“Man was born free; and is everywhere in chains” might not be an altogether inapposite comment upon trends affecting the conduct of international trade since the 1914-18 world war. Governmental intervention in the shape of export and import controls—essential in time of war—has since become a settled feature of the international trading scene. The pattern of peace-time intervention can, however, take shape in ways that are directly inimical to the traditional functioning of the entrepot trades. Historically, it was the business of the merchant to employ his expertise in forecasting future trends, so that if he bought goods for delivery three or six months hence at what events proved to be below the then prevailing market price, he could be assured of a profit on the deal. Conversely, the seller was protected against the risk of a subsequent fall in the market; if that happened, the loss was taken by the buyer.

Nowadays, however, the balance of this equation may all too easily be destroyed. Whereas the buyer remains committed to his bargain on a falling market, he may find that, on a rising market, he is deprived of his profit through the imposition in the country of origin of an export ban which prevents the seller from fulfilling his obligation to supply. This phenomenon is probably most frequently encountered in relation to those commodities which are prone to shortage of supply through crop failures and other natural misfortunes, but it is by no means unknown for governmental intervention to be influenced by economic considerations less straightforward than the laws of supply and demand. It is noteworthy that a United Kingdom Association which handles disputes between traders in one of the prime international commodity markets expects in 1975 to deal with some 1,800 cases, of which a substantial number are concerned with prohibition of export and kindred situations1.

Against this background it seems likely that the next few years will see some addition to the English case law on this topic and, no doubt, some clarification and development of the governing principles. This may, nonetheless, be an opportune moment at which to offer a brief outline of the law as it now stands and to indicate the nature of some of the more important problems to which governmental intervention gives rise.

There are two aspects which require separate consideration. First, there is the situation where trading is carried on in the context of an existing system of licensing control2. Secondly, there are the cases where government intervention manifests itself in a prohibition of export, which is imposed after the relevant contract has been concluded but before the time for performance has arrived.

When parties contract in the knowledge that a licensing system is in existence, so that the goods can be supplied only if the requisite export licence is obtained, they will often expressly make their bargain on a “subject to licence” basis. The result in law is that the bargain will go off if the necessary licence cannot be obtained3. But the incorporation of a term to that effect still makes it necessary to ascertain (unless the contract also deals expressly with these further matters):