A Changed Landscape for Entrepreneurs in Western Europe

In the 1990s, following the fall of the Berlin Wall, there was a widespread belief that large-scale armed conflict in Western Europe belonged definitively to the past. This assumption translated into a policy choice: defence budgets were structurally reduced and military equipment was decommissioned or sold off in the name of fiscal discipline. Between 1990 and 2011, for example, virtually all Dutch tanks were sold or taken out of service. At the time, this course of action enjoyed broad public support, but today it is increasingly viewed with incomprehension.

The current geopolitical climate reflects a fundamentally different perception of risk. Whereas the reduction of military capacity was previously regarded as rational and future-proof, today’s geopolitical instability has led to a broader recognition that stability has become far less self-evident.

For entrepreneurs, the current geopolitical climate means that it can no longer be assumed that they can conduct their activities entirely free from conflict-related risks, nor that they will be shielded from the economic consequences of situations such as war, uprisings, or other forms of so-called ‘molest’.

Against this background, this brief contribution examines the legal consequences of failing to explicitly address geopolitical risks in agreements between professional parties. Two key questions are central. First, what is the customary contractual instrument used by companies to regulate such risks, and what are the implications if these risks are not expressly included as grounds justifying non-performance? Second, in light of current societal circumstances, to what extent is it still possible to invoke force majeure or unforeseen circumstances when geopolitical developments hinder or prevent the performance of a contract?

Excluding Geopolitical Risks in Contracts

Civil law aims to create the conditions for orderly, predictable, and efficient social and commercial relations. The guiding principle is that a contract must be performed, even if it has become disadvantageous for one of the parties. Put succinctly: a creditor is, in principle, entitled to performance.

When a party fails to perform a contract, this usually constitutes a breach. More specifically, this may involve a complete failure to perform, partial performance, or defective performance. In all such cases, the contractual obligation is not properly fulfilled, resulting in a contractual default.

The attribution of damage resulting from non-performance depends, broadly speaking, on three factors: (i) enforceability — has the obligation become due (has the term expired or has it otherwise become enforceable)? (ii) imputability — does the cause of non-performance lie within the debtor’s sphere of responsibility, or does it fall outside it? And (iii) default — has performance failed to occur after the obligation became enforceable?

With regard to imputability, companies can explicitly regulate geopolitical risks in their contracts by including specific clauses. Such provisions define which events — such as war, uprisings, or other forms of molest — are borne by which party and under what conditions performance may be suspended or omitted altogether. This prevents disputes after the fact about which party bears responsibility for a breach and provides clarity in advance regarding the allocation of risk. In such cases, the risk lies with the counterparty of the user of the terms and conditions.

Such clauses are common in insurance policies. Molest is typically defined and excluded as follows:

“In the following cases, you will not receive [the service/benefit] from […]: (…) section (…) Molest: if [the failure to perform] is the result of organised violence (also referred to as ‘molest’). By this we mean: (a) civil unrest, defined as organised violent actions in multiple locations within a country; (b) internal disturbances, being organised violent actions in multiple locations within a country; (c) a conflict between states or groups involving the use of military weapons, including actions by a United Nations peacekeeping force (…)”

This abbreviated example illustrates how precisely the concept of molest can be contractually defined. However, an important caveat applies: standard clauses cannot simply be copied without adjustment. They must be carefully tailored to the specific business context and the contractual relationships in which they are applied.

Standard formulations do not automatically provide adequate protection in every situation; customisation is usually required.

In many practical cases, however, such provisions are entirely absent. This leads to a key question: in the absence of an explicit contractual clause, can a debtor deny imputability when geopolitical circumstances prevent performance?

Force Majeure: When Performance Becomes Impossible

One possible legal avenue is the doctrine of force majeure. Under this doctrine, a debtor is not liable for non-performance if it is caused by a circumstance that is not attributable to their fault and that does not, by law, contract, or generally accepted standards, fall within their sphere of risk. In principle, a debtor may avoid liability under such circumstances. In practice, however, a successful reliance on force majeure is far from self-evident, particularly in the context of geopolitical developments.

