Wars, Oil Shocks, and Contracts: How Chilean Arbitral Tribunals Handle Hardship

Geopolitical shocks — oil price spikes, trade route disruptions, sanctions regimes — do not respect contractual deadlines. When the cost of performing a contract doubles overnight due to events no party anticipated, the question is universal: can the affected party seek revision of the contract, or must it perform and absorb the loss?

In jurisdictions with codified hardship regimes — France since 2016, Germany, the UNIDROIT Principles — the answer is relatively settled. In Chile, it is not. The Civil Code contains no express provision on imprevisión. Yet Chilean arbitral tribunals have been forced to confront the question, and their recent decisions offer a body of doctrine that should be relevant for international practitioners.

Normal Risk Versus Catastrophic Risk

The most important conceptual contribution came from Chile’s Concession Arbitral Commission in Sociedad Concesionaria Nuevo Pudahuel S.A. v. Ministry of Public Works (Concession Arbitral Commission, award of May 15, 2024). The concessionaire of Santiago’s international airport had invested approximately USD 1 billion under a 20-year concession built on projected annual passenger growth of 2.9% to 8.35%. Then COVID-19 hit: traffic fell 81% in twelve months, losses reached USD 453 million in a single year, and the concessionaire entered technical insolvency.

The Commission drew a distinction with implications beyond concession law: between the alea normal of a contract — the market risks inherent to the industry that a party can reasonably be expected to absorb — and the alea anormal — catastrophic, unforeseeable disruptions that exceed any reasonable allocation. The pandemic, the Commission held, was alea anormal and declared that the contractual equilibrium had been destroyed and ordered the State to negotiate in good faith, within six months, a revision of the concession terms.

Five Requirements for Hardship in Contracts

Chilean commercial arbitral tribunals have followed a parallel but more cautious path. In a dispute over a cherry export contract (CAM Santiago Rol 6610-2023, award of April 17, 2023), the tribunal articulated five cumulative requirements for hardship to operate: (i) a fundamental change in circumstances; (ii) unforeseeability at the time of contracting; (iii) non-imputability to the invoking party; (iv) a substantially excessive burden on the obligor; and (v) a demonstrable divergence between the assumptions under which the parties contracted and the new reality. The tribunal accepted the defense and discharged the buyer from its obligation to pay the guaranteed minimum price.

The Strict Standard Applied by Chilean Arbitration Tribunals

While Chilean arbitral tribunals have recognized hardship as a viable doctrine, its successful application remains the exception rather than the rule. The awards that accept the defense — Nuevo Pudahuel and CAM Santiago Rol 6610-2023 — stand out precisely because they are rare. The prevailing pattern is one of rigorous scrutiny at every level, from doctrinal coherence to evidentiary sufficiency, resulting in rejection far more often than acceptance.

At the conceptual level, tribunals demand a degree of precision that most claimants fail to achieve. In a commercial lease dispute (CAM Santiago Rol 5782-2023, award of June 25, 2024), the tribunal drew a sharp distinction between reduced profitability of the business and excessive onerousness of the contractual obligation — two concepts that parties routinely treat as interchangeable but that arbitrators consider fundamentally different. The same tribunal held that invoking force majeure and hardship simultaneously is self-defeating, since the former presupposes impossibility of performance while the latter presupposes that performance remains possible but disproportionately burdensome.

At the evidentiary stage, the bar is equally high. The tenant in the same case had voluntarily paid rent throughout the closure without reserving its rights — conduct the tribunal treated as tacit waiver. A party that does not document the impact and formally object in real time effectively forfeits the defense before the arbitration even begins. A further illustration of this restrictive approach came from an award under the rules of the National Arbitration Center (CNA Rol 277-2022, award of August 6, 2024), in a dispute over export plums disrupted by the Shanghai lockdown. There, the tribunal held that Chilean private law does not recognize a general power to revise contracts for changed circumstances, and that force majeure cannot discharge pecuniary obligations already matured.

The result is a doctrine that exists in theory but is granted only under extraordinary circumstances and with substantial proof. Then, recognition of hardship in Chilean arbitration is possible, but should never be assumed.

The Practical Conditions Parties Should Satisfy Beyond the Substantive Requirements

Across these four decisions, a coherent and demanding standard emerges for parties invoking hardship before Chilean arbitral tribunals:

• The disruption must be genuinely extraordinary. Market fluctuations within historical ranges do not qualify. As an earlier CAM award held, a company that continued developing other projects could not credibly claim that a crisis had destroyed contractual commutability.

• The claim must be prospective. Hardship cannot rewrite obligations already performed. Silent compliance followed by belated claims of excessive onerousness is treated as waiver — a rule that penalizes parties who fail to act in real time.

• The evidence must be contract-specific. Contemporaneous documentation and expert economic analysis showing the concrete impact on the particular obligation are required.

• And the invoking party’s conduct must be coherent. Tribunals examine whether the party reserved its rights before continuing to perform, whether it activated available contractual mechanisms — price adjustment clauses, indexation formulas, renegotiation triggers — and whether its legal theory is internally consistent.

Anticipating the Next Crisis: How the Choice Between Courts and Arbitration Defines Hardship in Chile

Hardship, as a doctrine, has found effective recognition in Chilean law — but it has done so almost exclusively through arbitration, not through the ordinary courts.

Chilean courts have maintained an almost unyielding commitment to pacta sunt servanda. The Supreme Court has consistently declined to recognize imprevisión as a basis for contractual revision, and lower courts have largely followed suit. Although a handful of isolated decisions have shown some openness to the doctrine, they have not consolidated into a consistent line of precedent. The dominant judicial posture continues to treat the binding force of contracts as a near-absolute barrier, leaving parties affected by economic disruptions with no effective remedy before ordinary judges. No legislative reform is on the horizon.

But that conclusion captures only part of the picture. It is arbitral tribunals — commercial arbitrators at CAM Santiago and CNA, and the Concession Arbitral Commission — that have developed, case by case, a working framework for hardship that the ordinary courts have refused to build. The Nuevo Pudahuel Commission created the alea normal/anormal distinction and ordered the State to renegotiate. The CAM Santiago tribunal (CAM Santiago Rol 6610-2023) articulated five cumulative requirements and applied them to discharge a contractual obligation. Even the awards that rejected hardship (CAM Santiago Rol 5782-2023 and CNA Rol 277-2022) did so on evidentiary or procedural grounds, not by denying the doctrine’s theoretical validity. While Chilean courts close the door, Chilean arbitrators have opened it — narrowly, conditionally, but effectively.

This matters for international practitioners and investors. An arbitration clause is not merely a procedural choice — it is a substantive one. A party that anticipates invoking hardship has a materially stronger position before an arbitral tribunal than before an ordinary Chilean court. The inclusion of an arbitration clause, combined with explicit hardship provisions, provides the doctrinal space that the Chilean Civil Code and judicial precedent do not yet offer.

In an era of recurring geopolitical and economic shocks, the difference between a hardship claim that succeeds and one that fails is not the severity of the disruption. It is what the affected party did in the weeks and months after the disruption began.

Conclusion

The broader lesson of these awards is that, contrary to a widespread perception, Chilean law is not without tools when geopolitical or economic shocks destabilize a contract. The tools are not in the Civil Code, nor in the case law of the ordinary courts, but in the body of doctrine that arbitral tribunals have built over the past years with a workable distinction between ordinary and catastrophic risk, a defined test for excessive onerousness, and a set of conduct-based standards that tell parties what they must do — and document — in the weeks following a disruption to preserve their position.

Accessing these tools, however, requires anticipation. It requires choosing arbitration over ordinary jurisdiction, drafting hardship and renegotiation mechanisms into the contract itself, and reacting to the disruption with the discipline that tribunals expect. For parties operating in Chile, resilience against the next shock is therefore less a matter of substantive law than of contractual architecture.