Force Majeure and the war in Ukraine: legal cases and questions about insurance coverage

Many logistics companies may lull themselves into a false sense of security, believing that in the event of contractual problems related to Ukraine, they do not have to pay due to force majeure or are exempt from their liabilities.

The term “Force Majeure” comes from French law. However, it is foreign to German and Austrian law. Moreover, the term is interpreted differently across individual national legal systems. This essentially refers to cases of “force majeure,” which in Germany and Austria, influence, for example, the rules on impossibility (see § 275 BGB and § 1447 ABGB) or on the loss of the basis for the transaction (§ 313 BGB).

Regulations on this are also found in the UN Convention on Contracts for the International Sale of Goods (see Art 79 CISG). Unless excluded by mandatory freight law, the agreement of contractual force majeure clauses, such as those possible by the International Chamber of Commerce (ICC), is applicable. In road freight transport, however, the mandatory provisions of the CMR are decisive, particularly the provision of Art 17 Abs 2 CMR for unavoidable events.

The following two cases show that damage cases connected with the war in Ukraine can have very different legal consequences, which courts have recently addressed.

1st Case: rent for freight wagons that cannot be used in Ukraine due to the War

Facts

A mineral oil dealer rented over 30 tank wagons from a freight wagon rental company in Austria. The lease term was until 2023. The lessee actually used the freight wagons exclusively for transporting a petroleum product from Ukraine to Serbia.

The transport was designed so that the product was first loaded from the chemical producer plant in western Ukraine onto Ukrainian broad-gauge wagons and then transported to a transshipment terminal near the Slovakian border. There, the petroleum product was reloaded onto the standard gauge tank wagons and sent to the Serbian recipient.

The lessor of the freight wagons was aware of the Ukraine-Serbia route but the exclusive use of the freight wagons on this route was not stipulated in the rental agreements. The rental agreements did not contain any restrictions on a specific route or countries; the tenant could freely use the freight wagons according to the rental agreement.

On February 24, 2022, war broke out between Russia and Ukraine. The lessor notified its tenants on the same day that the use of freight wagons in Ukraine was prohibited. The tenant no longer had any use for the freight wagons and wanted to return them to the lessor. However, the lessor insisted on the remaining rent until the regular end of the rental agreement.

The tenant was surprised by this, as he believed the prevailing circumstances constituted force majeure, as also confirmed by the Ukrainian Chamber of Commerce and Industry.

Legal proceedings of the Vienna Commercial Court (17 Cg 95/22k)

The court agreed with the lessor, affirmed the tenant’s obligation to pay the remaining rent, and essentially justified this decision as follows: The term “Force Majeure” is foreign to Austrian law. There was no case of force majeure where the rental property became unusable within the meaning of Sections 1096 Paragraph 1 and 1104 ABGB, as the wagons themselves were usable and could be used for the planned purpose, namely the planned route Ukraine – Serbia.

However, the rental agreement for a specific route was not agreed upon. Also, no contractual force majeure clause was agreed upon. In fact, the landlord’s general terms and conditions even contained a clause stating that the tenant assumes the risk of loss of the rented property due to force majeure, which is why, according to the court, no loss of business basis could be considered. As a result, the tenant of the freight wagons could not invoke Force Majeure and had to pay the remaining rent for the freight wagons.

2nd Case: seizure of a truck at the start of Russia’s invasion of Ukraine – an unavoidable event according to Art 17 Paragraph 2 CMR?

Facts

A Czech freight carrier was commissioned to transport goods from Italy to Russia. The route led from Italy, through Slovenia, to Hungary, where the truck reached the Ukrainian border at around 7:32 a.m. on February 24, 2022. On the same day, Russia invaded Ukraine. Later that day, the truck and its cargo were confiscated by Ukrainian authorities. The fate of the Russian driver remains unknown.

The plaintiff accused the carrier of grossly negligent route planning and argued that the carrier should have chosen a route through Belarus. However, the freight carrier denied the claim, asserting that the outbreak of war was a complete surprise to the global community. According to Art 17 Paragraph 2 CMR, confiscation upon the outbreak of war is deemed an inevitable event. It was also noted that the Russian invasion occurred through Belarus as well. Additionally, the plaintiff had previously accepted the faster and cheaper route through Ukraine without objections.

Legal proceedings at the Innsbruck regional court (66 Cg 35/23h)

The court ruled in favour of the defendant carrier at the first instance, rejecting the claim and justifying its decision as follows:

“In fact, Russia’s attack on Ukraine on February 24, 2022, was unforeseen. The well-known, stunned reactions of the global community are noteworthy. Particularly, there were no indicators prior to February 24, 2022, that international transports would face confiscations. The defendant’s managing director could not have anticipated or avoided the sudden change in circumstances, despite exercising all possible and reasonable care under the circumstances. The route through Ukraine is approximately 280 to 300 km shorter and thus faster and more fuel-efficient than the route through Belarus. Additionally, using the roads in Ukraine incurs no tolls, making transportation through Ukraine cheaper than through Belarus. At the beginning of 2022, transportation costs to Russia nearly doubled, notably as waiting times at borders increased, prolonging the transport time and the utilization of drivers and vehicles. The plaintiff insisted on the transport and placed the order without any restrictions, fully aware that the majority of the defendant’s transports passed through Ukraine. It is incomprehensible why the defendant would have independently chosen a longer and costlier route, as they had no advantage in knowledge over the plaintiff. The court, therefore, concludes that the defendant has provided sufficient exculpatory evidence according to Art. 18 Z 1 CMR, and the defendant, as the carrier, is exempt due to the liability exclusion stipulated in Art. 17 Z2 CMR. The claim was therefore dismissed.”

Insurance Coverage

Logistics companies often overlook that transport insurance and traffic liability insurance (“CMR insurance”) regularly exclude damages from war events, potentially creating significant insurance gaps for transports through Ukraine given the current situation.

For instance, a standard clause states: “Damage caused by war, war-like events, civil war, internal unrest, rebellion, strike, lockout, orders from high authorities, confiscation, or other actions by a state-recognized power are excluded from insurance coverage.” To adequately insure such risks in Ukraine, an appropriate policy extension is necessary.