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Wednesday, 22 April 2020 11:00
Taher Legal Group Egypt publishes Legal study and analytical research on the exceptional circumstances the country is going through with the emergence and spread of the Corona virus pandemic (COVID-19)
Taher Group Law Firm has the honor to submit to your Excellency this legal research that it has prepared in accordance with the exceptional circumstances the country is going through on the local and international level as a result of the emergence and spread of Corona Virus (COVID-19) .
on the global level and its impact on society and relations between its individuals and society, both for natural persons and /or legal, and in order to showcase the effects of that virus from the moment of its emergence and its spread globally as one of the forms of exceptional circumstances to which various segments have been exposed, it is first necessary to know what these exceptional conditions (or extreme conditions) and the terms of their implementation and adherence to them and their impact on the general obligations, between two contracting parties or between a creditor and the debtor, or in the relationship between a landlord and a tenant or in the field of labor relationship between an employer and an employee in the private sector. In the process of defining exceptional circumstances: the legislator has defined the exceptional circumstances according to the definition contained in the text of Article (147/2) of the Egyptian Civil Law which states it as: “It is a general exceptional sudden happening of an event and is intended to be that uncommon accident rare occurrence, such as an earthquake, war, or sudden strike, or a plague, locust swarms arriving, forced compulsory pricing, cancellation, or exorbitant price hikes, etc. that may burden the debtor and threaten the circumstances with a heavy loss.” It is understood from the above that the legislator has stipulated the implementation of the theory of emergency (exceptional circumstances) where several conditions, namely that the contract must not have been finalized in the sense that it differs at the time of concluding the contract from the time of its implementation, whether the implementation of the entire contract was postponed or the implementation was carried out in stages or periodically. If the emergency circumstance occurs before the contract is executed, the debtor has to adhere to this circumstance, and if the implementation takes place in stages or periodically, and the emergency condition occurs during the implementation of the contract, the parties have to adhere to it in relation to the stages of implementation that are resolved throughout the period during which the emergency remains in place, as required. It is also necessary to adhere to the theory of emergency circumstances that occur after the date of execution of the contract there as an unusual and rare general occurrence of an incident and the legislator has referred to it as a precedent and not exclusively, which includes the epidemic, and thirdly: that the incident is not expected, if the debtor had anticipated the incident he has no right to adhere to emergency circumstances. The Court of Cassation in Egypt has ruled on this that; the emergency incident is required to be exceptional, general, unforeseeable incident and out of the ordinary and rare occurrence, and the emergency incident is considered as general if its effect has passed to a large number of people, and the criterion is based on the availability of what the text has stipulated in the description of the incidents referred thereto. Although it is considered that the occurrence of the event could not have been expected where the ordinary person would not have envisioned that it would happen considering the circumstances of that debtor at the time of the contract, regardless of whether this debtor actually expected it or not, and assessing this matter is within the scope of the judge on the subject matter when he rests his case on valid grounds. (Revocation rule no.4/3/1975 p. 266 p. 515, veto 5/5/1970 p. 21 p. 788). The grounds on which to base it as an incident which is expected or not, is the standard for an ordinary person if it applies in the same circumstances as that of a debtor. When the above-mentioned conditions are met, the judge may deal with the contract through an amendment, by either reducing the debtor’s obligations or increasing the creditor’s obligations or completely stopping the execution of the contract for a specified period if there is a possibility of the conclusion of such emergency. And since the theory of emergency conditions is related to the public order in terms of the inadmissibility of an agreement when contracting or to not apply it, the text of it applies immediately upon its implementation and without retroactive effect. The effect of this is that the theory applies to contracts concluded under its shadow, and for contracts that were concluded earlier then its implementation would be contemporaneous with the theory that its provisions were applicable to it. If the implementations of the contracts are to be carried out in stages then the stages of implementation that took place prior to the occurrence of these emergency conditions shall not be subject to its provisions, whereas the stages that are executed after its enforcement are subject to its provisions with regard to emergency conditions. Guided by the above and with the emergence and spread of the Corona virus (COVID-19) epidemic locally and globally, and the consequent actions of governments in various countries, including Egypt, to take some precautionary measures to confront that virus and limit its spread, among these measures for example include the issuance of decisions to shut shops, clubs, café’s and commercial centers and impose a curfew, which affected the private sector companies and store owners, and the consequent results which inflicted heavy losses on these companies and individuals, which is the consequence of this theory (exceptional circumstances theory). Some of the transactions and contracts that were initiated before the emergence and spread of this virus, which is not finalized or implemented yet, so it was a duty on a pure legal basis to be exposed to this theory and the extent of its influence and their applicability to the obligations which are as follows: First: In the field of contractual obligations in general According to what the legislator has stipulated in the text of Article (147/2) of the Civil Law, the judge may, at the request of the debtor, interfere with the contractor’s will to reduce the debtor’s obligations or increase the creditor’s obligations, in order to ward off the heavy loss that the debtor may