On 17 March 2020, the Parliament of Ukraine amended the list of the force majeure events in the Law on Chambers of Commerce and Industry in Ukraine. It added to the list the quarantine approved by the Cabinet of Ministers of Ukraine (“CMU”). The force majeure event can have a significant impact on the fulfilment of contractual obligations in the energy projects both at the development stage and at construction stage. For this reason, in the process of implementing energy projects during a period of force majeure, it is important to understand the features of the force majeure event and take into account the following recommendations:
Since the beginning of the force majeure period, the Parliament adopted two legal acts amending Ukrainian legislation in connection with COVID-19. The Resolution of the CMU On preventing the spread of COVID-19 coronavirus in Ukraine No. 211, dated 11 March 2020, was amended three times within four weeks. The latest amendments to the Resolution were adopted by the government on 2 April 2020. These amendments include stricter rules for the movement of people, clarify the rules of work for electricity suppliers, distribution system operators and gas suppliers. These amendments cover all other aspects of the quarantine for the state authorities, business entities, and citizens.
Therefore, it is important to monitor all changes in the legislation and update the conditions of the work on energy projects in accordance with applicable requirements.
In case of force majeure, it is important to check the following force majeure conditions in the contracts:
If force majeure circumstances affect fulfillment of the contractual obligations, a party may rely on the force majeure clause of the contract.
A notification of a force majeure event should be sent as quickly as possible and in accordance with the terms of the contract. In the absence of a proper notification, the party to the contract cannot rely on exemption from liability for breach of contract due to force majeure.
Therefore, timely and proper notification on force majeure circumstances is paramount for exemption from liability.
To obtain a certificate of confirmation of the force majeure event, the following documents must be submitted to the Ukrainian Chamber of Commerce and Industry (UCCI):
The period of time for consideration of this request according to the regulations is seven business days. However, due to the large number of such requests, issuing a certificate can take significantly longer.
We draw your attention to the fact that the right to apply for a certificate of force majeure exists only in case of non-performance of the contractual obligations due to the quarantine.
Documents for issuing a certificate of force majeure must indicate:
The UCCI analyses each request for a certificate of force majeure and in case of non-compliance with these criteria may refuse to issue such certificate.
According to the position of the Supreme Court of Ukraine, even though the UCCI is obliged to consider a request for a force majeure certificate, it is not obliged to issue a certificate of force majeure.
It is recommended, therefore, to submit all documents confirming the impact of the force majeure circumstances on the fulfillment of the contract obligations.
Regardless of the results of applying to the UCCI for a certificate, it is worthwhile:
UCCI recommends to amend the contract with a view to establish new time periods for fulfilling the contractual obligations after the end of the force majeure event. The parties may amend the terms of the contract without having to apply to the UCCI for a certificate.
Each party to the contract must take measures to reduce delays in performance and the losses due to the force majeure event. This means that the parties must do everything possible to prevent additional costs or losses for implementation of the energy project during the period of the force majeure circumstances.
We hope the above is useful for you to cope with the effect of the quarantine on your business. In order to avoid liability for breach of the contractual obligations due to the force majeure event, you may contact the SK Energy practice team:
If you would like to discuss in more detail the issues highlighted in this document, please contact the SK Energy practice team.
Information contained in this legal alert is for the general information purposes only, does not constitute legal or other professional advice, and should not be relied upon as a substitute for the specific professional advice tailored to the particular circumstances.