The impact of armed conflicts on commercial disputes

Tiwalade Aderoju 
Olympus Solicitors and Advocates, Lagos
tiwaade@ymail.com

Armed conflict is a pervasive reality of human existence, whether between sovereign states or among countrymen. Between states, the profound reality is that diplomacy often fails, resulting in the eruption of international armed conflicts. An example is the Russia-Ukraine war, one of the deadliest wars on the European continent, resulting in thousands of deaths with millions without access to food, water and other essential supplies. Another example is the Israeli-Palestinian conflict, a long-standing conflict between both states over territory, resources and recognition. On the national level between compatriots, non-international armed conflicts (NIACs) are particularly rife with more than 110 armed conflicts involving at least 55 states and over 70 armed non-state actors ongoing presently. [1]

It is clear that whether international or non-international, armed conflicts result in the devasting loss of civilian lives, gross violations of human rights as well as massive displacements. The impact of armed conflicts also extends beyond these to also include influence on business and more significantly commercial disputes and the response to them. To put it simply, armed conflicts destabilise societies creating a fertile ground for legal disputes among businesses. Even more, these armed conflicts also disrupt the normal functioning of legal systems, making the resolution of commercial disputes difficult, and sometimes impossible.

Types of disputes arising from armed conflicts

As highlighted above, armed conflicts, whether international or domestic, usually leave behind consequences that extend beyond the battlefield, affecting businesses and leading to commercial disputes and how people respond to them. To begin with, one of the most common type of commercial dispute arising from armed conflicts involves property rights. The mass displacement of populations, destruction of infrastructure, and the appropriation of land and resources often result in contentious legal battles over ownership and control. Displaced individuals are often engaged in disputes over their abandoned homes or lands seized by armed groups. Additionally, the destruction of property raises questions of compensation and restitution, further complicating matters for those affected.

Armed conflicts also give rise to issues related to international trade and investment. Cross-border transactions become fraught with uncertainty as trade routes are disrupted, borders closed, and economic sanctions imposed. Disputes over trade agreements, tariffs, and customs regulations usually escalate, impacting the flow of goods and services and exacerbating economic instability in conflict-affected regions. For instance, the Russia-Ukraine war reduced imports from Ukraine by 47.3 per cent between February and August 2022 with Ukraine also losing around US$19.4 billion in exports.  In the first year of the conflict, Ukraine lost 30-35 per cent of its GDP with the country also experiencing one of the largest recessions in its history.  Disputes over foreign investments, such as expropriation or nationalisation of assets, become more prevalent, deterring foreign businesses and investors from engaging in commerce in conflict zones.

Another category of commercial disputes emerging from armed conflicts pertains to insurance and risk management. Businesses operating in conflict zones often rely on insurance policies to mitigate risks associated with property damage, business interruption, and political instability. However, insurers may dispute claims or deny coverage based on war clauses or force majeure provisions, leaving policyholders without adequate protection. Similarly, the assessment of risks and premiums becomes more challenging, leading to disputes over the terms and conditions of insurance contracts.

Access to courts and judicial process during armed conflicts

Armed conflicts also impact efforts to resolve commercial disputes, which includes access to courts. One of the most significant impediments to accessing courts during armed conflicts, is the breakdown of legal infrastructure. Courts may be damaged or destroyed, legal professionals displaced or incapacitated, and essential legal documents are lost or become inaccessible. As a result, the formal judicial process grinds to a halt, leaving parties to commercial disputes without avenues for resolution.

The type and severity of armed conflict plays a critical role in obtaining access to the courts and the judicial process. In protracted conflicts characterised by widespread violence and displacement, access to the courts can, for many, be nigh on impossible. Legal professionals and members of the judiciary are targeted by belligerent parties, which further compounds the problems.  

Despite these challenges, efforts can be made to enhance access to courts and the judicial process for resolving commercial disputes. For one, specialised courts and tribunals, including those established to address war crimes and human rights violations, may play a role in adjudicating commercial disputes within the broader context of conflict resolution and transitional justice. Furthermore, innovations in technology, such as online dispute resolution platforms and mobile courts, hold promise for expanding access to justice in conflict zones. These technologies can facilitate remote hearings, electronic filing of documents, and alternative dispute resolution mechanisms, overcoming geographical barriers and security risks associated with attending court in person. 

