HOW WILL THE FORCE MAJEURE ON CORONAVIRUS AFFECT THE CONTRACTUAL OBLIGATIONS?

Magomed Yangulby, the managing partner of the “Yang Consult” business legal company and a member of the expert council of the office under the Commissioner for the Protection of Entrepreneurs' Rights in Moscow, acted as a columnist for the “Rusbankrot” website. Magomed Yangulby prepared material, regarding the introduction of force majeure against the backdrop of the coronavirus pandemic and the possible consequences of the initiative.

The outbreak of Covid-19 significantly hit the economy of the planet and Russia in particular - a large number of bankruptcies are forecasted. The most affected enterprises are enterprises, associated with the public services - food services, chain clothing stores, air transportation, etc.

In these circumstances, the recognition of coronavirus force majeure at the legislative level will help to many companies. The Government of the Russian Federation introduced the force majeure regime in case of non-performance of contracts due to a pandemic. Non-application of penalties so far will be valid only in two cases: violation of state contracts and non-fulfillment of foreign exchange contracts by non-residents in situations, related to coronavirus.

In order to help entrepreneurs, the federal authorities in the person of the Ministry of Industry and Trade, the Ministry of Finance and the Ministry of Justice are preparing a regulatory document, according to which the coronavirus will be recognized as a force majeure circumstance in public procurement.

The authorities of Moscow issued the following acts: Decree of the Mayor of Moscow No. 12-UM dated 03/05/2020 "On the introduction of high alert", No. 17-UM dated 03/10/2020 "On amendments to the decree of the Mayor of Moscow dated March 5, 2020 No. 12- MIND".

The Chamber of Commerce and Industry of the Russian Federation issues a certificate of force majeure circumstances (force majeure). For example, if it is not possible for a Russian businessman to fulfill his obligations to foreign counterparties, he or she can apply to the RF CCI for this document and submit it in the country, where he has obligations.

It is worth noting that the current legislation provides four ways to use force majeure. The first is the release of a party from liability if it proves that the non-fulfillment of obligations was due to force majeure. The second is the termination of an obligation if it is caused by circumstances, for which neither of the parties is responsible. The third and fourth are significant changes in the circumstances of the agreement, which may be the basis for its amendment or termination.

Meanwhile, the mere recognition of coronavirus as force majeure is not enough for any of the parties of the contract to simply refuse to execute this contract, or for its termination. If the parties failed to agree, then in any case they need to go to the court, where it is necessary to prove that the failure to fulfill the obligation was a consequence of the circumstances of force majeure. Each specific case is individual and depends on many factors, including the type of contract (lease, delivery, transportation, state contract, etc.) and other circumstances.

However, for the current period of time, it is impossible to determine the prospects of such litigation because of upcoming legislative changes and initiatives, but it can be assumed that many victims of coronavirus have good chances to survive this time and avoid penalties. Still, we can conclude that the number of bankruptcies will only increase.