Regional: COVID-19 as Force Majeure in Aviation Contracts. Comparative Analysis across 10 Jurisdictions
26 March 2020 – As the COVID-19 pandemic and related decrease in international travel throws the European aviation industry into a standstill, an increasing number of businesses in the aviation supply chain are struggling to meet their contractual obligations. Obviously, many lawyers are looking at force majeure clauses as a last resort to relieve their clients of the most burdensome contracts. Most aircraft lease agreements are governed by English law, with a “hell or high water” clause requiring lessees to make lease payments regardless of whether an aircraft is operating or parked on the ground. However, many aviation contracts (related to maintenance, ground handling, rent of airport facilities, charters etc.) are drafted under local laws and are therefore subject to various interpretations of force majeure. Kinstellar’s team of civil law and aviation experts have analysed whether contractual parties may rely on COVID-19 as a force-majeure event in the firm’s ten jurisdictions across Central and Eastern Europe and Central Asia.
On 13 March 2020, the Bulgarian National Assembly declared a state of emergency effective 13 March 2020 until 13 April 2020 due to COVID-19. In addition, the Minister of Health has been issuing orders implementing measures against COVID-19 and prohibiting certain activities (e.g., the entry in Bulgaria of non-EU citizens). Further, a legislative act on the state of emergency was adopted by the National Assembly.
Force majeure under Bulgarian law constitutes an unforeseeable or unavoidable event of extraordinary nature that has arisen after the conclusion of a commercial agreement, and prevents the performance of the obligations of any of the parties under the agreement.
Such an event absolves the defaulting party from liability arising from its default, as long as the party had not been in default prior to the occurrence of the event. The spread of COVID-19, the orders of the Minister of Health, and the act on the state of emergency (when adopted) do not necessarily qualify by themselves as a force majeure event. While they most likely qualify as an unforeseeable or unavoidable event of extraordinary nature, the affected party must prove the causal link between such an event and the impossibility to perform its specific obligation(s) under the agreement. In addition, the affected party should notify its counterparty of the force majeure event and the consequences thereto.
The Bulgarian Chamber of Commerce and Industry is issuing certificates on force-majeure events upon request and the submission of related documents. Such certificates may be used to support a party’s claim, however they would not be binding for Bulgarian courts.
Situations beyond objective control, such as the current COVID-19 pandemic, should be covered by the concept of force majeure as set out in Section 2913 (2) of the Czech Civil Code. The party breaching a contract is not liable to pay damages if it can prove that the breach was caused by an unforeseeable extraordinary obstacle that the party was objectively unable to overcome.
In order to rely on this principle, the breach must only have occurred after such a circumstance arose. The current coronavirus pandemic thus cannot be used to justify contractual breaches occurring prior to the outbreak. Also, the concept of force majeure generally does not relieve the breaching party of the obligation to pay contractual penalties, although such penalties may sometimes be set aside as illegitimate. No formal action is required to apply for the force majeure exception. However, the breaching party has a general duty to notify the counter-party of a future breach.
There is no exact definition of ‘force majeure’ set out in Hungarian law, thus, it is a matter of judicial discretion to determine case by case whether a given event qualifies as force majeure. It is generally accepted, however, that a force majeure event must be an irresistible force of natural or human origin that is of an absolute nature. An epidemic like COVID-19 is considered as such, however it would only exempt the party invoking the force majeure event if it would be able to prove that: (i) the breach of the contract occurred as a direct consequence of the current circumstances, (ii) such circumstances were not foreseeable at the time of entering into the contract, and (iii), it could not be reasonably expected to avoid these circumstances and to mitigate the resulting damage. In Hungary, no official certificates are issued by authorities regarding the aviation sector that could be used to support the occurrence of a force majeure event.
Pandemics including the COVID-19 pandemic are not expressly specified as an event of force majeure under Kazakh law. Article 359.2 of the Civil Code contains general provisions on release from the liability for a breach of contractual obligations resulting from an event of insuperable force (being an extraordinary and unavoidable event). The National Chamber of Entrepreneurs (“NCE”) is authorised under the Law “On the National Chamber of Entrepreneurs of the Republic of Kazakhstan” to certify circumstances of insuperable force in accordance with the terms of foreign economic transactions and international treaties of the Republic of Kazakhstan. The authority on force majeure certification was transferred by the NCE to the Foreign Trade Chamber LLP (“FTC”) located in the capital, Nur-Sultan. An official letter of the FTC dated 4 August 2016 (No. 2245) mentions epidemics (and therefore pandemics) as one of the examples of an event of insuperable force. The burden of proof of the occurrence of force majeure circumstances, the impossibility of fulfilling obligations under a contract, and the impact on the fulfilment of obligations lies with the party to a contract seeking to obtain a certificate confirming the force majeure circumstances.
On 16 March 2020, Romania’s President declared a state of emergency due to COVID-19. However, the COVID-19 outbreak was not expressly declared as a force majeure event. In this respect, under general Romanian law provisions, the COVID-19 pandemic does not necessarily qualify by itself as a force majeure event.
The party invoking the force majeure event must evidence the existence of such circumstances on the basis of the provisions of the agreement related to force majeure, case law, and the principles of Romanian law. In practice, in certain situations, the Chamber of Commerce and Industry of Romania and/or its local offices may issue, at the written request of companies and based on the documents submitted, a document certifying the existence of a force majeure event regarding the respective agreement; nevertheless, such a document does not represent irrefutable proof of the force majeure event.
