On Thursday, March 26, the CFO Association of Serbia held an online discussion with members of the Association of Corporate Lawyers of Serbia.

The topic of discussion was the labor relations, rights and obligations of the contractor at the time of emergency, collection of claims, as well as what cases allow invoking the concept of “force majeure” in the newly created situation.

During the meeting, it was discussed whether the initiated layoff programs in these circumstances could continue smoothly and whether the National Employment Service would continue its activities. It was concluded that, formally, there are no obstacles to the smooth implementation of everything on the topic defined by the Labor Law, and that the National Employment Service continues to operate smoothly. On the other hand, it was pointed out that given the situation, there could be reputational damage to a company that would decide to take such a step.

in the case of paid leave, the employee is served with the Decision on paid leave. If the employee is sent on vacation, he or she must be issued with the Decision 15 days earlier or the employee can submit a request for use of annual leave in which case vacation may occur from the next day.

Unpaid leave is provided for in Article 78 of the Labor Law and an employee may be offered unpaid leave, then his / her rights and obligations arising from employment are dormant. It is important to say that an unpaid leave requires an employee’s written request. The law did not stipulate how long such a status could last.

To the use of “Force Majeure” the members of the Association of Corporate Lawyers of Serbia stated themselves as follows:

Depending on how force majeure is defined in the Agreement between the Entities (and generally defined), entities may in their Treaty define in greater detail the force majeure than is described in the laws. Then what is stated in the Treaty will apply. That said, the other party (who should do something) can make a proposal for production goods that are defined by the Contract deadline as an essential element of the Contract when termination occurs by law. More specifically, in Article 137 of the Law on Obligations:

1) When the fulfillment of an obligation of one party in a bilateral agreement becomes impossible due to an event for which neither party is responsible, the obligation of the other party shall be extinguished, and if the latter has fulfilled its obligation, it may request repayment according to the rules on return of the acquired baseless.

2) In case of partial inability to fulfill due to an event for which neither party is responsible, the other party may terminate the Contract if the partial fulfillment does not meet its needs, otherwise the Contract remains in force and the other party has the right to demand a proportional reduction of its obligation.

It was concluded that a pandemic and a state of emergency certainly represent a force majeure, and thus a general ground for exclusion of civil liability for damages and other consequences of inability to fulfill an obligation. However, force majeure must be linked to the extent of the state of emergency, which depends on the decisions of the state authority, because not all force majeure occurred in the same way, so that the situation must be viewed from country to country, depending on whether the legal work has a foreign element.

Within the topic of force majeure, special attention was given to renting business premises, considering that the measures of the Government restricted the operation of shopping malls and shops, and that the tenant was unable to use the object of the lease to have grounds for termination of the subject Contract and that in the case of a potential dispute before the court, which would have been initiated by the lessor to pay the rent, could successfully defend the position regarding the declaration of a state of emergency and the fact that there was an inability to fulfill which the tenant was not responsible for.

However, as this state of emergency is not expected to last for long, it is certainly a conclusion and advice to modify the contractual relationship with one another, modify the business relationship, reduce the rent or seek a mutually acceptable modality. This is because landlords are not in a better position than tenants at the moment.

It was further concluded that for the other tenants each case should be considered, for example. they cannot successfully invoke force majeure tenants – retail chains that for the time being cannot document the occurrence of an inability to fulfill their contractual obligations as they record sales growth. Also, this implies that the further reflection of the state of emergency on the business operations of all segments of the economy is closely monitored and that measures are adopted in stages after careful consideration of the effects.

In addition, the meeting addressed issues related to suspensions of forced collection of debtors, insurance of claims, payment of transport allowances in working conditions from home, allowances, etc.

We thank the members of the Association of Corporate Lawyers of Serbia for all their answers and advice, as well as the members of the CFO Association of Serbia for their productive discussion.