06 April, 2020
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Coronavirus repercussions on Contractual Relationships in Bosnia & Herzegovina

The outbreak of the COVID-19 pandemic prompted the competent authorities to take measures to safeguard public health.  These measures have had repercussions for business in all countries affected by the coronavirus and Bosnia & Herzegovina is no exception.  The main question is whether COVID-19 pandemic can be treated as force majeure and whether it can affect contractual relations.  This is a very complicated question, with no one-fits-all answer and must be examined on a case-by-case basis.  As we have already advised in our article Is Covid-19 a case of force majeure? shrewdness is called for wise when contracting clauses regarding force majeure or similar matter.  Therefore, if your contracts fail to clearly define what constitutes force majeure then you should know the following legal provisions.

 

Impossibility of performance

 Article 137 of the Federation of Bosnia and Herzegovina/ Republic of Srpska Contracts and Torts Act (“CTA”) stipulates that in a bilateral contract should the performance of an obligation by one party become impossible due to an event not attributable to either party, the other party’s obligation shall be terminated.  Furthermore, a party that performed part of its obligation may request restitution according to the rules of restitution in case of unjust acquisitions.

 

Exemption from liability – force majeure

 Article 263 of the CTA provides for exemption from liability for loss for a debtor who proves its inability to perform the obligation, or that its delay in performing the obligation was due to circumstances taking place after entering into a contract that it was unable to eliminate or avoid.

 

Changed circumstances – termination or amendment of contract

Article 133 of the CTA provides for the right of termination for a party affected by changed circumstances.  Namely, if after concluding the contract circumstances emerge which hinder the performance of the obligation of one party, or if due to them the purpose of the contract cannot be realized, while in both cases this is to such a degree that it becomes evident that the contract no longer meets the expectations of the contracting parties, and that, generally speaking, it would be unjust to maintain its validity as it stands, the party having difficulties in performing the obligation i.e. the party being unable, due to changed circumstances, to realize the purpose of contract, may request its termination.  However, the termination of contract may not be requested if the party claiming the changed circumstances had a duty, at the time of entering into contract, to take into account such circumstances, or if it could have avoided or surmounted them.

 

Response by the competent authorities

 In order to give a helping hand in these trying times, the Foreign Trade Chamber of Bosnia and Herzegovina (“FTC BiH”) decided to issue the so-called vis maior verification completely free of charge.  Namely, the Public Documents Sector of the FTC BiH, within its competence and regular course of business will issue this verification to all Bosnian companies at their written request.

 

What is the vis maior verification?

 The force majeure – vis maior verification (“Verification”) is a document i.e. certification, which serves, temporarily or permanently, to extinguish the obligation arising from a contractual relationship for objective reasons (weather, energy reductions, earthquakes, etc.).

 

The prerequisites for issuing the Verification

 In order for FTC BiH to issue the Verification, it is necessary to:

  • deliver a written request on the company’s headed paper. The request must include: specific information about the service/product that could not be delivered due to “force majeure”, the number of the contract in question, the name of the goods that should have been delivered, the delivery date and the area / place where force majeure occurred. You can download the Verification request form here.
  • that the Verification is certified by the signature and seal of the authorized person in the Public Documents Sector of the FTC BiH whose signature has been deposited with the competent authorities.

 

The main purpose of the Verification

 The issued Verification will allow BiH companies to prove to their business partners inability to comply with the contractual obligations for objective reasons, i.e. reasons that they could not influence and which could not have foreseen.  In these extraordinary circumstances it was necessary to engineer the issuance of this document because the entire coronavirus situation has caused many companies to limit their regular business activities.  Based on the analyses conducted by the FTC BiH, which surveyed about 250 companies in BiH, it was found that currently the companies’ hardest hit are manufacturing and transport companies i.e. small and medium-sized enterprises and tourism.

 

For more information, please contact us via covid19@geciclaw.com.