Damage Compensation due to Pandemic of Coronavirus Disease 2019 (“COVID – 19“)

Author: Law Firm “VUK Tax Attorneys”

Date: 15th April 2020

Coronavirus disease 2019 („COVID-19“) is a contagious disease caused by newly found virus Corona 2 (SARS-CoV-2), that is connected to the same virus family as Severe Acute Respiratory Syndrome – SARS. World Health Organisation (“WHO“) proclaimed a state of emergency due to COVID-19 pandemic outbreak. City of Wuhan from province of Hubei in People’s Republic of China („PRC“), has been registered as an epidemic cluster, where virus first emerged at the end of 2019. Goal of emergency situation announcement was to leave sufficient time for helping and preparing countries with weaker health protection systems against this disease. However, despite everything, due to facts that the virus is new, highly contagious and fast spreading, i.e. effectively and sustainably transferred between people, WHO proclaimed pandemic of COVID-19 on 11th March 2020.

Not long after, on 15th March 2020, in order to prevent the epidemic within its borders, the Republic of Serbia proclaimed state of emergency on whole of its territory, with certain restrictions on the freedom of movement of citizens, as accompanying measures that deviate from Constitutionally warranted human and minority rights. However, it is known that before proclamation of concerned decision, on borders of the Republic of Serbia, in air, road, river and rail traffic, there were no measures introduced for control of health condition of individuals (domestic and foreign) that were freely entering on the territory of the Republic of Serbia. Therefore, in days after state of emergency proclamation, a series of questions have been raised concerning validity of decision, as well as the moment of its proclamation, namely:(i) Was it necessary to proclaim state of emergency provided by the Constitution of the Republic of Serbia or was it more appropriate to proclaim emergency situation in accordance with the Law on Lowering Risk of Disasters and Managing Emergency Situations? (ii) Was the decision itself made untimely and should have the proclamation of such harsh measure been preceded by health and other measures defined by current Serbian legislation? (iii) Was the proclamation of state of emergency purposeful for slowing the epidemic, concerning that precaution measures were not undertaken, with already mentioned uncontrollable number of entrances of foreign and domestic citizens from cluster areas? (iv) Who is responsible for pecuniary damages, if damages ensued or will ensue by these actions? (v) Who is responsible for non-pecuniary damages if they arise because of deviation from Constitutionally warranted human and minority rights, or because of death of close persons caused by COVID-19, or maybe the incapability that people who are not infected by COVID-19 to exercise the right on health protection because of overload of health system?

Furthermore, many of participants on various markets asked themselves, in context of business relations, could the spreading of COVID-19 epidemics qualify as force majeure? Article 263 of the Law on Contracts and Torts of the Republic of Serbia defines that cases of force majeure are circumstances that have arisen after the conclusion of contract, and that could not have been prevented, eliminated or avoided. Therefore question is raised if in concerned case circumstances could have been prevented, eliminated or avoided? COVID-19 pandemic will negatively influence business relations as well as cooperation between most of the business subjects, from aspects of labour and lease relations, as well as in areas of tourism and catering services, construction business, banking and other segments of business undertaking of whole economy.

On the other hand, as an alternative to force majeure there could be applied termination of contract due to changed circumstances. COVID-19 pandemics and all its accompanying consequences, proclamation of state of emergency, borders’ closure etc., represent circumstances that certainly affect given contracting party’s possibility to fulfil contractual obligation, resulting in that party’s right to request termination the contract. However, termination of contract on such basis can be declared only by the Court decision and only on the basis of claim of the contracting party who wants to terminate the contract, so in this moment it is questionable when such proceedings could commence and how long would they last, because currently the Courts work with very limited capacity and hold proceedings only in emergency cases, excluding termination of contracts.

Finally, we would like to emphasize that there was a first claim filed for damage compensation against PRC for causing COVID-19 pandemic. Attorney-at-Law Matthew Moore from USA filed a claim against PRC at the beginning of March 2020 in the capacity of attorney of four (4) citizens of State of Florida, from which neither one was infected by Coronavirus disease. However, in the claim it is stated that claimants did suffer psychological trauma, that is explained by: (i) companies suffer because of the disbalance in their supply chains and deficiency of customers, and that (ii) public is in panic, buying stocks of toilet paper, disinfectants, face masks and other products. Moreover, PRC is being accused for unsuccessful and untimely reporting of the virus, that it did not undertake adequate measures for stopping the virus, as well as that PRC did not announce the real number of infected cases, which eventually caused global epidemics.

In claim against PRC, a theory is presented that everything concerning the virus went out of control, respectively that it was an oversight of laboratory for biologic weapons research in Wuhan, that is dealing with the “deadliest viruses”. Claimants deem that laboratory, due to oversight of control, “allowed” the virus to leave the laboratory, or simply allowed their researchers to sell lab animals on the wild animals market in Wuhan, instead of cremation required by Chinese legislation.

PRC is signatory party to the Convention on the Prohibition of Development, Production and Stockpiling of Bacteriological (Biological) and Toxin Weapons and on their Destruction from 1972 (“Convention”). However, significant weakness of the Convention is absence of reliable and efficient mechanism of international surveillance. Likewise, the Convention does not define responsibility of countries for artificial creation of viruses and not retaining so created biological weapons within their borders.