[co-author: Bernardo Benitez-Landa]
According to the Mexican Constitution, Mexico's Consejo de Salubridad General (the National Health Council) is the governmental body authorized to declare the COVID-19 pandemic a national sanitary emergency on the grounds of its posing an imminent and significant health risk to the Mexican population.
The National Health Council (NHC) was established on March 24, 2020. It issued two official decrees on March 27, 2020, that established extraordinary actions to confront COVID-19 as a "disease that requires priority attention."
On March 30, 2020, NHC declared a sanitary emergency of COVID-19 due to force majeure. As a consequence of this declaration, NHC can take necessary actions to attend to the pandemic for the necessary time. A formal decree was expected for publication on March 31, 2020.
The declaration could support a force majeure case for a private or public contract. However, as the situation is steadily evolving with complexity, it is necessary to consider the specific details of each contract. Below are some considerations to have in mind.
For the time being, it is up to the courts to confirm whether force majeure claims based on such declaration have sufficient merits to trigger a force majeure event.
In Mexico, a general principle of pacta sunt servanda applicable to civil and commercial contracts is that the contracting parties fully agree with, and consent to, all the terms and conditions under such contracts and all natural consequences thereof. Contracts should be honored despite any type of event that may prevent its compliance. No matter how unpredictable these events may be, such as the COVID-19 pandemic, parties are still bound to comply with the obligations to which they have agreed under civil and commercial contracts.
However, as is customary in other countries, Mexican laws and courts have excluded responsibilities to contractual obligations on the principle rebus sic stantibus, depending on the particular circumstances of each case, based on the concepts of force majeure or acts of God. Mexican law provides an almost identical application of force majeure events and acts of God.
The first step is to confirm whether an executed contract expressly provides for pandemics as a force majeure event, and if so, then identify requirements to apply for any available contractual relief.
Where contracts are silent on this topic, exceptions to comply with obligations established in private agreements by reason of force majeure events are recognized by law. The following are some examples that apply under certain circumstances and jurisdictions:
It is also a good contractual practice to include force majeure clauses to define exactly the triggers, extent and consequences for the parties. While these clauses are not identical, it is customary to have clauses with the following provisions:
The above paragraphs contain general considerations. Specific circumstances, actions and omissions carried out by people involved in projects and operations have a direct impact on how force majeure events are interpreted according to the law and by courts.
In other words, a timely and correct approach can help your organization qualify for relief or exception. Here are some recommendations to consider before triggering and preserving force majeure rights:
As indicated, in some industries, contracts have customary force majeure clauses. In fact, some industries have vast experience, knowledge and court resolutions addressing such events under Mexican law. Below are a few agreements that commonly have force majeure clauses and require continuous stakeholder attention in order to enforce these clauses for their benefit or reject notifications from counterparties:
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis.