Acts of God – Banking Digits

Article e14: Force Majeure

“A bank assumes no liability or responsibility for the consequences arising out of the interruption of its business, including but not limited to its inability to access a data processing system, or a failure of equipment, software or communications network, caused by Acts of God, riots, civil commotions, insurrections, wars, acts of terrorism, cyberattacks, or by any strikes or lockouts or any other causes, including failure of equipment, software or communications networks, beyond its control.”

Explanation and Examples

1. “A bank assumes no liability or responsibility for the consequences arising out of the interruption of its business”

Explanation: This clause means that if a bank’s operations are disrupted, it will not be held responsible for any negative outcomes that result from such interruptions. This protection is crucial for banks, as their operations are highly sensitive to disruptions.
Example: Suppose a bank is unable to process transactions due to an unexpected power outage. According to this clause, the bank would not be liable for any issues that arise from the inability to complete transactions during the outage.

2. “Including but not limited to its inability to access a data processing system”

Explanation: This phrase extends the bank’s liability protection to situations where it cannot access its data systems, which are critical for its operations.
Example: If a bank’s data processing system is offline due to a cyberattack, and the bank is unable to provide services such as account management or fund transfers, the bank will not be liable for the resulting inconveniences or losses.

3. “Or a failure of equipment, software or communications network”

Explanation: This clause covers any failures in the bank’s equipment, software, or communications infrastructure, which could impact its ability to perform its functions.
Example: If a bank’s server crashes, preventing customers from accessing their accounts online, the bank is not responsible for any issues or losses that occur as a result of this failure.

4. “Caused by Acts of God”

Explanation: Acts of God refer to natural events that are beyond human control, such as natural disasters. The bank is not liable for disruptions caused by these events.
Example: During a major earthquake, if a bank’s operations are disrupted due to damage to its facilities, it will not be held liable for any inconvenience or losses experienced by customers.

5. “Riots, civil commotions, insurrections, wars, acts of terrorism”

Explanation: This clause includes various forms of social and political unrest that could disrupt banking operations. The bank is not responsible for issues arising from these events.
Example: If a bank’s services are interrupted due to a war or a riot near its branch, it will not be liable for any delays or losses that customers might face as a result.

6. “Cyberattacks”

Explanation: This covers attacks on the bank’s digital systems, such as hacking or malware, which can disrupt services. The bank will not be held liable for issues resulting from these attacks.
Example: If a bank’s systems are compromised due to a cyberattack, causing a temporary loss of online banking services, the bank is not responsible for any resulting financial losses or service disruptions.

7. “Or by any strikes or lockouts”

Explanation: This part addresses labor disputes that could affect the bank’s operations. If a strike or lockout impacts the bank, it will not be liable for the consequences.
Example: If bank employees go on strike and the bank cannot process transactions or provide customer service, the bank will not be held liable for any disruptions or financial losses incurred by customers.

8. “Or any other causes, including failure of equipment, software or communications networks, beyond its control”

Explanation: This clause is a catch-all for any other unforeseen or uncontrollable events that disrupt the bank’s operations, not explicitly listed in the previous clauses.
Example: If a sudden and severe network outage prevents the bank from processing transactions, and this issue is beyond the bank’s control, the bank will not be responsible for any problems resulting from this outage.

Clause 1:

Clause: “A bank assumes no liability or responsibility for the consequences arising out of the interruption of its business by Acts of God, riots, civil commotions, insurrections, wars, acts of terrorism, or by any strikes or lockouts or any other causes beyond its control.”

Explanation: This clause specifies that banks are not liable for any interruptions in their services caused by events that are beyond their control, commonly referred to as “force majeure” events. These events include natural disasters (Acts of God), social or political unrest (riots, civil commotions, insurrections), wars, acts of terrorism, and labor disputes (strikes or lockouts). The clause ensures that banks are protected from being held responsible for disruptions in their business due to these uncontrollable events.

Example: Imagine a bank in a country experiencing severe flooding due to a hurricane (an Act of God). The flooding disrupts the bank’s operations, making it impossible to process transactions or honor letters of credit. Under UCP600 Article 36, the bank is not liable for any financial losses or consequences that customers might face due to this interruption.

Clause 2:

Clause: “A bank will not, upon resumption of its business, honour or negotiate under a credit that expired during such interruption of its business.”

Explanation: This clause indicates that if a letter of credit expires while a bank’s operations are interrupted due to a force majeure event, the bank is not obligated to honor or negotiate the credit once it resumes business. This provision ensures that banks are not forced to process expired credits after their operations have been restored.

Example: Consider a bank that had to close its offices for two weeks due to a violent civil commotion in the city. During this period, a letter of credit that was issued by the bank expired. According to UCP600 Article 36, once the bank resumes its operations, it is not required to honor or negotiate the expired letter of credit. The beneficiary of the credit cannot demand payment or negotiation of the credit post-expiry due to the force majeure event that caused the interruption.

eUCP Version 2.1 Article e14: Force Majeure Clauses Explained – CDCS Guide