Martial law as force majeure

We would like to inform you that the website of the Ukrainian Chamber of Commerce and Industry (hereinafter referred to as the UCCI)¹ has published a general official letter regarding the certification of force majeure in connection with the military aggression of the Russian Federation in Ukraine. The UCCI confirms the following terms of force majeure (force majeure events): from February 24, 2022 until its official end.

Below we offer you our analysis of the impact of force majeure on civil and labor relations.²

1. Force majeure confirmation procedure

As a general rule, both in contractual³ and non-contractual obligations, a document issued by the UCCI is used as confirmation of the fact of force majeure.

According to the Regulations of the UCCI, the fact of force majeure is confirmed by a certificate, which is issued for each specific contractual or non-contractual obligation on application to the CCI of Ukraine or regional chambers. At the same time, the general letter published by the UCCI on its website is not provided for by law.

However, due to the current actual situation in Ukraine it is not possible to apply to the UCCI for a certificate for each individual obligation, and as we understand from the information on the website of the UCCI, as well as from the contents of the letter, it was published as an analogue of a general certificate for the period of martial law.

At the same time, today we cannot unequivocally state which way in the future (after the normalization of the political situation and the abolition of martial law) the judicial practice will go in the matter of recognition or non-recognition of the specified letter of the UCCI as documentary evidence of force majeure in relation to each specific obligation.

In particular, we cannot exclude any attempts to challenge the fact of confirmation of force majeure by such a letter by counterparties for whom the reference to force majeure would be not profitable.

2. Consequences of force majeure

According to the law, force majeure exempts from liability for violation of an obligation (penalty: fine, penalty), but not from the obligation itself.

However, additional conditions often are included in the agreements of the parties, for example, termination of the validity of the agreement if the force majeure lasts for a certain number of days (for example, 90 days, etc.).

Also in the contract the parties can independently establish a list of cases of force majeure, but according to generally accepted practice, force majeure clauses usually include a reference to war, military actions, etc.

In this regard, in order to assess the situation under each contract, it is necessary to study its conditions in terms of force majeure and the existence of conditions for terminating the contract due to its duration.

As for labor relations with employees, according to the court practice we analyzed, by analogy with the Civil Code: force majeure does not exempt from the obligation to pay wages (for example, to pay for downtime), but exempts from liability for failure to fulfill obligations due to force majeure major (for example, from compensation for non-pecuniary damage due to delayed payment of wages).

3. Condition of exemption from liability

In addition, it should be taken into account that the condition for exemption from liability with reference to force majeure is the existence of a causal relationship between the force majeure event and the impossibility of fulfilling specific obligations (under a specific contract or legal act).

Thus, force majeure does not exempt from liability for failure to fulfill absolutely all obligations, but only in cases where the subject can prove that the failure to fulfill the obligation was directly due to force majeure.

Therefore, it will be necessary to prove in each specific case based on the content, nature and specifics of a particular obligation: whether the force majeure affected its performance or not.

For example, if today we are talking about an obligation to transfer funds abroad under a foreign economic activity contract, then for the period of the moratorium of such operations established by the NBU, the causal relationship here is obvious, and this obligation will unambiguously be exempted from liability for its failure.

As for internal non-cash payments, the performance of works and services, here the issue of exemption from liability with reference to force majeure may depend, for example, on the region where the enterprise is located, the presence of military actions in such a region, or other specific circumstances that impede the implementation obligations.