incur as a result of emergency circumstances or the exceptions to which the country was subjected to due to the impact of the emergence and spread of that virus, and this may happen as an exception to the general principle stipulating that the contract is based on the law of contracts, as is also the case in the absence of agreement between the parties to face these exceptional circumstances experienced by the country. Second: With regard to the obligations arising from the relationship between the landlord and the tenant The Egyptian government’s decisions taken over the past few days to confront the proliferation of the new Corona virus including the imposition of a partial curfew that caused the stoppage of businesses and stores and the inability of some to pay rent has raised many questions about what rights and obligations of each of the two parties to the contractual relationship towards the lease contract and the extent of the commitment of the tenant to pay the agreed rent as specified in the contract under the exceptional circumstances which the country is undergoing. The first item of the first pivot has dealt with the right of the lessee to delay payment of the rent due to the exceptional circumstances that the country is going through due to the Corona virus and the closure of some activities and commercial stores or in the event of a financial difficulty faced by the tenant according to the current circumstances, and as stipulated in Article 18 of the Rental Law No. 136 of 1981which states that “If the tenant refrains or delays in fulfilling the payment of the rent due without proper justifications determined by the court, he shall be subject to eviction or expulsion according to the circumstances” so the aforementioned text is used to enable the tenant to submit to the court the relevant documents towards the lawsuit, which is based on the theory of emergency conditions so that the Court can satisfy itself that the tenant has no compelling excuse for failure to pay the rent due to the closure of facilities and shops. All of this would make the court to depend on the circumstances and after considering the interests of both parties to respond to the commitment to a reasonable limit. The second item of the first axis deals with exempting the tenant from paying or reducing the rent due to the exceptional circumstances the country is going through and the state’s decision to stop the activities of commercial stores. The third item of the first axis touches on the continuing desire to terminate the rent contract with an emergency excuse in accordance with Article 608 of the Civil Law. “If the rent is for a specified period, each of the parties may request the termination of the contract before the expiry of its period if there are dangerous and unexpected conditions that would make the implementation of the rent possible in principle or in its exhaustion, as long as those requesting such termination of the contract observe an evacuation alert date in accordance with Article 563 of the Egyptian Civil Code. There following conditions are specified by Article 608 civilians that must be met for an emergency excuse: A- That the contract for which the theory is raised is relaxed, and this condition corresponds to the same in the lease, that the lease is specified for a specific period. B- To observe that after the issuance of the contract, general extraordinary incidents (Corona Virus) and this condition corresponds to it in the lease contract, and it is not a condition which is not a stipulation that these conditions are generally dangerous, but rather that they are specific to one of the parties. C- That these incidents are exceptional and cannot be predicted and this condition is also obligatory in the lease if there is an happening of dangerous unforeseen circumstances in accordance with Article 608 / a of the Civil Code. D- That these incidents make the implementation of the obligation burdensome and not impossible and such stipulation is also an obligation in the lease contract, as the aforementioned article stipulates that making the implementation of the rent from the principle of the order or while it is in force is burdensome. These circumstances may be dangerous, usually involving all people, as is the case in the general theory of emergency conditions but rather an urgent excuse, even if it is a personal excuse that is limited to the party to a contract and not to other people and is a damage which will occur after the start of the lease or after a certain period of execution of the lease. The text states that "If there are dangerous and unexpected circumstances that will make the implementation of payment of the rent while it continually ongoing shall be burdensome" (M / 608 / A Civil), as the damage may occur to the tenant. For example: (An engineer who rents an office and then has to quit his profession for a reason in which he was not infected with “Corona virus” and the any consequent insolvency of a tenant in which he is transferred to another country due to an employment except for examples of emergency excuses that justifies the termination of a lease). The situation, in which one of the two parties fails, means that a heavy loss will occur if he continues to implement the payment of rent until the end of the period as well as against the imposition of a curfew, which forces him to close the shop. The loss here is huge because he is obliged to pay the rent of the place for the entire duration of the period without using it. He is permitted to warn the lessor of the evacuation within the legal deadline for the pay of the rent of the place for the period of time and pay him a fair compensation and this is then analyzed based on the lease contract. However, the court has discretionary powers to determine whether there is exhaustion that requires exemption from the tenant from paying the rent or decreasing the rent and he may reserve the documents that indicate such condition. Hence, we observe that the other party alone does not bear all the loss that may result from the termination of the lease before its term expires, but rather divides or shares it with the other party and each of them bears a share in it. While, the Egyptian Civil Law stipulates in the first paragraph of Article 608 of Civil code "that the affected party requesting the termination of the contract shall observe the evacuation alert dates set forth in Article 563", then the person who is demanding the end of the rent for the urgent damage must be notified to the other party for evacuation within three months in relation to Land, two months for non-furnished places and one month in what was not provided, so that this date does not exceed half of the lease period specified in the contract. Example: If a house is rented for a period of one year and an emergency excuse arises from the lessor after the lapse of two months, then he must notify the tenant of eviction within a period of two months, and then the lease ends after four months have elapsed from its original period. The lease expires only after the expiration of two months of its original period in this case. Third: With regard to the obligations arising from contracting contracts Article (658) of the Civil Code stipulates that: 1 - if the contract is concluded within a total fee based on a design agreed upon with the employer, the contractor is not allowed to claim any increase in the fee even if there is an amendment or addition to the design, except it is due to a mistake by the employer or a person authorized by him and has to be agreed with the contractor on his fees. 2- Such an agreement must be obtained in writing unless the original contract itself was agreed upon orally. 