Three weeks have passed since the — now outgoing — Government made the decision to close cafés, bars, pubs, restaurants and shopping malls, as well as to cancel cultural and sports activities. In parallel with these measures, public institutions were ordered to reduce their activities and staff to the minimum, and private sector employees were ordered to work from home.
Although measures have been taken to prevent the spread of the virus, the suspension of an overwhelming majority of activities in the public and private sectors has already led to a series of questions about the rights and obligations of citizens on various legal issues. Just as concerning is the situation for employers and businesses, when we consider how they will manage production, supplies and employment. Perhaps the only companies we can exclude from this group are the ones that produce masks and disinfectants, as well as pharmaceutical and food companies.
Below we’ve compiled practical instructions for how businesses and individuals can approach the threat of COVID-19 from a legal perspective, as well as provide answers for some legal questions related to the effects of the pandemic on legal obligations.
Does my contract foresee events such as the spread of an epidemic or pandemic?
To understand what implications the COVID-19 situation has for contractual obligations, you should check the rights and obligations written into your contract.
Initially, check if your contract mentions or has a clause called force majeure. To break down the legal jargon, force majeure or vis major, is a contract clause that releases parties — employer and employee, for example — from their responsibilities and obligations when an extraordinary event or circumstance, which could not be foreseen or evaded and is beyond the control of the parties, prevents or hinders the fulfillment of the obligations of the parties.
Kosovo laws do not provide a clear definition of force majeure, leaving it to be defined in contracts signed between parties.
Examples that are usually mentioned in contracts are riots, wars, floods, lightning, earthquakes, volcanic eruptions and other “acts of God.” In most cases, the implementation of the clause does not excuse a party’s non-performance entirely, but only suspends it for the duration of the force majeure.
Is the COVID-19 outbreak considered a force majeure?
Unlike many other countries that provide clear definitions of the concept in their respective civil codes, Kosovo laws do not include such a definition, rather the term is defined in contracts signed between parties. So contracting parties decide for themselves as to what events or circumstances constitute force majeure in a contract through the principle of autonomy of the will.
In most cases, the force majeure section of a contract determines a series of conditions that have to be fulfilled so that a circumstance or act can be considered as a case of force majeure, which are usually accompanied by concrete examples such as riots, wars, pandemics etc.
However, in general, it is not so easy to trigger the force majeure clause. Besides checking whether a pandemic or epidemic is included in the examples or definition of force majeure, the employer and employee must also carefully check whether or not the clause requires any additional action, such as the obligation to notify the other party or an official confirmation about the circumstance in question.
The Law on Obligational Relationships provides both parties with legal capacity to review the contract in cases of circumstances that hinder the fulfillment of obligations or render it impossible.
In an example taken from a contract published by a TV service provider in Kosovo, the force majeure clause states: “Neither of the parties are responsible for failure to fulfill obligations caused by or resulting from force majeure that includes events that are unforeseeable, unexpected, irresistable and beyond the control of the parties, such as severe and extreme weather, flood, mudslide, earthquake, storm, lightning, fire, acts of terrorism, war (with or without a declaration of war), riot, explosion, workers’ protests or strike, civil riot, sabotage, expropriation from the government or other acts or events which are beyond the reasonable control of the parties in question.”
Such a definition could be considered relatively broad, although it does not explicitly mention epidemics and pandemics in its examples. This definition leaves space to interpret the COVID-19 pandemic as an unexpected event that could not be foreseen, resisted or controlled by the parties, and as such is considered a force majeure.
So it is essential to properly analyze what situations are considered force majeure by the contract and whether or not the clause explicitly lists them or leaves space for interpretation through phrases such as “other acts or events that are beyond the reasonable control of the parties.”
Is there any other alternative to force majeure?
If the contract does not include such a clause — to be frank, this is not rare in Kosovo — the parties can find a solution in similar concepts, such as “impossibility of fulfillment” and the rebus sic stantibus doctrine (change of circumstances). Both of these concepts are also regulated by the Law on Obligational Relationships, providing both parties with the legal capacity to review the contract in cases of circumstances that hinder the fulfillment of obligations or render it impossible.
Naturally, determining whether the spread of the virus constitutes a change of circumstances will depend on each case; especially considering the time, objective and nature of the contract, as well as the information that was at the disposal of the parties at the time the contract was signed. In such a case, you would have to argue that the pandemic has influenced the conditions of the contract in such a way that it has rendered the fulfillment of the obligations impossible, and that the circumstance was not foreseeable or avoidable, meaning that it would be unjust for the contract to remain in force in its original form.
Also, Kosovo law requires the party that decides to amend the contract as a result of changed circumstances to notify the other contracting party in due time, otherwise they risk being held responsible for failing to fulfill their contractual obligations.
Employers are obliged by law to undertake all reasonable measures for protecting the security, health and welfare of their employees.
The clause for change of circumstances is generally triggered in extreme cases — the 2008 economic crisis was one such case, however there is also the concept of the impossibility of fulfillment as an alternative for review in these circumstances. More specifically, when the fulfillment of one party’s obligations is rendered impossible as a consequence of an event that neither of the parties are responsible for, the other party is released from its obligations. In case the other party has already fulfilled some of its obligations, it has the right to seek compensation.
So failing to fulfill contractual obligations as a consequence of COVID-19 depends on the case. Nevertheless, all parties that have been affected by the spread of the pandemic should review the conditions of their respective contracts to identify what action they must take accordingly.
Other legal issues as a consequence of COVID-19
Kosovo is not immune to the consequences of the pandemic on the global economy. With the increasingly strict implementation of preventive measures for the benefit of public health, affected workers and businesses have already started to feel the financial difficulties.
Large existing debts, a potential liquidity crisis and a drastic decrease in demand are expected to produce dire economic consequences for many businesses. That is why businesses must be vigilant and must analyze their capacity to fulfill their obligations to pay their workers and manage cash flow.
If the financial situation worsens, businesses will have to consider whether it is the time to initiate procedures of reorganization, bankruptcy, contract termination, and the like. The level of intervention is closely related to the Government response through the emergency package to address economic problems that have come as a result of the pandemic.
In this situation, among other things, employers are responsible for the health and security of their workers, and are obliged by law to undertake all reasonable measures for protecting the security, health and welfare of their employees. This implies that all employers must ensure that they have taken all necessary actions to protect the health of their staff, which includes putting certain individuals on paid leave and providing proper protective equipment for employees who must continue to show up at work.
Employers who, against government orders, force their workers to show up at work are exposed to legal procedures and penalties as a consequence of failing to implement preventive measures and violating legal obligations which are determined by the Law on Safety and Health at Work.
COVID-19 is dominating headlines, discussions and decisions around the globe with good reason. As the outgoing government continues to take measures for prevention and to control the situation, healthcare and law enforcement authorities stand tirelessly at the frontline, we as individuals must be informed about the legal consequences and obligations that affect us as a result of the COVID-19 outbreak. Each of us must take care to minimize the negative effects of this formidable virus, which is already affecting the legal sphere.
Feature image: Arrita Katona / K2.0.