Travel, retail, cross-border transportation, manufacturing, agribusiness, and investment, in general terms, have been heavily impacted by health threats of the Coronavirus. Chinese companies have encountered unforeseen situations that make them unable to comply with contractual obligations leading to inevitable default in economic obligations.
Unfortunately, the worldwide situation may become as bad or worse. The number of new COVID-19 cases reported daily outside China now exceeds the number of new cases inside China for the first time. In the last week (since February 24), more than 30 countries have reported their first COVID-19 cases, including in Latin America, Argentina, Brazil, Chile, Dominican Republic, Ecuador, and Mexico.
In a worsening scenario, the invocation and enforceability of force majeure clauses in contracts are seen as legal options for companies that conduct business with Chinese counterparts.
What is Force Majeure?
Force Majeure provides that debtors failing to perform their obligations to creditors are not liable for damages caused by such nonperformance when it is due to force majeure or a “chance occurrence,” except where the debtor has been negligent, or unexpected consequences have occurred due to his fault, or when the default has not been motivated by facts that may not have been foreseen or, if foreseen, they are inevitable. Force majeure is construed as an extraordinary and insurmountable event that is not determined by the will of the debtor.
Measures to Constrain COVID-19 in Central America
Costa Rica: Due to COVID-19, Costa Rica is working under the national risk system. This system provides preventive and procedural measures without closing borders. Currently, there is no limitation on the type of goods to be imported nor their country of origin.
As of February 13, 2020, airline passengers with the destination of, or a connection in, San José, Costa Rica who have been in China during the past 14 days must notify the airline at the place of origin as well as the Costa Rican Immigration Authority. Airlines and Immigration staff are informed that anyone returning from China with symptoms such as severe respiratory infections, fever, sore throat, or cough will be questioned.
El Salvador: El Salvador is operating under the national risk system and WHO International Health Regulations. The government has established permanent control at all border points as a result of the national emergency plan in order to detect any possible cases and provide appropriate treatment, without restricting automatic entrance.
The government has not issued regulations or restrictions on the importation of goods from China.
Honduras: The Ministry of Health is implementing control and follow-up measures under WHO International Health Regulations for travelers arriving from areas with confirmed cases of COVID-19. However, no official restrictions or travel bans have been issued.
Customs authorities have not issued any official communications or restrictions at this point.
Guatemala: Because of COVID-19, the Government of Guatemala has prohibited the entrance of Chinese nationals to Guatemalan territory. To date, no restrictions on the transportation of goods from China to Guatemala have been instituted.
Nicaragua: Although its borders remain open, Nicaragua is strengthening surveillance measures at the international airport, with special attention to passengers arriving from areas with confirmed cases of COVID-19.
Regarding import regulations or domestic transportation of goods from China, no limitations have been set on the type of goods imported nor the country of origin of the goods.
No official restrictions or travel bans have been issued.
It is important to consider beforehand how to manage the risk exposure and prevent the breakout-related consequences as much as possible for existing businesses. Also, when considering any new ventures, companies must contractually address the potential impact of other unexpected events related to the Coronavirus and its effects.