Report from Italy: The Gulf Crisis and Contracts under Execution* – Vol. 2 No. 1

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AuthorsDr. Giuseppe Salvini** and Dr. Cesare Vacca***

Published: March 1991

Commercial Disputes

Description: As events were unfolding in the Middle East over the past year, Milan was the site of two important conferences assessing the impact of the Gulf crisis on the execution of commercial contracts. The conferences were co-sponsored by ISDACI (the Milan Institute), which promotes the development of arbitration culture and scholarship on international trade law, and the Milan International Arbitration Chamber.

The first of the conferences took place on October 22, 1990, and brought together some of Italy’s best-known experts on international trade and arbitration. These included Professor Giorgio Bernini, Professor Michael Joachim Bonell, Professor Sergio Maria Carbone, Professor Antonio Crivellaro, Professor Ugo Draetta, Professor Francesco Galgano, Professor Luigi Ferrarri Bravo, Ambassador Gianfranco Varvesi, and Mr. Franzo Grande Stevens, who is the former president of the Italian Bar Association, as well as a number of business people and professionals.

At that time, all commercial relations with Kuwait and Iraq had been discontinued under the embargo enacted by the United Nations Security Council. The questions then arising from the business community concerned the consequences of this so-called “freeze” on the performance of existing contracts.

While no one doubted the legal impossibility of dealing directly with Iraqi or Kuwaiti parties after August 2, 1990, the participants in the October workshop debated the nature of such impossibility, which lay in a grey area between frustration and force majeur. The speakers also emphasized the close link between international public policy principles — i.e. l’ordre public, embodied in this case in the security council resolution — and domestic embargo statutes. Business and professional people discussed their own experiences, raising a number of more practical considerations. The embargo, they said, had significantly affected sub-contracting relations, and the delegates’ most pressing question dealt with the claims of sub-contractors against main contractors. The number of sub-contractors involved in projects in Iraq and Kuwait was, of course, larger than that of main contractors. In addition, many sub-contractors had signed contracts without realizing that the main contracts were to be performed in Iraq or Kuwait (or involved an Iraqi or Kuwaiti party).

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*Current Developments
**Officer of ISDACI, the International Institute for the Study of International Trade Law and Arbitration.
***ISDACI Legal Advisor, Boccani University, Milan.