This short article reviews whether it is possible to qualify the spread of the Coronavirus infection, and the introduction of related restrictive measures by Russian authorities, as Force Majeure circumstances under the Russian Civil Code, which supremely governs civil interactions among individuals, private entrepreneurs and organizations.
In principle Covid-19 can be treated as a Force Majeure event in the Russian jurisdiction. Currently there are still very few cases of Covid-19 treated as Force Majeure by Russian courts, however, taking into account general practice and some very recent resolutions it is to be expected that a general standard will not be applicable in practice, and ultimately courts will make decisions in a case-oriented and possibly contradictory way on the issue.
The Civil Code has one clause which directly addresses Force Majeure in commercial interactions– clause 3, article 401. Under this clause a business person or a commercial organization is exempt from any liability for contractual non-performance, if such non-performance is caused by an extraordinary and unavoidable circumstances, which parties could not foresee at the time of entering into a contract.
However, pursuant to the mentioned clause, such circumstances do not include breach of liabilities by suppliers, lack of
goods and, what is the most important, lack of funds to fulfill an obligation. In other words, a party can be exempt from a contractual liability only if the party is not able to fulfil such obligations physically, for instance, if borders are closed for transportation of goods.
Moreover, in the vast majority of cases Russian courts have considered any destabilization of economic situations in our jurisdiction, even in case it is quite directly connected to state acts (such as sanctions), just as ordinary business risks.
So far, the only «solid» argument which Russian courts take into consideration is the Certificate of Force Majeureissued by the Russian Chamber of Commerce and Industry as well as other regional chambers. Until recently such certificates were issued only in connection to international transactions, but now we are observing that chambers have started to issues such certificates for domestic transactions as well.
Nevertheless, such a Certificate does not «substitute» a court’ s decision, even though it serves as a quite strong argument in case of dispute.
The mentioned clause addresses the issue of non-performance or improper performance of an obligation due to Force Majeure only in relation to liability. The issue of a contract termination should be considered separately, however, it is no less important, since only in case of termination of a contract a party will be able, for example, to demand return of a previously made prepayment.
