LOCAL CHAPTER LEGAL WRITINGS
alsa-indonesia.org
ALSA LC UNPAD ENGLISH DEVELOPMENT SUBDIVISION AUGUST, 2020
Is Covid-19 a Force Majeure Event? by Gilbert William David Sitorus
Nowadays, Coronavirus Disease 2019 or Covid-19 is haunting people around the world regardless of their age. Several countries have also made ‘extra measures’ to stop the spread of this virus from people to people. Some
countries through their government, such as China, the United Kingdom, Italy and many other countries, have made some ‘extra measures’ by declaring the lockdown policy in their country to stop the movement of foreigners to their country in particular times. This policy has also affected various kinds of contracts, where, by the lockdown measure, some business activities in various sectors can not be done by the time which has been agreed before. This uncertain situation does not make the business practitioners, whose contract is affected, do nothing, but to anticipate any condition in the future which may affect their business. One of the terms that we are getting used to hearing in the current situation is the “force majeure”. Although not every country in the world acknowledges the notion of force majeure, however, the parties of the contract may put the notion of force majeure in its contract in the form of a clause.1 Despite the parties’ original intention to fulfill their obligation under the contract, the possibility of one party to fail in fulfilling the contractual obligation due to the events which are unforeseeable and which disturb the completion of the parties’ undertakings still exist.2 In such a situation, this clause acts as an “escape clause” to the general rule of “pacta sunt servanda”, which means the contract is binding on any condition, which is the very fundamental rule of a contract.3 This is why, usually, the parties of a contract make a provision of force majeure to prevent such a situation.
Michael Polkinghorne & Charles B. Rosenberg, Paris Energy Series No. 9: Expecting the Unexpected: The Force Majeure Clause, White&Case, February 2015, p. 2 2 Hubert Konarski, Force Majeure and Hardship Clauses in International Contractual Practice, The International Business Law Journal 405-428, 2003, p. 407 3 Stefan Ditrih, Svetlana Marković, Olgica Milošević, Change of Circumstances and Force Majeure Clauses in Serbian Legal System and Sources of International Uniform Law, Ditrih et al./Economic Themes, 57(1): 67-86, 2019, p. 68 1
The concept of force majeure is an established doctrine in French law which relieves a promisor from responsibility for non-performance in certain circumstances.4 In French law, it appears in article 1218 of the French Civil Code, “In contractual matters, there is force majeure where an event beyond the control of the debtor, which could not reasonably have been foreseen at the time of the conclusion of the contract and whose effects could not be avoided by appropriate measures, prevents performance of his obligation by the debtor.”5 To be qualified as a force majeure event, the performance of the contract must have been both unforeseeable and irresistible.6 The applicability of force majeure condition is a little bit different in English law. The concept of force majeure is often used by the parties who entered into a contract in one of its provisions in their contract. Although the term is not specifically stipulated as a force majeure7 it comes in many shapes and sizes, where it can be ranged from a simple clause providing for cancellation of the contract in the event that performance is prevented by circumstances comprehended within the term force majeure, to clauses of immense complexity containing a list of excusing events, provisions for notices to be issued to the promisee and detailing the consequences of the f orce majeure event.8 In making a contract, the parties of a contract will never know what they will meet in the future of the performance of their contract. At the first hand, the parties shall acknowledge, whether there is an exclusion clause in the contract or not. The parties usually use the word of the “force majeure” itself in
Ewan McKendrick, Force Majeure and Frustration of Contract Second ed., Informa Law from Routledge, 2013, p. 5 5 Art. 1218, French Civil Code 2016, can be accessed in https://www.trans-lex.org/601101/_/french-civil-code-2016/ 6 Supra Ewan McKendrick, p. 6 7 Hackney Borough Council v. Dore [1922] 1 K.B. 431 8 Supra E wan McKendrick, p. 9 4
its contract,9 or the word of “Acts of God” in determining the exclusion of the contract.10 However, even though the term is different, it has the same meaning, that it is applied as the exclusion clause of the performance of a contract in particular situations which are unforeseeable, such as natural disasters, inter alia floods, earthquakes, violent storms, etc.;11 war, whether declared or not;12 acts of authorities, whether lawful or unlawful;13 and other specific things which have been agreed by the parties of the contract. There are a lot of contract forms made around the world which includes the force majeure clause in specific conditions. One of those examples is in a contract formed by The Grain and Feed Trade Association, Contract No. 100 (GAFTA 100), on clause 22: “Sellers shall not be responsible for delay in shipment of the goods or any part thereof occasioned by any Act of God, strike, lockout, riot or civil commotion, the combination of workmen, breakdown of machinery, fire, or unforeseeable and unavoidable impediment to navigation, or any cause comprehended in the term "force majeure".