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Force Majeure Recognition Procedure

If, among the possible list of force majeure, the contract indicates “extraordinary circumstances”, “epidemics”, “actions of authorities”, “acts of authorities”, etc., this should be sufficient to initiate the procedure for recognizing coronavirus as force majeure and apply its consequences.

Schematically, the procedure may look like this:

1. A party for which it has become impossible to fulfill its obligations under the indicated circumstances shall be obliged to notify the other party of the occurrence of force majeure within the time limit and in the manner specified in the contract.

2. The facts stated in the notification should, as a rule, be confirmed by a document of the chamber of commerce at the place of occurrence of force majeure. In Belarus, the Belarusian Chamber of Commerce and Industry (BelCCI) is engaged in this, issuing a “conclusion on the examination of force majeure circumstances” on a paid basis.

3. In addition, to confirm the existence of force majeure circumstances in court, you can use conclusions, certificates, answers to inquiries, summaries of official state bodies and services, as well as information from publicly available sources.

It is important to understand that compliance with the contractual procedure is critical. As a rule, force majeure clauses contain the following restrictions: “the absence of a notice or untimely notification of force majeure circumstance deprives the affected party of the right to consider the occurrence of force majeure as a reason that will relieve her of liability for failure to fulfill her contractual obligations”.

If the agreement does not contain provisions on force majeure, you can resort to the direct provisions of the law and try to justify (in pre-trial or judicial order) that the coronavirus or measures to prevent it are of an emergency and unavoidable nature and that neither of the parties could have foreseen these circumstances at the conclusion of the contract.

The consequences of force majeure
By law, the impossibility of proper fulfillment of an obligation due to force majeure circumstances releases the debtor from liability for the entire period of force majeure.

If the agreement additionally provides for the possibility of termination of the agreement in connection with force majeure, then the parties may demand from each other its termination and complete termination of obligations.

If there are no such provisions and one of the parties is against, then there is no formal reason for terminating the contract, since the occurrence of force majeure circumstances does not in itself terminate the debtor’s obligation, but only relieve him of liability for its non-performance for the period of force majeure, may suspend execution but do not exclude his future performance obligations.

The creditor may withdraw from the contract if, as a result of the delay arising in connection with force majeure, he loses interest in performance. Moreover, the debtor is not liable for losses caused by such a delay.

If the circumstances that prevented the debtor from fulfilling the obligation, the court does not recognize force majeure, he can take them into account only when determining the amount of liability of the debtor (for example, reduce the amount of penalties).

But still it is worth remembering that the coronavirus and the measures taken in connection with it should directly affect the possibility of fulfilling the obligation, as they say, “in kind”.
If the fulfillment of an obligation is possible, but not profitable due to, for example, high costs, the court is unlikely to establish the existence of force majeure.

Force Majeure and Public Relations

But no matter how strong your force majeure clause in the contract is, whether the Chamber of Commerce and Industry says that force majeure or a court decision is in your favor, it should be remembered that this does not provide the company with “tax holidays”. Those. does not exempt from the obligation to pay taxes and incur penalties for their non-payment.

Unless, of course, government agencies adopt a separate special act of a temporary incentive nature and introduce a “vacation” for certain categories of taxpayers.

True, the Belarusian Tax Code refers to non-operating expenses such as “losses and expenses in connection with emergency circumstances of a business (fire, accident, natural disaster, traffic accident, losses from production shutdown and other similar circumstances, including force major), including expenses associated with the prevention or elimination of the consequences of such extraordinary circumstances. ”

That is, in fact, the law provides the right to deduct expenses related to force majeure from the tax base for profit, however, there is practically no practice in applying this rule, therefore it is extremely difficult to understand the regulator’s approaches to accepting such expenses for deduction.

By the way, it is a mistake to believe that banking is a public relations sphere and that there is no chance to compete for exemption from sanctions for late payment of a loan in connection with force majeure or to get “interest” vacations.

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