Ongoing Geopolitical Disruption – A New Normal
The Strait of Hormuz crisis did not arrive in a vacuum. It follows the Houthi attacks on Red Sea shipping, the rerouting of global trade around the Cape of Good Hope and the cascading effects of the Russia-Ukraine conflict on energy supply chains.
For shipowners, charterers, commodity traders and energy companies alike, the instinct is to reach for the force majeure clause. QatarEnergy and Bapco Energies have declared force majeure on deliveries, with several major energy traders in turn invoking force majeure in their downstream supply.
A Higher Bar Than You Might Think
Under English law, there is no freestanding doctrine of force majeure. Force majeure only exists to the extent that the contract expressly provides for it. Everything relies on the precise drafting of the force majeure clause and the context in which the contract was concluded, including: what events qualify as force majeure, what level of impact is required, what obligations the claiming party must satisfy, and what relief is available.
A force majeure clause will typically define force majeure events as those events beyond a party’s control and provide a list of force majeure events (for example: war, epidemics and natural disasters), often followed by a catch-all provision, such as ‘or any other event or circumstances beyond the reasonable control’ of the party seeking to rely on the clause. The party invoking the force majeure clause bears the burden of proof. Suspension of performance under a force majeure clause may be contingent on the affected party giving notice to the other party and mitigating the effects of the force majeure event. Force majeure clauses may also allow either or both parties to terminate the contract if the suspension continues beyond a ‘longstop’ period.
Some force majeure clauses excuse performance only where performance has been “prevented” by force majeure. This sets a far higher threshold than force majeure triggered where performance has been “hindered” or “delayed”. Where the word “prevented” is used, English courts have generally required the performance to be physically or legally impossible, rather than merely more expensive or more dangerous. The case of Tandrin Aviation Holdings Ltd v Aero Toy Store LLC and another confirmed that economic hardship alone does not constitute force majeure, nor does an increase in cost, however dramatic that increase might be.
For the shipping market, this creates a paradox. Freight rates have surged, insurance premiums have become prohibitive, and the risks of transit are severe. If an alternative route exists, even one that is vastly more expensive and time-consuming, many force majeure clauses will require a party to use it before that party can claim relief. The UK Supreme Court’s decision in RTI Ltd v MUR Shipping BV reinforced this point while offering one important clarification: the obligation to use reasonable endeavours to overcome force majeure does not require a party to accept non-contractual performance absent clear wording to that effect.
The Foreseeability Problem
There is a further complication that the industry must confront. Force majeure clauses (depending on their wording) commonly require the force majeure event to be unforeseen, or at least beyond the reasonable control of the party seeking to rely on it at the time of contracting.
In the context of the current Strait of Hormuz crisis, given that Iran’s parliament voted in support of closing the Strait in June 2025 and the current crisis has been ongoing for many weeks now, parties currently entering into contracts will find it increasingly difficult to argue that a closure of the Strait of Hormuz was beyond reasonable contemplation. Contracts concluded after the onset of the current conflict face particularly acute exposure on this point.
Drafting for the World as It Is
It is clear that geopolitical risk will remain a feature of shipping and energy markets for the foreseeable future. Parties should review current contracts and enter into future contracts with this in mind, ensuring that drafting keeps pace with geopolitical realities to limit exposure. When drafting a force majeure clause, parties should keep in mind that this is potentially a far narrower remedy than many understand it to be, and should consider:
• Current risks to seek to expressly include in the prescribed list of events covered by the force majeure clause, as well as inclusion of a ‘catch-all’ wording referring to other events ‘beyond the reasonable control’ of the party seeking to rely on force majeure. For ongoing conflicts, consider that these may be ‘foreseeable’ and may not qualify as force majeure events. Consider including language that expressly addresses this – for example, by specifying that escalations or particular port closures nevertheless trigger relief.
• Does the list of prescribed force majeure events need to ‘prevent’ contractual performance, or merely ‘delay’ or ‘hinder’ it?
• Does the party invoking force majeure need to give notice of the start and end of the force majeure event and, if yes, how? Does that party waive its right to force majeure relief if it fails to do so?
• What is the impact of the force majeure clause being invoked? For example, does this only provide relief in respect of certain contractual obligations? Is there a termination right if the force majeure event is ongoing past a prescribed ‘longstop’ date?
Force majeure should not be the sole mechanism for managing geopolitical risk. Parties should consider other ways of tackling the risk, such as price adjustment mechanisms that account for rerouting costs, extended delivery windows, and obligations to notify. Parties should also consult before either party takes unilateral action and clearly define the allocation of additional freight, bunker, and insurance costs.
Source: By Andreas Silcher and Mette Duffy at Haynes & Boone
