Adaptation of Long-Term Contracts by International Arbitrators in the Face of Severe Economic Disruptions: Three Salient Problems

Abstract

For many decades, international arbitrators have gone beyond deciding traditional legal disputes and have been involved in the adaptation of long-term contracts. These contracts are particularly vulnerable to extreme and unforeseen changes of economic circumstances such as those caused by the consequences of the Coronavirus Disease 2019 (COVID-19) pandemic. However, doubts have always been raised as to whether, how, and to what extent international arbitrators may interfere with the parties’ contractual bargain. In dealing with these concerns, this article explores three essential issues. They relate to the procedural authority for and the substantive legitimacy of the tribunal’s adaptation decision, as well as to the search for adaptation standards, which ensure outcomes of contract adaptations by international arbitral tribunals that make business sense. Covid-19 pandemic, contract adaptation, gap filling, long-term contracts, hardship, force majeure, notion of ‘dispute’, good faith, ex aequo et bono.