Trade sanctions and international sales

Trade sanctions are powerful political tools devised to prevent the conclusion of new commercial contracts and paralyze the performance of pre-existing ones. Following the imposition of a sanction, a party prohibited from performing its obligations under a validly concluded contract may resolve to withhold performance or performance may de facto be prevented by measures of enforcement of the sanction. If this party therefore fails to perform its obligations, its contracting partner may decide to initiate legal proceedings.

The author offers solutions to issues faced by arbitral tribunals and domestic courts when one party raises the existence of a sanction to support its claim to be freed from its contractual obligations. Critical legal issues such as the following are thoroughly investigated:

- authority of arbitrators and judges to give effect to statutes serving public interests;
- reasons to disregard certain sanctions, including some extraterritorial, secondary, and tertiary sanctions, and circumstances in which performance may be mandatory despite the risk of enforcement measures and/or penalties;
- consequences of the delivery of a commercially reasonable substitute;
- circumstances in which exemption from liability for non-performance may be granted following the imposition or reinforcement of a sanction prohibiting performance or subjecting it to a regime of authorization;
- right to suspend performance;
- remedies available to the aggrieved party, including the right to declare the contract totally or partially avoided, to declare a price reduction or to collect interest;
- threat of penalty for breach of a sanctions program as a valid ground for renegotiation or for a court-ordered adaptation of the contract; and
- terms under which performance must be resumed once a sanction is lifted, sometimes years, perhaps even decades, after it was imposed.

For an in-depth examination of the constraints inflicted by trade sanctions − the likely scenarios and how they play out, as well as available remedies − this analysis is without peer. It will be of immeasurable value to counsel for States and for multinationals and to other lawyers working in fields connected with international trade. Jurists and academics will also find here highly enlightening perspectives on the long-standing controversy regarding the characterization of trade sanctions in a private-law context.