Building law and regulation in France during Covid-19

From the outset, it shall be stressed that, for the time being and as of 26 March 2020, there are no proper regulations (of whatever nature) addressing -directly- the consequences of COVID-19 for the Construction industry specifically. Rather, and notably following Emergency Law No. 2020-290 of 23 March 2020 to deal with the COVID-19 epidemic, which allows the French government to rule by orders, a number of regulations have been issued recently to address various ancillary issues or sectors which may have a direct impact on such industry, the latter of which are briefly presented as follows:

• Decree No. 2020-293 of 23 March 2020 incorporating Decree no. 2020-260 of 16 March 2020 regulating travel

This Decree authorises notably "travels between the home and the place(s) of exercise of the professional activity and business trips that cannot be postponed".

Thus, companies facing quandaries as regards the continuation of their activities, hence their ongoing works, may either decide to: 

1. continue the work while adapting the working conditions of employees (i.e. by implementing measures to prevent the spread of the virus). This shall be subject to the agreement of the project owner, upon advice from a specialized adviser, the "Coordonnateur SPS" (Safety and Security Advisor) and the employees. Tasks which cannot comply with these safety rules or which cannot be carried out (e.g. lack of supplies) must be postponed;
2. reduce the services to be performed by the employees by resorting to partial activity scheme (please refer below); or
3. decide to shut down the construction site.

• Order No. 2020-306 of 25 March 2020 relating to the extension of time limits during the period of health emergency and the adaptation of procedures during the same period

The main principle is laid down in Articles 1 and 2 of the said Order, which provide for a special period for all time limits, expiring between 12 March 2020 and the month following the end of the state of health emergency: the latter being expected, as of this day, to occur on 24 May 2020, such special period should therefore be expected to end on 24 June 2020 (the "Special Period").

In a nutshell, during this period, the time limits are suspended for any act, appeal, legal action, formality, registration, declaration, notification or publication prescribed by the law or regulation which should have expired. 

One (1) month after the end of the Special Period, the time limit will start to run again and the act must be performed. However, in all cases, the postponement is limited to two (2) months after the end of the Special Period.

Thus, the extension of time limits provided for by this order seems to apply to the duration of construction contracts but also to the legal guarantees of the French Civil Code. 

Concerning the exceptions, they are not related to the construction sector per se, as they cover, in particular, the time limits already adjusted by Emergency Law No. 2020-290 of 23 March 2020, to deal with the COVID-19 epidemic, time limits in criminal matters or criminal proceedings, measures involving deprivation of liberty and financial obligations relating to compensation and assignment of claims, among others. 

Article 3 lists the judicial and administrative measures whose effect is automatically extended for a period of two (2) months from the expiry of the special period (state of health emergency + one (1) month). These include precautionary measures, investigation, conciliation, prohibition or suspension measures which have not been pronounced as a sanction, as well as authorisations, permits or aid measures.

Penalties, resolutive or forfeiture clauses that should have taken effect during the special period shall be suspended. They shall take effect one (1) month after the end of this period. Those which had begun to run before 12 March 2020 shall be suspended. 

Article 5 provides for the extension by two (2) months after the end of the Special Period of the time limits for terminating an agreement when it must be terminated within a predefined period.

For administrations, the time limits within which they must give a decision or opinion are extended until the end of a Special Period. The Order provides for the possibility of exceptions for certain administrative acts, which will be determined by decree, on grounds of the fundamental interests of the Nation, security, preservation of the environment or protection of health, public health or children. Moreover, the time limits applicable to the recovery and contestation of public debts are suspended for the duration of the state of health emergency plus three (3) months.

As mentioned above, Emergency Law No. 2020-290 of 23 March 2020 to deal with the COVID-19 epidemic, allows the government to rule by ordinances (published on 25 March 2020), and more notably on the following labour law-related issues:

•  to facilitate and reinforce the use of partial activity for all companies and employers, whatever their size, notably by temporarily adapting the social regime applicable to the allowances paid in this framework, by extending it to new categories of beneficiaries, by reducing the remainder to be borne by the employer. The employer may be authorized to pay to the employee seventy percent (70%) of the salary for the non-performed hours and the employer may receive a state allocation amounting to the compensation paid to the employee with a maximum of seventy percent (70%) of four point five plus (4,5*) SMIC, the entry-level minimum wage in France  (i.e. approx. thirty-two Euros (32 EUR) maximum per hours); 
• allowing the employer, through a company or branch agreement, to impose or modify the dates of paid leave within the limit of six (6) working days; 
• allowing any employer, by unilateral decision, to impose or modify unilaterally the dates of days of reduced working hours, rest days provided for in day package agreements and rest days allocated to the employee's time savings account;
• to allow companies in sectors particularly necessary for national security or the continuity of economic and social life to derogate from the rules of public order and the contractual stipulations relating to working hours, weekly rest and Sunday rest;
• possibility of modifying, on an exceptional basis, the deadlines and terms of payment of the sums paid under the profit-sharing and incentive schemes; and of modifying the deadline and terms of payment of the exceptional "Macron" bonus; or
• possibility of deferring in full or staggering the payment of rents, water, gas and electricity bills relating to professional and commercial premises and waiving financial penalties and suspensions, interruptions or reductions in supplies that may be applied in the event of non-payment of these bills for the benefit of microenterprises suffering a substantial loss of turnover. 

