On 2 April, 2025, U.S. President Donald Trump announced sweeping tariffs on imports, including a universal 10% tariff and sharply higher "reciprocal" tariffs targeting over 60 nations, including Switzerland. Intended to address trade imbalances, these measures have triggered significant disruptions in global trade and heightened economic uncertainty. Businesses reliant on international supply chains face increased costs, operational strain, and potential legal disputes.
Legal Ramifications
The immediate effect of these tariffs was a surge in financial
market volatility, followed by a temporary improvement in economic
sentiment after reciprocal tariffs were reduced to 10% for most
countries during a 90-day pause (excluding China). However,
uncertainty persists as nations scramble to negotiate trade deals
with the U.S. The tariffs are likely to spark a wave of contractual
disputes as companies struggle to adapt to the new economic
reality. Legal questions will center on whether parties can be
excused from performance or obtain relief under various doctrines
and contractual provisions:
Force Majeure: Many
international trade contracts contain force majeure clauses. These
clauses may excuse non-performance if tariffs qualify as
unforeseeable government actions. However, their applicability
depends on the precise language used in the contract. For instance,
contracts explicitly listing "government orders" or
"import/export restrictions" as force majeure events are
more likely to provide relief. What relief might be available under
a contractual force majeure clause will also depend on whether the
clause in question is interpreted to require that the event renders
performance impossible rather than merely uneconomic, which in
practice is often the case. Where a contract does not contain a
force majeure clause, some laws, including Swiss law, may
nonetheless provide relief under the concept of force majeure.
Whether tariffs fall within the usually narrow interpretation of
force majeure under the governing law will need to be determined in
each individual case.
Hardship Clauses: Contracts containing hardship
provisions may allow renegotiation if tariffs fundamentally alter
the economic balance of the agreement. Such clauses often require
good faith negotiations to restore equilibrium and may permit
arbitration if no resolution is reached.
Clausula Rebus Sic Stantibus: This
doctrine allows for the modification or termination of contracts
when a fundamental change in circumstances renders performance
grossly unfair or impractical. It applies only when the original
circumstances were objectively essential to the contract and have
substantially changed. Under Swiss law, this principle may be
invoked in long-term contracts where unforeseen events, which may
include steep tariffs, create a substantial economic imbalance.
However, courts and arbitral tribunals will carefully assess
whether the change was unforeseeable, unavoidable, and beyond
normal business risks, as well as whether the contract contains
provisions assigning such risk to any of the parties.
Impossibility to Perform: Swiss law recognizes
impossibility under Article 119 of the Swiss Code of Obligations.
If performance becomes permanently impossible due to unforeseen
circumstances beyond a party's control, such as prohibitive
tariffs, the affected party is excused from its obligations without
liability for damages. However, temporary impossibility or mere
commercial impracticality will usually not suffice; parties must
prove that performance is fundamentally unachievable.
Conclusion
Current tariff policies are set to increase arbitration and
litigation globally as businesses will be seeking remedies for
disrupted operations and investments. Each dispute will require
careful analysis of contractual provisions and governing law to
determine whether relief is available. Companies should proactively
review contracts to mitigate risks in this volatile
environment.
In addition to reviewing their contracts, it is essential for
businesses to determine which party is responsible under their
agreements for paying tariffs. This will ultimately depend on the
agreed terms (e.g., INCOTERMS). Furthermore, parties are advised to
keep diligent records of all communications and transactions
related to tariff impacts, be mindful of any duties to mitigate
losses, and ensure that all contractual and legal rights are
preserved and properly exercised.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
