BIAC Webinar on "Application of Force Majeure Clause: Should COVID 19 be included?"

Force majeure clauses are related to the common law doctrines of impossibility of performance and commercial impracticability. Experts define a ‘force majeure event’ as something that makes performance impossible or illegal. Under those clauses, COVID-19 may not be a force majeure event unless the project is in a locality that has ordered all non-essential businesses to cease operations. Force majeure clauses typically are construed narrowly so that performance will only be excused ‘if the event that caused the party’s non-performance is specifically identified.’ Most clauses contain a broad list of force majeure events such as, acts of God, war, hurricanes, fires, earthquakes, terrorism, etc. But it is less common for a clause to expressly include events like epidemic, pandemic, or quarantine, which are more clearly COVID-19 related. If a clause includes one of those terms, that may support an argument that COVID-19 and related social distancing orders were intended to be potential force majeure events.Clauses typically require that the burden of proof lies with the party claiming to be affected by a force majeure event. In that case, the party claiming force majeure based on COVID-19 may need to provide additional information showing how the pandemic impacts its performance. This may be easier for some elements of the work than others. Supply chain disruptions, for example, are well-documented and may result in a delay of parts being delivered to a project site. But the same logic does not necessarily extend to project personnel, who may be able to continue performance subject to a government’s social distancing guidelines. In those circumstances, the affected party may need to explain why the guidelines cannot be implemented. If they cannot and a standstill is required, the affected party may need to provide regular updates on when work might resume and what, if any, return-to-work protocols may be required. Many governments have already issued return-to-work guidance that may be helpful in gauging when and how work can resume safely.In the circumstances, we would suggest rational application of Force majeure clause and even there is no Force majeure clause in the original contract, such clause may be inserted in the new settlement contracts in order to mitigate the huge bulk of ongoing disputes. Our thrust will also be to dispute resolution through ADR mechanism in all upcoming cases.We have a lineup of expert speakers who will address application of Force Majeure Clause in commercial contracts and opine from their own perspectives, should COVID­-19 be considered for such clause.

Posted by Bangladesh International Arbitration Centre (BIAC) on Sunday, July 26, 2020