On 30 Jan 2020, World Health Organization (‘WHO’) has declared the Coronavirus outbreak or COVID-19 in Wuhan, China a Public Health Emergency of International Concern (‘PHEIC’) following the rampant spreading and rising confirmed cases and death tolls reported in many countries. The term PHEIC is defined in the International Health Regulations (2005) as “an extraordinary event which is determined to constitute a public health risk to other States through the international spread of disease and to potentially require a coordinated international response”.
The China’s isolation started with the Chinese President Xi Jinping order for transportation blockage around central Hubei province on 23 Jan 2020 to stop the outbreak from its originating province capital, Wuhan. This was followed by the suspension of flight service including air shipments to China, a mandatory 14 days quarantine upon arrival for people who have visited China, the lockdown of several major cities and shut down of offices and factories in China, all these have inevitably caused disruptions and delay to domestic and international trades of China. China is one of the major global player, as it is the largest exports destination for 33 nations and the largest source of imports for 65 nations from an analysis based on 186 countries (McKinsey Global Institute’s report July 2019).
With such magnitude of freeze in operation, production and logistics, including the quarantine of residents in major cities of China, the delays or failures to fulfil commercial and/ or contractual obligations amongst many organisations, in particular China corporations are increasingly apparent and have impacted the global supply chains extensively. In this exceptional and unfortunate situation, are the contracting parties protected from liabilities of non-performance due to the measures taken by China, Malaysia and other countries in stopping the virus outbreak under the Force Majeure clause in their construction contracts? Is the Coronavirus or Covid-19 outbreak one of the triggering events under Force Majeure claim? What other relevant contractual provisions can the contracting parties rely on for claims and entitlement under construction contracts ?
This article discuss and review the applicability and possibility of the said virus outbreak as a Force Majeure event for time and/or cost claims and their entitlement, particularly under FIDIC and the commonly used Malaysian standard forms of contract, as well as serves as a guide to readers in their preliminary risk assessment
when dealing with such unforeseen and unfortunate event.
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