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Coronavirus – Commercial law overview – Russia

  • Russia
  • Commercial agreements
  • Coronavirus
  • Coronavirus - Country overview

20-03-2020

The spread of COVID-19 has extended to Russia and is affecting commercial and contractual relationships between market actors.

In this alert, we will look at the applicability of force majeure clauses in contracts under Russian law, and touch upon certain other relevant issues for commercial contracts.

Force Majeure in Moscow and the Moscow region

The Mayor of Moscow’s decree of 14 March 2020 - and the Governor of Moscow Region’s resolution of March 16 - establish that the spread of COVID-19 is to be recognized as a force majeure circumstance.

The decree and the resolution describe the spread as an “emergency and unavoidable circumstance that has entailed the introduction of a high-alert regime in accordance with Federal Law No. 68-FZ of 21 December 1994 ‘On the Protection of the Population and Territories from Natural or Man-Made Disasters’”. These acts apply to all companies based in Moscow and Moscow Region.

Force majeure is such a circumstance, which is unforeseeable, unavoidable and irresistible.

The COVID-19 virus corresponds to these main signs of force majeure established by Article 401 of the Civil Code of the Russian Federation.

What legal effect this part of the decree has in reality, is somewhat uncertain. The presence or absence of force majeure circumstances are and remain a fact to be ascertained in each individual case in the relationship between the parties of a contract.

Depending on the nature of the contract and of the parties’ activities, the epidemic and the measures introduced to combat it may have widely different effects on their ability to fulfil their contractual obligations, and it should not be assumed that the current set of circumstances may be considered as force majeure in all types of contracts regardless of their content.

Public authorities, including the Mayor of Moscow or the Governor of Moscow region, have no formal authority to regulate private parties’ contractual relations in this way. Nevertheless, it can be assumed that the courts will in any future dispute between parties of a contract give a certain amount of weight to the mayoral decree in their consideration of whether force majeure circumstances are present.

Force majeure outside Moscow

As for other regions and constituent entities of the Russian Federation, the Chamber of Commerce and Industry at federal level has already begun to issue conclusions. These are that the coronavirus is a force majeure circumstance insofar as export supplies have been disrupted. In this regard, the same circumstances for one obligation will be force majeure, but not for another. Therefore, the courts will need to carefully study whether the “anti-coronavirus measures” somehow influenced the ability to fulfill the obligation or not.

For example, in case No. А04-665/2020, the State Commercial (Arbitrazh) Court of the Amur Region recognized the impossibility of physically holding a company’s general meeting of members (shareholders) due to travel restrictions imposed on travelers from China. Conducting the general meeting through absentee ballot was not provided for in the company’s Articles of Association.

In our opinion, even outside of Moscow and the Moscow region, the spread of coronavirus infection and the measures taken to combat it will most likely be considered by the courts as amounting to force majeure circumstances in most contractual relations, assuming the parties can show some concrete effect on the parties’ ability to fulfil their obligations.

Termination of an obligation by impossibility of performance

In theory, the coronavirus and its consequences can also cause the termination of contractual obligations, not simply release the parties of liability for their failure to perform the contract, as with force majeure. Article 416(1) of the Civil Code of the Russian Federation provides the following:

An obligation is terminated by impossibility of performance if the impossibility was caused by circumstances for which neither party is responsible.

In most cases under this provision, the obligation should be and remain physically unenforceable, even if the grounds that caused the impossibility of performance were to disappear.

The impossibility of performance could also be legal in nature, for example, where it is physically possible to fulfill the obligation, but doing so would be in violation of the law. This situation is regulated by Article 417(1):

If, as a result of issuance of an act (decision) by a state authority, the performance of the obligation becomes impossible in full or in part, the obligation is terminated in full or in the respective part.

In both cases, the impossibility should be permanent and final, and not temporary. The main criterion is the constant ultimate impossibility to perform, by which it can be distinguished from force majeure circumstances.

The exception is if it is reliably known that the circumstances that caused the impossibility to perform, although temporary, will not disappear before the obligation expires.

Significant change in circumstances

In our opinion, the coronavirus and its consequences can also be considered as a significant change in circumstances. In accordance with Article 451 of the Civil Code of the Russian Federation:

A significant change in the circumstances from which the parties proceeded in concluding the contract shall constitute grounds for its amendment or termination, unless otherwise specified by the contract or indicated by its nature.

In case of force majeure, the circumstances completely hinder the performance of the obligation, while in case of a significant changes in circumstances, they may merely complicate performance.

The change in circumstances is considered significant if the circumstances have changed to such an extent that if the parties could have envisaged such changed circumstances, they would not have concluded the contract, or the contract would have been concluded on significantly different terms.

A significant change in circumstances does not entitle the party upon which the obligation lies not to perform the obligation, and nor does it relieve the party of liability. Instead, that party is only entitled to seek to terminate or amend the contract. This right is exercised by applying to the courts if an amicable solution cannot be reached with the counterparty.

Suspension of court proceedings, including in State Commercial (arbitrazh) courts

In accordance with resolution No. 808 of the Presidium of the Supreme Court of the Russian Federation and the Presidium of the Council of Judges of the Russian Federation adopted on 18 March 2020, due to the coronavirus, physical access to all courts will be restricted from March 19 to April 10 inclusive. Only cases of an urgent nature, as well as cases of summary and writ proceedings, will be considered. Documents to the courts should be sent by mail or via the internet.

For example, the following is indicated on the website of the Moscow State Commercial (arbitrazh) Court:

  • cases with a consideration period of ten days are considered urgent
  • physical case files can only be accessed to prepare an appeal or cassation appeal following an already pronounced first-instance decision
  • writs of execution can only be given for rulings on the adoption of interim measures (injunctions)

Contact a commercial lawyer from our team to learn more about the coronavirus effect today.

For more information contact

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