Does the law protect us against unforeseen events?

https://www.dhakatribune.com/opinion/op-ed/2021/08/05/op-ed-does-the-law-protect-us-against-unforeseen-events

M S Siddiqui

• Published at 03:36 am August 5th, 2021

BIGSTOCK

Why Bangladesh needs force majeure clauses

RMG retailers in the West rely on timely shipments to fulfil time-sensitive

customer orders that impose penalties on Bangladeshi garments exporters for

late delivery. Bangladesh is not a party to the UN conventions on international

sales contracts to safeguard the interests of exporters.

In the coronavirus situation, some Western buyers of RMG expressed that they

are in economic hardship, and there is no space in the warehouses. They are

asking for either cancellation of orders or delayed/deferred shipment until their

warehouses are vacant to intake the cargo.

Usually, international supply chain contracts have a force majeure clause that

excuses or extends performance upon the occurrence of certain unforeseen

contingencies. But the RMG supply contracts hardly contain any force majeure

clauses. In many cases, even RMG supplies have no formal contract.

In Bangladesh, there is no statute that directly governs the doctrine of force

majeure or gives effect to it in express terms. Under English Common Law, the

applicability of force majeure is purely contractual. Therefore, Bangladeshi

exporters may also rely on the parties’ agreement and the respective terms of the

contract entered into between the contracting parties.

Under public procurement law, clause 38-41 of General Conditions of Contract

(GCC) of Standard Tender Document (STD), PG-4 published by the Central

Procurement Technical Unit (CPTU) at the Implementation, Monitoring, and

Evaluation Division IMED of the Ministry of Planning defines the modality of

application of the force majeure clause. This document is applicable for

international government purchase. The rule has defined the force majeure in our

jurisdiction.

If a contract does not have a force majeure clause, the RMG exporters may find

some comfort in the doctrine of commercial impracticality codified in some laws.

It is not easy to take advantage. The first question is which law applies. The

contract may specify the origin of the laws to be applicable for the contract.

There is the other challenge of enforcement of judgment of one legal system in

other jurisdictions. In order to meet the challenges of different laws in different

jurisdictions, there are some international conventions to resolve these issues.

The United Nations Convention on Contracts for the International Sale of Goods

(CISG) governs supply agreements and international sales contracts between

countries that have adopted the UN convention, unless another governing law is

expressly stated in the contract and/or the CISG is expressly excluded.

The Principles of International Commercial Contracts (PICC) of 2010 is another

document prepared by the UNIDROIT that intends to assist in the harmonization

of international laws used in commercial contracts.

Most of Western countries are parties to these UN conventions. If a contract is

governed by the laws of Western countries and does not explicitly disclaim

application of the CISG or PICC, these conventions are deemed to supplant that

laws of the countries ratified and adapted, since the CISG is a treaty that

overrides national law. If, on the other hand, the contract is governed by the law

of another country, the exporters must look to the laws of that country.

Unfortunately, Bangladesh has yet to ratify both the conventions: The United

Nations Convention on Contracts for the International Sale of Goods (CISG) and

the Principles of International Commercial Contracts (PICC) are missing the

opportunity to avail the force majeure under these conventions.

Therefore, in the absence of an appropriately worded force majeure clause in a

contract, the parties in Bangladesh may have the option of relying on the existing

provisions of Bangladeshi law -- in particular, Section 56 of the Act of 1872 -- in

order to excuse itself from the timely performance of their respective obligations

under the contract. It is common practice in international commerce to insert a

force majeure clause in sales contracts that precisely defines the applicable

circumstances. A properly drafted force majeure clause has the potential to

minimize a dispute. The parties can agree on the contingencies that will excuse

performance. If the contingencies are mentioned clearly, the party bearing the

economic loss is less likely to bring legal action.

Other countries that have decided to avoid any ambiguity on the subject have

already issued circulars clearly stating that Covid-19 is to be treated as a force

majeure event. For example, the government of India has issued a notice on

February 19, 2020, that Covid-19 was a natural calamity and facilitated the force

majeure clauses in contracts for such events. The China Council for the

Promotion of International Trade (CCPIT), a quasi-governmental entity, issued a

few thousand force majeure certificates to exempt Chinese companies from their

contractual obligations. These certificates are proof of the existence of relevant

events that may constitute force majeure and impinge the company’s capacity to

perform the contract. These certificates, however, are not legal documents and

do not have direct executive or legal effects. They only attest the factual details

instead of certifying that those events are indeed force majeure in law.

Bangladeshi RMG exporters should sign contracts of export with properly drafted

clauses of force majeure, and the Bangladeshi government should ratify The

United Nations Convention on Contracts for the International Sale of Goods

(CISG) and The Principles of International Commercial Contracts (PICC) at an

early date.

M S Siddiqui is a legal economist. He can be contacted at

mssiddiqui2035@gmail.com.