Does the current corona crisis constitute a (global) force majeure — act of god situation from a legal point of view?

02 April 2020
Julia Korablyova
Associate
Nadezhda Fedotova

Under the Russian Law the force majeure — act of god situation means emergency, unforeseen and unavoidable situations, which cannot be reasonable predicted, avoided or overcome in time of contracts execution and are not under the control of parties.

The standard list of the force majeure — act of god situations includes among others mass diseases (epidemies)1.

How to constitute the pandemic 2019-nCoV (COVID-19) as a force majeure — act of god situation?

In connection with the fast spread of the 2019-nCoV (COVID-19) in the territory of the Russian Federation, the state authorities approve legislative acts, which stipulate that 2019-nCoV (COVID-19) is an emergency and unavoidable situation2.

However, the pandemic 2019-nCoV (COVID-19) cannot be constituted as a force majeure only on the basis of the abovementioned facts. In accordance with civil legislation, the impact of the force majeure circumstances on the parties’ relationships should be estimated individually in each particular case. The party, which refers to the force majeure, should prove that the breach of a contract was due to the pandemic 2019-nCoV (COVID-19).

That is why, it is not enough to refer only to the legislative acts, which stipulate that 2019-nCoV (COVID-19) is an emergency and unavoidable situation.

It is necessary to prepare documentary support of force majeure impact on contracts relationships as well as to apply for certification of the force majeure:

  1. In international contracts — to the Chamber of Commerce and Industry of the Russian Federation;
  2. In internal contracts — to the Chamber of Commerce and Industry of the relevant region3;

The consequences of the confirmation of the pandemic 2019-nCoV (COVID-19) as a force majeure — act of god situation

To determine the legal consequences of the confirmation of the pandemic 2019-nCoV (COVID-19) as a force majeure the following questions should be clarified:

  1. Is a performance of the parties’ obligations under the contract impossible due to the force majeure?
  2. Or, if the performance is possible, is such a performance sill actual and relevant for the parties?

The impossibility of the obligation performance can be due to (1) the pandemic 2019-nCoV (COVID-19) itself as well as (2) the state authority legislative act, which is approved in connection to the pandemic 2019-nCoV (COVID-19) and provides additional basis for the impossibility of the obligation performance. In the first case, the obligations terminate due to the impossibility of their discharge under cl. 1 art. 416 of the Civil Code of Russia. In the second case, the obligations terminate on the grounds of an act, issued by the state authority under cl. 1 art. 417 of the Civil Code of Russia.

Another situation — when the obligation performance is possible — raises the following questions: (1) is the performance possible even along with the pandemic 2019-nCoV (COVID-19); or (2) can the performance be continued only after the end of the force majeure?

In the first variant, one of the parties can face the fact that pandemic 2019-nCoV (COVID-19) situation leads to the great disadvantages. To prevent or minimize this negative effect this party is entitleв to apply to the court for amending or termination of the contract due to the essential change of circumstances (art. 451 of the Civil Code).

In the second variant, the party should notify its counterparty immediately, when the 2019-nCoV (COVID-19) situation starts to raise obstacles for duly performance of the obligations. According to cl. 3 art. 401 of the Civil Code in this case there is no liability for parties for non-performance or improper performance of their obligations. At the same time the parties should be ready to start the performance immediately once the force majeure will be ended (or in agreed terms).

Also, it should be noted that the creditor is entitled to withdraw from an agreement in case he loses his interest in the deal because of the delay in fulfilling obligations (cl. 9 Resolution of the Plenum of Supreme Court of the Russian Federation No. 7 dd 24.03.2016).

1Cl. 1.3. Procedure on the certification of the act of god situations (force-major) by Chamber of Commerce and Industry of the Russian Federation (appr. Decision of the Board of the Chamber of Commerce No.173-14 dd 23.12.2015).
2For example, the Moscow Mayor Decree No. 12-UM dd 05.03.2020.
3he letter of the to the Chamber of Commerce and Industry of the Russian Federation No. PR/0315 dd 26.03.2020.