For the fourth month already, the world has been living in a new reality and adapting to this reality against the background of Covid19. As of today, in most countries a state of emergency has been declared and the operation of enterprises (not only) has been suspended, taking into account that, up to now, the most effective means of fighting the virus are social distancing and self-isolation. Along with health issues, Covid19 and the mechanisms of fighting it have put a number of legal and economic issues on the agenda.
In Georgia, a special legal situation was created after a state of emergency was declared and a number of constitutional rights were restricted, including freedom of entrepreneurship and labor, and any entrepreneurial activity was prohibited or restricted, except for exceptions. [1] Accordingly, Georgian business found itself facing three alternative realities: (1) companies whose activities were temporarily prohibited, (2) companies that had to modify their activities (for example, operating only with a delivery service, etc.) and (3) companies that more or less have the opportunity to continue operating in the usual mode.
The situation created places entrepreneurs before complex legal problems, the ways of resolving which they expect from lawyers. Business always demands from lawyers a solution and not advice that they are prohibited from performing a specific action and or that there is no way out of the existing situation. The fact is that lawyers, both during the state of emergency and after it, will have to answer many legal questions, including those for which there is no ready answer.
One of the topical questions that business is interested in from lawyers today is whether their activity is permissible and in what form or with what restrictions. As of today, after a number of amendments were made to Government Decree No. 181 and a list of activities that are permitted with relevant restrictions was provided by annex, [2] the lawyers’ “headache” has become relatively simplified.
The second question that business is actively concerned about is whether the created situation qualifies as “force majeure” and what impact the existing situation may have on their multifaceted civil law relations. To better imagine the situation, it will be familiar to no one if we say that there are companies whose activities are suspended under the conditions of the state of emergency, however, on the other hand, they have employees towards whom they have relevant obligations, they have a loan to finance production and rented premises for the enterprise, and their financial situation cannot ensure the performance of existing obligations.
There is no ready answer as to whether the created situation is “force majeure” or “irresistible force” [3] and each specific case requires an independent assessment of how the existing situation affects non-performance of an obligation. At the legislative level, the list of events that qualify as “force majeure” is not regulated. Even if such a legislative list existed, it could not automatically be assessed as “force majeure” for everyone if its impact on a specific legal relationship is not established. The absence of a list, on the one hand, leaves more room for action for lawyers and gives us the possibility of flexibility, and on the other hand, creates ambiguity and may become a basis for initiating a dispute. In case of a dispute, the Georgian court must say the decisive word. Georgian court practice teaches us that “irresistible force” includes both a natural disaster and public events (civil war) that disrupt the normal mode of operation of transport, the court and other bodies. In order for this or that event to be qualified as irresistible force, it must, first of all, be unusual, that is, outside the normal course of events and, as a rule, unforeseen in advance. In addition, such an event must be objectively unavoidable, stopping it must be impossible with the technical and other means available in a specific situation. [4] Despite the fact that we do not have a direct list of events, by this assessment of the court we have objective criteria into which the existing situation may fit.
How should business navigate this legal labyrinth and respond to this challenge legally? Probably, it will be very difficult without qualified legal advice. A clear confirmation of this is the statements of those companies that “sent employees on unpaid leave” and forget that leave, including unpaid, is the right of the employee and the employer is deprived of the possibility to “send” an employee on unpaid leave on its own initiative.
What should we advise those companies that we talked about above?
First of all, let us check whether there is a legal "hole" that will allow it to continue operating.
We will definitely have to think (or come up with) a basis for suspension or termination of the labor relationship, even in conditions when such does not seemingly exist.
The challenges related to loan and lease agreements should not remain unanswered either. Here we must think and assess whether we should look for the key in “force majeure”. And if we find it, we should not forget to assess what the company that is in “force majeure” circumstances should do and what rights it will have.
You would understand that this is only a small list of the issues for which business will definitely demand answers from lawyers. And we lawyers have only one thing left, while in self-isolation, to fight Covid19 and prepare for new challenges.
Sources:
[1] Decree of the President of Georgia of March 21, 2020 “On measures to be implemented in connection with the declaration of a state of emergency throughout the territory of Georgia”. Decree No. 181 of the Government of Georgia of March 23, 2020.
[2] Legislative Herald of Georgia: https://matsne.gov.ge/ka/document/view/4830610?publication=17
[3] The Civil Code of Georgia does not recognize the legal definition of “force majeure” and mentions it only in one article, without explaining what is meant by it. In the Civil Code, “force majeure” is replaced by such terms as “irresistible force” and “impossibility of performance”.
[4] SUSG: as-1160-1080-2017, February 1, 2018; see: http://prg.supremecourt.ge/DetailViewCivil.aspx
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