Research Handbook on UN Sanctions and International Law
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Research Handbook on UN Sanctions and International Law

Edited by Larissa van den Herik

The 1990s have been labeled the ‘Sanctions Decade’, since they witnessed an unprecedented intensification of the use of collective non-military enforcement measures, and in particular sanctions, by the post-Cold War reactivated Security Council. This Research Handbook studies the current practice of UN sanctions in international law, their interrelationship with other regimes and substantive areas of law, as well as issues arising from their implementation and application at the domestic level.
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Chapter 15: Economic sanctions and contractual disputes between private operators

Mercédeh Azeredo da Silveira

Abstract

This chapter examines the impact of economic sanctions on contracts between private operators. It offers some solutions to issues faced by domestic courts and arbitral tribunals when one party to a contractual dispute claims that it should be freed from its obligations, on the ground that their performance is prohibited by an economic sanctions programme. The focus is, in particular, on the characterization of economic sanctions from a private law perspective, on the identification of the types of economic sanctions that may, perhaps must, be taken into account by a domestic court or an arbitral tribunal, and on their substantive effects on the parties' rights and obligations. Not only multilateral sanctions imposed by way of mandatory resolutions of the United Nations Security Council, but also regional sanctions and sanctions imposed by states individually, may limit the contractual freedom of private operators. A transaction may be affected by a sanction even if the sanctioning state is not the state of the applicable law and, in the case of a dispute litigated before a domestic court, even if the sanctioning state is not the state of the forum. Furthermore, a sanction may constitute an exonerating impediment to performance not only while it is in force but also after it has been lifted if, as a result of changes in market conditions, performance has become radically more onerous or dramatically less profitable for one of the parties. Economic sanctions are powerful tools devised to paralyze the performance of validly concluded contracts: the longer a sanction remains in force, the more efficient the sanction, if not in achieving its ultimate political goal, certainly in preventing the performance of contracts under the initially agreed terms, perhaps even altogether. Keywords sanctions, contracts, international arbitration, commercial litigation, force majeure, hardship

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