China issues record number of force majeure certs to coronavirus-hit businesses

The China Council for the Promotion of International Trade (CCPIT) has issued 1,615 force majeure certificates to businesses in China affected by the novel coronavirus (2019-nCOV) outbreak.

Local exporters that applied for the force majeure “legal shield” cover over 30 different sectors, according to a CCPIT announcement on its website on February 26.
The legal provision is traditionally used in contracts to protect parties under unforeseeable circumstances that prevent them from fulfilling the contract’s obligations.
The force majeure certificates awarded to Chinese firms allow them to claim exemption of liability for breaking the contract with a counterpart, according to Chinese commercial law. 
CCPIT announced the provision of the certificates in late January after the coronavirus started to spread more widely in in China.
The certificate holder may claim partial or complete exemption for the contract’s liability for non-performance, partial performance or delay, the CCPIT said.
The certificates issued are worth roughly 109.9 billion yuan ($15.7 billion) in contracts, with the largest deal is worth around 23 billion yuan, it said.
Chinese authorities are attempting to support local businesses to tackle the impact of the coronavirus epidemic on its domestic economy.
At the time of writing, travel restrictions in place in the country - implemented to contain the spread of the virus - were still in place, causing logistic disruptions and paralyzing many of domestic industry supply chains.
International trade impact
In its statement, CCPIT reassured that counterparts of Chinese businesses holding the force majeure paper have been “understanding”. However, the legal validity of these certificates in courts outside China remain unclear.
Counterparts to Chinese firms “kept the order and agreed to delay the delivery, avoiding the liability of [breaching] the contract due to delayed performance” CCPI said.

Dalila Ouerghi

dalila.Ouerghi@fastmarkets.com

Published

Dalila Ouerghi

March 02, 2020

15:48 GMT

London