In contracts commonly used, including in our industry, it is customary to include clauses that provide a definition of the concept of “force majeure” and therefore specify the “extraordinary and unpredictable” events upon the occurrence of which breach of contract is to be charged to the defaulting party. Besides atmospheric events, earthquakes, fires, wars and uprisings, strike is among the events commonly listed. Nonetheless, one question must be asked: does a strike really always exempt the defaulting party from contractual liability?
In the Italian legal system, there is no statutory definition of force majeure. Nevertheless, the concept is used in numerous statutory provisions such as the Navigation Code (e.g. Articles 482, 532, 947, 968 and 1012) and the Civil Code (e.g. Articles 132 and 1785). In order to determine which event can be considered as a “force majeure event” and which cannot, reference must be made to case law.
Italian courts have construed the concept of force majeure in the sense of not ascribing liability for non-performance to the defaulting party. In such perspective, the event that prevents due performance of the contractual obligation must be, on one hand, “extraordinary” and, on the other, “unpredictable”:
It is easy to understand that especially the concept of predictability can significantly vary, depending on the transaction to be carried out and the relevant factual circumstances. It is therefore highly advisable to always include specific clauses in the contracts, whereby – having regard to the specific context and transaction – the parties can duly define the context and specify the (extraordinary and unpredictable) events upon the occurrence of which no contractual liability shall arise on the part of the defaulting party.
In our industry – where compliance with service levels and especially timely performance is a primary concern – the contractual definitions of “force majeure” normally include both acts of God (such as fires, floods, earthquakes, inundations, sea storms, washing out, exceptional weather and sea conditions as well as epidemics and quarantines) and human acts (such as wars, riots, uprisings, governmental acts and strikes).
Although standard contractual definitions usually include strikes, it must be borne in mind that strike cannot always be considered as a “force majeure event”. In case law, a distinction is indeed made based on whether a strike is (i) an instrument of trade union pressure in phases of ordinary conflict on the workplace or (ii) is completely aloof from the business reality in which the strike is called.
If the strike concerns the workforce of the port operator (who subsequently failed to meet its obligations) and represents a form of pressure in a specific situation of the company life, such as, by way of example, second tier of negotiations for the renewal of collective bargaining agreements or collective redundancies, it cannot be considered unpredictable and therefore does not fall within the legal concept of “force majeure”. In such a case, the port operator will remain liable for the non-performance or delayed performance of the contractual obligations resulting from the call of the strike.
On the other hand, if the strike preventing the proper fulfilment of contractual obligations has been called at other operators and their workers hinder the regular performance of port operations, if the strike is called for “solidarity” with employees of other companies or if it is a political strike, i.e. a reaction to announced statutory reforms, said initiative is completely disconnected from the company’s circumstances and is therefore objectively outside the operator's sphere of control. In such a case, the strike can legitimately be considered as a “force majeure event”.
So, in the event of strikes, Courts will have to carry out their assessment on a case-by-case basis, investigating, in particular, the reasons behind the initiative and the actual behavior of the parties during the conflict.
A recent ruling of the European Court of Justice (judgement of 23 March 2021 in case C-28/20) followed a similar line of reasoning to that of the Italian Courts, outlined above. In the case examined by the Court (with regard to the aviation industry), a strike had been organized by the workforce in order to secure pay increases and was therefore inherent in the ordinary conflict of the employment relationship.
The Court explained that a strike aimed at obtaining pay increases or, in general, changes in working conditions does not exempt the employer from its contractual liability towards third parties. Indeed, according to the Court, the event is an integral part of the entrepreneurial risk and the conflict could well be managed differently by the operator, thus avoiding confrontation and the legitimate exercise of the right to strike by the workforce. Therefore, there is no “exceptional circumstance” exempting the employer from liability to its principals on account of non-service. Possible inefficiencies resulting from the strike are therefore fully part of the operator’s entrepreneurial risk and consequently the operator cannot invoke the strike as a “force majeure event”, but remains fully liable for the non-performance or delayed performance of its contractual obligations.
This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Ulrich Eller.
