4 March 2020
Foreign companies which are parties to contracts with the French public sector may wonder how to deal with the Covid 19 outbreak. This raises the question of the legal qualification of the coronavirus epidemic, and especially that of its impact on the performance of said agreements. Two main questions arise :
Can covid-19 be qualified as a case of force majeure such as to exonerate the said partners from their liability in the event of non-performance or bad performance of their contracts?
Are the said partners in a position to be compensated for the consequences of an administrative decision taken in the context of the fight against Covid-19that would affect their contractual bond?
Externality, unpredictability and irresistibility. Pursuant to decisions from both the administrative and judicial courts, this triptych defines the characteristics of a force majeure event. The global coronavirus outbreak announced by the World Health Organization as a public health emergency raises several legal issues regarding the performance of public contracts.
One question stands out: Does the Covid-19 epidemic meet such criteria and can it therefore be recognized as a force majeure
The administrative judge, in its January, 29th, 1909 judgment Compagnie des Messageries Maritimes, ruled that to qualify as force majeure, an event must satisfy the conditions of externality, unpredictability (at the time of the signature of the contract), and irresistibility, meaning an incapacity of the co-contracting party to perform its obligations.
However, the administrative courts have never ruled specifically on the contractual and legal consequences of a pandemic.
Still, the administrative judge did consider that the following events constituted cases of force majeure: exceptionally severe bad weather (Etablissements Descours and Cabaud (1935)), a tidal wave (SARL Niçoise pour l’extension de l’aéroport (1991)), a storm of exceptional strength (La Mutuelle du Mans Assurances IARD (1998), a flooding due to extremely heavy rainfall and a particularly high tide (Société Grands Travaux Marseille (1987)).
However, not all natural events are concerned. Thus, a cyclone which revealed defects in the design and the construction of
the building was not ruled as a case of force majeure (Lomba (1997)).
It’s a general rule that a public contract may be terminated either pursuant to its contractual provisions, or by referral to the administrative court when an event leads to a definitive disruption of the economic equilibrium of the contract.
Unless the parties agree on a new direction to ensure the execution of the contract, the judge will assess the reality of a force majeure event and its financial and legal consequences.
In the decision Société Chantiers et ateliers de Saint-Nazaire (1925), the Council of State, the highest administrative court in
France, considered that, prior to any termination, the existence of a case of force majeure impeding the normal performance of
the public contract should lead to an exemption from contractual liability of the administration’s co-contracting party, or even, tosome extent, to a compensation of the damage suffered by the contract holder. In the light of the foregoing, the Covid-19
epidemic doesn’t quite satisfy the condition of irresistibility required to characterize a case of force majeure, notably if it appears that the contract holder had the possibility to adapt its performance to the circumstances.
Nevertheless, if such a qualification should be held, it would have consequences on the continuation of the contract as well as on the conditions of its performance.
The theory of unforeseen contingencies covers abnormal and unforeseeable events beyond the control of the contracting party of the administration, which make the execution of the contract impossible (which brings it close to force majeure) or, at least, increase in massive proportions the obligations of the contracting party and thus disrupt the general economy of the contract.
This theory aims at preserving the continuity of the public service and thus enabling the contracting party of the administration to continue, despite these serious difficulties, the performance of the contract. When it is justified, the contracting party is entitled to an indemnity for unforeseeable circumstances, which will enable him to continue to perform the contract to which he is party.
However, the co-contracting party cannot be exonerated from his contractual liabilities.
In public contract law, the term “fait du prince” is used to refer to a measure taken by the administration which has an impact on the performance of a contract to which it is a party (Entreprise générale Veuve Duval (1953)).
When the conditions for the application of the theory of “Fait du Prince” are met, the contracting party of the administration
is entitled to obtain full compensation and therefore restoration of the financial equilibrium of the contract (Société Alcools du
Vexin (1963)). Because of a very restrictive application of this theory, it seems unlikely to be applicable to the Covid-19 epidemic.
The liability of the administration may be sought not only in the event of a fault on its own part, but also without fault, being specified that no-fault liability covers various hypothesis. Pursuant to this theory, under some circumstances, the administration has to compensate the harmful consequences of its decisions, even though it has not committed any fault. This liability without fault may be based either on risk (Cames (1895)) or on a breach of equality before public charges.
Such could be the case of an economic operator (contracting party of the administration), who would see the performance of its contract disrupted by a non-contractual administrative decision taken in the context of the fight against the Covid-19 epidemic.
In addition, it should be noted that for the time being, the mere declaration of the Minister of Economy and Finance (February, 28th, 2020) stating that Covid-19 was indeed a case of force majeure that exempts the State’s co-contractors from the application of any penalties in the event of late delivery, cannot be considered as an administrative decision.
It should thus be stated that the qualification of force majeure of the Covid-19 epidemic depends largely on the circumstances at hand. Whereas, for some contracts, the virus will have such an impact on the performance of the contract that it will fulfil the
conditions of a force majeure event, for others, one or several of the conditions could be lacking.