The Impact of Force Majeure and Economic Sanctions on Engineering, Procurement, Construction and Financing (EPCF) Contracts - An Examination of Contractual Liabilities
Published 4 March 2019
In an Engineering, Procurement, Construction and Financing ("ECPF") contract, the client is often faced with challenging circumstances such as force majeure, in dealing with the Engineering, Procurement and Construction ("EPC") contractor on one side, and the financier, on the other. This paper examines the above relationships and investigates the impact of force majeure on contractual obligations. The main hypothesis is that any force majeure event occurring in the main EPCF contract has inevitable impacts on the financier's interest. Due to the hybrid nature of EPCF contracts - involving a combination of a service contract and an investment agreement - parties require certain mechanisms to reduce the risk of force majeure and instead maintain the contractual balance. Consequently, to improve the efficiency of EPCF as a contractual framework as currently practiced in the Iranian oil industry, there is significance in the exclusion of economic sanctions from the list of force majeure events in oil and gas contracts, alongside building technical joint management committees, and further stabilizing contracts using a variety of methods later explored in this study.