The Effects of the COVID-19 (Corona Virus) on International Trade and Whether it Constitutes Force Majeure
The COVID-19 virus, emerging in China and spreading all over the world, has literally become a global threat and has been considered a pandemic by the World Health Organisation. It is observed that the virus, which also spreads to many European countries such as Italy and Germany, negatively affects the international trade market. Unfortunately, the measures to prevent the pandemic virus and the deaths, the treatment of those infected, and the prevention of this pandemic have not yet fully yielded. In this article, the effects of the Corona Virus on the international trade field will be explored and an evaluation will be made as to whether it can constitute force majeure.

i. Effects of COVID-19 in Commercial Context

While the economic problems and losses caused by the outbreak continue to increase day by day, the estimated loss it could cause for the travel industry is approximately 1.7 trillion dollars. In addition, the outbreak has had its most pronounced effects on suppliers, and it is observed that contracts could not be fulfilled within the prescribed periods due to the emergency measures on the goods to be supplied and logistics channels.

The effects of COVID-19 in the above-mentioned commercial context arise from the practices that countries try to prevent against the pandemic. As an example of these applications; sanctions such as quarantines, blocking access to country borders, export-import prohibitions in commercial activities, and travel ban can be imposed. Turkey, France and Switzerland and many other countries have banned public indoor events with more than 5,000 and 1,000 people respectively, and other countries may follow if infection becomes more widespread. Flights have been cancelled to save costs and moving round the world may become harder while the spread of COVID-19 continues. As a result of these, many products cannot be supplied, deliveries are not made at all or not made on the commercial platform, and many factories whose raw materials have been exhausted have to stop their production.

In the light of the aforementioned failures, the question arises whether the COVID-19 pandemic, which has influenced the whole world, can be qualified as a force majeure in law.

ii. The Definition of Force Majeure in Turkish Law

Within the scope of Turkish law, the concept of "force majeure" is not clearly defined in the laws. In doctrine, the definition of a force majeure is that the performance of the actions undertaken by the parties in a commercial relationship becomes objectively impossible outside the control of the parties and for absolutely unpredictable reasons.

In order for an event to be accepted as a "force majeure" by law, it must be a tangible fact that is unpredictable, unavoidable and impossible to overcome in terms of occurrence or impact. A certain link is sought between the party affected by the force majeure in question and not fulfilling the performance agreed by the contract. The force majeure event must inevitably have caused a violation of the norm of behaviour or debt. In this context, despite all the measures taken, all possibilities and tools, the results of the force majeure event must be absolutely inevitable. However, it should be emphasized that the fact that a special provision in a contract that has been issued as a force majeure, does not mean that it can benefit from this provision in any case.

Substances related to force majeure may be arranged to cover the following events:
  • Compliance with a law or governmental order, rule, regulation or direction,
  • Any action taken by a government or public authority, including an embargo, export restriction or other restrictions or prohibitions,
  • Delays due to suppliers or material shortages,
  • Difficulty or increased costs in procuring workers, goods or transportation,
  • Other situations affecting the supply of goods or services.

iii. The Present Standing Point of COVID-19

It seems that trade is affected largely by the COVID-19 all over the world. The fact that the COVID-19 was surfaced in China does not mean that it will only be a force majeure for companies based in China. For instance, in Turkey, two Turkish companies trading within the borders of Turkey, if one may seem to have activities associated with a Chinese company is more likely to be affected by the COVID-19 pandemic in Turkey. In other words, the COVID-19 due to their sheer companies established in Turkey or resident assessment would be wrong to force majeure. What is legally important in the evaluation of force majeure is that the party claiming the force majeure proves that their ability to fulfil the contract is "impaired" or "impossible" by the COVID-19.

For example, a Turkish company entered into a contract with a Chinese company on electronic goods trading to Turkey from China, the fulfilment of the production to keep the presence of the products or shipping facilities in the quarantine area of the factory which could lead to a blockage of the trade and an impact on the contract. In this case, considering the COVID-19 pandemic, the Chinese company may notify the Turkish company that it cannot deliver electronic goods and assert to end the debt due to force majeure. However, it is important to note that if the Chinese company received an advance or similar prepayment from the Turkish company, it would be liable to return this amount.

On the other hand, if there will likely be a shortfall of input or lack of offtake, it is worth reviewing the contracts to see what defences and remedies the party may have. In interpreting the parties' obligations during occurrence of a contingency, courts and arbitrators will look first to the bargain power that the parties made in fact, and then to the background doctrines that might excuse performance. In any case, at some point or another, the contemplations of business contract parties will likely to assert force majeure statements. The China Council for the Promotion of International Trade has given "force majeure endorsements" to local businesses as potential shields against risk for non-execution. It is not clear in every case whether an organisation or its counterparty may have a compelling force majeure justification, or rather might be in breach of the agreement, or rather may have no legally binding results. Every venture during this time may need to work in a lawfully delicate condition, dealing with its relations with providers, wholesalers and clients without knowing its cures and exposures.

In a recent article it stated that; ''In the recent events especially in the UK, several force majeure analyses during the outbreak have referred to the designation by the UK government of coronavirus as a "notifiable disease", a formal classification required by many insurance policies. The UK National Health Service declared COVID-19 a level 4 incident, its highest level of emergency. These and similar government actions that have a mandatory character even under separate legal or regulatory regimes may be given weight for commercial contracts.''

As it stated above, one occasion generally remembered for force majeure provisions and prone to be depended on as for coronavirus is the government contingency order. As the coronavirus reaction advances, what are presently "warnings" and "alerts" may transform into government orders that would fortify the case for force majeure. The obligor's obligations as a business to give a sheltered working environment and related wellbeing and security insurances for representatives might be referred to.

iv. Conclusion

It must be understood from the definition of force majeure; the performance of the actions undertaken by the parties in a commercial relationship becomes objectively impossible outside the control of the parties and for absolutely unpredictable reasons. Whether these difficulties faced by the parties constitute a force majeure or not, whether the parties are affected by the force majeure or to what extent it is affected should be evaluated by considering the nature of the debt subject to the commercial relationship between them. This will only be possible with a rigorous examination of each individual event.

In general, a party to a commercial transaction does not need to speculate, predict or guarantee the future. It would not be correct to say that the practices within the scope of the COVID-19 pandemic constitute a force majeure in every commercial relationship related to China. However, in any case, in terms of commercial relations, where COVID-19 applications are likely to be considered as force majeure, it is important in order to eliminate the possibility of a possible loss of rights for the parties to inform each other in writing within a reasonable time.

Although there is no dispute arising from COVID-19, which has been brought to the attention of Turkish courts until now, we think that COVID-19 pandemic will be considered as a force majeure in cases that will arise in the next process and be brought to judgment due to the rapid increase of its negative effects.

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