Coronavirus is considered force majeure ?! How to foresee a contract or supply breakdown
The spread of the coronavirus COVID-19 officially received pandemic status, i.e. global epidemics. However, the effect for the business became obvious much earlier: companies faced with non-fulfillment of contractual obligations – disruption of schedules, non-payment, non-delivery, forced production downtime, etc.
Daria Zhuk, managing partner of the international law firm COBALT in Belarus, and Anastasia Bykovskaya, managing lawyer of the international law firm COBALT in Belarus, note: the time has come to look at the force majeure section of the agreement or the “other conditions”, which should be kept secret – often simply ignored and signed without looking.
– The main question is whether COVID-19 can be considered force majeure, which means it is a sufficient basis for defaulting on business partners, banks, employees, the state without penalties and negative consequences?
According to the generally recognized approach in the legislation of the vast majority of countries, including Belarus, the CIS, the EU, a person who has not fulfilled an obligation or has performed it improperly is not liable – if he proves that the circumstances of force majeure prevented proper execution, i.e. Force Majeure.
The law does not give a clear definition of force majeure circumstances or their closed list.
There are only criteria for qualifying certain circumstances as force majeure, as well as the practice of their application, and in different jurisdictions – they are their own.
Therefore, there can be no single “world” recognition of COVID-19 as force majeure in terms of fulfillment of obligations.
This will be resolved locally in each jurisdiction and within the framework of a specific contract and dispute, even in the case of cross-border business (the law that always applies to the relations of the parties is ultimately the law of one country). From a medical point of view, it can be, but the authorities of each country have the right to decide independently what measures to introduce as a reaction to the epidemiological situation. So, in Belarus circumstances will be recognized as force majeure only if they simultaneously have two signs:
1. The emergency. Extremeness is usually understood as exclusivity, non-standard circumstances.
2. Tolerance. Inevitability, as a rule, is the inevitability of circumstances and / or their consequences, which does not depend on the will or actions of the parties. As you can see, these are very evaluative and subjective criteria.
In theory, force majeure circumstances are conditionally divided into physical force majeure (natural and technological disasters), social force majeure (war, revolution, etc.) and legal force majeure (government acts, international sanctions, etc.).
In fact, force majeure is force majeure circumstances that arose after the conclusion of the contract, which the parties could neither foresee nor prevent by reasonable measures.
It is such contractual language that can most often be found in practice.
Can coronavirus be recognized as force majeure?
Epidemiological indicators indicate that the current dynamics has not only a pronounced emergency character, but also unavoidable consequences.
Therefore, the possibility of recognizing coronavirus as force majeure potentially exists.
While the state bodies of Belarus have not officially introduced quarantine and taken other measures to combat the spread of the virus and its consequences, such recognition is carried out:
Or voluntarily by the parties to the contractual relationship
Or by a court / arbitration (depending on which dispute resolution body is agreed by the parties) in the event of a dispute between the parties.
Not only specific reasons and circumstances (non-fulfillment or improper fulfillment of obligations) will be taken into account, but also the provisions of the force majeure clause in the contract, applicable law and its rules.
As a rule, the parties include in the agreement certain provisions on force majeure – the so-called force majeure clause.
A clause in a contract usually contains the following elements:
Circumstances that must be recognized as force majeure circumstances. Often this is not a closed list of situations, for example, “wars, terrorist acts, strikes, natural disasters of all kinds, fires, prohibitions of state bodies, nationalization and other circumstances that are not dependent on the will of the Parties”
The procedure for notification of the occurrence of force majeure and the recognition of circumstances as such: the timing, form of notifications to the parties, evidence base
Consequences of force majeure for the execution of the contract, the possibility of its termination, compensation measures