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Power outages and force majeure

In respect to the irregular and inconsistent power outages in Jiangsu and other provinces, and whether it amounts to a force majeure event, we can report the following.

Is a force majeure clause applicable to the rolling blackouts in Jiangsu?

The rolling blackouts in Jiangsu are due to government orders to enable the province meet the energy usage limits set by the central government. Courts are likely to look at the blackouts and how they hinder production of the factory in two ways (1) was it foreseeable and (2) could mitigating measures be applied by companies affected.

In the current situation, where there is little or no communication from the local authorities before the reduced power periods there is a strong argument for force majeure, as the event was unforeseeable. However, for contracts that are signed now, and for the remainder of the year, as we are aware that there is likely to be rolling blackouts in the last quarter, our comment is that a force majeure argument would be difficult to support for future contracts, and that companies will need to take mitigating measures.

Should the local authorities start to provide specific advanced notice of times of reduced power or similar criteria for the remainder of the year, courts are unlikely to support an argument of Force Majeure, as the event is required to be unexpected or unpredictable.

A force majeure clause will normally specify that the party which is seeking the relief to prove that the event could not have been mitigated by preventative action. This demonstrates the point force majeure may only be invoked when the event has prevented performance of the contract, not simply that the event has caused economic hardship or that performance has become difficult or commercially undesirable.


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