Law and regulation of force majeure in Russia

Yes, Russian law recognises the concept of force majeure.

According to Section 3 of Article 401 of the Civil Code of the Russian Federation, unless otherwise provided by law or in a contract, a party that has not performed or has unduly performed a contractual obligation relating to an entrepreneurial activity shall be liable for the consequences arising from this failure, unless the party proves that proper performance was impossible due to a force majeure event (i.e. an extraordinary and unavoidable circumstance).

As a general rule, force majeure events do not include the violation of contractual obligations by counterparties, lack of available goods on the market or a party’s poor financial standing, as such circumstances can normally be overcome by taking reasonable and appropriate measures.

Yes, in light of the principle of “freedom of contract”, parties are free to regulate force majeure clauses.

The legislation does not expressly limit the extent to which parties may regulate force majeure clauses and tailor such clauses to their own needs.

Usually, parties set out a list of circumstances in their contracts which are considered force majeure events (e.g. epidemics, embargoes, wars, acts of God etc.). However, even if a particular circumstance is specified as an event of force majeure in a contract, the court may refuse to recognise it as such in a particular case if it is not extraordinary or unavoidable. We note that the court’s qualification may also depend on the particular contractual wording, as well as the nature of the event and the obligation in question.

In any event, courts do not consider events which are dependent on the actions of a third party to be force majeure.

In addition, parties are free to set out notification procedures (e.g. deadlines for the notification of the occurrence of such events), the procedure for negotiations designed to minimise the negative impact of the force majeure event and the legal impact of the force majeure event on the parties (e.g. each party may have the right to unilaterally terminate the contract, etc.).

As a general rule, force majeure only releases a defaulting party from liability (i.e. damages or contractual penalties); however, a contract may provide otherwise.

Even simple wording may be sufficient to allow a party to terminate a contract unilaterally if a force majeure event occurs. Nevertheless, the party intending to exercise such right should verify whether the respective force majeure event actually occurred. The affected party must also comply with all contractual provisions relating to such termination, or in the absence of such provisions, the applicable procedures under the law.

The usual procedure for unilateral termination includes sending a written termination notice to the other party, which is effective on receipt by the other party or as of the date specified in the notice.

In the absence of any contractual provision, the general rule of Section 3 of Article 401 of the Civil Code of the Russian Federation (see above) will apply.

Russian law does not expressly provide for any difference in the regulation of force majeure in relation to B2B and B2C transactions.

However, in practice, a consumer has much more opportunity to challenge the force majeure clause on the basis that it is unfair or due to an infringement of the consumer’s statutory rights. Therefore, there is a risk that a “pro-business” force majeure clause may be contested by the consumer.

Russian law generally prohibits a party from unilaterally terminating the contract if the other party is a consumer. Therefore, unilateral termination of the contract by a commercial party due to force majeure may be deemed null and void.

There is no difference under Russian law. In practice, T&Cs are usually considered as either contracts in and of themselves (if they exist as standalone documents, e.g. as framework agreements), or as integral parts of a contract (e.g. if they are referred to in a contract or incorporated as an annex thereto).

A comprehensive force majeure clause (i.e. one that describes force majeure events, specifies notification/communication procedures between the parties, and applicable legal consequences) should normally be enforceable in practice. We note that, under Russian law, force majeure events are not limited to those listed in the clause unless the clause provides otherwise.

Please see below for an example   force majeure clause (please note that the actual wording of the clause should be adjusted according to the particular circumstances of each contract).

“The parties’ ability to perform their obligations hereunder may be affected by force majeure circumstances.

Force majeure circumstances may include, without limitation, earthquakes, volcanic eruptions, tsunamis, floods, natural disasters, other disasters, epidemics, public health emergencies, fire, war risks (wars, military actions or military operations, whether a state of war has been declared or not, military invasions, civil wars, civil unrests, coups, unlawful seizure of civil/military power, conspiracy, uprisings, terrorism, any explosions or impact of mines, bombs, shells, grenades, ammunition, missiles, or other results of explosions, which occur at/near the location of any of the parties and/or the parties’ contractors), strikes and lockouts, terrorist attacks, enforcement of new laws and actions of state and municipal authorities (decrees, directives, restrictions), and any other circumstances that are extraordinary and unavoidable under regular conditions (hereinafter, each referred to as a “Force Majeure Event”, and collectively as the “Force Majeure Events”).

