13

2020

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02

Force Majeure "Certificate: Misleading and Response

Recently, the issue of the China Council for the Promotion of International Trade (CCPIT) handling the "force majeure certificate" has attracted widespread attention from the media and legal community.


Force Majeure "Certificate: Misleading and Response

 

 

 

Author: Lawyer Chen Ju

 

 

 

Unit: Guangdong Legal Shengbang Law Firm

 

 

 

 

Recently, the issue of the China Council for the Promotion of International Trade (CCPIT) handling the "force majeure certificate" has attracted widespread attention from the media and legal community.

 

 

 

 

1、 Misleading

 

 

China Council for the Promotion of International Trade wrote on its Chinese website: "If the impact of the pneumonia epidemic caused by the novel coronavirus infection makes it impossible to perform or cannot perform the international trade contract on schedule, the enterprise can apply to us for a factual certificate related to force majeure." It also claimed on its English website that: Force majeure certificates have been recognized by governments, customers, chambers of commerce and enterprises in more than 200 countries and regions around the world, and it is widely accepted overseas

On the Internet, there are a lot of news headlines that read: "CCPIT Guidelines for Handling Factual Certificates of Force Majeure" and "CCPIT XX issued the first batch of Factual Certificates of Force Majeure for enterprises in the COVID-19". Some information channels claim that "after proving the facts related to force majeure, the parties can partially or completely exempt themselves from the responsibility of non performance, incomplete performance, and delayed performance of the contract." However, some websites directly claim that the relevant certificates "have strong enforcement force outside the territory.

The above titles and content are misleading, and some claim that the rules are clearly incorrect.

In fact, whether in terms of form or content, the certificates issued by relevant institutions are "factual". As for whether they constitute "force majeure", this is not something that the institution issuing these certificates can determine, nor can the entity applying for these certificates make a claim. The Chinese expression of the China Council for the Promotion of International Trade is also conditional judgment, but the right to make judgment is "sent" to the applicant who has obtained the certificate in a vague state. Legally speaking, we should not refer to such certificates as "force majeure certificates" in order to avoid misunderstandings and incorrect expectations among ordinary people. For example, in the Certificate No. 203305B0/000331 issued by the China Council for the Promotion of International Trade, This only proves that "according to the Notice of the General Office of the Zhejiang Provincial People's Government on Delaying the Resumption of Enterprises and the Opening of Schools issued by the Zhejiang Provincial People's Government on January 27th, all types of enterprises in the province shall resume work no earlier than 24:00 on February 9th (Sunday) and start normal work on February 10th (Monday)." (The English translation strictly follows the above Chinese content.), Whether its legal nature belongs to "force majeure" or other obstacles must be determined based on actual transactions. In fact, in the press release of the China Council for the Promotion of International Trade, the subject who previously recognized the "force majeure certificate" did not appear in the court or arbitration commission (arbitration court). In a large number of disputes, only the court and arbitration institution have the power to make the final determination of the "force majeure".

 

2、 Response

 

Whether this epidemic constitutes force majeure or not, in both civil law and common law systems, judgments need to be made based on the laws of the jurisdiction, contract terms, and specific circumstances of the case. Among them, the plaintiff (or claimant) needs to prove whether and to what extent the relevant facts meet the standards of force majeure in the jurisdiction where the competent court is located. Relying solely on such a 'certificate' is far from enough.

When responding to the current epidemic, various enterprises should actively notify, communicate, fulfill in good faith, take the initiative to remedy, and try to negotiate well. Regarding business partners in different regions, there should be a slight emphasis.

 

 

For civil law regions such as the European Union, the criteria for determining "force majeure" can be found in a clause of the International Association of Consulting Engineers. The association was initiated by three European countries and can basically represent the judgment standards of the continental legal system. In Article 19.1 of the FIDIC Red Book, there is a widely accepted criterion for determining force majeure:

 

 

 

 

a) Which is beyond the control of one party,

 

 

 

b) which such Party could not reasonably have provided against before entering into the Contract,

 

c) which, having arisen, such Party could not reasonably have avoided or overcome,

d) which is not substantially attributable to the other Party。

In common law countries such as the United Kingdom, the United States, and Australia, courts do not have a unified standard for judging force majeure. Whether this epidemic constitutes force majeure depends on whether the claiming party of "force majeure" has the ability to bear the following burden of proof:

a)It could not perform its obligations due to the relevant event,

b)  Inability to perform was beyond its control,

c) There were no reasonable steps the party could have taken to avoid the event or the consequences。

In fact, even in Chinese Mainland, whether the epidemic situation of COVID-19 constitutes force majeure still depends on multiple factors in specific cases. The materials issued by the China Council for the Promotion of International Trade or any such institution do not have qualitative power or ability.

Regarding this issue, in terms of domestic disputes, the opinion of the Beijing First Intermediate People's Court on "appropriately applying the principle of fairness to promote the continuous performance of lease contracts for factories and sites affected by the epidemic" is relevant and effective. As for the application and determination of other jurisdictions, please refer to Mr. Yang Liangyi's article "The novel coronavirus Epidemic and Force Majeure in International Business Contracts". In short, the issue of "whether the COVID-19 constitutes force majeure", which is currently under heated discussion, still needs professionals to combine specific cases to effectively respond.