The Concept of "Material Change in the Circumstances" in the Context of New Аnti-Russian Economic Sanctions

Abstract

The article consideres the category "material change in the circumstances", as well as related categories "termination of obligation for impossibility of performance" and "force majeure circumstances", taking into account the practice of their application under anti-Russian economic sanctions and restrictions. The author analyzes the current judicial practice of modification and termination of contract commitments due to "sanctions circumstances" involving these institutions. The available judicial practice indicates a negative, in most cases, attitude of the courts to the application of Article 451 of the Civil Code of the Russian Federation as a basis for modifying or terminating the contract, without considering sanctions as a material change in circumstances. The author concludes that regardless of the political and economic conjuncture, a change in circumstances should be recognized as material, when it has had a direct impact on the agreement made by the parties, and has been a direct consequence of the negative results that one of the parties bears. At the same time, the change in circumstances should go beyond the usual business turnover and in this sense be of an "extraordinary" nature. A similar approach is used by the courts when assessing sanctions as grounds for termination of an obligation due to the impossibility of its performance. "Anti-sanction warranties about the circumstances" are proposed to be included into contracts as well as amendment to the current legislation providing for such grounds for termination of the obligation as the impossibility of its fulfillment "in the conditions of unfriendly actions of foreign states and international organizations".