Building law and regulation in Switzerland during Covid-19

1. Is there construction-relevant COVID-19 regulation?

Based on its emergency right, the Swiss Federal Council issued the Ordinance on Measures to Combat the Coronavirus (COVID-19) of 13 March 2020.

According to article 7d of the 2nd COVID-19-Ordinance from 13 March 2020, employers in the main and ancillary building trades and in industry are obliged to comply with the recommendations of the Federal Office of Public Health regarding hygiene and social distance. To this end, the number of people present on construction sites or in companies must be limited accordingly, the organisation of construction sites and companies must be adapted and crowds of more than 5 people in break rooms and canteens must be prevented.

2. Subsidies and other government support for employer, contractor and other involved parties? (generic, high level only).

The waiting period for short-time work has been abolished; guaranteed bank loans are available to companies through recognised guarantee organisations; in some cases, there are also other measures at cantonal level.
The Federal Council has also announced further support measures with a volume of a further CHF 32 billion. These are expected to be available from 26 March.
In addition, there are possibilities for deferring social security payments and extending payment deadlines for tax payments.

Although the concept of force majeure is recognised by the Swiss courts, there are no provisions in Swiss law on this matter. The legal concepts that are most similar and on which one relies for the defence of force majeure are the impossibility of performance (Art. 119 of the Swiss Code of Obligations) and the change of circumstances in the sense of hardship or "economic impossibility" (clausula rebus sic stantibus). Based on the freedom of contract, the parties are free to include provisions on force majeure in their agreement. Therefore, each individual case must be assessed separately.

With regard to an extension of the deadline, the provisions of the specific contract take precedence. If the Contractor is entitled to extend the deadline, no contractual penalty is due in case of a justified extension of the deadline. As a rule, damages are only payable if the contractor is at fault. This does not appear to be the case with COVID-19.
If the contract refers to the provisions of the SIA standard 118 and does not contain a contrary provision, there is an extension of the deadline in the event of delays for which the contractor is not responsible, even though the contractor has taken additional precautions (e.g. natural influences, delivery disruptions, official measures).  The contractor has to notify the client and to propose acceleration measures. Such measures may only be taken with the consent of the client. The costs arising from this shall be borne by the client.

In the event of extraordinary circumstances, there is a claim to additional payment in accordance with Art. 373 Para. 2 of the Swiss Code of Obligations and Art. 59 of SIA Standard 118, if unforeseeable circumstances prevent completion or make it excessively difficult. Here too, however, the specific contract for work and services must be checked to see whether any deviating agreements exist.

4. Does the Epidemic give rise to termination rights to either party?

Here, as well, the concrete contract must be checked for agreements deviating from the law.

According to article 184 of SIA standard 118 and article 377 Swiss Code of Obligations, the client may terminate the contract at any time against full indemnification of the contractor or, in the case of articles 107 et seq. Swiss Code of Obligations, in the event of default by the contractor, withdraw from the contract after setting a deadline.

The law does not provide for a special right of termination due to an epidemic, nor does it exist in the vast majority of contracts.

5. Do the measures currently being taken in relation to the Epidemic amount to change in law? What are the price and time consequences?

No, currently not.

6. Are there any other issues relevant to COVID-19 the construction industry should be aware of?

The applicable rules may change over the next days and weeks, therefore the legal situation should be regularly monitored.

Dr Sibylle Schnyder, LL.M.
Partner
Zurich