Are COVID-19 Consequences Considered Force Majeure Under Egyptian Law?
Is What’s Happening With COVID-19 Now Considered to be Force Majeure or is it Hardship?
The world is currently witnessing one of the most unprecedented events of modern times, given the almost complete disruption of our day to day lives. This disruption has undoubtedly effected everyone’s professional and private life, and while countries all over the world are taking the necessary precautionary measures to limit the outbreak of the newly emerging coronavirus pandemic (COVID-19), a legal point of contention arises with regards to how the current situation should be interpreted: should it be considered as force majeure, resulting in the parties being released of all contractual obligations? Or, should it be considered as only temporary hardship, necessitating contract amendments that would adjust the contractual obligations pursuant to the “Theory of the Unforeseen” or “Theorie de l’imprevision?” Furthermore, what is the proper interpretation of the aforementioned under Egyptian Law?
Force majeure can be defined as a sudden accident that is unforeseeable and absolutely unavoidable. As such, in order for the criteria of force majeure to be met, the following conditions should exist:
1 – Impossible foreseeability of the event: it is impossible to foresee such an event due to its rarity or unusualness.
2- It is an unavoidable event: in other words, it would have been impossible to avoid the event or carryout contractual obligations; such impossibility exists not only for the debtor, but also, for any person in his/her position, and this is the main distinction between Force majeure and the “Theory of the Unforeseen” or “Theorie de l’imprevision.”
The presence of the above conditions would relieve the contractual parties of any liability arising from failure to implement the terms agreed upon in the contract, and as such, the contract would be rescinded without the debtor having to bear any responsibility thereof.
Yet the question remains, given the current circumstances, what is the appropriate interpretation under Egyptian Law? Have the conditions of force majeure been met or should the situation be considered one of exceptional hardship? Is it impossible to implement contractual obligations entirely? Or, is execution of the contract be feasible, but only partially, in light of the decisions issued by the Ministry of Manpower and the Prime Minister’s office?
According to the Egyptian Civil Code, for a pandemic to be considered an event of force majeure, precautionary measures had have been taken by the country that would make fulfilment of contractual obligations impossible, which would result in the rescission of the contract. As such, for the latter to occur, the following three conditions must be met:
- The event resulting in a force majeure is foreign in nature; that is, it is beyond the control of the party aggrieved by the situation and the one who insists on it.
- The occurrence is unforeseeable by the party aggrieved by the incident and the one who adheres to it.
- It is impossible to avoid the event that constitutes the force majeure and by impossible, we mean entirely impossible, and not partially impossible.
Therefore, in the event that the party aggrieved by both the pandemic and the precautionary measures taken by the Egyptian State wishes to consider these events as an event of force majeure, and in turn wishes to rescind the contract, he/she must resort to the judiciary, and request such rescission of the contract based on the fact that the execution of contractual obligations has become totally impossible due to a reason that is beyond the contractual parties wills.
However, in the event that the party aggrieved by both the pandemic and the precautionary measures taken by the Egyptian State wishes to consider these as exceptional circumstances and consequently, he/she would be entitled to seek amendments his/her contractual obligations, he/she must also apply before the court seeking such amendments, based on the fact that the execution of such obligations has become burdensome or relatively impossible due to a general reason that is beyond the contractual parties wills.
Under such circumstances, the judge shall have the sole discretion to consider these circumstances as emergency circumstances or exceptional circumstances.
In light of the foregoing, we are of the opinion that the spread of the novel Coronavirus (COVID-19) in Egypt, bearing in mind the precautionary measures put in place by the Egyptian State regarding this pandemic, the effects and current state of disruption due to COVID-19 would be categorized as that of exceptional hardship, resulting in the temporary suspension of certain industries.
Hence, it is unlikely, given the current state of events (which may change over the course of the next few weeks) and the current ministerial decrees in place, that Egyptian Judiciary find the effects of COVID-19 to be those of force majeure but rather that of exceptional hardship against which, the contractual obligations may be amended.
That being said, such considerations would depend on the nature of the contract, as well as the court’s discretion for interpretation and factual applications.
Our team is equipped to assist with all contract related queries. Please let us know how we could be of assistance; we appreciate that these are difficult times we are going through and we hope that our services can provide you with some semblance of relief that you may require.
Stay safe, and in good spirits.