On 16 April 2025, Volterra Fietta held a virtual seminar entitled “Impacts of Tariffs on Supply Contracts: Key Legal Issues”. In the seminar, Volterra Fietta partners Mr Gunjan Sharma and Mr Ahmed Abdel Hakam analysed the contractual implications of tariff increases on supply agreements and sales of goods, from a common law and civil law perspective.
Mr Sharma began the discussion by noting the fundamental contractual issue with tariff increases – that, when appropriately severe, a tariff increase can vitiate the economic benefits of a contract and the economic balance between the parties. He noted that the purpose of the panel was to consider the contractual implications of this vitiation under English, American and French law.
Mr Sharma then discussed the common law position, as found in both the US and UK. Relying on a small set of decisions involving tariff and other international barriers to trade in the past decades, Mr Sharma explained that, in the absence of certain relevant contractual clauses that allocated tariff risk, common law courts had traditionally been reticent to excuse contractual performance based on a change in economic circumstances brought about by tariff increases or other barriers to trade (including dumping). The common law position appeared, in most instances, to isolate price adjustments and profit from doctrines excusing contractual performance based on Government-led, unforeseen or unforeseeable circumstances. That was true whether it was cast under the doctrines of force majeure, hardship, impossibility or frustration. Nonetheless, Mr Sharma noted that there were some cases excusing performance in such conditions and the argument could be made that recent developments were fundamentally different from prior cases.
Mr Abdel Hakam then addressed the position under French and civil law. After describing the French legal concepts of force majeure and imprevision, Mr Abdel Hakam noted that civil law was more likely to consider tariff fluctuations to be a form of force majeure and that parties in a long-term relationship could benefit from civil law statutory rights to require renegotiation of contract terms following a tariff increase. He cautioned businesspeople to play close attention to the requirements of notice and good faith negotiation, as found in the relevant statutory schemes.
The two Volterra Fietta partners then engaged in a discussion of the fundamental issues involved in litigating tariff fluctuation cases, noting the favourable position in civil law for parties more adversely affected by tariffs in their contractual relationships. Mr Sharma and Mr Abdel Hakam agreed that, in light of recent developments, common law judges and arbitrators would have to more clearly explain why, in common but not civil law, circumstances impacting taxes, tariffs, prices and money were more insulated from doctrines excusing contractual performance when compared to, for example, a straightforward import or export ban.
The seminar ended with a presentation by Mr Gabriel Olearnik of Burgundy Capital, who explained how litigation funders were considering these issues, especially in regards to long-term offtake agreements that have impacted project financing.
An audio recording of the seminar will be made available on request. For further information, please contact info@volterrafietta.com.
