Law and regulation of force majeure in Ukraine

Ukrainian legislation expressly recognises the concept of force majeure. The key statutory enactments that regulate force majeure include:

• Law of Ukraine On Chambers of Commerce and Industry in Ukraine, which defines force majeure and the entities entitled to document it; 
• Law of Ukraine On Temporary Measures for the Anti-Terrorist Operation Period, which regulates special rules for documenting the circumstances of force majeure that occur in the temporarily occupied territories of Ukraine; and
• the Civil and Commercial Codes of Ukraine, which provide for release from liability as a result of the breach of an obligation due to “circumstances of insuperable force”, a term occasionally used in Ukrainian law as an alternative to force majeure.

Neither the Civil Code of Ukraine nor the Commercial Code of Ukraine contain a definition of force majeure or provide guidance on how to ascertain whether a particular event constitutes a force majeure event. 

However, both the Civil Code of Ukraine and the Commercial Code of Ukraine provide that a party that has breached a contractual obligation will be released from liability for such breach if it proves that the breach occurred as a result of an accident or an insuperable circumstance (Articles 617 of the Civil Code of Ukraine and 218(2) of the Commercial Code of Ukraine).

At the same time, force majeure is defined in Article 14-1 of the Law of Ukraine On Chambers of Commerce and Industry in Ukraine, which provides that an event of force majeure is an extraordinary and unavoidable circumstance that objectively prevents the fulfilment of contractual obligations, as well as obligations under legislative and other regulatory instruments. Such events include: threat of war, armed hostility or a serious threat of harmed hostility, including but not limited to enemy attacks, blockades, military embargoes, actions by a foreign enemy, general military mobilisation, military actions, declared and undeclared war, actions by a public enemy, commotions, acts of terrorism, diversions, piracy, disorders, invasion, blockade, revolution, coup, insurrection, mass unrest, introduction of curfews, quarantine established by the Cabinet of Ministers of Ukraine, expropriation, enforced withdrawal, takeover of enterprises, requisition, civil demonstration, blockade, strike, accident, unlawful actions by third parties, fire, explosion, long interruptions in transport governed by the conditions of relevant decisions and acts by state authorities, closure of sea straits, embargoes, prohibition (restriction) of export/import etc., as well as those caused by weather conditions and natural calamity, namely: epidemic, severe storm, cyclone, hurricane, tornado, whirlwind, flood, snowdrifts, bare ice, hale, frost, freezing of sea, straits, ports, mountain passes, earthquake, lightning, fire, drought, soil subsidence, landslide and other natural calamities. The mentioned list of “force majeure events” is not exhaustive. 

Thus, under the above law, the definition of “force majeure event” applies to all kinds of agreements and obligations arising out of legislative and other regulatory instruments.

Under Ukrainian law, parties may regulate what they consider to be force majeure events (i.e. events which can prevent a party from being able to perform its obligations).

Where the parties fail to include a force majeure clause in their contract, the default provisions of Ukrainian law on force majeure will apply.

Even though parties are free to regulate force majeure clauses as they wish, such clauses should still comply with fundamental principles of Ukrainian contract law, such as fairness, diligence and reasonableness, and should not constitute abuse of rights or should not have been entered into as a result of abuse of market dominance.

In such case the definition of force majeure used in Article 14-1 of the Law of Ukraine On Chambers of Commerce and Industry in Ukraine will apply.

Ukrainian law does not expressly differentiate between the regulation of force majeure in B2B versus B2C transactions.

It should be noted, however, that Article 18 of the Law of Ukraine On the Protection of Consumers provides that a court can invalidate contract terms that are “unfair” if, in contravention of the principle of good faith, the incorporation of these terms into the contract substantially tips the balance of contractual rights and obligations to the detriment of the consumer.

Thus, if the force majeure clause in a B2C contract is framed in a way that amounts to an unfair contractual term, this term may be declared invalid.

No.

