How The LNG Crisis Has Reshaped Force Majeure  

The LNG sector has become one of the most significant testing grounds for force majeure (“FM”) provisions over the last decade.

A combination of events, including the COVID-19 pandemic, sanctions against Russia and others, supply chain disruption, and energy security concerns following the invasion of Ukraine, have combined to generate an unprecedented number of FM notices, arbitrations and court decisions.

While relatively few LNG disputes have resulted in publicly reported judgments (many being resolved confidentially), the sector has nonetheless materially influenced how force majeure clauses are drafted, interpreted and eventually litigated under English law.

Traditional principles of Force Majeure

Under English law, there is no freestanding doctrine of force majeure. Relief depends entirely on the wording set out in the relevant contract. A party seeking to rely upon FM must generally establish that:

1. An event within the FM definition occurred;
2. The event was beyond that party’s reasonable control;
3. The event caused the inability to perform;
4. The effects could not reasonably be avoided or overcome;
5. Notice requirements were satisfied.

Historically, English courts have interpreted FM clauses narrowly, particularly in commodity and shipping contracts. Mere economic hardship, increased costs, or an unfavourable market generally cannot amount to force majeure unless expressly provided.

COVID-19 and the 2020 LNG Force Majeure wave

The first major modern LNG FM crisis emerged during COVID-19. In February 2020, China’s largest LNG importer, CNOOC, issued force majeure notices to several LNG suppliers, citing the inability to receive cargoes because of lockdowns, labour shortages and logistical disruption. This was one of the first high-profile attempts by an LNG buyer to invoke FM due to pandemic-related demand destruction.

Other Chinese buyers, including PetroChina, also issued notices or sought contractual accommodation. However, many LNG sellers resisted these claims, arguing that reduced demand and poor economics did not amount to legal impossibility of performance. Several disputes were resolved commercially rather than through litigation.

The pandemic highlighted a critical distinction:

• Physical inability to perform may trigger FM.
• Loss of demand or adverse economics generally will not.

Consequently, many lawyers concluded that COVID-related FM claims would succeed only where government restrictions or operational barriers directly prevented performance, rather than merely making performance undesirable or unprofitable.

Why causation remains critical in force majeure claims

One of the most important force majeure decisions of the last decade, although not specifically an LNG case, was Classic Maritime Inc v Limbungan Makmur (Court of Appeal, 2019). The case concerned a dam collapse in Brazil which disrupted iron ore exports. The Court held that a party relying on a force majeure-type clause had to demonstrate that the FM event actually caused the non-performance and that it would otherwise have been willing and able to perform. The event could not simply provide a convenient excuse for an existing inability or unwillingness to perform.

This decision has had significant influence on LNG disputes because many LNG buyers and sellers attempted to rely on COVID, sanctions or supply disruptions while simultaneously facing independent commercial difficulties. The case reinforced that English law insists on genuine causative effect.

How sanctions, conflict, and the Ukraine energy crisis have affected force majeure claims

The second major LNG-related FM wave followed Russia’s invasion of Ukraine in February 2022 and, more recently, conflict involving Iran, leading to disruption to shipping through the Strait of Hormuz, a critical route for global LNG supplies.

The Russian sanctions regime created numerous contractual disputes involving shipping, financing, payment systems and commodity supply chains. LNG participants were forced to examine whether sanctions, banking restrictions and government interventions constituted force majeure events.

A key feature of these disputes was that performance was often still technically possible but became legally or operationally difficult. This moved the debate away from physical impossibility and toward questions of risk allocation and contractual interpretation. Many LNG contracts were amended after 2022 to include detailed sanctions clauses rather than relying solely on traditional FM drafting.

Disruption to shipping through the Straits of Hormuz, and the consequent impact to LNG supplies from the Middle East, has in addition had a catastrophic effect on LNG delivery worldwide. Together with the Russian sanctions regime, these events highlighted the vulnerability of international LNG supply chains and prompted parties to review whether their force majeure and sanctions provisions adequately addressed geopolitical risk.

MUR Shipping v RTI

The most significant English FM decision is the Supreme Court decision in MUR Shipping BV v RTI Ltd from 2024. The Supreme Court held that a party is generally not required to accept non-contractual performance merely because it would achieve substantially the same result. The court strongly emphasised:

• freedom of contract;
• contractual certainty; and
• preservation of the parties’ agreed bargain.

For LNG contracts, this is extremely important. LNG sellers or buyers invoking FM are not normally required to accept alternative cargo nominations, payment currencies, destinations or delivery arrangements unless the contract expressly requires such flexibility.

How LNG force majeure clauses are evolving

The principal five drafting developments can be summarised as follows:

1. Draft precisely

Older LNG SPAs often used relatively generic FM definitions. Modern LNG contracts increasingly contain highly detailed provisions dealing specifically with:

• pandemics and epidemics;
• sanctions;
• wars and other military action;
• cyber events;
• port or access closures;
• vessel unavailability;
• supply chain disruptions; and
• governmental interventions.

2. You will struggle to draft in economic hardship

Despite extreme LNG price volatility during both COVID and the Ukraine crisis, English law has remained resistant to treating economic hardship as force majeure. A bad bargain, even a very bad bargain, generally remains a commercial risk rather than an FM event.

3. Pay close attention to causation

The influence of cases such as Classic Maritime has reinforced that parties must prove the FM event genuinely caused non-performance. Opportunistic reliance on market conditions is unlikely to succeed.

4. Emphasise mitigation

Modern tribunals scrutinise whether reasonable steps were taken to overcome the disruption. However, following MUR Shipping, those steps do not generally require acceptance of performance fundamentally different from the contractual bargain.

5. Separate FM and sanctions risk

Following 2022, sophisticated LNG contracts increasingly address sanctions as a standalone regime. Parties are relying less on general FM clauses and more on bespoke sanctions and compliance provisions.

What does this mean for the LNG marketplace?

The recent wave of force majeure disputes demonstrates that contractual wording matters more than ever. In a market shaped by geopolitical instability, sanctions, supply chain disruption and energy security concerns, parties can no longer assume that standard FM wording will provide adequate protection when disruption occurs.

For LNG buyers, the key question is whether existing contracts properly address sanctions, government intervention, port restrictions and other events that may affect the ability to receive, process or utilise LNG. Just as importantly, businesses should ensure they can comply with notice requirements and evidence the impact of any disruption should an FM claim arise.

For LNG sellers, recent disputes underline the importance of clearly defining the circumstances in which performance may be suspended or excused. Sellers should consider whether force majeure provisions adequately address supply chain disruption, vessel availability, sanctions exposure and other operational risks that could affect performance.

More broadly, recent events have accelerated a shift away from generic FM clauses towards more sophisticated contractual risk allocation. Many LNG contracts now address sanctions, geopolitical events and regulatory restrictions through dedicated provisions designed to provide greater certainty and reduce the risk of disputes.

In short, successful reliance on FM increasingly depends on preparation rather than reaction. Regularly reviewing force majeure and sanctions provisions can help ensure contracts remain aligned with the realities of a rapidly changing global LNG market.

This content is provided for general informational purposes only and does not constitute legal advice. It is not intended to address the circumstances of any individual or entity, nor should it be relied upon as a substitute for specific advice from a qualified solicitor. The information reflects the legal position as at the date specified and may be subject to change. If you require advice on a specific matter, please contact us directly.