The Serbian Law on Contracts and Torts (in Serbian: ”Zakon o obligacionim odnosima”`) does not clearly set out the entire and exact definition of the term “force majeure” but rather opts for a fragmentary and descriptive approach. However, it is quite clear that all such references contain essential elements of the generally accepted notion of force majeure, which in effect encompasses events that are uncontrollable by the parties, unforeseeable, unavoidable and whose effects cannot be mitigated or eliminated. In the field of contractual relationships, such events may serve as basis for the termination of a contract and/or exemption from liability for damages.
As no uniform definition of force majeure exists under Serbian law and no specific list of events that could qualify as force majeure exist, it falls to the courts to determine, on a case-by-case basis, whether a specific event meets the requirements to be qualified as force majeure.
In accordance with the above, the COVID-19 outbreak would not necessarily qualify as a force majeure event under Serbian law unless the parties have inserted specific force majeure clauses. The effects of the outbreak must be examined individually in the context of the specific contract, which involves assessing the specific terms of the contract and the legal requirements described above.
Force majeure provisions contained in Slovak civil law exclude the liability of a party for breach of its obligations under a contract. There is no list of force majeure events. Whether the COVID-19 pandemic constitutes a force majeure event must be analysed on a case-by-case basis. For example, restrictions imposed in connection with the COVID-19 pandemic do not necessarily prevent a party from the fulfilment of its obligations. It is not sufficient that the performance of the contractual obligations has only become more onerous or expensive as a result of the COVID-19 outbreak. In practice, in certain situations, the Slovak Chamber of Commerce and Industry may issue, at the written request of companies and based on the documents submitted, a document certifying the existence of the force majeure event regarding the respective agreement; nevertheless, such a document does not represent irrefutable proof of the force majeure event.
Turkish law does not provide a precise definition of force majeure. Force majeure claims are considered on the basis of the provisions of the Turkish Code of Obligations on the impossibility of performance. As per those rules, a party is excused from performing its obligation to the extent that such performance has become impossible due to an event that cannot be attributed to that party. However, under Turkish law, the COVID-19 outbreak would not necessarily constitute a force majeure event excusing a party from the performance of its obligations. The performance should become impossible, either objectively or subjectively, as a consequence of the COVID-19 event. Rules on impossibility of performance and force majeure are default rules under Turkish law. Therefore, parties to a contract may agree on an entirely different treatment of force majeure events. If the contract is silent with respect to a force majeure event, the COVID-19 outbreak or the public measures taken by the authorities in response must make the performance of obligations actually impossible for the relevant party in order to be excused from performance and released from liability. Please note that it would not be sufficient for such party to claim force majeure if the performance of its obligations has only become more onerous or expensive as a result of COVID-19 outbreak.
In practice, usually where the contract terms specify it as evidence of the occurrence of a force majeure event, the Chamber of Commerce and Industry or its local offices may issue, at the written request of companies and based on the documents submitted, a document certifying the existence of the force majeure event regarding the respective agreement. However, the document itself does not constitute proof of a force majeure event.
The Law of Ukraine "On Amending Certain Legislative Acts of Ukraine Aimed at Preventing the Occurrence and Spread of Coronavirus Disease” No. 530-IX dated 17.03.2020 (commonly referred to as the COVID Bill) expressly includes the “introduction of quarantine by the Cabinet of Ministers” in the list of force majeure events (events of irresistible nature) as stipulated by the Law of Ukraine “On Chambers of Trade and Commerce”. The event of “epidemic” was already on the list. Based on the mentioned legislation, the Chamber of Trade and Commerce of Ukraine is entitled to issue certificates on force majeure circumstances to the affected businesses. Such certificates are issued if a force majeure event objectively prevents a business from fulfilment of its obligations under a particular contract. It is issued at the Chamber’s discretion and after review of such a contract.
On 19 March 2020, President Mirziyoyev signed a Presidential Decree “On Priority Measures to Mitigate the Negative Impact of the Coronavirus Pandemic and Global Crisis on Sectors of the Economy” (“the Decree”).
Under the Decree, the Ministry of Investment and Foreign Trade and Chamber of Commerce and Industry of the Republic of Uzbekistan shall publish, within three days of the signing of the Decree, an official notification of the occurrence of a force majeure event, which shall last until the restrictions imposed by the Decree are lifted.
Business entities will be able to receive a certificate on the occurrence of the force majeure event from the Ministry of Investment and Foreign Trade within one day. Issues related to issuance of the certificates on the occurrence of the force majeure event are regulated by the Regulation on Procedure of Confirmation on the Occurrence of the Force Majeure Event (Annex to the Decree of the Cabinet of Ministers of the Republic of Uzbekistan No 63 dated 15 February 2005).
It is not completely clear how this will impact the contractual obligations of Uzbek counterparties. We assume that it may be used as a basis to delay fulfilling obligations such as payments under loans without the imposition of penalties or other measures. Nevertheless, parties should review the facts and terms of their agreements to determine the specific requirements necessary to trigger the use of force majeure for the suspension of contractual obligations. In order to trigger the use of force majeure for suspension of contractual obligations, a certificate on the occurrence of the force majeure event from the Ministry of Investment and Foreign Trade must be duly obtained.
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