The Implications of Global Geopolitical Developments on International Trade Contracts

Today, international trade is shaped by the decisive influence of global geopolitical dynamics. The pressure of geopolitical risks on commercial relations is becoming increasingly evident. Ongoing armed conflicts worldwide, security issues along critical transit routes, and escalating political tensions between economic blocs directly undermine the legal basis of trade. These developments make the provisions regarding risk management in international sales, distribution, transportation, and production contracts more critical than ever. Making contracts resilient to unforeseen events beyond the control of the parties is no longer a theoretical preference, but a necessary practical requirement. Indeed, developments in this process are manifesting themselves in the form of protectionist measures implemented as a result of sudden price increases, geopolitical concerns, and environmental pressures, which necessitates a reassessment of all regulations concerning force majeure and performance obligations in contracts.

In this context, the most frequently used legal tools are the "force majeure " and "hardship" clauses . Both mechanisms become functional in situations where the balance of the contract is disrupted; they allow for the reassessment of performance obligations, especially in crisis situations.

Force majeure, in general terms, refers to the inability to fulfill contractual obligations due to unforeseen and unavoidable events beyond the reasonable control of the parties. According to the International Chamber of Commerce's (ICC) Force Majeure and Extreme Difficulty Clauses published in 2020, events such as war, civil war, export bans, monetary and trade restrictions, embargoes, sanctions, and significant interventions by public authorities are considered within the scope of this concept.

The conditions that must be met simultaneously for a force majeure event to be legally valid can be summarized as follows: The obstacle in question must be entirely outside the reasonable control of the affected party, and this obstacle could not have been reasonably foreseen at the time the contract was concluded. In addition, the affected party must prove that they could not reasonably avoid or overcome the consequences of the obstacle, and only to the extent of this proof is it accepted that the situation constitutes force majeure preventing the party from fulfilling one or more of its contractual obligations.

The concept of extreme difficulty in performance encompasses a different dimension: situations where performance is not impossible, but becomes an unbearable economic or commercial burden for one of the parties. This situation, particularly in long-term international contracts, includes developments that the parties could not have foreseen at the time of contract formation, such as currency fluctuations, surges in raw material costs, disruptions in energy supply, or sharp changes in transportation costs. The ICC's 2020 "hardship" regulation grants the parties the right to request renegotiation of the contract in such a case; however, adhering to the principle of favor contractus, which aims to keep the contract valid as long as possible, it offers the parties different solution options.

According to ICC regulations, if one party to a contract can prove that the uninterrupted performance of its contractual obligations has been excessively hampered by an event that could not reasonably have been foreseen at the time the contract was concluded and which occurred outside its reasonable control, and that this event or its consequences could not have been reasonably prevented or overcome, the parties are obliged, within a reasonable time following the invocation of the "hardship" provision, to negotiate alternative terms that could remedy the effects of the event.

The legal mechanisms that contribute to making commercial contracts resilient to geopolitical risks are not limited to these alone. Price adjustment clauses added to contracts to balance increases and decreases in raw material prices , INCOTERMS provisions , raw material supply conditions , and clauses for suspending obligations and granting additional time also play critical roles.

These clauses included in contracts not only provide exemptions from obligations for the parties but also safeguard the long-term sustainability of the commercial relationship. It is noteworthy that arbitration institutions and state courts are increasingly giving importance to these clauses. This clearly demonstrates the extent to which legal assessments, alongside commercial foresight, are decisive in contractual processes.

In conclusion, the current situation reveals that geopolitical conditions have profound and far-reaching effects on economic and legal structures. The impact of geopolitical risks on international trade directly shapes not only supply chain processes but also the course of trade law. Making contracts resilient against unpredictable risks is of paramount importance for sustainable commercial relationships. Therefore, it has become not a choice but a necessity for exporters, investors, and service providers operating in every sector to review their international contractual structures in accordance with changing risk maps.

Attorney Selin Ünverdi