The role of lawyers in and/or at war

Lawyers play a crucial role in commercial transactions, whether in negotiating deal terms and drafting transaction documentation between the parties at the commencement of commercial engagements or addressing commercial disputes when the business relationship goes south. The importance of lawyers is further highlighted during armed conflicts. One of the primary roles of lawyers in conflict zones is to provide legal counsel and representation to businesses and individuals embroiled in commercial disputes. Whether it's negotiating contracts, resolving disputes through mediation or arbitration, or litigating cases in court, lawyers serve as trusted advisors and advocates for their clients, helping them navigate the legal complexities and uncertainties of conflict-affected environments.

Lawyers play a critical role in upholding the rule of law and promoting access to justice in conflict zones. By defending the rights of their clients and advocating for fair and impartial judicial processes, lawyers contribute to the preservation of fundamental legal principles amidst the chaos of war. They challenge arbitrary decisions, advocate for due process, and hold accountable those who seek to exploit the vulnerabilities of conflict-affected populations for their own gain. In doing so, lawyers serve as guardians of justice, ensuring that the rights of individuals and businesses are upheld even in the most challenging of circumstances.

However, the role of lawyers in conflict zones is not without its challenges and risks. Operating in environments marked by violence, insecurity, and political instability, lawyers face threats to their personal safety, harassment, intimidation, and even targeted attacks; particularly those who seek to uphold and protect human rights. Furthermore, the scarcity of resources, including legal expertise, funding, and infrastructure, poses significant challenges to lawyers operating in conflict zones. Limited access to legal education and training, coupled with the destruction of legal infrastructure, hampers the ability of lawyers to effectively represent their clients and navigate the complexities of commercial disputes. 

Effects of armed conflicts on cross-border litigation and commercial transactions

Armed conflicts significantly disrupt cross-border litigation and commercial transactions, creating challenges for businesses, legal systems, and international stakeholders alike. One immediate effect of armed conflicts on cross-border litigation is the disruption of legal proceedings and the enforcement of judgments. Conflict zones often lack the necessary legal infrastructure and judicial mechanisms to facilitate cross-border litigation, making it difficult for parties to resolve disputes that span multiple jurisdictions. Court closures, logistical challenges, and security risks further exacerbate these impediments, delaying or derailing cross-border litigation proceedings and leaving parties without recourse.

Another significant effect is the proliferation of legal and regulatory risks. Legal frameworks may be unstable or subject to frequent changes, making it difficult for businesses to navigate the regulatory landscape and comply with international laws and standards. The displacement of populations and businesses can lead to challenges related to jurisdictional issues, choice of law, and the recognition and enforcement of foreign judgments. Businesses may find themselves caught in legal limbo, unsure of which legal jurisdiction governs their transactions and disputes, and face obstacles in accessing legal assistance and representation across borders.

There is also a profound economic effect on cross-border transactions, leading to disruptions in supply chains, increased costs, and market volatility. The uncertainty and instability associated with conflict environments deter foreign investment and trade, leading to a decline in cross-border commercial transactions and a contraction of global markets. The destruction of infrastructure, including ports, roads, and transportation networks, hampers the movement of goods and services across borders, further impeding international trade. In response to these challenges businesses and legal practitioners are increasingly turning to alternative dispute resolution mechanisms and risk mitigation strategies as well as the use of technologies; in view of the fact alternative dispute mechanisms also encompass online dispute resolution.

Conclusion

In conclusion, armed conflicts significantly impact businesses and commercial disputes, leaving a trail of disruption, uncertainty, and hardship in their wake. From the breakdown of legal infrastructure and access to courts to the proliferation of cross-border litigation and regulatory risks, armed conflicts pose formidable challenges for businesses, legal systems, and international stakeholders alike. However, amidst the chaos and complexity of conflict, there also exists opportunity – opportunity to innovate, to adapt, and to rebuild stronger and more resilient legal and economic systems. 
 

[1]  Geneva Academy, Today’s Armed Conflicts. Available at: https://geneva-academy.ch/galleries/today-s-armed-conflicts 
[2]  Sandro Steinbach, ‘The Russia-Ukraine War and Global Trade Reallocations’ Economic Letters (2023) 224, 111075
[3] Michelle Kilfoyle, Ukraine: what’s the global economic impact of Russia’s invasion? (24 October 2023) Available at: https://www.economicsobservatory.com/ukraine-whats-the-global-economic-impact-of-russias-invasion#:~:text=Ukraine's%20economic%20output%20is%20now,%2C%20if%20only%20by%200.5%25.