Legal Framework of Covid-19
Legal Framework of Covid-19
While Georgia, together with the rest of the world, tries to subdue and put in a cage one of the biggest challenges of the 21st century – Cobid19, it is important to assess its legal framework and analyze what might be its impact on business and consequently on the interests of the country.
Civil Code of Georgia entails the concept of unconquerable force, which is commonly known among lawyers as Force-majeure. It may represent a legal ground for suspending statute of limitations, termination of long-term or short-term contractual relationships or avoiding the civil liability.
According to international instruments, Force-majeure is:
a) An impediment of an extraordinary nature
b) It is beyond the parties’ control
c) It is unforeseeable
d) It renders the performance objectively impossible
According to the established practice of the courts of Georgia, force-majeure is an impediment that cannot be avoided. In addition, it is important to assess whether it was indeed impossible due to the circumstances beyond the parties’ control to avoid such impediment. In case of existence of such circumstance a party to a contract may terminate the agreement without following the established notice period. On 30th January 2020, the World Health Organization announced the Public Health Emergency of International Concern, on 11 March 2020, the world pandemic was declared. The fact that it was unavoidable by the efforts of the parties of any contractual relationship is undisputed; however, according to the decision of the Supreme Court of Georgia, the existence of force-majeure does not automatically render the performance impossible. The causal link between the force-majeure and non-performance needs to be proved. And it does not per se represent a ground for freeing from liability. Thus, it is important to assess the impacts of Cobid19 on your business. Furthermore, it should be noted that the wording of contract should be checked thoroughly.
Adjustment of the contract to the changed circumstances
According to Article 398, in case of changing the circumstances that represent a ground for forming the agreement, the party may request adjustment of the agreement to the changed circumstances. Accordingly, if Covid19 has made fulfilment of your contractual obligations substantially difficult, you may request renegotiation of the terms of the contract. In this case, it is of utmost importance to direct the negotiation process duly.
According to the definitions of the Supreme Court of Georgia, in case of existence below given preconditions, the request to adjust the agreement to the changed circumstances may be legally grounded. Namely:
1. The changed circumstances should render the performance of the contractual obligations substantially difficult.
2. The circumstances should be changed after forming the contract.
3. The change of circumstances should not have been foreseeable at the time of forming the agreement, i.e. the change should be beyond the parties’ control.
4. The agreement should not already have put the risk on the side of one of the parties. Otherwise, the contractual term applies.
5. The substantial difficulty of performing the contractual obligations should be caused by the change of circumstances.
It is important that the business is aware of its corporate social responsibility and the interests of its employees. However, Covid19 has fully stopped or made substantially difficult the operation of some of the businesses. In which case, regardless the company’s willingness to maintain the employees and provide them with monthly salary, the business might be compelled to terminate/suspend labour relationships.
Possible ways of suspending the labour contracts are paid or unpaid leave. The Labour Code of Georgia provides for 24 working days of paid leave, and additionally minimal 15 working days of unpaid leave to each employee. It is recommendable to negotiate with the employees in regard to taking the leave, so that both interests of the employee and employer are protected.
The suspension of labour contracts represents a better alternative than the termination. As in former case, on the one side, the employee loses the job, and on the other side, the employer has to pay the compensation if the termination is caused by the economic circumstances, which compel the company to dismiss the personnel.
Although, it is true that in certain circumstances, Covid19 might suspend the running of the statute of limitations, however, it must be noted that the force-majeure does not automatically represent the ground for such suspension and related outcomes; rather this is assessed according to objective criteria. As of today, it is possible to submit the claim electronically, through the website of e-court. This allows us to submit the claims to the court during the announced state of emergency.
Our law firm remains at your disposal remotely, if you need a legal advice. Please, do not hesitate to contact us if you have any questions.
Wish you a good health.
Chargeishvili Law Inn
The brochure is prepared by Attorney of Chargeishvili Law Inn Tamta Jgarkava.