To successfully invoke force majeure, five cumulative conditions derived from prevailing legal doctrine must be met: (1) there must be a breach of a contractual obligation; (2) the event causing the breach was unforeseeable; (3) the breach occurs at the time the obligation is due; (4) the breach is not attributable to the debtor’s fault; and (5) the consequences of the breach do not fall within the debtor’s risk sphere under the law, the contract, or generally accepted standards.

It is precisely the criteria of foreseeability and risk allocation that present difficulties in the current context. Whereas geopolitical escalations were once considered exceptional events, societal and economic perceptions have shifted. International tensions, sanctions regimes, disruptions of trade routes, and conflicts affecting global supply chains have increasingly become part of the international business environment in recent years.

When parties choose not to explicitly regulate geopolitical risks contractually, this may be interpreted as an implicit acceptance of that risk. Only under specific circumstances can a successful reliance on force majeure then still be made.

This significantly complicates a debtor’s ability to invoke force majeure after the fact. The counterparty may argue that, while the event lies outside the debtor’s direct control, the risk is not so exceptional — given current geopolitical realities — that it falls outside the debtor’s sphere of responsibility.

As a result, the focus of the assessment shifts. It is no longer sufficient to establish that the event was beyond the debtor’s fault; it also becomes relevant whether the risk should reasonably have been addressed contractually in advance. In many commercial agreements — particularly in the early years of a business — a gap exists precisely at this point. Where such provisions are lacking, it becomes considerably more difficult to justify non-performance solely by invoking force majeure.

Unforeseen Circumstances: When Performance Becomes Unreasonably Burdensome

Another possible avenue is reliance on unforeseen circumstances. This concerns situations in which a contract can still be performed, but performance has become significantly more onerous or costly for one party than both parties anticipated at the time of contracting. In such cases, a court may decide to amend or (partially) terminate the agreement if it would be unreasonable to hold the parties to the original terms.

However, this remedy is applied sparingly. During the COVID-19 pandemic, courts were more inclined to do so, sometimes adopting a so-called “share the pain” approach, whereby the consequences of the crisis were distributed between both parties rather than borne entirely by one. According to many legal scholars, this was largely due to the exceptional nature of the pandemic and is unlikely to be repeated so readily. Indeed, professional parties are now expected to account for potential disruptions themselves.

This expectation also applies to geopolitical tensions, sanctions, and other international disruptions. In today’s world, it is increasingly difficult to argue that such developments are entirely unforeseeable. For companies engaged in international trade, it is therefore less likely that a court will accept a claim based on unforeseen circumstances, particularly where such risks were not contractually addressed in advance. This is all the more true where agreements are structured according to common-law standards, which typically place greater emphasis on contractual risk allocation.

This brings us back to the fundamental principle of contract law: agreements must, in principle, be honoured. Entrepreneurs generally bear the ordinary economic risks associated with their activities. The more frequently certain risks occur, the more difficult it becomes to characterise them as unforeseen.

Forward-Looking Entrepreneurship: Contractually Managing Geopolitical Risks

The foregoing analysis demonstrates that geopolitical developments have fundamentally altered the legal landscape for entrepreneurs. Whereas war, sanctions, or disruptions of international supply chains were once regarded as exceptional events, they are increasingly part of the economic reality in which international companies operate. This has direct implications for the legal assessment of non-performance.

As geopolitical tensions, sanctions regimes, and other forms of so-called molest occur more frequently, it becomes increasingly difficult to treat such events as entirely unforeseen or as force majeure. For professional parties operating internationally, such developments are increasingly regarded as part of the normal business risk.

Those who operate internationally in a changing world order are well advised not to address geopolitical risks only in times of crisis, but to regulate them contractually in advance.

For entrepreneurs, this means that risk management is not solely a matter of strategy, logistics, or insurance, but also of careful contractual design. The contract is precisely the place where risk allocation can be defined and where the circumstances under which obligations may be suspended or adjusted can be specified. Doing so helps prevent disputes arising only after a geopolitical disruption as to who must bear the consequences.

Would you like to know whether your current agreements provide sufficient protection?

Please feel free to contact us without obligation. In a brief discussion, we can assess together which provisions may be missing and how they can be supplemented in a timely manner — ensuring that you have made a well-considered and legally robust policy choice.