Covid-19 (Corona Virus Disease) Article - The Stipulation of Covid-19 as a National Disaster as The Basis of Force Majeure

President Joko Widodo has officially established the non-natural disaster caused by the spread of Corona Virus Disease 2019 (COVID-19) as a national disaster through Decree No.12 of 2020 concerning the Stipulation of the Non-Natural Disaster of the Corona Virus Disease 2019 (COVID-19) as a National Disaster ("Presidential Decree 12/2020"). Even though it has been declared a National Disaster through Presidential Decree 12/2020, the question arises whether this can be used as a basis to justify defaults in a contract that can be said to be force majeure?

In order to answer this, we first need to look at the definition of the force majeure itself. In the Black’s Law Dictionary, force majeure is defined as an event or effect that can be neither anticipated nor controlled. While in the laws and regulations in Indonesia, force majeure is often associated with the provisions in the Indonesian Civil Code (ICC) specifically in article 1244 ICC and article 1245 ICC, which regulates as follows:

Article 1244:

“An obligor shall be required to compensate for any costs, profits and losses which are sustained if said obligor cannot prove that the non-performance or late performance of a legal obligation is caused by something unforeseen for which he/she cannot be held responsible, even in the absence of bad faith on his/her part; and”

Article 1245:

“No compensation for costs, losses and interest shall be payable if an obligor, due to an act of God or an accident, is prevented from delivering or performing such an obligation, or commits an act which is prohibited for the obligor”

The Indonesian Civil Code itself does not require a contract to include special provisions governing force majeure events. However, this has become a common practice for the parties to the contract to stipulate a force majeure event clause, along with its handling mechanism in the agreement based on the principle of freedom of contract according to Article 1338 of ICC. The parties to the contract may also arrange the cooperation of the parties to mitigate the impact of a force majeure event or even renegotiate a contract in the event of a force majeure event.

In general, a force-majeure event exempts an obligor from being declared as having committed a default. As a result, said obligor is to be relieved of their indemnification obligations, while the relevant counterparty is not entitled to request a cancellation of the original agreement. The obligor who wishes to claim force majeure must prove that any failure to carry out the contractual obligations is beyond its control and the obligor cannot prevent or mitigate damage from such failure, then he must be able to prove that there is a direct causal link between the pandemic and non-fulfillment of the obligations.

Therefore, the establishment of COVID-19 as a national disaster under Presidential Decree 12/2020 does not automatically apply as force majeure in relation to all agreements. The application of force majeure must be based on any actual conditions which are hindering the completion of an obligation in relation to the relevant agreement and not on the determination of any national disaster status by the government. if a force-majeure clause clearly stipulates that force-majeure events include “disease”, “epidemic”, “pandemic” or “national disease” in the contract, then the application of COVID-19 as a force majeure event shall become clearer. However, due to the absence of such clear stipulations in a contract, it is necessary to make further interpretations regarding the determination of the event of force majeure and this must be examined and determined case by case.

Suria Nataadmadja & Associates Law Firm

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