As the business world faces the challenges of the global COVID-19 public health emergency of international concern, declared so on January 30, 2020 by the World Health Organization, our Spanish team remains highly committed towards helping our clients and readers to ensure business continuity and address these challenges by offering our legal assistance.
Even though the full impact of the outbreak and public emergency measures imposed by authorities remains to be seen, the business world already faces operational disruptions, for example, to supply and distribution chains, the temporary impossibility of performing the services, shortage of labor and decrease in demand of services.
What are the emergency measures taken in Spain in regards with COVID-19?
The Order PCM/ 205/2020, of March 10, 2020, was published in the extraordinary Spanish Official Gazette the Agreement of the Council of Ministers, establishing exceptional measures to limit the spread of COVID-19. According to Section1: "Direct flights are prohibited from any airport located in the Republic of Italy to any airport located in the Kingdom of Spain from 00:00 hours on March 11, 2020 and until 00:00 hours on March 25 of 2020." This prohibition shall not apply to state aircraft, or to the realization of stops for non-commercial purposes, including cargo flights, positional flights, humanitarian, medical or emergency. This prohibition is of immediate effect.
Spanish Ministry of Consumers´ recommendations for flight cancellations due to COVID-19 expansion
According to the press release published on March 3, 20201 by the Spanish Ministry of Consumers, on the basis of the Regulation (EC) No 261/2004, passengers affected by flight cancelations due to COVID-19 expansion, are entitled to:
- Information – form with the conditions of assistance and compensation delivered by the airline;
- Assistance – enough food and drink, two phone calls or access to email and, if necessary, one or more nights of accommodation, as well as transportation between the airport and the place of accommodation.
- Reimbursement or alternative transport – to the final destination, where the company must offer three alternatives.
If the airline company does not comply with the aforementioned measures, the consumer has the possibility, after a non-satisfactory direct claim to the airline, to eventually submit a claim before the Spanish Air Safety Agency at no cost. Please note that these policies are subject to amendments and review, due to the continued changes in the circumstances caused by COVID-19.
Is COVID-19 a "force majeure" event according to Spanish law and jurisprudence?
Without neglecting the applicability of the international instruments to the contracts concluded involving a foreign element, we will explain below how the Spanish legal system addresses the concept of "force majeure".
a) "Force majeure" definition under the Spanish law
Section 1105 of the Spanish Civil Code, contains a descriptive definition of the concept of Force Majeure or fortuitous event: "Apart from the cases expressly mentioned in the law, and those in which the obligation so declares, no one shall be liable for those events which could not have been foreseen, or which, foreseen, were unavoidable".
In addition, Section 1575 of the Spanish Civil Code states: "Extraordinary fortuitous events shall be deemed to mean: Fire, plague, unusual flooding, locusts, earthquake or other equally unaccustomed events, which the contracting parties should have been unable to foresee reasonably."
In this context, it is important to remark that, under the Section 11012of the Spanish Civil code, Force Majeure excludes a willful act, negligence or late payment when the performance of the obligations is not possible because of a situation that can neither be foreseen nor avoided, and it occurs in an exceptional way.
b)Requirements and effects under the Spanish law and jurisprudence
Under Spanish law, the Force majeure event has to meet the following requirements:
- Unpredictability: The event surprises us when we take into account what happens normally and the usual consequences, so that the observation of reality does not allow us to anticipate that this event will occur and will have consequences of such magnitude. As a consequence, the event places one of the parties within an unforeseeable circumstance.
- Inevitability: The inability to prevent either the event itself from occurring or its harmful consequences from materializing. The situation must be impossible to avoid by applying normal care, attention and effort in relation to the event in question, considering the specific circumstances of place, time, and person. As a result, the event places one of the parties within an unavoidable circumstance.
In the light of the second requirement, please note that the contractual parties shall be aware of the fact that, to consider COVID-19 a force majeure event that exonerates from the liability to comply with the contractual obligations, there is a duty to mitigate the damage. That is, force majeure will operate only if the debtor of the obligation has exhausted the available means or alternatives for the fulfilment of said obligation. In this sense, if due to the circumstances of COVID-19, compliance with the contract is disproportionately costly, the parties could also consider reviewing the terms of the contract and finding legal alternatives for its compliance.
Please note that the contractual force majeure clauses can differ in terms of the scope of application or remedies provided thereof to the parties. That is, if the contractual clause establishes further requirements or limitations to the application of force majeure, those are to be valued and applied.
Recommendations
Even though the emergency measures might not directly affect the performance of commercial contracts, the overall COVID-19 outbreak has an important impact, that eventually could lead to the definitive or temporary impossibility to perform or receive contracted services. It could also mean that complying with the contract would imply an excessive onerous burden for the contractual parties.
Therefore, it is highly recommended to analyze how the contract regulates force majeure events, the scope of application, the mechanisms and requirements foreseen in this case, and the risks facing each contracting party. One should also review the potential compensation for non-compliance, as well as damages or delays agreed between the contracting parties. We recommend paying attention to the obligation to mitigate and, if possible, avoid the effects of the non-performance of the contract, by taking appropriate measures.
After analyzing the circumstances in which COVID-19 occurred and the prevention measures taken by the parties, if it can be interpreted that COVID-19 happened unexpectedly, was unpredictable, irresistible and inevitable even if the best diligence was applied, then is most likely that COVID-19 represents a force majeure case, as defined by Spanish law. Consequently, COVID-19 could release a party from its obligation, if it can be shown that the obligation was impossible to perform due to COVID-19.
Footnotes
1 http://www.cec-msssi.es/en/CEC/web/noticias/recomendacionesCoronavirus.htm
2 "Those who, in the performance of their obligations, incur in a willful act, negligence or late payment, and those who in any way contravene their obligations, shall be subject to compensation for damages caused."
Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
