Force majeure certificates, the silver bullet to shield from contractual obligations or a false sense of comfort?
Force majeure concept: Force majeure is a legal doctrine in civil-law systems like that of Thailand and China but is not a doctrine of common-law systems. At courts in London or Hong Kong, force majeure is respected only if the contract has a specific clause defining such legal concept as part of the contract.
Legality and lawfulness: Generally, force majeure certificates are recognized by governments, customs, chambers of commerce and companies in more than 200 countries and regions around the world. They are government tools to support its industries by providing documentation and provision of evidence. On an international level, they include the circumstances and detailed presentation of the event, its consequences in relation to the contractual partner and legal arguments that claim the force majeure. It is not at all an invention of the Chinese government in an attempt to protect domestic companies from justified claims.
Purpose of the certificate: The legal or contractual prerequisites for assuming a force majeure situation have factual and legal elements. In the context of the virus outbreak, it is typically a matter of facts that have occurred abroad and are therefore more difficult to prove. The Force Majeure Certificates that are issued by Chinese governmental agencies serve to facilitate the proof as far as events and conditions in China are concerned. Although Thai courts do not honor foreign court decisions, the documents issued by foreign courts, authorities, and agencies can be introduced in Thai litigation cases. The Thai court will therefore also include Chinese force majeure briefs in its own assessment of the legal and factual situation.
Legal statements in the force majeure certificate: The legal prerequisites, as well as legal consequences for legal force majeure cases, are governed by local law. For contractually agreed arrangements, foreign law, in particular Chinese law, may also be applicable. For non-Chinese legal issues, the Force Majeure Slips are not relevant. For legal issues under Chinese law, something else may arise; this would have to be assessed under Chinese law.
The issuance of force majeure slips by the quasi-government Chinese agency
Chinese force majeure slips: China’s Council for the Promotion of International Trade is a quasi-government trade body. Commencing February 2, 2020, the CCPIT is issuing signed and seals documents. Such Force Majeure Certificate (FMC) is a document for relieving of responsibility for failure to perform one’s obligations or delay in the performance of obligations under a transaction caused by some unpredictable circumstance.
4811: According to the China Council for the Promotion of International Trade, China has issued 4,811 force majeure certificates as of March 3, 2020 due to the epidemic, state media Xinhua reported. Those contracts were worth 373.7 billion Chinese yuan (US$ 53.79 billion), according to the report.
Impact on force majeure cases: Under Thai and international laws, the classification of a force majeure event, as well as its consequences under the laws and contractual dealings, is typically a highly complex matter. The standard wording might not fit into the overall dispute and litigation case. Additional supporting documents might be required to provide more comfort.
Enforcement: Even when the FM slip is not honored by a foreign court, if might be used by the Chinese company to block the enforcement of in Thailand. Chinese courts typically not only deny to enforce foreign judgments, but they also can choose not to enforce foreign arbitration awards on public policy grounds. Therefore, neither successful litigation nor arbitration abroad guarantees efficient collection against Chinese companies in Chinese properties.
Professional services from Bangkok for legal aspects of the coronavirus outbreak and force majeure slips
Shielding of Chinese corporate clients: The law firm advises Chinese clients on the legal implications of a force majeure certificate in the case of a disruption of the supply chain or other detrimental effects of the virus outbreak. It develops an overall strategy on how to utilize these slips in a commercial dispute or threatening litigation with Thai or other business partners. It supports to efficiently shield the Chinese client as good as it gets from contractual obligations and negative impacts.
Representation of Thai and international business interests: The law firm advises Thai and international clients on the legal implications of a force majeure certificate in the case of a disruption of the supply chain or other detrimental effects of the virus outbreak. It develops an overall strategy on how to neutralize and limit the utilization of these slips in a commercial dispute or threatening litigation with Chinese business partners. It supports to use the slips as an excuse from not performing or partially performing contractual duties because of extraordinary circumstances beyond control.
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