Law and regulation of force majeure in Luxembourg

1. Is there legislation on force majeure in your law system?

Yes. Article 1148 of the Luxembourg Civil Code covers situations where contractual obligations cannot be performed because of an event of force majeure.

2. If so, what is the text of the force majeure clause in your civil code?

Article 1148 of the Luxembourg Civil Code stipulates that: “No damages shall be due when, as the result of superior force [force majeure] or accident, the debtor has been prevented from delivering or doing what he has bound himself to deliver or to do, or has done what was prohibited”. 1 Art. 1148. Il n'y a lieu à aucuns dommages et intérêts lorsque, par suite d'une force majeure ou d'un cas fortuit, le débiteur a été empêché de donner ou de faire ce à quoi il était obligé, ou a fait ce qui lui était interdit.

3. Is this mandatory or are parties free to regulate force majeure clauses?

The parties are free to agree on alternative rules applicable to force majeure. 

4. If it is regulatory, to what extent are parties free to regulate such clauses (e.g. do parties have to take principles of reasonableness and fairness into account) and if so, in what way?

The principle of contractual liberty allows the parties to contractually determine how the force majeure clause will apply, subject to the principle of good faith and the prohibition of unfair terms in consumer contracts.

By way of example, and subject to the above reservations, the parties could limit the application of force majeure to specific situations or even completely exclude the application of the force majeure clause in cases of non-performance.

5. If a contract just says you can terminate for “force majeure” is there any guidance/case law as to what this means (in the absence of it being defined in the relevant contract)?

First of all, it is important to verify whether the contract allows a party to unilaterally terminate the contract in the event of force majeure (in the absence of a specific provision to this effect, the affected party would need to apply to the court for termination).

As for the interpretation of the concept of force majeure, legal doctrine and case law provide that the following three criteria must be cumulatively met in order for an event to qualify as a force majeure:

  • It has to be external with respect to the debtor;
  • It had to be unforeseeable at the time of entry into the contract; and
  • It has to be unsurmountable (irrésistible), i.e. render the performance of the obligation impossible (and not only more difficult or onerous).

Luxembourg case law (as is likely the case in other jurisdictions as well) is generally reluctant to admit force majeure as grounds for exemption from liability in the event of non-performance of a contract. We have no knowledge of Luxembourg case law examining the particular question of whether an epidemic may qualify as a force majeure event, however, French case law could be relevant to a Luxembourg judge ruling on the case. 

In this respect, one can find examples (especially in the case law concerning services offered by travel agencies) where the qualification of force majeure was refused by the courts on the grounds of e.g. the fact that an epidemic was recurrent in the country in question (and thus not unforeseeable), that the virus in question was non-lethal (and thus not unsurmountable) or that the epidemic was limited to a certain geographical zone (and thus, again, not unsurmountable). Bearing in mind the lethality of the Coronavirus, its rate of propagation and its unprecedented scale, as well as the restrictive measures adopted by the governments (which themselves may, in some cases, render continuance of economic activity impossible), one may expect that the above reservations made by the courts when parties argue force majeure in the event of an epidemic could be less relevant in some cases of non-performance of the contract due to Coronavirus.

A review should be conducted on a case-by-case basis, bearing in mind, in particular, the strict criteria of (i) unforeseeability of the event at the time of entry into the contract (it is not clear at what point the global impact of Coronavirus will be deemed to have been foreseeable) and (ii) its unsurmountability (not all businesses are affected by Coronavirus in the same measure and not all of them are unable to perform their contractual obligations because of it).

6. Is there a difference in all of this in B2B transactions versus B2C transactions?

The above applies to all contracts in general, except that, for B2C transactions, any contractual regulation of force majeure may not cause a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer (unfair term).

7. Is there a difference in judgement when the force majeure clause is laid down in a contract or in T&C’s?

In accordance with Article 1235-1 of the Luxembourg Civil Code, a force majeure clause (and any other clause) laid down in the T&Cs will only be applicable if the party who did not establish the T&Cs was in a position to know them and if, according to the circumstances, it is deemed to have accepted them. 2 Article 1235-1. Les conditions générales d'un contrat préétablies par l'une des parties ne s'imposent à l'autre partie que si celle-ci a été en mesure de les connaître lors de la signature du contrat et si elle doit, selon les circonstances, être considérée comme les ayant acceptées.

