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[Desiderato Merriwether]

First check if your contract has a force majeure (FM) clause. It is not implied into a contract under Hong Kong SAR law. If there is no FM clause, you would need to prove instead that your contract has been frustrated. The bar for showing frustration of a contract is much higher and extremely difficult to establish in practice.

It is important to check if there are any excluded events which would mean a party is unable to rely on the FM event (e.g. financial hardship/ lack of demand/ economic downturn consequent on the FM event is causing the non-performance rather than the COVID-19 outbreak).

Changes in economic or market circumstances affecting the profitability of a contract or the ease with which the obligations can be performed quite probably are not FM events. To be able to rely successfully on an FM clause, a business usually will need to show it is the FM event which is the primary cause of its non-performance.

For catering businesses, various mandatory measures are now required under Cap. 599F, for example, the number of customers at any premises on which food or drink is sold or supplied for consumption on the premises (catering premises) at any one time must not exceed 50% of the normal seating capacity of the premises; and, no more than 4 persons may be seated together at one table within any catering premises. Such measures will inevitably affect the profitability of the catering businesses. However, reduced profitability due to governmental interventions does not necessarily guarantee a successful reliance on the FM clause, a business will need to show it is the FM event which is the primary cause of its non-performance of contractual obligations.

To rely on a FM clause, a business will need to check and follow the process steps set out in the contract (in terms of form and timing of notice to be given to counterparties). The parties will also need to consider if the contract should be terminated (or merely suspended) depending on what the contractual provisions envisage.

As practice around containment/ management of the outbreak varies by jurisdiction, so does practice around governmental intervention in private law contracts between parties. The Chinese government proactively started issuing FM notices to suppliers in certain regions in China, but we have not seen this practice adopted elsewhere to date. It is also not yet known how courts outside the PRC would interpret government FM notices in the context of a Hong Kong SAR law FM clause.

Even though Covid-19 might be a FM event under contract, it may not be covered by an insurance policy. It is important to check insurance policies to understand the scope of cover and any exclusions applicable in these circumstances.

BCLP has assembled a COVID-19 Force Majeure taskforce to assist clients with force majeure issues across various jurisdictions. You can contact the taskforce here. You can also view other thought leadership, guidance, and helpful information on our dedicated COVID-19 / Coronavirus resources page.

It is a global pandemic and Hong Kong, like the rest of the world, is feeling the effects of this unprecedented event. These effects are further exacerbated by the fact that Hong Kong experienced some of the worst civil unrest it has seen, in the months leading up to the outbreak.

Under both English law and Hong Kong law, force majeure has no expressly agreed definition and is a contractual creation. The force majeure doctrine can only be relied upon, if there is an express force majeure clause within the contract, although the narrower doctrine of frustration may still apply.

The Hong Kong International Diamond, Gem & Pearl Show, and the Hong Kong International Jewellery Show, have both been rescheduled. The organizers have given participants discounts and have assured those who have already paid, that their money is safe should they decide not to attend an event they have paid for. In contrast to this, Informa Markets, who are organizing the Hong Kong Jewellery & Gem Fair in June and September, are not offering refunds to customers who have already paid for the event.

Flights worldwide have been cancelled. Different airlines have dealt with this in different ways. Some offer full refunds; some will refund but apply a cancellation fee; some have kept customer money and allowed them to change their flights to a later date.

This depends. It is essential that parties check their insurance cover with relation to force majeure. Insurance may cover events, such as COVID-19. If it does the insurance provider may have to be informed immediately for cover to be issued.

Many Hong Kong businesses will have contracts with Mainland Chinese businesses. In PRC law, force majeure is a defined concept codified in statute. In Hong Kong law, force majeure is a contractual creation.

Unfortunately, many businesses will learn this the hard way and may find themselves tied into a contract that is significantly difficult to complete and substantially expensive. Drafting of future contracts and force majeure clauses within them, should be thoroughly contemplated.

Parties can also include changes in law in their definitions of force majeure. It is essential to explicitly state what constitutes as a change in the law. For example, are governmental recommendations and guidance classified as changes in the law?

Chris advises on a wide range of corporate commercial, corporate finance, mergers and acquisition, information technology matters, from strategising on tech driven start ups to drafting documentation required for complex cross border transactions.

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We asked a group of our dispute resolution lawyers about the questions most frequently asked by their clients in relation to force majeure claims. As COVID-19 has and will continue to affect every industry, decision makers should have an understanding of how the concept operates and whether it can offer relief in these challenging times.

English law does not have a principle of force majeure. As a result, the circumstances in which force majeure will apply will depend on (i) the contract including a force majeure clause and (ii) the precise wording of that clause.

Whilst it will always depend on the specific drafting, it is generally accepted that the ejusdem generis rule does not apply to the interpretation of force majeure clauses. This means that where there is an illustrative list of events, followed by more general, sweeper wording, the wider wording will not generally be interpreted as only catching events similar to those specifically listed.

An economic downturn, change in market price or increase in the cost of performance will not typically amount to a force majeure, even if that change is very substantial. This means that a party faced with performing a contract which has become economically unfavourable as a result of COVID-19 is unlikely to be entitled to force majeure relief.

Finally, check whether the contract wording excludes foreseeable events from the definition of force majeure. If it does and the force majeure event, e.g. COVID-19, was foreseeable when the contract was entered into, you may not be entitled to contractual relief.

Establishing causation is essential to obtaining force majeure relief. You must be able to show that the force majeure event has prevented (or hindered or delayed, depending on the contract wording) you from performing your contractual obligations. It is not enough that the force majeure event has arisen.

The force majeure event must be the only or substantial cause of the inability to perform under the contract. If there is more than one reason for non-performance and that other reason is not a force majeure event, relief may not be available. For example, a party who claims force majeure as a result of the COVID-19 pandemic but who would not have performed the contract anyway because of the substantial drop in the oil price, is unlikely to be able to claim force majeure.

Failing to comply with notice provisions may mean force majeure relief is not available. Most clauses contain an express obligation to notify and some require continued provision of information for the duration of the force majeure event.

The most common consequence is suspension of rights and obligations for the duration of the force majeure event for either or both parties. In practice, this grants the affected party an extension of time for performance until the event impacting its ability to do so ceases.

The parties should check how soon after the force majeure event the affected party is required to resume performance. This recovery period can be critical. For example, where manufacturing plants have been closed down as a result of COVID-19 measures, it may take a considerable time to return to previous levels of production, even after official measures are relaxed. As a result, the affected party may not be able to immediately return to fulfilling its contracts and will continue to require relief beyond the official lockdown.

Depending on the contract, termination can either arise as an automatic consequence of claiming force majeure or it may give the parties discretion to terminate, normally after a specified period of time.

If you choose to exercise a right to terminate, you should comply with the termination requirements of the contract, including any notification provisions. Do not forget to check how payments or performance already made will be dealt with under the contract.

In those circumstances, carefully check the costs that the affected party is entitled to, how these should be calculated and what (if any) mitigation obligations apply. If you are the claiming party, do not assume that these costs will be easy to recover in the current economic climate.

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