In international trade, unexpected events such as wars, natural disasters, or system failures can interrupt banking operations and delay payments or document processing. To address such risks, Article 36 of UCP 600 provides clear guidance — protecting banks from liability when external forces prevent them from fulfilling their obligations.
👉 Article 36 states that banks assume no responsibility for consequences arising from interruptions of their business due to force majeure events — such as acts of God, riots, civil commotions, insurrections, wars, terrorism, or any causes beyond their control.
This means if banks cannot perform LC-related actions because of extraordinary circumstances, they are exempt from liability during the period of disruption.
📖 What Does Article 36 of UCP 600 Say?
1️⃣ Definition of Force Majeure
Force majeure refers to unforeseen, uncontrollable events that disrupt normal banking operations. Examples include:
- Natural disasters (earthquakes, floods, storms)
- Political instability (war, civil unrest, terrorism)
- Strikes or riots
- Power or communication failures
- Systemic breakdowns beyond the bank’s control
When such events occur, banks may suspend or delay their operations without being held liable for the consequences.
2️⃣ Suspension of Banking Obligations
If a bank’s operations are interrupted due to force majeure, it is not obligated to perform actions such as:
- Examining documents
- Issuing or amending credits
- Making or confirming payments
- Accepting or negotiating drafts
Once normal operations resume, banks will proceed with pending tasks according to standard rules, but they are not responsible for any loss or damage resulting from the delay.
3️⃣ Expiry of Credits During Interruption
If a Letter of Credit expires during the period of interruption, the bank has no obligation to extend it or accept presentations made after the expiry date.
The beneficiary must wait until the bank resumes operations or seek an alternative arrangement if possible.
🔎 Breaking Down Article 36
💡 Why This Matters
Article 36 protects banks from legal or financial liability when extraordinary events disrupt business continuity. It recognizes that certain risks lie beyond human control and ensures that banks are not unfairly penalized for circumstances they cannot influence.
This clause maintains fairness in international trade and provides legal clarity in unpredictable situations.
🚢 Exporter’s Responsibility
✔ Monitor geopolitical and environmental conditions in the country of the issuing or confirming bank.
✔ Be aware that if the bank is closed due to force majeure, payment may be delayed.
✔ Keep communication open with the applicant and banks for updates once operations resume.
🏦 Importer’s Responsibility
✔ Understand that payments or document releases may be delayed if the issuing or advising bank faces a force majeure situation.
✔ Consider including contingency terms in contracts for alternative payment or shipment arrangements during disruptions.
🏛 Bank’s Role
Banks must:
✔ Act in accordance with standard banking practice until disruption occurs.
✔ Suspend operations when necessary for safety or legal reasons.
✔ Resume normal operations promptly once conditions allow.
✔ Not bear responsibility for losses resulting from events beyond their control.
Banks are expected to act in good faith and maintain transparency with clients when such situations arise.
🌍 Practical Trade Examples
Scenario 1: Natural Disaster (Bank Not Liable)
A major flood disrupts operations of the issuing bank for ten days. During this period, the LC expires.
✔ Under Article 36, the bank is not obligated to extend or honor the LC after expiry, as the delay was caused by a natural disaster.
Scenario 2: Political Unrest (Bank Not Liable)
A beneficiary presents documents on time, but a sudden civil conflict causes the confirming bank to shut down temporarily.
✔ The bank bears no responsibility for delayed payment since the interruption resulted from force majeure.
Scenario 3: System Failure (Bank Not Liable)
Due to a nationwide internet outage, the issuing bank cannot receive documents electronically before the LC expiry.
✔ Under Article 36, the bank is not liable for missing the deadline, as the failure was beyond its control.
✅ Why Article 36 Matters
- Provides legal protection to banks in the event of uncontrollable disruptions.
- Clarifies that banking obligations are suspended, not cancelled, during force majeure.
- Reminds trading parties to consider external risks when structuring their contracts.
- Reinforces the neutral and documentary nature of banking responsibilities under UCP 600.
✍️ Final Thoughts
Article 36 of UCP 600 — the Force Majeure Clause — acts as a shield for banks when unforeseen events halt normal operations. It clearly limits banks’ liabilities to circumstances within their control and suspends their obligations during periods of disruption.
For exporters and importers, this serves as a reminder to plan ahead, include contingency clauses in trade contracts, and maintain open communication channels.
Ultimately, Article 36 ensures that international trade remains fair and legally balanced — even in the face of nature, conflict, or crisis.