This rule is applicable to both B2B and B2C contracts. One should bear in mind, however, that it applies only to T&Cs which were not negotiated by the parties (but rather were pre-formulated by one party).

8. Do you have examples of force majeure clauses which you think (would) work well in practice?

Yes. Please see below:

“Neither Party shall be liable to the other for the temporary or definitive failure to perform all or part of its obligations under this Agreement when such Party’s (the “Affected Party”) performance is prevented or delayed inter alia, by flood, drought, fire, war, riot, act of terrorism, epidemic, act of God or act of government or any other cause beyond the Affected Party’s reasonable control (“Force Majeure Event”). 

The Affected Party shall immediately inform the other Party in writing of the existence of the Force Majeure Event and that such Force Majeure Event has delayed or prevented performance of its obligations and shall take all action within its power to comply with its obligations, provided that it is no longer affected by a Force Majeure Event.

The affected Party must use reasonable endeavours to remove, overcome or minimise the effects of the Force Majeure, but is not obliged to undertake any measures to overcome the effects of Force Majeure which are not commercially or economically feasible.

The Affected Party shall, as soon as reasonably practicable after becoming aware of such Force Majeure event or circumstance, notify the other Party of:

  1. reasonably full particulars of the Force Majeure, the obligations affected by it and the extent of its effect on those obligations;
  2. an estimate of the period of time required to enable it to resume full performance of its obligations; and
  3. where possible, the means proposed to be adopted to remedy or abate the Force Majeure.

In case of Force Majeure, the Agreement shall be suspended for the duration of the Force Majeure Event, and the period of this Agreement shall be extended for a duration equivalent to that of the Force Majeure Event.

Should the Force Majeure Event endure for a period in excess of three months, then either Party shall be entitled to terminate this Agreement by written notice to the other Party.

For the avoidance of doubt, the application of the Force Majeure Event shall not be subject to any additional conditions other than those expressly set out herein (including, for the avoidance of doubt, any conditions required under Article 1148 of the Luxembourg Civil Code)”.

9. Do you (already) have an example of a force majeure clause which is “corona future proof” or “virus proof” and you willing to share that with us?

N/A.

10. Are there any alternative remedies that a party could consider based on being unable to perform a contract due to the corona virus?

Unlike certain European countries, Luxembourg law contains no express provisions allowing a party to an agreement to seek a judicial remedy when the circumstances which led to the party entering into such agreement have fundamentally changed and the parties could not have foreseen this (théorie de l’imprévision) and where such change of circumstances renders the performance of the agreement by a party excessively costly or difficult.

However, certain legal authors have expressed views in favour of allowing a judicial remedy in such case. The Luxembourg Supreme Court, in its decision of 24 October 2013, ruled on a case in which one of the parties invoked the théorie de l’imprévision as a defence against another party seeking enforcement of a sale agreement. While the Court did not rule in favour of the plaintiff, it did confirm the lower instance courts’ position that, in that particular case, the minimum conditions for the application of the théorie de l’imprévision have not been met, rather than refusing the application of this theory on the grounds of the principle that all contracts must be complied with. 

This has been perceived by certain Luxembourg legal doctrines as the Luxembourg Supreme Court being potentially favourable to allowing an agreement to be challenged on the grounds of the théorie de l’imprévision if the conditions are met. 

For the time being, however, in the absence of conclusive Luxembourg case law, any claims based on the théorie de l’imprévision would have to be tested before the courts. 

The parties may want to include change of circumstances clauses in their contracts providing that, where the circumstances of the contract become significantly altered, the parties will apply some alternative set of rules or will renegotiate the contract in good faith.

11. Is there anything else we should know or you would like to share on this topic?

It is worth noting that it is generally considered that an obligation of payment in cash may normally always be performed and, therefore, cannot be exempted on the grounds of force majeure.

Portrait of Gérard Maitrejean
Gérard Maitrejean
Partner | Avocat à la Cour
Luxembourg
Portrait of Pawel Hermelinski
Pawel Hermelinski
Partner | Avocat à la Cour
Luxembourg
Sylvain Elias