Coronavirus and force majeure (construction and concessions in Montenegro)
Requests for the application of the force majeure provision to modify construction deadlines and delay notices in the construction sector as a result of various restrictive measures taken by competent authorities worldwide for a coronavirus pandemic are certainly not unexpected in Montenegro.
What can concessionaires expect in Montenegro, and to what extent will they be exempted from payment of concession fees during the epidemic?
Given that Montenegrin regulations do not contain a definition of force majeure, here we provide the available case law:
„For an event to be characterized as a force majeure, it must be unexpected, extraordinary, atypical, and therefore unpredictable to the subject. The event must be stronger than the subject’s force, so that even if the subject could have predicted it, could not eliminate or avoid it*
What is important for the analysis and application of force majeure in each case is certainly the basic contract that regulates the mutual rights and obligations (investor and contractor or investor/ seller and buyer of the real estate in construction, concessionaire / grantor). Are there force majeure provisions and definitions of force majeure events (including epidemic), deadlines and provisions for notifying the other party of the existence of force majeure and the application of provisions and suspensions in fulfilment of obligations and deadlines? Possible contractual penalties in case of delay in the construction / handover of the property and the possibility of unilateral termination of the contract are especially concerning. In the case of coronavirus, is the delay in construction justified and to what extent in Montenegro? Who bears the costs resulting from the delay?
In case the contract does not contain detailed provisions on the application of force majeure, the applicable provisions of the Law on Obligations will apply, whereby the debtor is released from liability for damage if he proves that he could not fulfil his obligation, or that he was late in fulfilling his obligation due to the circumstances which happened after the conclusion of the contract, which he could not prevent, eliminate or avoid. Therefore, the timing of the conclusion of the contract and the ability to anticipate the given circumstances are important. Also important are the decisions of the competent authorities in the State, a possible ban on performing activities for a certain period, the residence and work of foreign nationals on the project and the related issues.
The Law on Concessions provides for the possibility of partial or total exemption of the concessionaire from the payment of the concession fee in case of force majeure during the duration of force majeure, depending on the provisions of the concession contract itself. The Concessionaire should submit a motivated request, but according to the law itself, the decision is made by the Grantor. What decision in the case of a coronavirus can one expect from a grantor?
Considering that construction site work is not prohibited in Montenegro, but the measures of April 8, 2020 stipulate in detail the conditions of safety at work, accommodation and transportation of employees at construction sites, the contractor / investor has the additional burden of proving that the declared epidemic is a force majeure. On the other hand, measures on restrictions on movement and social distance, safety at work measures in Montenegro and Europe / world related to the closure of borders for foreign nationals who are often labor force and the difficult procurement of labor / materials are arguments for the existence of force majeure and delays.
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* Decision of the High Court in Podgorica, Gž. no. 2973/16 of 16.12.2016.