…”14 All business transactions are legally bound by a contract, which also legally binds the parties involved within the transaction. All contracts require all of the parties involved to perform their obligations in order to fulfill the contract. Once a party fails to perform their obligations, they will have to pay C lause 5(b), International Swaps and Derivatives Association, Inc. 2002 Master Agreement, can be accessed in https://ppp.worldbank.org/public-private-partnership/ppp-overview/practical-tools/checklists-and-risk-matri ces/force-majeure-checklist/sample-clauses 10 Nugent v Smith (1876) 1 CPD 423, p ara. 426; Transco plc v Stockport Metropolitan Borough Council [2003] UKHL 61, para 59 11 Computer & Systems Engineering p.I.e. v. John Lelliott (Ilford) Ltd. (1990) 54 B.L.R. 1, (C.A.). 12 National Oil Co. of Zimbabwe (Pte) Ltd. v. Sturge [1991] 2 Lloyd’s Rep. 281. 13 Supra E wan McKendrick, p. 81 14 The Grain And Feed Trade Association Contract No. 100, Contract for Shipment of Feedingstuffs in Bulk Tale Quale – CIF/CIFFO/C&F/C&FFO Terms, Clause 22 9
the damages that they caused. However, sometimes, there are kinds of conditions that will cause the contract to be unfulfilled since the parties cannot perform their obligations. There are certain unpredictable events that may cancel out the contract where none of the losses is the responsibility of the parties. As we have learned above, these unpredictable events are covered under the force majeure clause under the contract. However, not every unpredictable situation is covered by the force majeure clause. It all depends on what conditions have been agreed by the parties of the contract. In the current situation, the world has been struck by the pandemic of Covid-19. Covid-19 is a virus that was once underestimated by the state leaders around the world and became one of the worst pandemics ever. Since the Spanish Flu in the year of 1920, there has been no pandemic that has caused damages up to this extent, starting from social distancing, even the total blockade by the countries, or so-called as a lockdown policy. One of the aspects that have been affected so seriously in the current situation is the economical aspect. Indeed, a lot of contracts which have been made before the spread of Covid-19 began have been affected by the unpredictable pandemic of Covid-19 which has just started in January 2020. The question which has frequently existed nowadays is, “does Covid-19 constitute as a force majeure event?”. The first step to ensure the scope of force majeure in the current situation is by seeing the force majeure clause in the contract itself. While the parties have agreed on the terms of force majeure in the contract, the parties shall ensure that the situation of “Pandemic” is also covered under the force majeure clause. For instance, In Lebeaupin v. Richard Crispin and Co,15 the parties of the contract have agreed that an “epidemic” is one of the circumstances that constitute a force majeure event. It shows that the parties have anticipated the condition of 15
Lebeaupin v Richard Crispin and Company [1920] 2 K.B. 714
the epidemic to be one of the factors which may possibly become a factor that can hinder the transaction with the agreed schedule in the future. Therefore, if any kind of situation that hinders the transaction which has been caused by the epidemic condition, the parties cannot be held liable for the damages under the contract. Now, if we assume that that contract was made right before the pandemic of Covid-19 with its final schedule of the transaction set at the time of the situation of the pandemic, the parties may not be held liable for the damages happened by the pandemic of Covid-19. It is because since the Covid-19 is a pandemic event, which is more significant than an epidemic,16 the pandemic of Covid-19 might also be covered by the force majeure clause. However, to make it clear, the parties shall not just assume the condition which may be covered by the force majeure event, but to take it to the court to be determined by the judge since there is still an ambiguity of the situation which can be covered by the f orce majeure c lause. One of the examples that we can take into account is the Master Purchase Agreement between Cisco Systems, International B.V, a Netherlands corporation and Acacia Communications, Inc., a Delaware corporation, where under their contract, they have anticipated every unpredicted event in the future, including the pandemic situation, where it is written in clause 16.1: “16.1 Force Majeure. Neither party will be considered in default of performance under this Agreement to the extent that performance of such obligation is delayed or prevented by fire, flood, earthquake or similar natural disasters, riot, war, terrorism, civil strife, labor disputes or disturbances, industry-wide material shortages outside Supplier’s reasonable control, an outbreak of a pandemic disease, governmental regulations, communication or utility failures (a “Force Majeure Event”). Following
16
Stedman’s medical dictionary. 28th ed. Philadelphia: Lippincott, Williams & Wilkins, 2006.
