Agenda

RUSSIA : COVID-19 BUSINESS IMPACT: WEEKLY LEGAL DIGEST

20/03/2020

 

The World Health Organization declared COVID-19 a global pandemic on Wednesday, March 11. As of today the situation is grave not only in Asia, but also in Central Europe.

Due to the growing number of cases of COVID-19 infection in Russia, the government imposed serious restrictions on the movement of individuals and transport. Among the key measures:

  1. From March 18 to May 1, the FSB restricted the entry of foreign citizens, including from the territory of Belarus (with exceptions for diplomatic employees);
  2. From March 18, the Home Affairs Ministry has indefinitely stopped accepting and processing documents submitted for obtaining work permits for foreign citizens, while the Foreign Affairs Ministry did so with regard to any visas other than diplomatic ones;
  3. The Supreme Court has suspended the work of courts with exceptions for urgent and specific cases requiring immediate consideration;
  4. A 14-days mandatory quarantine is now established for all arrivals from abroad.

At the moment, the main losses are borne by the tourism and aviation industries, and the government has already developed special measures for them. However, it is already clear now that a dramatic impact to the entire economy is a question of time only. So, as primary business support measures, the following main decisions were also made this week:

  1. Rostransnadzor suspended the weight control of transport transporting essential goods from March 25 to April 25;
  2. Small and medium-sized businesses were given a deferral on lease payments to the budget;
  3. For a number of state contracts, it was allowed to postpone the deadline without penalties;
  4. A delay of three months on payment of insurance premiums was also granted to business;
  5. A rent-free period for tenants of state and municipal property was adopted for 3 months;
  6. A deferral of new bankruptcies initiated on debts to the Russian budget, suspension of on-site inspections of businesses by tax and customs authorities until May 1 and others.

The business community believes these measures to be insufficient, so civil activists are now collecting signatures on an open letter (petition) to the President with their proposals for measures to protect citizens from the COVID-19 spread and entrepreneurship support.

From the legal view, since the current situation had no analogues in the modern economic system, experts name the institute of force majeure being the most appropriate from the existing legal instruments (the CCI of Russia has already started issuing force-majeure certificates, but each case is considered individually and cannot serve as a panacea for the majority of participants in civil turnover).

The second tool is the article 451 of the Civil Code providing that ‘significant change in circumstances’ may serve as legal ground for a contract termination or alteration by the court. However, the previous practice of applying this article in the situation of the ruble collapse showed great caution of the courts, which conservatively qualified losses incurred by entrepreneurs as foreseeable business risks.