Strait of Hormuz: Force Majeure and Repudiation Considerations24 July 2025

INTRODUCTION

It is well known that the consequences of closure or other disruption at the Strait of Hormuz are potentially cataclysmic given the strait’s importance for seaborn trade and by extension the global economy.

Commercial parties faced with such a situation will be exploring all options in their legal and contractual arsenal to adjust or even avoid performance altogether, including reliance on war risks clauses (often included within maritime contracts) and the common law doctrine of frustration, as considered in our previous articles in this series.

However, the incorporation of force majeure clauses (“FM clauses”) in contracts provides greater legal certainty than relying on the doctrine of frustration as they more clearly define the scope of events that qualify, provide how performance will be adjusted and set out notice requirements, consequences and allocation of risks, thus offering greater clarity and commercial flexibility.

This final article in our series will discuss how FM clauses may be relevant and indeed, essential in the context of a possible escalation at the Strait of Hormuz. We will also consider how invoking these contractual options may have unintended consequences in the form of allowing a contractual counterparty to claim the relevant contract has been repudiated.

FORCE MAJEURE CLAUSES

FM clauses refer to events that are unforeseeable, uncontrollable and render contractual performance effectively impossible. These FM events are, therefore, so serious that they supervene the parties’ pre-existing contractual arrangements and call for a new state of affairs to be managed in a different way.

FM is not an autonomous concept or independent right under English law, unlike in some other legal systems. It is instead a creature of contract and the parties to a contract will need to include an express contractual provision to be able to invoke it. Whether a party can rely successfully on a FM clause and the consequences of invoking it will depend on the interpretation of the specific FM clause and its precise wording and scope.

The most common FM clause incorporated in charterparties is the BIMCO Force Majeure Clause 2022 and its previous versions. There are similar clauses in other shipping-related contracts, such as the popular 2003 Shipbuilders’ Association of Japan (SAJ Form) standard shipbuilding contract.

The BIMCO FM clause caters for a comprehensive range of FM events, especially in the maritime context, including:

i. actual, threatened or reported war, act of war, civil war or hostilities; revolution; rebellion; civil commotion; warlike operations; laying of mines;
ii. act of piracy and/or violent robbery and/or capture/seizure; act of terrorists; act of hostility or malicious damage;
iii. blockade, generally imposed trade restriction, embargo;
iv. act of government or public authority whether lawful or unlawful, compliance with any law or governmental order, expropriation, seizure of works, requisition, nationalisation;
v. plague, epidemic, pandemic; and
vi. act of God, natural disaster or extreme natural event such as earthquake, landslide, flood, or extraordinary weather condition.

There is also provision for a “residual” FM event category that covers “any other similar event or circumstance unless caused by negligence of the affected party”.

Whilst the exact shape and extent of a potential disruption at the Strait of Hormuz cannot be predicted, it is clear that the forms of potential escalation feared by governments and maritime industry participants and specialists (such as the possibility of Iran formally closing the strait, deploying or threatening to deploy naval mines or unmanned aerial vehicles by itself or its proxies to harass ships, or even widening regional warfare) could trigger a number of the more common FM events.

The existence of a named FM event is necessary but not a sufficient condition in itself for a party seeking to successfully rely on such a clause. It is equally important for several additional requirements to be satisfied, which are reminiscent of the contours of the common law doctrine of frustration. For example, sub-clause (a) of the BIMCO FM Clause also requires that in all FM events the:

• party invoking FM must be prevented “from performing one or more of its contractual obligations” as a result of the relevant FM event;
• FM event must lie “beyond” that party’s “reasonable control”;
• FM event “could not reasonably have been foreseen at the time of the conclusion of the contract”; and
• effects of the FM event “could not reasonably have been avoided or overcome by the affected party”.

Depending on the nature and extent of the disruption caused by the FM event, the performance of the contract may either by suspended (for example, under sub-clause (e) of the BIMCO FM clause) or the contract as a whole may be terminated if the effect of the FM event is particularly serious and enduring (for example, under sub-clause (g) of the BIMCO FM Clause).