At this point, either directly or indirectly, whether for a matter of concern or information, no one is foreign to the coronavirus, baptized as “novel coronavirus”, COVID-19. As it is known, COVID-19 is a virus first detected in December 2019, in the city of Wuhan, China. It was declared as Public Health Emergency of International Concern (PHEIC) by the IHR Emergency Committee in accordance with the International Health Regulations (IHR, 2005), at its meeting on January 30, 2020, as reported by WHO[1].

To date, unfortunately, there are about 60,300 reported cases, of which 44 cases have been reported in Europe, and the number of deaths reaches 1,300[2].

Logically, many countries have taken severe control measures on the arrivals and departures of passengers and cargoes, highlighting different countries which are close to the epicenter of the virus, such as Singapore or Australia, and of course, China.

In Spain, after the risk assessment, by the European Center for Disease Prevention and Control among others, the Government reported that, in the current situation, the overall risk to public health in Spain is moderate[3], and no similar measures to those adopted by the above Countries (in which extraordinary control measures have been taken), have yet been agreed in Spain.

The coronavirus outbreak, by the way, has a direct and significant impact on the main sectors of the global economy, being the transport industry one of the most affected.

In the aviation industry, a large number of flights with origin and/or destination to China have been canceled, which affects both passengers and cargoes, and which is translated into delays, origin and/or destination airport changes, as well as an expected increase of the airfreight rates.

In the shipping, although IMO -in line with WHO- does not recommend any travel or trade restriction based on the current information available[4][5], shipping companies, for example, have reduced and limited their vessels’ calls to Chinese ports, modifying the routes, while in the case of Port Authorities, the closer they are to Chinese Ports, the more restrictive are the measures taken, ranging from the notification to the Health Authorities of any suspicion of infection disease, to temperature screen controls in ports, to the quarantine of the crew and passengers. Likewise, the International Chamber of Shipping has insisted on the need for screening controls in order to detect possible infection disease and prevent the spread of the virus, this includes checking any signs or symptoms, keeping confirmed cases under isolation and treatment. Implement campaigns of health information, as well as to collaborate with Health Authorities to manage cases of infection of people on board ships[6].

It is to be assumed that from a legal and economic point of view, the coronavirus has also a significant impact, resulting significant damages for all those stakeholders of the transport industry, such as shippers, shipping companies, shipyards and the rest of the parties that shape this key industry of the global economy. All these stakeholders will see how this situation may affect their different contracts (whether import-export, transport, construction/repairs, etc) and it fulfillment, wich will be translated into a considerable increase in litigation.

In this regard, with the goal of protecting its companies, the Ministry of Commerce of China has already informed that it will issue certificates of “force majeure” to Chinese shippers in order to protect and help them to face eventual disputes for breach of contracts caused as a result of COVID-19.

In Spain, as already mentioned, the Government has declared the risk in Spain as moderate, which leads to the question whether the Government – as well as the other Governments – would issue these certificates of “force majeure”, or at least a national and regional health alert statement, which could be of paramount importance for those cases of breach of contracts or cancellation contracts, as finally has been the case of the Mobile World Congress Barcelona 2020 (MWC), whose organization announced yesterday its cancellation.

Article 1105 of the Spanish Civil Code establishes that “outside of the instances expressly mentioned in the law, and those stipulated in the obligation involved, no person shall be liable for events that could not have been foreseen, or that, if foreseen, were inevitable.” Although the Civil Code does not expressly use the term “force majeure”, our best doctrine and jurisprudence has understood that in interpretation of said article, the force majeure, which is defined as an unexpected and inevitable event, prevent parties to meet their obligations agreed in the contracts. Therefore, an official statement of health alert and/or the issuance of a certificate of “force majeure” from the Government could be decisive to exempt those parties who, as a result of such events and circumstances, could not meet their contracts.

In the specific case of the Mobile World Congress cancellation, it has been estimated an economic impact of around 500 million euros, and, from the cancellation announcement, all parties involved ask the same question, who will pay compensation?.

The Government, through her first Vice-president, already declared that the cancellation was not due to sanitary reasons, so it seems unlikely that the MWC organizers could allege a case of “force majeure”.

Other important parties involved are the insurance companies, which in principle will have to face large compensations for contracts cancellation.

In any case, all disputes shall be analyzed on a case-by-case basis. That’s why from San Simon & Duch we recommend parties to review and check their contract positions at the earliest.

 

[1] https://www.who.int/es/news-room/detail/30-01-2020-statement-on-the-second-meeting-of-the-international-health-regulations-(2005)-emergency-committee-regarding-the-outbreak-of-novel-coronavirus-(2019-ncov)

[2] https://www.ecdc.europa.eu/en/novel-coronavirus-china

[3]  https://www.mscbs.gob.es/profesionales/saludPublica/ccayes/alertasActual/nCov-China/documentos/Evaluacion_de_riesgo_y_medidas.pdf

[4] http://www.imo.org/es/mediacentre/hottopics/paginas/coronavirus.aspx

[5] The IMO has issued Circular Letter No.4203 and 4204 with goal of advising Member States, seafarers and shipping.

[6] http://www.ics-shipping.org/

 

Authors:

Diego de San Simón

Luis de San Simón