Recently Libya lifted force majeure after imposing the measure in relation to its oil production due to unrest.
The National Oil Corporation (NOC) has declared force majeure several times when security concerns or the occupation of oil fields made it impossible to continue production or export.
One notable precedent was in 2014 when the NOC declared force majeure at multiple oil terminals, halting operations and citing uncontrollable circumstances due to militia blockades. The force majeure was invoked under both domestic law and relevant contractual terms with international oil companies. Another example was in 2020 amid the ongoing conflict between the two governments and the COVID-19 pandemic.
What is Force Majeure?
A force majeure event refers to acts or circumstances beyond the control of the parties, such as acts of natural disasters, or conflicts. A force majeure typically allows one or both parties to be excused from fulfilling their contractual obligations, or to suspend performance, when such events occur. In many Libyan government contracts, force majeure clauses are explicitly included to define what constitutes such an event. These clauses generally list specific types of events (such as acts of war, natural disasters, political unrest, or governmental orders) and set out the process for invoking the clause, including notice requirements and mitigation efforts.
How Force Majeure Affects the Obligations of Parties Under Ongoing Contracts?
The purpose of invoking force majeure is to temporarily or permanently relieve one or both parties from their contractual duties when the performance becomes impossible due to extraordinary events beyond their control. This means that the party invoking force majeure is no longer required to fulfill its contractual duties for as long as the force majeure event lasts. Key aspects of this suspension include temporary relief in which obligations are paused but not terminated; and ensuring the duration of suspension in which contracts often specify how long obligations can be suspended before additional remedies.
In most cases, when force majeure is declared, any associated payment obligations tied to performance are also suspended.
Limitations of Force Majeure and Liability Considerations
Force majeure does not provide an absolute defense in all cases. The scope of protection and the liabilities that may arise depend on the specific circumstances and the language of the contract.
Contracts often define what constitutes force majeure and outline what is not considered force majeure (e.g., financial difficulties). If an event does not fall within the contract’s definition, invoking force majeure may fail.
Nonetheless, the party invoking force majeure must typically demonstrate that the event meets the required criteria. Failure to meet the criteria could lead to breach claims. Additionally, if one party continues to benefit from the contract while the other is excused from it, issues of unjust enrichment or unfair advantage could arise, potentially leading to compensation or restitution claims.
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