Commercial Act Of Korea, Article 796: Force Majeure As Grounds For Exclusion Of Liability ' Russia-Ukraine War And EU Sanctions Against Russia

• Law Firm: DR & AJU LLC
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, International Law, Corporate and Company Law, Contracts and Commercial Law, Government Contracts, Procurement & PPP, Export Controls & Trade & Investment Sanctions
• Author: Hee Kyung Jeong
• Published date: 19 January 2023

In just a few years, the world has been struck by various forms of chaos. The COVID-19 pandemic hit in 2020, forcing many countries to take unprecedented measures, such as establishing quarantine and immigration restrictions. The Russia-Ukraine war earlier this year has had a significant impact on the economic activities of countries related to Russia due to the rapid rise of raw material and oil prices, raising concerns that the war might lead to a global economic depression.

In particular, out of international commercial contracts, contracts for the cross-border sale of international goods were affected by changes in the international politics. For example, the EU's economic sanctions caused by the Russia-Ukraine war were implemented in the form of a ban on imports and exports with Russia, a ban on transactions, trade restrictions with tariffs and other measures, and a ban on operating aircraft and ships in areas affected by the sanctions. Numerous disputes have resulted from the inevitable failure of those affected by the sanctions to perform their obligations, and are in the process of being resolved.

It is highly improbable that debtors will willingly bear default responsibility if the difficulties of performing obligations were due to such economic sanctions. In this situation, the first grounds for immunity that a debtor can think of is "force majeure." Force majeure means unforeseeable reasons beyond the control of parties to agreements, such as pandemics, war, etc. Although countries may stipulate the matter in different degrees, most countries generally give contracting parties room for exemption from obligations if force majeure is recognized.

The maritime section of the Commercial Act of Korea also stipulates reasons for a carrier's exemption due to force majeure. Article 796 Subparagraph 2 of the Commercial Act stipulates "force majeure" as one of the reasons that a carrier may be exempted from damages related to shipment. Then the key questions are whether the EU's economic sanctions against Russia fall under force majeure under the Commercial Act of Korea, which enables the contracting parties to claim exemption, and how contracting parties should prepare for these risks in cases where the applicable law for maritime transport contracts is stipulated as the Korean law.

1. Force Majeure and the Stance of Supreme Court of Korea

The Supreme Court of Korea rendered judgement that "force majeure is recognized only when the cause of the party's...