Martial Law as Force Majeure

As a result of the war in Ukraine, many businesses were forced to switch to a special regime of operation or suspend work. This may be due to their complete or partial inability to fulfill their obligations under contracts concluded with contractors. Below, we are analyzing whether the introduction of martial law is a force majeure circumstance, and what consequences it has.

Concept and Confirmation of Force Majeure

The very concept of force majeure is contained in
part 2 of Art. 141 of the Law of Ukraine “On Chambers of Commerce and Industry in Ukraine”, and they, obviously, include military action, declared and undeclared war.

According to part 1 of Art. 141 of the Law of Ukraine “On Chambers of Commerce and Industry in Ukraine”, the Chamber of Commerce and Industry of Ukraine and its authorized regional chambers of commerce shall certify force majeure and issue a certificate of such circumstances within seven days from the date of application of an economic activity at cost. The Certificate of Force Majeure is issued to small businesses free of charge.

It should be noted that the official website of the Chamber of Commerce and Industry of Ukraine (hereinafter, the “CCI of Ukraine”) has published a general official letter of the CCI of Ukraine to certify force majeure of February 28, 2022, which can be downloaded in PDF format and printed (link: https://ucci.org.ua/uploads/files/621cba543cda9382669631.pdf).

This letter of the CCI of Ukraine certifies the force majeure as follows: military aggression of the Russian Federation against Ukraine, which led to the imposition of martial law from 05:30 on February 24, 2022 for 30 days, according to the Decree of the President of Ukraine of February 24, 2022 No. 64/2022 “On the Imposition of Martial Law in Ukraine”. Taking this into consideration, the CCI of Ukraine confirms that these circumstances, lasting from February 24, 2022 until their official end, are extraordinary, unavoidable and objective circumstances for business entities and/or individuals under the contract, separate tax and/or other obligation, the fulfillment of which occurred in accordance with the terms of the contract, agreement, legislative or other regulations, and the fulfillment of which has become impossible in due time due to the occurrence of such force majeure.

The CCI of Ukraine notes that the publication of this letter is intended to simplify the procedure for certifying force majeure and eliminate the need to apply to the CCI of Ukraine and its authorized regional CCIs with the appropriate package of documents to obtain a certificate.

At the same time, the company has the right to apply for the certificate in case of such an opportunity.

Procedure for Notification of Force Majeure

Terms and procedure for notification of force majeure are set directly in the contracts with contractors. The contract may also provide for special provisions, such as the exemption of the parties (or one party) from obligations, payments, etc. for the duration of force majeure.

Therefore, it is necessary to analyze each individual contract under which the entity is unable to meet its obligations.

Consequences of Force Majeure

The existence of force majeure may be grounds for release from liability  for the breach of a contract. However, such circumstances do not release from the obligation to fulfill the obligations as a whole, given the content of part 1 of Art. 617 of the Civil Code of Ukraine, part 2 of Art. 218 of the Commercial Code of Ukraine.

In addition, the provisions of the contract may contain provisions that, in case of a certain duration of force majeure (for example, 30 days, a month, two months, etc.), the contract may be terminated (unilaterally or by agreement of the parties), and the order of mutual settlements in such a situation may also be specified.

It should also be noted that the existence of force majeure is not in itself a basis for exemption from liability for non-performance or improper performance of an obligation.

In particular, the decision of the Supreme Court in the composition of the panel of judges of the Commercial Court of Cassation of June 01, 2021 in Case No. 910/9258/20 with reference to other case law states that:

• force majeure circumstances are not prejudicial, and if they occur, the party who refers to them as a basis for impossibility to perform the obligation must prove the existence of such circumstances not only in themselves, but also the fact that these circumstances were force majeure for this particular case of fulfillment of the economic obligation;
• proving the existence of force majeure is the responsibility of the person who breached the obligation. It is exactly this person who must provide the relevant evidence in the event of a dispute.

Thus, in addition to confirming the very fact of force majeure, entities should also focus on providing evidence to justify the impossibility of fulfilling a particular obligation.