War as force majeure: what does it mean?

What are force majeure circumstances?

Force majeure circumstances (acts of God) are extraordinary and unavoidable events that objectively make it impossible to fulfill obligations stipulated by the terms of a contract (agreement).

What are these circumstances? The list of such circumstances is defined by law. Some examples include war, military actions, general military mobilization, the imposition of a curfew, quarantine, epidemics, accidents, fires, etc.

Why include force majeure clauses in a contract?

If obligations under a contract are breached or inadequately performed due to force majeure circumstances, the “breaching” party may be exempt from liability under certain conditions. Liability involves imposing fines, penalties, and interest charges. For example, this might apply to delays in delivering goods or services or making payments.

Inflation losses and 3% annual interest are not considered penalties, so force majeure does not exempt parties from paying them. The Supreme Court’s September 13, 2023 ruling in case No. 910/8741/22 also stipulates this.

The presence of force majeure cannot be used as an excuse for non-performance of obligations, does not exempt parties from fulfilling their duties under the contract, nor does it alter the performance deadlines.

What to do if force “majeure occurs”

First, you must inform the other party about the force majeure circumstances. This means notifying the party to whom you owe the delivery of goods, performance of work, provision of services, or payment. Then, you should confirm with documents the occurrence of force majeure circumstances that prevented you from fulfilling your contractual obligations.

The parties in the contract agree on what to include in the notification, the timeframe for sending it, and what documents serve as evidence of force majeure. Therefore, it is crucial not to neglect the terms regarding force majeure circumstances and to address them during contract negotiations.

If force majeure has already occurred, it is recommended that the contract be reviewed and that action be taken according to the agreed-upon procedures within it.

Sometimes contracts contain the following wording: “Failure to notify or late notification of force majeure circumstances deprives the defaulting party of the right to refer to these circumstances as grounds for exemption from liability.” In practice, this situation unfolds as follows: a force majeure circumstance arises; the affected party forgets, fails, or does not notify the other party; consequently, they cannot avoid penalties.

However, this only applies if such consequences of failure to notify are explicitly provided for in the contract. This is also confirmed by case law, which holds a similar position (Supreme Court ruling of August 31, 2022, in case No. 910/15264/21).

Therefore, it is recommended that the other party be notified about force majeure as soon as possible. Although force majeure circumstances typically affect one party to the contract (the performer), they primarily have negative consequences for the other party, which does not receive proper performance under the contract.

How to confirm force majeure circumstances and what is a CCI Certificate

In the contract, the parties specify which document should be provided for confirmation. Typically, this is a certificate from the Chamber of Commerce and Industry (CCI), an organization that certifies force majeure circumstances. To obtain a certificate, you must submit an application and a set of documents to the CCI. The detailed procedure and regulations are available on the CCI’s website.

If the parties cannot reach an agreement and the conflict escalates to a court case, force majeure circumstances can also be confirmed with other evidence. This means the certificate is not the only conclusive proof; additional documents (orders, acts, directives, certificates, etc.) can also be submitted. This is supported by court decisions, such as the Supreme Court rulings of August 19, 2022, in case No. 908/2287/17, and June 7, 2023, in case No. 906/540/22.

CCI letter of february 28, 2022, No. 2024/02.0-7.1 “regarding the war”

Many are likely aware of the CCI letter dated February 28, 2022, which certifies force majeure circumstances, specifically the military aggression of the Russian Federation against Ukraine.

However, this letter is not proof of the occurrence of force majeure (war) for all companies, entrepreneurs, or individuals who have breached their obligations. Consequently, it does not serve as grounds for automatic exemption from liability. Therefore, obtaining a CCI certificate is still necessary.

Why This Is the Case and the Supreme Court’s View on the CCI Letter of February 28, 2022:

• The letter is a general official document and does not contain identifying features of a specific contract whose performance became impossible due to the mentioned circumstances (Supreme Court ruling of June 15, 2023, in case No. 910/8580/22).
• The letter cannot be considered a CCI certificate and is not a document issued upon the request of the relevant entity for which certain force majeure circumstances may have occurred (Supreme Court ruling of June 7, 2023, in case No. 912/750/22).
• The letter is a document of general informational nature and does not serve as proof of the occurrence of force majeure (acts of God) for a specific business entity in a particular obligation (Supreme Court ruling of September 13, 2023, in case No. 910/7679/22).

Obligation deadline before february 24, 2022: what to do in such a case

Let’s consider a scenario: under a supply contract, the supplier was obligated to deliver goods to the buyer by February 15, 2022, which was before the start of the full-scale invasion. For some reason, they did not do so and delayed the delivery by several months.

In this case, the war as a force majeure circumstance does not justify the non-fulfillment of the obligation and does not exempt the supplier from liability for the delayed delivery. This is because the deadline for fulfilling the obligation expired before the war began.

The courts also hold this position: the occurrence of force majeure circumstances does not justify the non-fulfillment of an obligation whose deadline expired before such circumstances occurred, nor does it exempt the party from liability in such a case. If the obligation was due in early February 2022, the claim of inability to fulfill the commitment could not be linked to the start of the armed aggression by the Russian Federation (Supreme Court rulings of March 10, 2023, in case No. 922/1093/22, and March 28, 2024, in case No. 922/1061/23).

Obligation deadline after february 24, 2022

If a breach of obligation under the contract occurred during martial law, the force majeure clauses may be applicable. However, it is essential to notify the other party about the force majeure circumstances despite the well-known war. After that, you must confirm the force majeure with a certificate. Establishing and justifying the causal link between the inability to fulfill the contractual obligations and the force majeure circumstances is also crucial.

Recommendations

Instead of conclusions, we would like to provide the following key recommendations:

1. Define a clear action plan in the “Force Majeure Circumstances” section: this contract section should outline the steps to be taken when force majeure circumstances arise. This will serve as a “roadmap” that, when properly followed, can help avoid unpleasant consequences.
2. Set realistic notification and certification timeframes: specify realistic deadlines for notifying the other party and providing the CCI certificate. Generally, 7-14 working days are sufficient for preparing and sending the notification. Obtaining and submitting the certificate, however, takes more time, so it is advisable to plan for 1-3 months.
3. Choose and specify the relevant CCI: indicate the specific Chamber of Commerce and Industry to be used. This could be the Ukrainian Chamber of Commerce and Industry (for contracts between Ukrainian residents or international agreements) or a regional Chamber of Commerce and Industry (for contracts between residents).
4. Apply for the CCI certificate after breach occurrence: You can apply for the CCI certificate after the breach of obligation under the contract has occurred.