Association questions legality of Force Majeure declarations



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Raises an important question about security of supply

When I worked at a major international natural gas producer I spent some time on their trading floor where send or pay contracts governed their short or long position on gas produced in the north sea (as well as open paper trades). There were very strict regulations as to when we could and couldn’t call force majeure as a reason not to be able to supply any long positions and get out of send or pay penalties as per the definition in this article. Essentially it meant we had to manage the assets to a higher standard and couldn’t turn off supply whenever it suited us.

Seems the EuMBC are calling on the strict definition of Force Majeure and rightly so. But there is strictly only recourse from a buyer's perspective if there are contracts in place along the supply chain.

It opens up a very important question about security of supply. We are so used to economic growth being driven by demand, and forget there needs to be supply to give economies something to produce. Without supply (ie like the situation in Europe post WW2) growth can be hindered and coupled with a spike in demand (fast recovery from double dip recession) there is a risk this may lead to high inflation and an unstable economic times.

And the question which is being asked here as to whether producers are behaving within the boundaries of good practice I think is an important one.

Anon more than 5 years ago

Force Majeure

Whilst I am now working in Plastics Extrusion I have at times in my career worked in a range of industries including heavy industries such as aluminium production. I have never seen such a proliferation of declarations of Force Majeure. It is difficult not to doubt the validity of some of these claims.

Michael Stewart more than 5 years ago

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