International contracts in Latin America will call for the application of both civil and common law particularly as they relate to project financing agreements. Critically, the doctrines of force majeure and impracticability in common law jurisdictions, such as the United States, are often stricter than similar doctrines in Latin America. For example, in the United States, changes in market conditions or increased costs to perform may not represent impracticability, thereby excusing non-performance. Conversely, some Latin American jurisdictions may excuse non-performance where conditions are deemed sufficiently severe. In the United States, force majeure has largely become a contractual matter, with courts often preferring to avoid excusing performance where force majeure events have not been expressly mentioned within an applicable contract.

Responses to litigation risk management challenges caused by COVID-19

In order to minimize risks arising from force majeure events, it is crucial to be proactive and identify potentially affected contracts early. A premium should also be placed on developing a coherent strategy to be applied in a uniform manner. Inconsistent approaches may present challenges in litigation.

Once a potential force majeure event has occurred, where possible, efforts should be made to document what transpired. The party claiming an impact will often bear the burden of proof – be it force majeure, impracticability, or excessive onerousness. Depending on the jurisdiction and applicable law, the party might need to produce verifiable documentation of delays, disruptions, and supply chain issues.

The party responding to a claim, on the other hand, may look to obtain documentation and test the counterparty’s assumptions. Knowing what the contract requires, whether the impact was foreseeable, and what mitigating actions the counterparty took to minimize impact, could be important.

Be careful when drafting force majeure clauses. Any attempt to list every contingency that might be considered a force majeure event is itself an impossibility. However, a carefully drafted clause that includes applicable catch-all provisions may prove useful in capturing events beyond those specifically listed. In addition, while defenses such as impossibility, impracticability, and frustration of purpose generally require that an event excusing performance be unforeseeable, parties are generally free to fashion force majeure clauses as they see fit – including to attempt to excuse foreseeable risks.

About the authors

M. Cristina Cárdenas focuses her practice on international arbitration and complex commercial litigation. She is a native Spanish speaker and has experience representing clients in a variety of complex international arbitrations and business disputes. Cristina has served as counsel, both in Spanish and in English, before many of the most important arbitral institutions, including the International Chamber of Commerce, the International Centre for Dispute Resolution, the American Arbitration Association, and the Inter-American Commercial Arbitration Commission. She also coordinates and oversees the work of local counsel in connection with litigation proceedings in Latin America.

Francisco Rivero leads the firm’s Latin America Business team and is former co-practice leader of the International Arbitration Group. He advises clients around the world on complex commercial, commodities, construction, energy, joint venture, mining, oil and gas, partnership, and renewables disputes. Francisco’s most recent representations involve large-scale disputes in Argentina, Bolivia, Brazil, Colombia, Dominican Republic, London, Mexico, Panama, Peru, Spain, the United States, and Venezuela.

Benjamin Antillon Fernandez is an associate in the Houston office, and focuses his practice on international arbitration and cross-border matters.