The Russian Supreme Court issued two consecutive reviews of certain issues of judicial practice pertaining to application of legislation and measures aimed at preventing the spread of COVID-19 in Russia. They were published respectively on April 21 and April 30, 2020. The reviews address multiple issues related to the legal consequences of pandemic in civil, criminal, administrative and procedural law. In this contribution we address the Court’s findings regarding COVID-19 as force majeure and the ground for termination or adjustment of the contract.
COVID-19 as Force Majeure
The Court confirmed that epidemical situation and restrictive measures can be recognized as force majeure circumstances. However, the court emphasized that “recognition of the spread of the novel coronavirus infection as force majeure cannot be universal for all categories of debtors, regardless of their type of activities, conditions in which they are implemented, including the region in which an organization operates.” Therefore, force majeure defence shall be granted only on a case-to-case basis after thorough consideration of the facts of a particular case, “including the time period for the fulfilment of the obligation, the nature of the outstanding obligation, whether the debtor acted reasonably and in good faith, etc.”
Thus, the Court directly held that the circumstances caused by the threat of spread of the novel coronavirus infection, as well as measures taken by the public authorities and local self-government bodies to limit its spread, can be recognized as force majeure, if their compliance with the above criteria of such circumstances is determined, as well as the causal link between these circumstances and failure to fulfil obligations.
Notably, the Court found that under exceptional circumstances, force majeure can be invoked in order to excuse the non-performance of a pecuniary obligation.
COVID-19 as the ground for termination or adjustment of the contract
The Supreme Court held that the epidemic situation and the related restrictive measures can be recognised as sufficient ground for judicial termination or amendment of the contract, if, subject to anticipation of these circumstances, the contract would not have been concluded or would have been concluded under significantly different terms and conditions.
Interestingly, the Court found that adjustment of the contract is possible only in exceptional cases, when the termination of the contract is contrary to the public interest or will cause damage to the parties and significantly exceeding the costs required to implement the contract under conditions amended by the court.
Currently, many businesses are preparing for disputes caused by the disruption of production chains and contractual delays caused or exacerbated by the COVID-19 crisis. In this regard, the Russian Supreme Court’s reviews can be a help in evaluation of chances to prevail.