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Can Covid 19 constitute a force majeure event for Aircraft lessees?

As Governments across the globe have implemented strict measures in an attempt to fight the spread of coronavirus Covid 19, significant number of aircraft lessees may be tempted to claim a force majeure event in order to avoid or defer their lease rental payments.

However, the Covid-19 pandemic and the governmental measures will not, at least systematically, constitute a force majeure event, depending on contractual provisions as well as the law governing the lease agreement.

1. Common law systems

Under common law jurisdiction, the contracting parties are free to set out in their contract all the terms that will govern their relationship. As such, there is not an automatic concept of ‘force majeure’ applying when some events occur and the term ‘force majeure’ itself has no established meaning. Consequently, if the contract does not provide a clause of force majeure event, it is extremely unlikely that a court in such system would receive a force majeure event qualification to justify a breach in the lease rental payments.

Yet, most of common law submitted lease agreements do not provide for a force majeure clause. Consequently, in such case, the lessee will not be able to use the force majeure event to avoid or postpone payment of the lease rent.

Furthermore, even where a lease agreement would provide such a clause, it will almost systematically submit its use to the demonstration of certain conditions (mitigation measures taken by the defaulting party, impossibility to anticipate…), and will always limit its application to specific events.

Under New York law, force majeure has been interpreted as “an extreme and unforeseeable occurrence”[1]. When a provision is contained in the contract, New York courts tends to interpret it sparingly and the party’s breach might be excused “only if the force majeure clause specifically includes the event that actually prevents a party’s performance”[2]. Therefore, aircraft lease agreement under New York law must provide for a very specific force majeure clause, which would expressly include epidemics as a force majeure event so that the Covid-19 could be considered as a force majeure event.

Under English law, there is no case-law definition of a force majeure event. UK courts only apply such concept only when a force majeure clause is included in the agreement. When applicable, the courts will analyse the clause in order to determine if the parties included epidemics as a force majeure event and if the conditions of the clause are met.

One exception of the strict interpretation of force majeure in common law systems is the frustration doctrine. This doctrine applies when a serious event occurs during the execution of a contract which is both unexpected and beyond the control of the parties. Circumstances must make it commercially of physically impossible to execute its obligations, or to a very low extent, circumstances must have modified the obligation to such an extent that it is radically different from the one undertaken at the conclusion of the contract and thus almost impossible to perform.

However, courts are, even then, applying this principle as narrowly as possible, in order not to interfere in the contract. To be recognise by the court, the frustration ought to be so fundamental that it affects contractual foundations and make its performance impossible or radically different.

2. French law system

The French Civil Code include a general principle of force majeure applicable to all contracts submitted to French law, without distinction[3]. Three conditions are required and checked by the judge in order to qualify a legal force majeure event:

  • the event is beyond the party’s control,

  • the event could not reasonably have been foreseen at the time of the conclusion of the contract,

  • the effects of the event cannot be avoided by appropriate measures.

However, this provision of the French Civil Code is not mandatory. Consequently, the parties are free to either exclude its application or to provide specific additional conditions in their contracts that must be met to reach a force majeure event. The contractual parties may as well provide for different consequences than the one provided by the French Civil Code.

In that respect, it is necessary to check, even though the contract is submitted to French law, the possible clause of force majeure in order to determine if coronavirus enters its scope.

Though, under a strictly legal perspective, without consideration of a potential clause of force majeure, the current epidemic might not be considered as a force majeure event by the French judges. French courts are indeed not willing to easily accept the force majeure events, for example, they considered that the swine flu pandemic was not a force majeure event providing that it was expected and predicted by French authorities[4]. They did not recognize either the chikungunya virus epidemic or the dengue fever epidemic as being force majeure events. Furthermore, except for certain decisions, French case law does not systematically recognise force majeure event in order to justify insolvency, as money is considered to be a replaceable thing and thus a default of payment is deemed an avoidable effect of the force majeure event.

However, the extraordinary circumstances provoked by Covid-19 may lead French courts to admit a force majeure event more easily than in the past.

In particular, regarding the aviation industry, extremely strict measures have been implemented, obliging airlines to reduce drastically or completely shut down their operations. As such, these circumstances, the international context of lockdown and in some cases border shutdown, might have some persuasive influence over the French judges regarding the force majeure events in aircraft contracts.

Anyways, under French law, the recognition of a force majeure event might have different consequences depending on its duration. If the impediment is only temporary, the obligation is not erased but might only be postponed; if it is permanent, both parties might be released of its obligations.

Moreover, if the force majeure event cannot be demonstrated by the party, then the contractor could use the “hardship” provision of article 1195 of the French civil code. This provision allows a party to ask its co-contractor to renegotiate the provisions of the contract if a change of circumstances that was unforeseeable at the time of the conclusion renders execution excessively onerous for this party, which had not accepted the risk of such a change. In that case, the suffering party may ask to renegotiate, but must continue to execute its obligation. If no agreement is reached, if the co-contractor refuses to negotiate or if the parties fail to reach an agreement, they can either terminate the contract or require a judge to revise or terminate it.

Even then, this provision of the French Civil Code is not mandatory and can in any case be excluded or otherwise stipulated in the contract.

As this provision is quite recent, there is no significant case law in France regarding its application. Yet, it might, as well as the force majeure event, be difficult to demonstrate the conditions of its enforcement. Specifically, the condition of the “excessively onerous” execution provoked by the extraordinary circumstances is, to this day, unclear. Its interpretation should in theory lead to the demonstration of an extreme increase in the costs endured by the suffering party (at least 50%) and the demonstration of a fundamental change in the balance of contractual obligations. Still, the demonstration of this last condition by an aircraft lessee might be extremely difficult to establish, in the specific context of epidemic, where the other party, the aircraft lessor, is at least as affected as the lessee by the crisis.

Whether the contract is submitted to a common law system or to French law, the aircraft lessee will not easily be able to avoid or postpone its rental payment obligation. In any case, the provisions stated in the contract must be checked before starting any action.

Meanwhile, the best answer to the difficulties encountered by all companies is probably measured and good faith negotiation to reach an intermediate solution.

[1] Team Mktg. USA Corp. v. Power Pact, LLC, 41 A.D.3d 939, 942, 839 N.Y.S.2d 242, 246 (2007)

[2] Constellation Energy Servs. of New York, Inc. v. New Water St. Corp., 146 A.D.3d 557, 558, 46 N.Y.S.3d 25, 27 (N.Y. App. Div. 2017) (“[W]hen the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure”)

[3] Article 1218 of the French Civil Code

[4] CA Besançon, 12 novembre 2013, n° 12/02291


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