple jurisdictions and markets have fallen prey to new and unexpected risks presented by the pandemic. In this highly uncertain business climate, how should multinational companies be negotiating new commercial agreements and addressing these risks through force majeure provisions?

This White Paper explores some key issues for international businesses to keep in mind as they tread uncharted waters during the COVID-19 pandemic, focusing on force majeure provisions that may forgive contractual performance. The phrase “force majeure” comes from the French language and means “superior force” that can be neither anticipated nor controlled. A force majeure provision is used for “allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or effect that the parties could not have anticipated or controlled.”[1]

This White Paper first provides some updates on the business environment in major markets, in particular the United States, the United Kingdom, the People’s Republic of China, and Japan, and proffers a general overview on how force majeure provisions in contracts may be interpreted, and where there are no force majeure provisions negotiated in advance, under applicable law in these jurisdictions.

In light of the current COVID-19 pandemic, we also discuss key issues that multinational companies should consider in negotiating and entering into new commercial agreements and preparing for future unexpected events that may make contractual performance difficult or impossible.

[1] Black’s Law Dictionary, 718 (9th ed. 2009).