The Influence of International Sanctions on Formation and Performance of Contracts for the International Sale of Goods: Legal Aspects

This paper is aimed at determination of the qualification of international sanctions in the framework of existing exemption doctrines and evaluation of the most efficient mechanisms of mitigation of legal risks stemming from the introduction of international sanctions. The main objectives of the paper are: 1) comparative analysis of scholar views on possibility of sanctions qualification as a circumstance which releases from liability for non-performance of a contractual obligation; 2) analysis of Russian and foreign court and arbitral practice concerning sanctions qualification; 3) consideration of existing mechanisms of mitigation of legal risks stemming from introduction of international sanctions. Based on this research the following conclusions were made: 1) the Vienna Convention 1980 deals with the majority of issues stemming from the introduction of international sanctions. Art. 79 of the Vienna Convention secures the failing party from necessity to pay damages and restricts to a minimum a range of legal remedies available to the aggrieved party; 2) the illegality doctrine should be recoursed to if it is impossible to prove criteria of an impediment beyond parties control or hardship; 3) the hardship doctrine is more suitable for long-term contracts and situations where both parties are interested in further cooperation; 4) qualification of sanctions under Russian legislation depends on the domicile of the parties. If a contract for the international sale of goods is considered, international sanctions are most likely to be recognized as a circumstance of irresistible force according to art. 401 of the CC RF. If two Russian parties conclude a contract for the delivery of goods from abroad, this is less likely; 5) mitigation of legal risks is possible by virtue of a force majeure, antisanctions and compliance clauses, insurance against political risks, chose of neutral jurisdictions as law applicable to a contract and a place for dispute resolution.