3- The contractor does not have the right to increase his fees even if the prices of the raw materials and manpower or other costs increase. The costs are to be based on that in order to demand an increase in the fees, even if this rise reaches the limit that it makes it financially difficult for the contractor to execute his engagement. 4- However, if the economic balance between the obligations of both the employer and the contractor collapses due to exceptional general incidents that were not taken into account at the time of the contract and the basis for the financial evaluation the contract calls upon, the judge may decide to increase the fees or terminate the contract. From the context of the foregoing, it is evident from this text that the legislator has authorized the judge if the conditions of emergency or exceptional conditions are met in the conditions of a contract in the manner that we have previously indicated then the contract may be canceled or the contractor’s fees may be raised, and this is to ward off the risks and exhaustion that the contractor is burdened with due to the availability of these exceptional circumstances on the general level. Fourth: With regard to the obligations arising from the employment contract in the private sector The text of Article 41 of the Labor Law No. 12 of 2003 stipulates that (........, but if he attends and prevents him from starting his work for reasons which are compelling and beyond the control of the employer, he shall be entitled to half of his wages). It is understood from this that when there are compelling reasons that leads to the inability of the worker to perform his work in the establishment without interference from the employer in these reasons, the worker in such cases deserves half of his wages agreed upon in the labor contract, and according to the precautionary measures taken by the state and from among them is Egypt’s measures to confront the Corona Virus pandemic and limit its spread, and among those measures are the decisions issued by the government to close most companies, shops and private sector establishments, which at the same time are also considered among the emergency or exceptional circumstances that affect the facility negatively for both the employer as well as the worker at the same time. On the other hand, with regards to the extent of the impact of these exceptional circumstances on the rest of the worker’s entitlements including permits, bonuses and so on, the basic principle is that the labor law as a special law is applicable and that the general rule requires priority in the application of special laws because the special law as a general principal restricts the common Law, but Labor law articles didn’t expose the theory of emergency conditions and the extent of their impact on the relationship between the employer and the worker and the employee's dues, and therefore these matters are addressed according to the appropriate vision that the employer sees in facing exceptional circumstances and making a balance between those conditions as well as between the dues of the worker and how to conduct a proportionate process between them, as these conditions may be dealt with by agreement of the parties. For example, some private sector companies have given employees a paid vacation for a specific period and in return it is agreed with the employees of these companies that after the end of those exceptional circumstances, this is compensated by increasing the number of working hours to compensate for the material loss to the facility. We therefore conclude from this that in the field of labor relations and the obligations arising there from and in the face of exceptional circumstances, the legislator was not exposed to them except as stated in the text of Article 41 of the Labor Law as mentioned above. As for the rest of the matters, it is up to the employer and the extent of the impact of the exceptional circumstances on the establishment of the loss subsequent to it, and in all cases we recommend dealing in such circumstances through an agreement between the parties until these exceptional circumstances end and matters return to their normal course. However, in the event that these exceptional circumstances cease to exist and the amount of losses suffered by the establishment after its treatment and dealing with the participation among the parties is remedied, the worker shall be compensated. In the event that a dispute is brought before the court in such matters, the court considers the availability and exposure of exceptional emergency circumstances or not, but in the current case the court only considers the contractual relationship and its impact on the current circumstances, as the issue of the Covid-19 coronation is a global pandemic and a recognized fact, and it does not differ from its existence. At this period of time, the consequence of the court's failure to discuss the existence or absence of an exceptional emergency circumstance is always about the impact of this epidemic on contractual relations of any kind and the extent to which this circumstance violates the obligations of the contractors, which is something that any researcher or any court must detail. It is important to consider the existence of the emergency circumstance in all cases during the epidemic. This is what we have observed from research on the exceptional circumstances the country is going through as a result of the emergence and spread of the covid-19 virus (epidemic) and its impact on the various obligations arising from legal relationships and transactions between individuals and companies, while Taher Group Law Firm is happy to provide you with any assistance and advice that you may require, as well as happy to respond to any queries from your side regarding these circumstances and their consequences.