Covid-19 Is Force Majeure? Let’s Check the Regulations

 
 
Source: pixabay.com
 
I.   Preface
At the end of 2019, the world was shocked by the virus originated in Wuhan, China, popularly known as COVID-19. The virus spread rapidly to various countries and made this phenomenon obstruct economic activities until the third quarter of 2020. This is due to preventive actions taken by several countries to reduce positive cases of COVID-19 in their countries which has disrupt global economic activity. As a real impact of disruption to economic activity caused by the spread of COVID-19, global economic growth has slowed down and a storm of recession has occurred in various countries including Indonesia.
 
Delloite explained that in the worst case scenario, the recovery of this global economic is predicted to happen in 2023. This is due to the disrupt of supply chain production processes and economic activity. Demand from various parts of the world will decline for approximately 2 (two) years. Given the impact and predicted length of time for recovery, many concerns have been raised regarding the implementation of work under existing agreements. But can the disturbance caused by COVID-19 be considered a force majeure? In order to find out, it is necessary to look deeper into how the regulation of force majeure is in the legal framework in Indonesia.
  
II.   What is Force Majeure ?
 

Source: pixabay.com
    
According to R. Subekti, a coercive situation is a condition when matters that have been agreed upon is not carried out, which is caused by things that are completely unpredictable and the debtor is unable to do anything about the circumstances or events that arise beyond the expectations. In other words, the non-implementation of the agreement or the delay in implementing the agreement is not caused by negligence, therefore it cannot be said wrong or negligent and the innocent person may not be subject to sanctions that are threatened for negligence.

Regarding its implementation in business transactions, force majeure is a clause that is generally included in an agreement. However, force majeure is not something that is often found in statutory regulations. There are several regulations that can be used as a reference in defining force majeure, such as the following:

• Construction Services Law  (UUJK)

In UUJK, force majeure is described as a state of force containing provisions regarding events that occur beyond the willing and ability of the parties that cause harm to one party. This Law also explains the classification of force majeure which is included in the absolute and relative categories.
 

• Presidential Decree for the Procurement of Goods and Services (Perpres Barang dan Jasa)

Though different to UUJK, it has a similar meaning. Force majeure in the Presidential Decree on Goods and Services is described as a force majeure that defines the following:
 
"A situation that occurs outside the will of the parties in a contract that cannot be predicted in advance, therefore the obligations specified in the contract cannot be fulfilled"
 
Other than this explanation, the Presidential Decree on Goods and Services explains the possible consequences in which the event of force majeure happens, the implementation of the contract can be closed. However, if the contract continues, the parties are allowed to make changes to the contract.

• Indonesian Civil Code (KUHPer)

As a colonial legacy regulation, the Civil Code does not explain in detail the definition and types of events that are considered to be force majeure events, but there are several provisions regulating the consequences, namely:

Article 1244
“The debtor must be penalized to cover costs, losses and interest. if he/ she is unable to prove that the non-performance of the contract or the improper timing of carrying out the engagement was caused by something unpredictable, which cannot be borne by him/ her. even though no bad intention included."
 
Article 1245
“There is no reimbursement for expenses. losses and interest. if due to coercive circumstances or because something that happens coincidentally, the debtor is prevented from giving or doing something that is required, or from committing an act that is forbidden to him."

Looking upon the explanation of force majeure in the current national legislation, it is seen that this regulation does not define in detail what events are classified as force majeure. Therefore, by looking at the principle of freedom of contract adopted in Indonesian contract law, the enforcement of force majeure itself is handed back to the parties engaged in the agreement in determining the editorial. In practice, there are two types of force majeure clauses, including:

(i)   Inclusive clause
This clause does not explicitly define the events that are considered as force majeure, but rather describe the conditions that fulfil the elements of force majeure itself. The editorial used is intended to expand events that can be considered as force majeure. Usually there is a use of the phrase "including but not limited to". Therefore, if the event ever occurs and meet the conditions mentioned, then one of the parties can claim the incident as force majeure.
 
(ii)  Exclusive Clause
This clause will explain the details of events that are classified as force majeure, and the editorial used is not intended to expand events other than those that have been determined. Therefore, the submission of force majeure is limited to the events that have been agreed in the contract.

When compiled from several laws and regulations and generally accepted contract preparation practices, the consequences of force majeure can vary because their implementation will always refer to the contracts applicable to the parties. However, related to losses arising from force majeure, it will be borne by each party. Therefore, the party experiencing force majeure is not obliged to compensate for the loss or in accordance with the applicable agreement between the parties.
 
In relation to the continuation of the contract, the negotiations carried out by the parties have an important role in the continuity of contract implementation. Some contracts provide relief in the form of an extension of the period, changing the terms according to the agreement, to allow for contract cancellation. However, it should be noted again, that each contract stipulates different terms, so that it refers to the agreement of the parties.

III.      Can COVID-19 be categorized as Force majeure?
 
The President has declared the emergency condition for COVID-19 through the Presidential Decree No. 11 2020 regarding the Determination of Public Health Emergency Corona Virus Disease 2019  and Presidential Decree No. 12 2020 concerning the Designation of Non-Natural Disasters of the Spread of Corona Virus Disease 2019 as a National Disaster. However, with this stipulation, can the disruption of work implementation be categorized as force majeure?

When referring to the definition of force majeure as explained by the experts, the spread of COVID-19 in general can be considered as force majeure. However, to be able to find out the force majeure in each transaction, it is necessary to further examine how the force majeure clause works in each contract that applies to the parties. This is in line with the Minister of Law and Human Rights statement, quoted from online media, that in order to declare an incident considered a force majeure one must see whether there is a clause in the agreement, also it must be looked into further on the type of force majeure that occurs which is also included in the clause contract. Therefore, the consequences arising from the occurrence of COVID-19 in the contract implementation may vary depending on the agreement made by the parties in the applicable agreement.

 
Reference:
-          https://www.ballardspahr.com/-/media/files/alerts/force-majeure-and-covid-19---03-20.pdf
-          https://www.hukumonline.com/berita/baca/lt5ea11ca6a5956/penjelasan-prof-mahfud-soal-i-force-majeure-i-akibat-pandemi-corona/
-          Undang-Undang No. 2 Tahun 2017 tentang Jasa Konstruksi
-          Peraturan Presiden No. 16 Tahun 2018 tentang Pengadaan Barang/Jasa Pemerintah
-          Kitab Undang-Undang Hukum Perdata