Is the quarantine considered to be a force majeure and legal reason not to discharge obligations for business (For-real no)

For several weeks in different social media “quarantine experts” have been sharing their legal opinions regarding minimizing business losses happen because of quarantine.

The say that: “Force majeure – is extraordinary and inevitable circumstances that objectively make it impossible to fulfill the obligations stipulated in the terms of the Contract or obligations under the law. It means that entrepreneurs need to apply to the Chamber of Commerce and Industry to get the confirmation that all their obligations cannot be fulfilled.

For- real no

Why?

Quarantine by itself is not a force majeure. You, be an entrepreneur should prove that precisely because of quarantine it becomes impossible to fulfill your obligations (causal connection). For example: an HR agency customized by a corporation has found a candidate for the position of a top manager. According to the contract, on March 25th ,2020 the candidate had to come to Ukraine from Germany for handling the formalities of employment relations and started to work. The agency fulfilled its obligations: purchased tickets and rented a hotel beforehand. But the candidate did not come to Ukraine because of closed borders. Formally, the agency did not fulfill all the terms of the contract within the stipulated time. But this happened because of a force majeure: a complete stoppage of Ukraine’s passenger connection with Europe. In other words, the candidate had no alternative ways to reach Kiev. This situation is considered to be a force majeure.

Still, if the circumstances of your business can be recognized as a force majeure, be aware of: this fact releases you from responsibility (sanctions) of failure (or delayed fulfillment) of the obligation, but does not release you from the obligation to perform it after the termination of force majeure, namely after quarantine. Please note that –
• the certificate of force majeure circumstances can only be issued by the Chamber of Commerce and Industry of Ukraine or its authorized chambers. Each individual contract can only have a separate certificate to be issued and only in respect of obligations which have already come due;
• self employed person can get the certificate of force majeure free of charge, but application processing will cost 3300 hrivnas with tax.
• the certificate will confirm the occurrence of force majeure from the date of inability to fulfill obligations to the date when this certificate was issued. If the quarantine is extended, you will have to apply for a force majeure certificate again.

If you have doubts whether your case is a force majeure or not, you can directly consult CCI for free. Law firms can also provide this information but you will have to pay for it.

Do not overestimate the certificate of force majeure. Analyze the structure of your current liabilities; note that there are other tools and opportunities to minimize losses. You can try to review or terminate the Contract due to changes in circumstances, or changes in leasehold law.

Try to set a dialogue with your contractors and always consult with lawyers.

Best regards,
Ekaterina Levchenko
Lawyer of Chernihiv CCI