“Neither Party will bear liability for full or partial non-performance of any of the terms hereunder if such non-performance or improper performance was a result of circumstances of insuperable force (force majeure), namely extraordinary and unavoidable circumstances that objectively prevent the fulfilment of obligations provided for by the terms and conditions of the agreement and obligations under legislative and other regulatory instruments, namely: threat of war, armed hostility or a serious threat of it, including but not limited to enemy attacks, blockades, military embargoes, actions by a foreign enemy, general military mobilisation, military actions, declared and undeclared war, actions by a public enemy, commotions, acts of terrorism, diversions, piracy, disorders, invasion, blockade, revolution, coup, insurrection, mass unrest, introduction of curfews, quarantine established by the Cabinet of Ministers of Ukraine, expropriation, enforced withdrawal, takeover of enterprises, requisition, civil demonstration, blockade, strike, accident, unlawful actions by third parties, fire, explosion, long interruptions in transport governed by the conditions of relevant decisions and acts by state authorities, closure of sea straits, embargoes, prohibition (restriction) of export/import etc., as well as those caused by weather conditions and natural calamity, namely: epidemic, severe storm, cyclone, hurricane, tornado, whirlwind, flood, snowdrifts, bare ice, hale, frost, freezing of sea, straits, ports, mountain passes, earthquake, lightning, fire, drought, soil subsidence, landslide and other natural calamities., etc. (“Circumstances of Insuperable Force”).

Within [●] days, the Parties must notify each other of the occurrence of Circumstance of Insuperable Force, which must further be certified by a document issued by a competent authority. The Circumstance of Insuperable Force must be confirmed by a document issued by the Ukrainian Chamber of Commerce and Industry or a regional chamber of commerce and industry in accordance with Ukrainian legislation, or by another competent authority of the state where those circumstances arose. Where a relevant Party fails to give or delays notice of the Circumstance of Insuperable Force, it will have no right to refer to those Circumstance of Insuperable Force.

If the Circumstance of Insuperable Force continue for more than [●] days, either Party may terminate this Agreement unilaterally by a written notice to the other Party. In this event, neither Party shall be entitled to the reimbursement of its costs concerning the early termination of this Agreement. The Agreement shall be deemed terminated on the date that the notice is received.”

No.

A party affected by the virus may be willing to invoke the defence of “substantial change in circumstances” for contracts entered into before the beginning of the outbreak.

A court may rescind (or amend in exceptional instances under the law) an agreement due to substantially changed circumstances at the request of the defaulting party if the  defaulting party can prove that the following four cumulative conditions have been met: 

1. at the time the agreement was entered into, the parties assumed that such change in circumstances would not occur;
2. the change in circumstances was caused by events which the defaulting party, acting with all due care and prudence, could not have prevented after they arose;
3. the performance of the contract would upset the balance of interests between the parties and deprive the defaulting party of what it expected to obtain at the time the agreement was entered into; and
4. it does not follow from the nature of the agreement or business practice that the risk of the changed circumstances should be borne by the defaulting party.

The Ukrainian Chamber of Commerce and Industry, a non-governmental body that is vested with the right to document events of force majeure under Ukrainian law, recently clarified that a quarantine caused by Coronavirus should not be considered a force majeure event in and of itself. However, the quarantine may potentially constitute an event of force majeure if it hinders the ability of a party to perform its contractual or statutory obligations.

It should be also noted  that:

1. Under Ukrainian law a person can be relieved from liability if he/she can prove all of the following three elements: (i) an event of force majeure; (ii) inability to perform under the contract or obligation arising from the law; and (iii) a direct causal link between (i) and (ii). Where the Chamber of Commerce and Industry of Ukraine has been presented with an application to this effect, it can only evidence force majeure in the context of a particular contractual or statutory obligation.
2. Even if a contract contains a specific force majeure clause, as a general rule, the clause is not automatically triggered by the occurrence of the force majeure event as defined by the parties;  a party must be hindered by this unpredictable event from performing a particular contractual or statutory obligation as a precondition.
3. As a general rule, force majeure cannot be invoked where the performance of the obligation becomes cumbersome, but is objectively possible – it may only be invoked where the performance of the obligation became objectively impossible.