the Force Majeure Event, Supplier will resume performance under this Agreement within the time to recover objectives defined in its BCP.”17 With the word of an outbreak of a pandemic disease in the force majeure clause, if the transactions are delayed or prevented by the effect of any kind of pandemic, interalia due to the lockdown policy and any kind of measures by the state’s authority in the event of preventing the spread of the disease, any parties cannot be held liable on the damages that occurred. The point is, in order for the Covid-19 pandemic situation to be considered as the force majeure event, the term “pandemic” must be written within the force majeure clause of the contract. It is an absolute right of the parties to put any terms of situation in the force majeure clause since, in making a contract, the parties are free to determine the contents of the contract, as the contract itself would also be the law which governs both parties until they finish the contract. The pandemic of Covid-19 is surely one of the most frustrating events that is happening in 2020. From the business point of view, this pandemic had inflicted severe damage to companies which hinder their ability to conduct business as usual. Most companies that are affected by this pandemic perform their businesses in accordance to the contracts that bind them. Since the pandemic restricted their ability to perform their contractual obligations, the parties must refer the dispute to the force majeure clause of the contract. This is the very first effort that the parties can ensure, whether this pandemic situation is covered by the force majeure clause, or not. If the force majeure clause and “pandemic” term has met the meeting point, the parties have two choices to do with the contract, either they can re-communicate the further
Master Purchase Agreement between Cisco Systems, International B.V, a Netherlands corporation and Acacia Communications, Inc., a Delaware corporation, can be accessed in: https://www.lawinsider.com/contracts/5VIA7OZRHxU 17
performance of the contract, or they can take it to the dispute resolution bodies, so the damages caused by this situation can be determined by the judges or the arbitrators.
© ALSA LC UNPAD Jl. Raya Bandung-Sumedang KM.21, Hegarmanah, Kec. Jatinangor, Kabupaten Sumedang, Jawa Barat 45363
Climate Change on How We Regulate It by Dona Regina Napitupulu Arctic’s reduction in shorefast sea ice, Australia's wildfire, Middle East’s water scarcity, and China’s polluted air are some of the environmental events which can be traced back to one cumulative event, Climate Change.1 The World Meteorological Organization stated that every decade since 1980 has been warmer than the previous one and the organization's analysis of leading international datasets shows the temperature in 2019 and 2016 were the highest in record.2 Such things occur as temperature rises continuously, environmental degradation, changes in rainfall pattern, extreme weather, more droughts and heatwaves, rise of sea level, ice-free arctic, and many horrible environmental nightmares.
Source: Met Office, via World Meteorological Organization, 2019 NASA, “Overview: Weather, Global Warming and Climate Change”, https://climate.nasa.gov/resources/global-warming-vs-climatechange/#:~:text=Global%20warming%20is%20the%20long,gas%20levels%20in%20Earth's%20atmosph ere, accessed on 15th August 2020. 2 UN Environment Programme, “Who Turned Up the Temperature? Climate Change, Heatwave, and Wildfires”https://www.unenvironment.org/news-and-stories/story/who-turned-temperature-climate-changeheatwaves-and-wildfires, accessed on 15th August 2020. 1
Climate Change is dangerous for the future of earth and humankind as it will cause more natural disasters which increase the risk of landlessness, social disarticulation, food scarcity, and increased morbidity.3 This phenomenon is a ticking time bomb and thereby arises because prior human intervention.
