The Battlefield is 'Hormuz', the Strategy Room is 'Seoul'... Law Firms Expand Trade Advisory Services

Seeking Alternative Crude Oil Suppliers Outside the Middle East
Growing Number of Inquiries on Liability for Nonperformance of Contracts

Following the heightened tensions in the Strait of Hormuz due to the aftermath of the U.S.-Iran war and the emergence of trade issues, domestic law firms are expanding their advisory services to better meet the needs of corporate clients. As companies respond to disruptions in crude oil supply and the risks associated with sanctions, trade advisory work—which was previously focused on WTO disputes or FTA interpretations—is now expanding to encompass a broader range of industrial, policy, and strategic matters.

Recently, some domestic oil refiners and petrochemical companies have been consulting law firms to assess the possibility of importing crude oil and refined products from Venezuela or Russia, following the relaxation of U.S. sanctions. As it becomes more difficult to import crude oil and refined products from the Middle East, these companies are seeking alternative suppliers and are reviewing the permissible scope and transaction conditions. Law firms are advising clients on whether transactions can proceed without violating U.S. or EU sanctions against Russia and Venezuela, and whether there are any issues with transportation methods.

There has also been a steady stream of inquiries related to force majeure clauses. Energy importers must renegotiate supply contracts if suppliers such as Qatar declare force majeure. Law firms are receiving requests for advice on which party should bear additional costs arising from this process and the limits of liability. Companies that need to supply goods to their own customers while receiving supplies themselves may find themselves both invoking force majeure and defending against similar claims from their counterparties. Law firms are reviewing how specifically transportation routes and passages are stipulated in contracts and advising that, if transportation through the Strait of Hormuz is explicitly specified, a blockade could be considered grounds for exemption from liability.

Insurance risk is another area where law firm advisory demand is concentrated. As oil tankers and LNG carriers are large vessels transporting massive quantities, any accident can result in significant losses. Accordingly, law firms are frequently receiving inquiries from domestic trading companies, shipping companies, and shipowners regarding new contract terms, coverage limits, and the interpretation of specific clauses, even when transportation has not yet been interrupted.

Dongchan Shin (26th Judicial Research and Training Institute), an attorney at Yulchon LLC, stated, "As companies seek alternative crude oil supplies outside the Middle East, it is difficult to make blanket judgments, as the level and enforcement of sanctions by major countries such as the United States and Europe vary for each country." He added, "There is growing demand for advisory services that also examine regulations related to alternative supplier countries."

Recently, there has also been an increase in requests for advice regarding concerns about disruptions in crude oil imports due to the potential blockade of the Strait of Hormuz. In particular, law firms are receiving review requests from the refining and petrochemical industries on issues such as supply delays due to surging prices for naphtha—a key feedstock—liability for damages, and the need to re-examine contract language.

Yoonjung Park, a foreign attorney at Bae, Kim & Lee LLC and former in-house counsel at HMM, explained, "Recently, there have been many inquiries about additional cost burdens and liability for nonperformance of contracts due to difficulties in sourcing raw materials."

Meanwhile, the construction and plant industries are also showing increased interest in seeking legal advice from law firms, as they keep a close watch on the potential for future reconstruction projects in the Middle East.

Seoha Yeon, Legal Times Reporter

※This article is based on content supplied by Law Times.

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