Newsletter: Disruption to merchant shipping around the Arabian Peninsula – Legal implications for international sales contracts from the perspective of Swiss law
Current situation: disruption of a global trade bottleneck
Since late February 2026, passage through the Strait of Hormuz has effectively been possible only to a limited extent. As the main route between the Persian Gulf and the open ocean, the Strait is crucial for a large part of the global energy trade. At times, tanker traffic has come to a virtual standstill, with numerous ships anchored within the Gulf.
Although a ceasefire between the US and Iran was agreed on 8 April 2026 and the blockade formally lifted, the situation remains tense. Attacks on merchant and cruise ships, as well as military incidents, demonstrate that safe passage cannot yet be regarded as guaranteed. Furthermore, there remains a risk of escalation by the Iran-backed Houthi militia in Yemen in the area of the Bab al-Mandab Strait, which connects the Suez Canal and Europe with the Indian Ocean and Asia. Although the US government officially declared on 1 May 2026 that hostilities with Iran had terminated, the security situation in the region remains fragile.
Against this backdrop, companies are faced with the question of what legal consequences these developments may have for existing purchase and supply contracts. This newsletter highlights key considerations from the perspective of Swiss law and the CISG (UN Convention on Contracts for the International Sale of Goods or Vienna Sales Convention), focusing in particular on delivery delays and price developments.
1. Delivery delays: which party bears the risk?
From the seller’s perspective
The current situation poses a significant risk of delivery delays for sellers shipping goods from Asia or relying on raw materials transported through the Strait of Hormuz.Whether or not such delays are legally excusable depends primarily on the contractual provisions agreed between the parties. Since the Covid-19 pandemic, force majeure clauses have been frequently included in sales and supply contracts. Under Swiss law, such clauses are interpreted in accordance with the actual and mutual intention of the parties.
Typically, force majeure clauses exempt a party from liability if the delay results from events beyond its control that were unforeseeable at the time the contract was concluded and could not reasonably have been avoided or overcome. Armed blockades and attacks on merchant vessels are likely – depending on the wording of the clause, particularly where acts of war, governmental measures or embargoes are expressly referenced – to qualify as force majeure events. Many clauses further require prompt written notification and may apply only where performance becomes impossible or severely impeded, rather than merely more burdensome.
In the absence of relevant contractual provisions, the allocation of risk and liability depends on the applicable law. In international sales contracts, this will generally be the CISG unless expressly excluded. Otherwise, the Swiss Code of Obligations (CO) applies.
Under the CISG, remedies available to the buyer (Art. 45 et seq. CISG) depend not on the classification of the breach, but on its severity. Pursuant to Art. 79 CISG, the seller is exempt from liability where non-performance results from an impediment beyond its control that was unforeseeable at the time of conclusion of the contract and could not reasonably have been avoided or overcome.
A complete blockage of the principal transport route is likely, in principle, to satisfy this standard, although tribunals may also consider whether commercially reasonable alternative routes remained available. In any event, this assessment is likely to differ depending on when the contract was concluded. For contracts entered into after the discernible escalation at the end of February 2026, it will become increasingly difficult to argue that the disruption was unforeseeable. Timely notification of the impediment to the buyer is also essential under Art. 79(4) CISG.
The Swiss CO distinguishes more clearly between the various forms of breach of contract: Article 97 CO governs non-performance and improper performance generally. Under this provision, the debtor is liable for damages unless it proves the absence of fault. Exemption from liability generally requires objective impossibility of performance (Art. 119 CO), meaning that performance has become definitively impossible either from the outset or at the time performance is due. Mere hindrance – even if substantial – is generally insufficient. As long as performance remains possible, delayed performance is governed by the provisions on default (Art. 102 et seq. CO). Under Art. 103(1) CO, the debtor is liable for damages caused by the delay unless it proves the absence of fault. Swiss Federal Supreme Court case law recognises that war-related events and wartime economic measures may constitute objective grounds excluding fault.
In the event of extraordinary price fluctuations, a judicial adjustment of the contract may additionally be considered under the doctrine of clausula rebus sic stantibus (see below). However, as a general rule, disruptions to shipping alone are unlikely to constitute legal impossibility under Swiss law.
From the buyer’s perspective
Buyers depending on timely delivery may face the question of whether they can procure substitute goods and pass on additional costs to the seller.
Under the CISG, the buyer may continue to demand performance while simultaneously claiming damages caused by the delay (Art. 46(1) in conjunction with Art. 74 CISG). The buyer may also grant the seller an additional period for performance (Art. 47 CISG). If delivery is not made within that period, the buyer may terminate the contract (Art. 49(1)(b) CISG), claim damages (Art. 74 CISG) and/or make a substitute purchase (Art. 75 CISG). Where the delay amounts to a fundamental breach of contract (Art. 25 CISG), the buyer may even avoid the contract immediately without granting an additional grace period, although the threshold for establishing a fundamental breach is high. If the seller successfully invokes Art. 79 CISG, liability for damages is excluded. However, the buyer’s claim for performance generally remains unaffected.