Human activities are the main factor of the accelerating global temperature. The growing industrial activities have caused huge emissions of greenhouse gases and likely accelerate the climate to change.Thus, the effort to mitigate the impact is the responsibility of every nation. Each and every nation must work hand in hand to achieve the purported goal to minimize the impact of climate change since the problem will not be solved if there are some countries that continuously permit activities that will exacerbate climate change. In this ambience, law holds a big role since it is the major instrument by which societies consolidate their relationships and without legal rules, the life of society becomes unpredictable.4
To include climate change under any legal structure is challenging due to the interdisciplinary nature of climate change which combines the aspects of political, legal, and science. Climate change gives rise to new principles in international law and the substantive dimension among environmental law, criminal law, administrative law, and many more. Climate change law intersects with different levels of international and national law that gives impact on conflicts among different legal regimes, approaches, and activities within national jurisdiction areas.5 International legal rule can be incorporated into the national legal system, depending on how the respective national legal system regulates it. International law rules can be perceived through incorporation
3
Oliver C. Ruppel (et.al), Climate Change: International Law and Global Governance: Volume II: Policy, Diplomacy and Governance in Changing Environment, Baden-Baden: Nomos Verlagsgesellschaft, 2013, p. 20 4 Rudiger Wolfrum, Coexistence, Cooperation and Solidarity: Liber Amicorum Rüdiger Wolfrum, Martinus Nijhoff Publishers, 2012, p. 1283 5 Oliver C. Ruppel, Op. Cit., p. 45-47
or applying in the original form and through transformation or changing into the formal form of national law.6
Climate change has become an international challenge including the realm of international law and its coordination between states to cooperate for minimizing the impact of climate change in the future. International law as a law that governs states needs to develop a system to prevent or adjust states with the worst case. A governing rule to regulate states is required to attain the purported result, which binds all of the sovereign states together to perform their international obligations to minimize the impact of climate change. The United Nations Framework Convention on Climate Change initiated a system of negotiation in the legal aspect to find the solution.
The convention resulted in the Kyoto Protocol. This protocol commiting industrialized countries and economies in transition to limit and reduce greenhouse gases (GHG) emissions. Kyoto Protocol was approved in Kyoto, Japan, on 11 December 1997 and entered into force on 16 February 2005. Out of 195 countries, there are currently 192 parties to the protocol and has been ratified by at least 55 countries. The protocol's main goal is to decrease global warming by cutting greenhouse gas concentration in the atmosphere to the “level that would prevent dangerous anthropogenic interference with the climate system” and only asks parties to adopt policies and measures on mitigation and report it regularly. The Kyoto Protocol only binds developed countries since those countries are largely responsible for the high levels of GHG emissions in the atmosphere.7 The greenhouse gases listed in the protocols are Carbon dioxide, Methane, Nitrous oxide, Hydrofluorocarbons, Perfluorocarbons, and Sulphur hexafluoride.8
6
Mochtar Kusumaatmadja. Etty R. Agoes, Pengantar Hukum Internasional, Bandung: PT. Alumni, 2003, p. 56 7 Breidenich, C., Magraw, D., Rowley, A., & Rubin, J. “The Kyoto Protocol to the United Nations Framework Convention on Climate Change” American Journal of International Law, Volume 92, Issue 2, 1998, p. 315-331 8 UN Climate Change News, “What is the Kyoto Protocol?”, https://unfccc.int/kyoto_protocol, accessed on 16th August 2020.