Notwithstanding any provisions hereof stating the contrary, the parties have agreed that the party that fails to perform or improperly performs its obligations hereunder shall not be liable if it proves that proper performance was impossible as a result of a Force Majeure Event, provided that:

• a party that is unable to perform its obligations due to a Force Majeure Event shall within [●] business days after the onset of such Force Majeure Event notify the other party thereof in writing and provide information about the nature and extent of a Force Majeure Event (hereinafter - the “Force Majeure Notice”);
• the Force Majeure Notice is to be forwarded in accordance with the notification procedure set forth in clause [●] hereof;
• the reporting party shall also supply documentary evidence of the Force Majeure Event in the form of a certificate issued by [●] or another competent authority not later than [●] business days after the onset of a relevant Force Majeure Event,

hereinafter – the “Notification Requirements”.

If the above Notification Requirements have been duly fulfilled, the deadline for the fulfilment of the obligations by the relevant party shall be extended for the period of the respective Force Majeure Event, as referred to in the Force Majeure Notice, as well as the time reasonably required to resume the performance hereof.

Should the Notification Requirements fail to be complied with or should the relevant Force Majeure Notice be delayed beyond the time limits specified above, the affected party shall no longer be entitled to refer to a corresponding Force Majeure Event as a ground for relieving it from its liability for breaching its obligations hereunder.

If a Force Majeure Event that affects any party’s ability to duly perform its obligations hereunder persists for more than [●] consecutive weeks, either party shall be entitled to unilaterally terminate this agreement at its sole discretion and without application to court, provided that it has delivered the termination notice to the other party in accordance with clause [●] hereof. Should such termination take place, the following consequences shall apply: [●].”

Force majeure clauses relating to the COVID-19 pandemic have yet to be tested in practice by the courts. However, based on our previous experience, if a force majeure clause refers to “pandemics”, “epidemics” and/or “public health emergencies”, the COVID-19 pandemic and related measures taken by relevant state authorities would be covered by such wording. Even if a force majeure clause does not have any reference to such circumstances, COVID-19 may still be regarded as a force majeure event PROVIDED it has directly affected the obligations of a party to the contract.

As an alternative to the enforcement of a force majeure clause or in addition to the same, a party may

• declare that the obligation in question should be terminated because it is impossible to fulfil it (e.g. as result of measures taken by authorities to prevent the spread of COVID-19); or
• initiate court proceedings to amend or terminate the contract due to a significant change in circumstances.

A party is also entitled to terminate the contract and seek damages due to a loss of “business purpose” relating to the performance of a particular obligation (e.g. where seasonal agricultural works are delayed due to force majeure events, etc.).

In each of the above cases, the Coronavirus pandemic is not in itself a ground for such remedies. A party seeking such a remedy must prove that the COVID-19 pandemic caused a significant change of circumstances, made performance of the contract impossible or caused a loss of “business purpose”. Accordingly, each situation will be assessed by a court on case-by-case basis, taking into account the nature of the relevant obligation, the terms regulating its performance and how the relevant event (in this case, the COVID-19 outbreak) affected the performance of the obligation.

During the pandemic the Supreme Court of the Russian Federation acknowledged that the COVID-19 outbreak by itself does not qualify as force majeure and all circumstances should be carefully considered when applying such a qualification on a case-by-case basis. Nevertheless, the Supreme Court also noted that even though, as a general rule, poor financial standing does not represent force majeure, it may qualify as such if poor financial standing was directly caused by administrative restrictions imposed by authorities to combat COVID-19. In this case, the court may release a party from its liability if it determines that a reasonably acting legal entity or individual entrepreneur under the same circumstances and restrictions would not be able to avoid similar negative consequences.