← All media

“Economic and sanitary unpredictability” — Alexandra Khaustova for the Legal Information Agency

Quarantine actions, the oil crisis and the ruble exchange rate weakening in most cases do not release market actors from their obligations. In practice, such situations are often not recognized as force majeure. In other words, travel agencies, event organizers, museums, theaters, fitness clubs, and many other companies will have to take all the losses.

Sergey Sobyanin, Mayor of Moscow, has already declared the coronavirus pandemic a force majeure event. However, his decree only concerns the reasons for the implementation of an emergency regime in the capital, while potential difficulties for business aren’t honored. According to the Civil Code of the Russian Federation, "force majeure" refers to "extraordinary and unavoidable circumstances". Losses, unprofitable transactions and economic disasters are not recognized as such. In addition, the occurrence of such circumstances does not in itself terminate the obligation.

Alexandra Khaustova, senior lawyer of Prime Advice Law Office for the Legal Information Agency:

It is obvious that a pandemic is an emergency – it is not a normal situation and market actors could not have foreseen and prevented it. In addition, the COVID-19 outbreak caused the authorities to take measures to counteract it, including a ban on events, closing state borders, imposing quarantines, and a number of others. Accordingly, courts must assess the causal relationship between such restrictions and the consequences of a breach of contractual obligations.

However, the occurrence of force majeure only creates legal consequences in the form of exemption from liability for improper performance of obligations but is not the basis for their termination. In other words, the parties to the agreement are given the right to choose their preferred mechanism for resolving the situation when the violation was not caused by the guilty actions of one of the parties.

In particular, the organizers of events (seminars, exhibitions, other cultural and miscellaneous events) have the right to postpone their dates without the risk of incurring financial losses in the form of fines, penalties, and other sanctions stipulated by law or contract. In turn, the user of such services can cancel the contract and receive an advance payment. However, its losses (for building stands and other) are not subject to compensation by the organizer. Since the organizers often also bear the associated expenses (for renting the site, remuneration for speakers, and other), the postponing option seems more favorable.

Read more