Under the Swiss CO, a creditor must generally grant the debtor a reasonable grace period before exercising remedies for delay (Art. 107(1) CO). Such grace period is only unnecessary in exceptional circumstances, such as when it would be clearly futile or when timely performance was essential under the contract. If performance is still not rendered after expiry of the grace period, the creditor may either insist on performance and claim damages for delay or waive subsequent performance and instead claim damages for non-performance or withdraw from the contract (Art. 107(2) CO). Upon withdrawal, reciprocal obligations lapse and benefits already exchanged must be returned. The creditor may additionally claim compensation for damages caused by the termination unless the debtor proves absence of fault (Art. 109 CO).
Under both legal systems, buyers are also subject to a duty to mitigate losses. In practice, buyers should therefore carefully document all reasonable mitigation measures taken, including substitute purchases, alternative transport routes and related communications with suppliers.
2. Price increases for crude oil and petroleum products: should contracts be adjusted?
The disruption to shipping through the Strait of Hormuz has resulted in dramatic price volatility. Brent crude oil prices rose temporarily to more than USD 126 per barrel, with some analysts warning that prices could reach USD 200 if disruptions continue. These developments raise significant issues for long-term contracts concerning crude oil, petroleum products and transport-dependent goods.
From the buyer’s perspective
For buyers that secured fixed-price supply agreements before the escalation, the current market situation may initially appear advantageous, provided the seller remains capable of performance. However, difficulties may arise where buyers themselves are unable to meet downstream supply obligations due to disruptions in their own supply chains.
In the absence of contractual price adjustment mechanisms, buyers may generally insist on performance at the agreed price. Sellers may nevertheless seek to invoke hardship doctrines or renegotiation mechanisms (see below). In practice, buyers with strategically important suppliers may therefore wish to signal a willingness to negotiate commercially reasonable adjustments.
From the seller’s perspective
For sellers committed to fixed prices while facing sharply increased procurement costs, the present situation may create significant economic pressure.
Where the contract contains a hardship clause, the seller may request renegotiation if circumstances have changed fundamentally and performance has become excessively burdensome. Well-drafted hardship clauses typically define objective thresholds (for example, a specified percentage increase in costs) and establish structured renegotiation procedures. The ICC model hardship clauses (updated in 2020) provide widely used examples.
Absent such clauses, Art. 79 CISG offers only limited relief in cases of purely economic hardship. While legal scholarship increasingly recognises that severe economic impediments may, in principle, fall within the scope of Art. 79 CISG, the threshold remains high. Ordinary market fluctuations will generally not suffice. Extreme and unforeseeable cost increases – example, a doubling or tripling of procurement costs – may, depending on the circumstances, be assessed differently. Importantly, Art. 79 CISG does not provide for judicial adaptation of the contract; it merely exempts the affected party from liability for damages.
Swiss law offers a broader mechanism through the doctrine of clausula rebus sic stantibus. Under this doctrine, courts or arbitral tribunals may adapt or, in exceptional circumstances, terminate a contract where circumstances have fundamentally changed since its conclusion. According to the Federal Supreme Court's case law, the doctrine applies only where the change was unforeseeable, beyond the obligor's control and results in a serious imbalance between performance and consideration. Whether these conditions are met for contracts concluded before the end of February 2026 must be carefully assessed on a case-by-case basis. The historical uniqueness of the price spikes is likely to play a significant role in this assessment.
Proactive contract management is crucial
The current situation around the Strait of Hormuz once again illustrates how quickly geopolitical developments can put significant pressure on contractual relationships and supply chains.
In light of the continuing uncertainties, companies involved in the trade, transportation or procurement of crude oil, petroleum products or transport-dependent goods should consider taking the following measures:
Review existing contracts carefully, in particular force majeure and hardship clauses, notification obligations, governing law provisions and dispute resolution mechanisms.
Notify counterparties promptly and in writing of any relevant force majeure events or anticipated disruptions.
Document mitigation measures thoroughly, including alternative transport routes, substitute purchases and storage arrangements.
Approach renegotiations proactively, particularly in long-term commercial relationships where preserving cooperation may be commercially preferable to litigation.
Draft future contracts carefully, including tailored force majeure, hardship and price adjustment clauses, as well as clear allocation of logistics and transportation risks.
If you have any questions regarding international supply and sales contracts, contract amendments, force majeure, hardship claims or international trade disputes, our team at Wartmann Merker would be pleased to assist you.