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06 April 2020

Force Majeure Certificates: China leads but does the UK follow?

The uncertainties underlying the coronavirus outbreak (COVID-19) have inevitably led to an increase in force majeure-related issues. Although COVID-19 may not always in itself constitute a force majeure event, its unexpected and widespread effects may be seen as such.

The current trend in China

Nationally-imposed measures invoked to suppress COVID-19 have hindered many Chinese companies from performing certain contractual obligations, particularly in the context of foreign trade. The Chinese government has specifically addressed force majeure issues via its quasi-governmental body, the China Council for the Promotion of International Trade (CCPIT). The CCPIT has been issuing ‘Force Majeure Certificates’ to support Chinese companies. In doing so, this has enabled Chinese companies to be in a position to invoke force majeure clauses and associated remedies. It is understood the certificates corroborate specific COVID-19-related events, including travel bans, quarantine and restrictions on business operations and re-commencement of work.

The CCPIT has claimed that the certificates will be recognised internationally. Given the novelty of the certificates, it remains too early to say whether they would be upheld in PRC courts, let alone in other jurisdictions.

The English law position

If a particular contract is subject to the laws of England and Wales, the courts would not be bound to accept or attach any evidential weight to a Force Majeure Certificate provided by the CCPIT. The courts will only consider the specific drafting of the clause and whether there is a causal link between the party’s non-performance and the alleged force majeure event.

Interestingly, the London Chamber of Commerce and Industry is also capable of issuing Force Majeure Certificates. These certificates are not intended to invoke, enforce or argue the existence of a force majeure event on behalf of any commercial party; it merely details the force majeure circumstances in existence. However, if the parties are disputing whether the force majeure provision in their contract is applicable, these certificates could provide persuasive evidence should the dispute require judicial determination.

Potential future trends

It is undeniable that the COVID-19 pandemic will be remembered in history as one of the prime examples of a force majeure event (much like any of the previous natural disasters felt around the world). As they did then, UK companies will now need to adapt to the changes in both the consumer and commercial markets to ensure their survival through the coming months.

Force Majeure Certificates may become a crucial piece of evidence, which will help parties to exercise the relevant provisions in their commercial contracts.

The application of force majeure provisions in a contract requires bespoke legal analysis. Should you have specific queries, we would highly recommend you to seek independent legal advice or contact us as soon as practicable.

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