The ‘Force Majeure’ Doctrine and Coronavirus: A Mining Industry Perspective

The novel coronavirus (Covid-19) is real. It is violent and raging like an injected warthog. It spreads out exponentially, causing irreparable economic damage not only to South Africa, but the whole world. The majority of institutions and companies worldwide are issuing notices to staff and contractors cancelling the provision of services, international travel, conferences, goods and trade exchanges, not to mention in-person meetings. All these measures are taken primarily to mitigate employees’ risk exposure and chances of contracting the virus. In joining this global call, President Cyril Ramaphosa has on 15 March 2020 declared the covid-19 outbreak a national state of disaster.[1] This declaration led to various containment measures being instituted. These include closing schools, prohibiting gatherings of more than 100 people and imposing travel bans on foreign nationals who have recently visited high-risk countries. Despite having these measures in place, the deadly covid-19 seems to be hell-bent on striking as many individuals as possible.[2] This necessitates the intensification of system response. In doing just that, the President has once again announced a 21-day nationwide lockdown with effect from 23:59 on 26 March 2020.[3]

Given these developments, a pressing concern for many corporate companies in various sectors is whether they still have enforceable contractual rights to protect them during the covid-19 outbreak. The companies in the mining sector are not spared. This concern relates particularly to force majeure. A force majeure is a contract law concept which entails that a contracting party may under exceptional and unforeseeable circumstances be exempted from fulfilling his/her contractual obligations.[4] The effect of force majeure is that obligations under the contract get suspended for as long as the exceptional and unforeseeable event in question persists. Ideally, mining companies ought to be revisiting their contracts with various service providers and contractors (locally and internationally) to check what the stance is regarding force majeure in the midst of covid-19. The reverse is also true, as those entitled to certain services and obligations from mining companies ought to be checking whether their entitlements against the mining companies are still enforceable. At this point, who is being referred to are the mine-affected communities that are entitled to certain benefits and services from the mining companies under the Community Development Agreements (CDAs).[5] In particular, whether a mining company can fail to fulfil its obligation under the CDA to provide, for instance, water services to a particular mine-affected community and invoke force majeure to justify such failure. A large possibility is that the covid-19 outbreak may be abused, exploited and used as a scapegoat by mining companies, knowing how opportunistic most of these companies can be just to evade liability.

At this point, it is then necessary to ask: does covid-19 constitute a force majeure? The clear-cut answer is that whether it does or not depends largely on the specific wording of the concerned agreement (including CDAs) and the parameters of the definition within which force majeure is to be interpreted. However, it is unusual to have a closed list of circumstances that constitute a force majeure in a particular agreement and, instead, a ‘catch-all’ wording is often used. Other agreements may also feature criteria against which a particular circumstance (in this case, covid-19) is tested and weighed against to determine whether it really constitute a force majeure event or not. It is trite that a contracting party relying on a force majeure argument must prove that the circumstance was not within its reasonable control; could not have reasonably been averted or overcome; and is not directly or indirectly a result of its negligence, wilful conduct or default.^[6] Now, where an agreement does not contain a force majeure clause at all (neither expressed nor implied), the legal doctrine of supervening impossibility is evocable.[7] The party wishing to invoke this doctrine bears the onus of proving that the performance is objectively impossible and that the impossibility cannot be averted by a reasonable person.[8]

In August 2014, ArcelorMittal successfully invoked a force majeure event in relation to its iron ore mining operations in Liberia due to an outbreak of the Ebola virus.[9] This resulted in the complete evacuation of workers at its iron ore mines across West Africa, exemption from fulfilling its contractual obligations and immediate cessation of mining operations.[10]

Therefore, with the Liberian case demonstrating that a virus epidemic can actually constitute a force majeure event, South African mining companies are also more likely to successfully invoke covid-19 epidemic as a force majeure to escape liability. This, however, may not be so good news for those having certain contractual claims against the mining companies, particularly the mine-affected communities. In conclusion, a lot of litigation is anticipated following these developments. Whether covid-19 can be invoked successfully as a force majeure is yet to be seen. This will set a remarkable precedent and make a cutting-edge shift in the domain of South African law of contract.

Written by Gaopalelwe Mathiba.

This work was carried out under the COVID-19 Africa Rapid Grant Fund supported under the auspices of the Science Granting Councils Initiative in Sub-Saharan Africa (SGCI) and administered by South Africa’s National Research Foundation (NRF) in collaboration with Canada’s International Development Research Centre (IDRC), the Swedish International Development Cooperation Agency (Sida), South Africa’s Department of Science and Innovation (DSI), the Fonds de Recherche du Québec (FRQ), the United Kingdom’s Department of International Development (DFID), United Kingdom Research and Innovation (UKRI) through the Newton Fund, and the SGCI participating councils across 15 countries in sub-Saharan Africa.