Pakistan - Chapter 11 - Force Majeure and Hardship in the Asia-Pacific Region
Rana Sajjad is a dual-qualified Lawyer (licensed in New York and Pakistan) having over 15 years’ experience of practicing law in Pakistan and the U.S. in practice areas including contracts, cross-border transactions, commercial litigation and domestic and international arbitration. Mr. Sajjad is a Partner at the Lahore-based law firm of Rana Ijaz & Partners and the Founder & President of the Center for International Investment and Commercial Arbitration (CIICA), Pakistan’s first international arbitration center. He is a Fellow of the Chartered Institute of Arbitrators (CIArb) and an accredited mediator of the Singapore International Mediation Institute (SIMI).
Originally from Force Majeure and Hardship in the Asia-Pacific Region
I. Force majeure
A. Background and definition of force majeure in Pakistan
1. Does Pakistan recognize force majeure or any other legal concept similar to force majeure such as frustration, etc. (in the following: “force majeure”)? Are there any statutory provisions or is there any case law setting forth the definition of force majeure?
Although there is no statutory definition of force majeure in Pakistan, courts in Pakistan have defined force majeure in certain judgments. For instance, the Islamabad High Court discussed the doctrine of force majeure a few years ago in Atlas Cables (Pvt.) Limited vs. Islamabad Electric Supply Company Limited
In this case, one of the issues was whether an unexpected price hike in the aluminum market constituted force majeure under the terms of the agreement/purchase order between the parties. The party invoking the force majeure clause argued that it was unable to import and supply the cable to the other party due to the high rates which would render the transaction financially unviable. The court referred to and defined the term, “force majeure”, as an event “that absolves a
party from liability for the non-performance of a contract due to a supervening impossibility”. The court held that “a change in economic/market circumstances affecting the profitability of a contract or the ease with which parties’ obligations can be performed, is not a force majeure event.”
Contracts which typically contain force majeure clauses are construction contracts, contracts for supply of services and/or shipping agreement.
A couple of other High Courts, specifically the Lahore High Court and the Sindh High Court, have also passed judgments on the issue of force majeure. In Anjuman-e-Mustareen Khshatkaran Ravi River v Province of Punjab one of the issues decided by the Lahore High Court was whether embankments constructed on a river that had diverted the water and caused heavy flooding and damage was a force majeure event that fell under the category of an Act of God. The court held that “it is beyond human power to control tides and heavy floods’ and that “no one can claim damages caused due to force majeure”.
Another judgment was passed by the Sindh High Court in Sadat Business Group Ltd v Federation of Pakistan. The case involved an agreement for supply of sugar in which the supply was delayed due to heavy rainfall. The court held that “where reference is made to ‘force majeure’, the intention is to save the performing party from the consequences of anything over which he has no control.”
2. What events have been recognized as force majeure events by the courts in Pakistan to date?
Heavy flooding and consequent damage were recognized as a force majeure event in Anjuman-e-Mustareen Khshatkaran Ravi River v Province of Punjab. The court held that embankments constructed on a river that had diverted the water that caused heavy flooding was a force majeure event.