Is the COVID-19 Pandemic a Force Majeure Event? - YouTube

In December of 2019 a new corona virus was discovered in Wuhan China. In the

weeks and months to follow it spread around the globe bringing with it

illness and triggering dramatic government responses now with global

business disrupted we'll take a look at if and one the corona virus may trigger

a provision known as force majeure or act of God hello and welcome to talks on

law i'm Joel Cohen and we are joined remotely by Jose Moran a partner at

Baker McKensie where he leads that firms energy, infrastructure, and mining

practice group, Jose, welcome and before we get started on the corona virus maybe

you could lay some foundation what is a force majeure provision the term force

majeure also reflect referred to as an act of God addresses scenario when

performing contract obligations becomes impossible difficult or onerous to

perform due to exceptional events outside of either's parties control with

that background how do you apply the analysis of kovat 19 or the government

shutdowns to force majeure provision generally there are two approaches for

contracts governed by common law the first approach is to have an open or non

exhaustive list of events or clauses include a list of example events force

majeure events that we have seen expressly listed may apply to Kabat 19

such as an epidemic or pandemic a government action or indirect or

intervention a quarantine a shortage of labor or materials if there's one

takeaway from the recent events particularly light of the very narrow

construction that courts have applied in certain jurisdictions is to a pandemic

an or epidemic language to future force majeure clauses now sometimes these

lists are open-ended and leave open the possibility of events unforeseen by the

drafters how are courts interpreting that parties must be very careful

placing too much reliance on a catch-all language

and sort of an open list for example New York courts a New York law construes

force majeure provisions very narrowly and a New York court typically will find

an event to be covered by a catch-all only if it's of the same nature and kind

and those as those events that are specifically listed you mentioned there

are two types of force majeure provisions we talked about one

what's the second approach the second approach is to have a general objective

test for example an event beyond control of the parties an event that could don't

recently have been provided against or that could not recently have been

avoided or an event that is not attributable to either party now

regardless of the type of force majeure provision or the drafting are their

duties or obligations of a party even where the force majeure provision may be

triggered the affected party cannot generally just sit on its hands there's

often an obligation on the affected party to mitigate the effects of a force

majeure event for example sourcing alternative supply or labor even if that

is more expensive or moving personnel to avoid restrictions we perhaps between

two operating projects plants or assets at the very least there's an obligation

to mitigate and it will require talking to the other party to the agreement and

trying to make alternative arrangements and perhaps creating an amendment to the

agreement or what its so called a reopener a follow-up question Jose

sometimes these force majeure provisions have exceptions or carve outs what are

you seeing in the market there's almost always a list of exclusions an

obligation to pay money is perhaps the most frequently seen but matters such as

economic hardship reductions in demand and sorta gist of labor are commonly

seen particularly in projects in developed countries these exclusions can

be extremely important as they can completely negate otherwise valid claims

and for existing projects they are not always negotiated as fully and as

carefully as they should and lastly before we let you go if the force

majeure provision is triggered what are some of the

remedies that the parties may have generally an excuse against known

performance to the extent that the force majeure event affects performance the

affected party has no liability for non performance often an express right of

suspension and lastly termination of the contract for prolonged force majeure

periods Thank You Jose Moran for your time and for those that are watching

remember this is a global issue so each individual case will depend on the

circumstances of that case the law governing in that state or country and

the specific drafting of the governing contract i'm joel coen thanks for

watching talks on law

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