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How to prove force majeure?

07.04.2020

During the State of Emergency and the government-imposed restrictive anti-epidemic measures to tackle the Covid-19 pandemic the issue regarding the existence and verification of force majeure (an unpredictable or unpreventable consequence following the conclusion of a contract which prevents the execution of the obligations of one of the parties) appears to be crucial to avoid the adverse effects of delayed commercial contract performance and the respective liquidated damages.

Regardless of whether or not a commercial contract contains a clause explicitly regulating force majeure, on the grounds of Art. 306 of the Commercial Act, merchants affected by the anti-epidemic measures and forced to suspend or to reduce their activity either because of direct public authority restriction or due to inability to reorganize their activities and to comply with all anti-epidemic measures whether because their work is dependent on third party deliveries who are also affected by the pandemic and have majorly limited or stopped the respective deliveries shall be able to invoke force majeure.
However, a few things are important for making such a reference. First, if the counterparty disputes the existence of force majeure or makes claims for performance that could escalate to a dispute before a court or arbitration, the necessary evidence for the existence of the force majeure should be prepared in advance by the affected parties.
One of the most established and widely accepted in the case law and arbitration procedures official documents in this field are the force majeure certificates issued by internationally recognized organizations. Such certificates in Bulgaria are issued by BCCI and the procedure for their issuance is described in detail on the Chamber's website: https://www.bcci.bg/member-certificates-fm.html.
Although the issuance of such a certificate is not the only possible means of proving force majeure, obtaining the certificate is advisable, especially if the case involves potential risks of international arbitration, because in such proceedings, proving by other means would burden the party with quite higher costs in the course of the arbitration proceedings.
On the other hand, it is also necessary for the party referring to the force majeure to notify the other party, who is not aware of its existence, at the earliest opportunity in order to avoid potential claims for damages resulting from late notification and from the fact that the other party has relied on the performance of the contract and has not tried to find alternatives to satisfy its interests.
Therefore, especially in case of international shipments, contracts for the international sale of goods and contacts for delivery and installation of equipment, it is necessary the affected party to send as soon as possible a notice that it cannot and will not perform due to force majeure. Also, the party shall give a brief description indicating the period for which it expects or assumes that it will continue (which in this case would most often be the State of Emergency), stating that it had requested the issue of an internationally recognized force majeure certificate and would send it to the other party immediately after its issuance. In so doing, the affected party would act in good faith and would limit to a large extent the practical risks of bringing any action against it by the respective counterparty.
 
Of course, the abovementioned is not a legal advice on a specific case and shall not be seen as such - the procedure, deadlines, etc. for notification, reference and proving of force majeure may be modified both by the explicit clauses in each contract and by the substantive law applicable to the contract (in this case, the reflections are based on Bulgarian law and practice) - which is why we remain at your disposal to give a specific advice on actual situations, if interested.
 
The team of Penkov, Markov & Partners