Novel Coronavirus (Covid-19) has been affecting the world on a large scale since the beginning of 2020.
It is highly contagious with a mortality rate of %2 (approx.), and the World Health Organization declared the outbreak as a pandemic.
It is originated from Wuhan, China. China quarantined Wuhan and neighboring cities in the wake of the epidemic, and nearly all international flights interrupted in and out of China. However, the efforts to keep the outbreak within Chinese borders failed, and now it has reached to nearly all continents, only in two months. Other affected countries such as Italy and Iran declared state of emergencies, as well. The number of currently infected is around 120.000.
Undisputedly, the main concern is public healthcare. The governments are trying to keep the spreading under control, with drastic measures such as travel restrictions, border closures, and curfews. However, these measures create domino effects on multiple aspects. We already started to feel the economic impact of this pandemic.
The international shipping network has been negatively affected as well, along with global commercial and passenger flights. China is the largest exporter and second-largest importer in the world and now is in the state of emergency, struggling with coronavirus with around 100.000 confirmed cases. Any adverse effect of China’s growth will drastically affect the entire world. US President Trump announced a travel restriction on 26 European countries to prevent the virus from spreading further.
The effects of the pandemic are already visible in the stock markets and PMI markets. US Federal Reserve Bank made an emergency cut in interest rates on March 2nd, followed by Britain, Australia, and more. We will see a much clearer picture of how this coronavirus epidemic affected global trade within the following months.
In terms of contract law, a force majeure event is an “unpredictable and inevitable event that caused a breach of a debt or a contract, which is unrelated to the business activity of the debtor.”
The pandemic is already forcing businesses to cease production due to labor, material or demand shortages, and creating domino effects on all interconnected sectors.
In Wuhan, the Chinese government started to issue force majeure certificates to companies unable to meet their contractual obligations to protect them from breach of contract claims.
Turkey recently reported its first Covid-19 case, an individual contracted to the virus during an international flight. No details of the infected individual are given.
There are Turkish companies and sectors directly affected by this pandemic.
The businesses, companies that have been financially affected and failed to perform some or all their obligations under their respective contracts, must immediately review the force majeure clauses. A contract must have a force majeure event definition or provision expressly mentioning “disease” or “pandemic” or “epidemic”. A party to a contract must state how this force majeure event prevented, hindered, or delayed its obligations or performance under the contract, and a written notice needs to be served to inform the counterparty.
In any event, even if a contract does not contain a specific force majeure clause or definition, under Article 138 of the Turkish Code of Obligations, parties who failed to perform their obligations under respective contracts, attributable to an event such as this pandemic, are eligible to apply to the court for the adjustment of that contract based on the unforeseen developments.
We hope that the current efforts shall suffice to keep the pandemic under control.
We are expecting a worldwide spike in disputes arising out of the coronavirus.