On January 12, 2020, the World Health Organization named the outbreak Wuhan Viral Pneumonia as 2019 Novel Coronavirus (2019-nCoV). The National Health Commission of People's Republic of China issued Notice No. 1 in 2020, which includes pneumonia infected by the Novel Coronavirus into the B class infectious disease stipulated in the Law of the People's Republic of China on the Prevention and Treatment of infectious diseases, and taking measures of A class infectious diseases to prevent and control.
Under these circumstances, can the current outbreak of Novel Coronavirus constitute Force Majeure?
We remember that, according to article 117 of the Contract Law and other relevant PRC regulations Force Majeure refers to unforeseeable, unavoidable and unconquerable objective circumstances that make impossible for the parties to performing their obligations. Under Article 117, as under article 180 of General provisions of Civil Law, civil liability shall not be borne for failure to perform civil obligations due to force majeure. If the law provides otherwise, such provisions shall prevail.
Moreover, under article 118 of the Contract law, if either Party is unable to perform the contract due to force majeure – it shall promptly notify the other party so as to mitigate the possible losses to the other Party and shall provide evidence within a reasonable time limit.
Occurrence of force majeure needs to be ascertained on a case by case basis. In June 11, 2003 the PRC supreme people's court issued "Notice of the supreme people's court on the trial and execution of the people's court in accordance with the law during the prevention and treatment of SARS" (the "Supreme Court's Notice") in order to make clear with "SARS" epidemic prevention and control of the processing methods of civil cases.
According to the Supreme Court's Notice, the fact that (i) administrative measures taken by the government and relevant departments to prevent and cure the SARS epidemic directly cause impossibility to fulfill the contract obligations, or that (ii) "SARS" epidemic causes disputes between the Parties due to impossibility to perform contracts, constituted a force majeure event.
As stated above, even if the Supreme Court's Notice is specific to SARS, it is also a important reference to the current Novel Coronavirus.
Besides this, we shall consider that the China Council for the Promotion of International Trade ("CCPIT") issued a Notice (the "CCPIT Notice") on January 30, 2020, which clearly states that according to the articles of association of CCPIT approved by the state council, the CCPIT may issue a certificate of force majeure.
In case of failure to perform the international trade contract as scheduled or failure to perform the international trade contract due to the outbreak of pneumonia caused by the Novel Coronavirus, the enterprise may apply to CCPIT for proof of related to force majeure.
Please check http://www.CCPIT.org/Contents/Channel_4256/2020/0130/1238885/content_1238885.htm for the "CCPIT Notice". It appears that CCPIT evaluation is mainly based on the relevance between the outbreak and the performance of the contract signed by Parties.
In conclusion, although there is not (yet) any laws or regulations stating that Novel Coronavirus constitute force majeure, we can infer a high possibility that it will have a big impact on many existing agreements.
Companies outside China should communicate with their PRC counterparts to understand whether performance of contracts from them is at risk, and potentially activate insurance remedies.
Companies in China should ideally obtain CCPIT force majeure certification for disclaiming their duties with counterparts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
