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COVID-19 quarantine is legislatively recognized as “force majeure”: consequences and opportunities for business

18 March, 2020 Newsletters

On March 17, 2020 the Verkhovna Rada of Ukraine has adopted the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine Aimed at Preventing the Occurrence and Spread of the Coronavirus Disease (COVID-19) (hereinafter referred to as the “Law No. 530-IX”) based on the Draft Law No. 3219 dated March 16, 2020. The Law was promptly signed by the President of Ukraine as already stated on the website of the Verkhovna Rada and the President.

The Law No. 530-IX, among others, introduces amendments to part 2 of Article 14-1 of the Law of Ukraine “On Chambers of Commerce and Industry in Ukraine”, which include the quarantine imposed by the Cabinet of Ministers of Ukraine to the list of force majeure (circumstances of irresistible force). Therefore, at the legislative level the quarantine is considered to be a force majeure (previously this Article provided only a long idle period in transport service caused by the epidemic).

The Ukrainian Chamber of Commerce and Industry (hereinafter referred to as the “UCCI”) has already expressed the opinion as regards to the adoption of the Law No. 530-IX. The UCCI considers these actions of the state authorities as a vital step simplifying the reference to force majeure of the business entities, which were deprived of the opportunity to fulfil their obligations with contractors in respective spheres due to restrictions imposed in the face of Coronavirus epidemic in Ukraine and aimed at prevention of spread of Coronavirus disease (COVID-19). The UCCI underlined that the procedure for force majeure certification due to quarantine has been already established.

With regard to the international practice of using force majeure clauses the UCCI stated that the party suffered from the force majeure is obliged to notify the other party on occurrence of force majeure (circumstances of irresistible force) in any form.

Therefore, the UCCI advises the business entities, which are deprived of the opportunity to fulfil their obligations with contractors due to force majeure, including quarantine, to issue first of all  the supporting documents on termination of their business activity in respective sphere (order, decree etc.) and notify in writing the counterparty before applying to the UCCI or regional chamber of commerce and industry.

Therefore, the UCCI will issue certificates confirming the quarantine to be a force majeure.

As a matter of course, release from civil liability due to violation of contractual obligations requires not only the occurrence of force majeure, but also the proper justification that such circumstances resulted in inability of the party to fulfill its obligations.

We are keen to advise you on the proper application of this new legal provision from the perspective of our experience in contractual disputes, as well as application of provisions of contracts and legislation on the force majeure matter.

Maxim Oleksiyuk,

Partner

The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.

Kind regards,

© WTS Consulting LLC, 2020

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