Managing Cross-Border Contract Risk in 2026: Volatility, Compliance and Disputes

The interaction between policy developments and economic conditions is increasingly influencing cross-border commercial relationships. Supply chain disruption affects both goods and services, particularly when delays and shortages hinder the movement of inputs and finished products. The ECB Economic Bulletin distinguishes between supply-side bottlenecks and demand-side factors, noting that supply constraints are often industry-specific and produce uneven effects across markets. This was evident during the COVID-19 pandemic, when, according to the ECB, suppliers’ delivery times lengthened markedly, reflecting production constraints and capacity pressures.

Entering 2026, a combination of policy, regulatory, and operational volatility has reinforced these structural vulnerabilities. Commentary on global risk conditions, including the Conflicts to Watch in 2026: Preventive Priorities Survey Results (December 2025), highlights a concentration of risk factors with potential to affect major trade corridors and maritime routes. For commercial parties, the practical implications are increased uncertainty for logistics providers, insurers, and multinational enterprises, which may translate into higher freight costs, shipment re-routing, and extended delivery timelines—particularly for energy, semiconductors, and industrial inputs.

Beyond active conflict zones, regulatory and diplomatic shifts have further reshaped commercial relationships. In late 2025, several jurisdictions accelerated the implementation of strategic trade controls, foreign investment screening mechanisms, and sanctions-related compliance frameworks. While intended to enhance resilience, these adjustments have increased short-term costs and legal complexity, particularly for firms operating across multiple regulatory regimes.

Following the series of events in global politics at the onset of the new year 2026 and other conflict hotspots worldwide, political instability and heightened regulatory rigor are expected to further affect international commercial transactions. The ECB’s Economic Bulletin (Issue 8, 2025) highlights that disruptions to supply chains are likely to weigh on consumption and investment, increase the likelihood of tighter financing conditions, and elevate inflation risks. The ECB has signalled its continued reliance on macroprudential tools to mitigate the spillover effects of geopolitical uncertainty and sudden asset repricing, particularly where financial exposures are concentrated in trade-sensitive sectors.

Against this backdrop, commercial parties face an increased likelihood of contractual stress and dispute. What solutions or approaches, then, behoove close consideration in circumstances where disputes arise during these volatile times? As a general matter, commercial contracts remain subject to the law of obligations designated by the parties. The contours of the contract therefore guide its interpretation, scope, and legal effect. It is critical to scrutinise contractual representations and warranties, including whether standard terms applicable to the relevant industry are incorporated. By way of example, international construction and infrastructure projects frequently rely on FIDIC-based frameworks, which contain calibrated risk-allocation mechanisms for political and logistical disruptions.

Equally important is an assessment of whether contracts adequately address exigencies arising from political or trade volatility. Such protections may appear as force majeure clauses, hardship provisions, suspension rights, or impediment clauses tailored to regulatory or sanctions-related events. Force majeure clauses protect contracting parties where extraordinary or unforeseen circumstances beyond parties’ control affects performance of the contract. Generally, force majeure clauses require performance to be impossible or impractical, not simply commercially onerous, to relieve parties’ obligations.

Hardship clauses are also designed to address unforeseen events that affect the contractually agreed-upon performance. Generally, hardship clauses are intended to enable contracting parties to modify their obligations when unforeseen events occur. Therefore, whereas a force majeure clause relieves parties’ of their obligation to perform entirely, hardship clauses provide parties with the ability to modify their agreed obligations especially where circumstances make performance onerous.

Particularly against the background of political discursivity, commercial parties also utilise clauses protecting parties in the event of a change in any applicable law or legislation, as far as that change impacts parties’ obligation under contract. The purpose of such clauses is to mitigate risks of additional obligations and/or costs arising out of a change in the legal or regulatory framework under the applicable law.

Another, most common contractual provision is the clause on sanctions. Generally, such clauses require contracting parties to continue compliance with all applicable economic or trade laws, including sanctions, and provide for distinct consequences for any violations thereof. Key considerations in the scope and effect of such clauses are: the distinct regimes (in relation to sanctions) covered by the contract; the various types of restrictions within the scope of such sanctions regime; whether one or both parties have remedy under the clause; and the nature of such remedy.

Finally, as a practical matter, the trajectory of any dispute is shaped by the contract’s governing law and dispute resolution provisions—whether negotiated, bespoke or incorporated by reference. In an era where geopolitics increasingly intrudes upon commercial performance, careful contractual architecture and proactive risk management remain indispensable tools for navigating global supply chains at the start of 2026.

Editorial Note: Content on the HCLA and BE-NEXEL blogs is prepared by the HCLA team, its advisors, and external partners. It is provided for general information purposes only and does not constitute legal advice or represent any formal position of HCLA or BE-NEXEL. This piece reflects the collective work of the HCLA team. Ramya Ramachanderan (Legal Counsel) conducted relevant research and contributed to the article’s preparation.

BIBLIOGRAPHY / SOURCES

·         European Central Bank

- Economic Bulletin Issue 8, 2021 (available at https://www.ecb.europa.eu/press/economic-bulletin/html/eb202108.en.html)

- Economic Bulletin Issue 8, 2025 (available at https://www.ecb.europa.eu/press/economic-bulletin/html/eb202508.en.html#toc2)

·         European Investment Bank

- Navigating supply chain disruptions – New insights into the resilience and transformation of EU firms (2024) available at https://www.eib.org/files/publications/20240179_navigating_supply_chain_disruptions_en.pdf

·         Reed Smith Client Alert, Key sanctions cases and trends in England: Is your sanctions clause robust? (22 April 2024) https://www.reedsmith.com/articles/key-sanctions-cases-and-trends-in-england/

·         Pinsent Masons Out-Law Guide, Variations to contracts and changes in the law (1 August 2016) https://www.pinsentmasons.com/out-law/guides/variations-to-contracts-and-changes-in-the-law

·         Lorenz & Partners, NL119 Comparison of Commonly Used Force Majeure and Hardship Clauses in International Contracts https://www.lorenz-partners.com/hardship-clauses/

·         Venable LLP Insights, Understanding Force Majeure Clauses (February 2011), https://www.venable.com/insights/publications/2011/02/understanding-force-majeure-clauses