The protocol took period in 2008 and ended in 2012 and as the result, all 36 countries that fully participated complied with the protocol. A second commitment to carry this protocol was agreed in 2012 known as the Doha Amendments. The Doha Amendment includes new commitments that take period from 1 january 2013 to 31 december 2020 and several articles which specifically referenced issues that needs to be updated from the first commitment. Under Kyoto Protocol which continued by Doha Amendments, the parties must meet their targets through national measures and are monitored by The United Nations Climate Change Secretariat so they can verify the state consistency to the protocols. Reporting is done by parties by submitting annual reports and the compliance system ensures Parties to meet their commitments also help the problem within it.9
The protocols came into force in 2005 and in its Annex B, obliges 37 industrialised countries to reduce greenhouse gas emissions. Even though the Doha Amendment not as of yet entered into force, the convention itself only asks those countries to adopt policies and measures on mitigation and to report periodically. International Conventions and agreements are binding to the party states. Under Article 2 (f) of the Vienna Convention on the Law of treaties, “Contracting State means a state which has consented to be bound by the treaty, whether or not the treaty has entered into force.” Therefore, in spite of the fact that the Doha Amendments has not entered into force, the treaties under the Kyoto Protocol are legally binding.10
However under Article 18 of the Kyoto Protocol, any compliance mechanism “entailing binding consequences” must be approved by amendment requiring ratification. The Kyoto Protocol enforcement mechanisms are limited by the States' consent to enforcement and the state's action will construct the effectiveness to the International agreement.11 Each state can implement the agreement to the national law by ratification
9
Ibid Ibid 11 Hannah Chang, “A ‘Legally Binding’ Climate Agreement: What Does it Mean? Why Does it Matter?”, https://blogs.ei.columbia.edu/2010/02/23/a-%E2%80%9Clegally-binding%E2%80%9D-climateagreement-what-does-it-mean-why-does-it-matter/ accessed on 16th August 2020 10
and accession. At this rate, the protocol has been ratified by at least 55 parties state. This issue raises a question on how does Indonesia contribute to reducing Climate Change and regulate it under its national law?
Indonesian Government adopted the United Kyoto Protocol right from the start in 1998. Ever since the beginning, the government has prepared for the necessary capacity development activities by hosting various projects, including the Activities Implemented Jointly (AIJ) pilot phase, a national action plan, institution strengthening, assessment of technologies, national strategy studies, and the completion of the First National Communication.12 The United Nations Framework Convention on Climate Change ratified under Law No. 6 of 1994 and the Kyoto protocol under Law No. 17 of 2004. By virtue of this fact, Indonesia has the duty to identificate and be responsible for its greenhouse emissions. Moreover, Law No. 31 of 2009 on Meteorology, Climatology, and Geophysics obligates the identification of greenhouse gas emissions to formulate policies, guidelines, and controls on climate change.
At this present time, Environmental protection in Indonesia is regulated under Law No. 32 of 2009 on The Management and Protection of the Environment (‘Environmental Law”). This law purportedly established for protecting and managing the environment to parties whos responsible for businesses and/or activities in the relevant environment. For instance, any business or activity that is probable to have an impact on polluting the environment requires an AMDAL (Analisis Dampak Lingkungan) or An Environmental Audit to evaluate compliance with government requirements.13 This regulation has a strict liability to everyone or entities in Indonesia’s jurisdiction who breached this law. In the year of 2009, President Susilo Bambang Yudhoyono issued a decree to reduce
Daniel Murdiyarso, “Implications of the Kyoto Protocol: Indonesia’s Perspective”, International Review for Environmental Strategies, Vol. 5, No. 1, 2004, p. 146 13 The International Comparative Legal Guides, “Indonesia: Environment & Climate Change Laws and Regulations 2020” https://iclg.com/practice-areas/environment-and-climate-change-laws-andregulations/indonesia#:~:text=Indonesia%20has%20also%20ratified%20the,Climate%20Change%20, accessed on 10th October 2020. 12
greenhouse gas emission down to 26% by 2020 and had expressed interest in reducing emissions from deforestation.14
Despite all of these regulations, Indonesia is still the world's fifth largest emitter of greenhouse gases. One of the biggest challenges that are closely related to climate change is the problem of land fires that significantly increased Indonesia’s greenhouse gas emissions. Ineffective bureaucracy in Indonesia often allows entities to build factories or conduct any activities that have a negative impact on the environment. One of its instances is massive forest fires that are deliberately set up to convert forest into industrial uses.15 The government still has a bunch of homework to do to improve the quality and implementation of Environmental Law under its jurisdiction. Therefore, as individuals who have awareness regarding the impact of the Climate Change, we must obey and maximize all of the regulations set by the authorities to create a better and safer earth.
World Resources Institute, “Forest and Landscapes in Indonesia”, https://www.wri.org/ourwork/project/forests-and-landscapes-indonesia/climate-change-indonesia, accessed on 11th October 2020. 15 Kuki Soejachmoen, “Ancaman Serius Perubahan Iklim di Indonesia”, https://www.dw.com/id/ancamanserius-perubahan-iklim-di-indonesia/a-19196264, accessed on 11th October 2020 14