Lawyers discuss, whether the coronavirus pandemic is force majeure

What may be rendered force majeure and may the COVID-19 pandemic be treated this way? These and other questions were discussed at the St. Petersburg International Legal Forum by international and domestic experts.

Anton Ivanov, the Academic Supervisor from the Faculty of Law of the National Research University Higher School Of Economics, explained that force majeure circumstances in legal sense suggest an extraordinary, and particularly noxious turn of events that is not typical of day-to-day life, as well as it is unavoidable, in other words it is impossible to avoid its impact.

 “The issue of force majeure is not entirely clear, especially with respect to the extraorinarity feature of it. I come across multiple online comparisons between the coronavirus and an ordinary flu, the latter one sometimes leading to graver aftereffects. A classic example springs to mind of the autumn storms in the North Atlantic that are regular, and thus cannot be regarded as force majeure,” told Anton Ivanov

It is noteworthy that force majeure would exempt you from civil liability (payment of damages or a penalty, etc.) but not from the fulfilment of obligations. Some companies facing such a situation negotiate amendments to contracts with due regard for the obligations.

“For instance, a party is not capable of performing its obligations because of a ban in a governmental decree. It is not fully unnatural, and the party cannot be held accountable if it is not able to execute the contract. Thus, the validity of the contract is suspended until the ban is repealed….A definitive timeline must be indicated for the terms of the contract to be executed. And it must be done in good faith, with mutual trust between both parties. It is preferable not to terminate a contract, but to perform it later on,” clarified Enrico del Plato, Professor of Civil Law from The Sapienza University of Rome.

The speakers made a separate mention of the rental issue. Currently many businesses do not actually occupy the premises they rent, as they have suspended operations. The question is whether they are supposed to pay the rental charges at this moment? “We see that the continental law has accumulated good groundwork of how to handle such crisis phenomena as COVID-19. In particular, the Civil Law made a provision for that, for instance that no rental fees would be charged. …when people fled their homes, as they feared plague or other scourges. In case of real danger those people paid no rental,” noted Florian Heidler, Assistant Professor in Law from Sigmund Freud University in Vienna. He added that, at this juncture, European shops and restaurants that are closed down because of the pandemic are allowed to suspend payments. Moreover, it has been banned to amend previously concluded rental contracts until June 2020, with temporary deferral for other sorts of payments, e.g. penalties, in place until the same month.

China, that was the starting point of the pandemic, took time in deploying the restrictive measures. The trouble arose after the Chinese New Year, when lockdowns and quarantines for cities were phased in. The measures differed from city to city and from province to province. Ian Lewis, a Managing Partner at the Beijing office of Mayer Brown, put the Forum up to speed on the Chinese situation.

  “Basically force majeure in China will be determined by certain developments that lie outside the realm of conventional circumstances. However, not all the contracts in China are governed by the PRC law, as there are some companies with international equity. If one of the parties to the contract is a foreign company, the law of Hong Kong may be used, or English law, etc. But, generally, the definition of force majeure is more or less standard. China respects the freedom of  contract and the basic template normally contains provisions that eliminate uncertainty” said Ian Lewis.

The epidemic has launched the use of argument of force majeure to stop performing one’s obligations. But if it turns out that you were capable of fulfilling part of your obligations, or the impact of the company collapsing or becoming insolvent upon you has proved to be insufficient, you may not be able to resort to force majeure situation to justify non-performance,” summarised the Managing Partner at the Beijing office of Mayer Brown

The participants of the discussion concurred that acknowledging a circumstance to be of force majeure nature should be done on a case by case basis.

St. Petersburg International Legal Forum (SPBILF) 9 ½: RULE OF CORONA is held online from 10th to 12th of April. The virtual discussions are attended by heads of Russian and international public authorities, legal professionals, academia, politicians and mass media. This year’s focus of the Forum is on the legal aspects of public and business life against the backdrop of the COVID-19 pandemic.