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Russia: Construction force majeure and alternative relief

Force majeure and alternative relief under standard form construction contracts and local law

Publication May 2020

For the sake of clarity, the laws mentioned in this section are in Russian and any translation of legislative provisions we have given has been carried out internally.

What is the most commonly used standard form construction contract used in the country?  

No specific form. Construction contracts in relation to major facilities are often entered into on a turn-key basis. Some sophisticated international contractors may insist on adopting a FIDIC form. 

Does the contract include provisions on force majeure?

A force majeure clause is typical for most types of contracts in Russia.

A typical force majeure clause would be as follows:

“Neither party is liable for failure to perform its obligations under the contract (whether in part or in full) if such failure is caused by a force majeure event. Force majeure events include among others, but are not limited to: (i) war; (ii) rebellion; (iii) riot; (iv) natural catastrophes, etc.

Following the occurrence of a force majeure event, an affected party shall [promptly/ within [] days] notify the other party of the force majeure event and its particulars. The occurrence, duration and termination of a force majeure event shall be certified by [an authorised authority / the Chamber of Commerce and Industry or a similar authority in the relevant jurisdiction]. The party affected by force majeure and failing to notify the other party of the occurrence of the force majeure event in accordance with the provisions above shall forfeit the right to invoke such circumstances in future.

If, following the termination of force majeure, performance of the contract can be resumed, then the time for performance of the contract shall be extended for the duration of the force majeure and its consequences. 

If the performance of the contract is prevented for a continuous period of [  ] by reason of a force majeure, either party can request termination of the contract.”  

Usually the contract would include a non-exhaustive list of force majeure event in the clause.

Does the contract include provisions for alternative relief that may be relevant to projects impacted by COVID-19?

No specific provisions in a contract. 

Do the laws of the country provide for force majeure relief?

A force majeure event is defined in article 401 of the Russian Civil Code (the Civil Code) as an extraordinary and unavoidable circumstance in a given situation. Article 401 of the Civil Code further states that, unless otherwise provided by the law or the contract, a party engaged in a business activity is liable for the breach unless and until it has proven that the proper performance was made impossible by a force majeure event. 

The law expressly states that the following circumstances do not constitute force majeure:

  • Breach of contractual obligations by subcontractors of the contracting party;
  • Shortage of necessary goods in the market;
  • Shortage of necessary funds.

Do the laws of the country provide for alternative relief that may be relevant to projects impacted by COVID-19?

Article 416 of the Civil Code provides that an obligation terminates due to impossibility to perform, if such impossibility is caused by a subsequent event for which neither party is liable.

Article 417 of the Civil Code states that if as a result of adoption of an act by a governmental or municipal authority an obligation cannot be performed in full or in part, such obligation shall terminate (in full or in the respective part).

Article 451 of the Civil Code allows the parties to a contract to amend or terminate it as a result of material change of circumstances provided that:

  • at the time of signing of the contract, the parties were acting on the assumption that such a change in circumstances would not occur;
  • a change in circumstances is caused by reasons that the interested party could not overcome after their occurrence with the degree of care and discretion that was required of it by the nature of the contract and good practices;
  • performance of the contract without changing its terms would violate the balance of interests of the parties and would entail such damage for the interested party that it would largely lose what it was entitled to rely on when entering into the contract;
  • it does not follow from the customs or essence of the contract that the risk of a change in circumstances is borne by the interested party.


Contacts

Senior partner; Joint head of Moscow

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