Under French Law, the legal concept of force majeure is regulated by Article 1218 of the French Civil Code, the latter of which stipulates the following:

"In contractual matters, there is force majeure where an event beyond the control of the debtor, which could not reasonably have been foreseen at the time of the conclusion of the contract and whose effects could not be avoided by appropriate measures, prevents performance of his obligation by the debtor"

This provision may be amended in the contract by the parties. 
Thus, the contract should first of all be analysed in order to check whether contractual arrangements for force majeure have been provided for.

Three (3) situations can be distinguished:

1)    Contracts signed before knowledge of the epidemic: 

In the absence of a specific contractual stipulation, the assessment of force majeure, as defined in Article 1218 of the Civil Code, will remain subject to the appreciation of the judges on a case-by-case basis. Force majeure requires four (4) conditions:

1. Externality: the event must be beyond the debtor's control
2. Unforeseeability: the event must not be reasonably foreseeable on the day the     contract is concluded.
3. Irresistibility: the event must produce effects that cannot be avoided.
4. Impediment: the event must effectively prevent the debtor from performing his obligation.

Until now, case law has refused to classify epidemics as force majeure. However, the qualification of COVID-19 epidemic as a force majeure event shall depend on the Parties' positions when negotiating and/or amending their contracts, and the judges' assessment of these contracts, on a case-by-case basis, in the light of such epidemic's actual impact on the works. 

2)    Contracts signed at the very beginning of the epidemic (i.e. early January 2020):

the unpredictability remains subject to assessment, on a case-by-case basis.

3)    Contracts signed after knowledge of the epidemic:

Force majeure seems to us to be excluded. Even if the consequences of the pandemic are evolutionary, the condition of unpredictability does not seem to be able to be likely fulfilled. 

The termination clauses of the contract should first be analysed to determine whether the COVID-19 epidemic may result in the termination of the contract.

In this respect, it shall be stressed that the French Civil Code provides for mechanisms that may ultimately lead to the termination of the contract, upon occurrence of an unexpected change of circumstances that has a substantial impact on the performance of the parties' obligations, i.e. (i) force majeure, on the one hand, whereby one party is prevented from performing its obligations, at least temporarily, and (ii) unforeseeabilty, on the other hand, whereby a party may still be able to perform its obligations, although such performance has been rendered more onerous than it would reasonably have been anticipated at the time of the conclusion of the contract:

1. Force majeure: in the event that the COVID-19 epidemic is considered to be force majeure (see the answer to question No. 3), the Article 1218 paragraph 2 of the French Civil Code provides that "If the impediment is temporary, performance of the obligation shall be suspended unless the resulting delay justifies termination of the contract. If the impediment is permanent, the contract is terminated by operation of law and the parties are discharged from their obligations under the conditions provided for in articles 1351 and 1351-1." In consequence, it could lead to the suspension or termination of the construction agreement, depending on the extent of the impediment resulting therefrom.
2. Unforeseeability ("Imprévision"): pursuant to the Article 1195 of the French Civil Code: "If a change in circumstances unforeseeable at the time of the conclusion of the contract makes performance excessively onerous for a party who had not agreed to assume the risk, that party may request the other party to renegotiate the contract. It shall continue to perform its obligations during the renegotiation. If the renegotiation is refused or fails, the parties may agree to terminate the contract, on the date and on the terms they determine, or request the court to adapt it by mutual agreement. If no agreement is reached within a reasonable time, the court may, at the request of one of the parties, revise or terminate the contract, on the date and under the conditions it shall determine. "This provision, introduced by the reform of contract law, is applicable only to contracts concluded after 1st October 2016.  The parties may derogate from this article.

Two (2) situations can be distinguished: 

1. Contracts signed after October 1, 2016 and before the COVID-19 epidemic became known by parties: 
   1. In the absence of a specific contractual stipulation derogating from Article 1195 of the French Civil Code, each of the parties could attempt to invoke these provisions to renegotiate the terms of the contract. The party concerned will have to provide proof of a change of circumstances, proof of the unforeseeable nature, at the time of the conclusion of the contract, of the change of circumstances, proof of the excessively onerous nature of the contract due to this change of circumstances and proof of the absence of acceptance of this risk. If the unforeseeability is recognized, the party concerned may ask the other party to renegotiate the contract. In the event of refusal or failure to renegotiate, the parties may agree to terminate the contract, it being specified that in the absence of agreement, the judge may, at the request of one of the parties, revise or terminate the contract.
   2. In the presence of a specific contractual stipulation derogating from article 1195 of the French Civil Code, each of the parties could not invoke these legal provisions to renegotiate the terms of the contract. 
2. Contracts signed after October 1, 2016 and after the COVID-19 epidemic became known by parties: 

In this hypothesis, each of the parties could not invoke the provisions of Article 1195 of the Civil Code, regardless of whether or not the contract provides for an express derogation from Article 1195 of the French Civil Code. Indeed, the change of circumstances would no longer be unforeseeable for the parties at the time of signing the contract.

Several measures have been taken by the government to deal with the COVID-19 epidemic.

Please note that Order No. 2020-306 of 25 March 2020 on the extension of time limits during the period of public health emergency and the adaptation of procedures during the same period (applicable for all agreements) notably provides for:

• the neutralization of periodic penalty payments ("astreintes"), penalty clauses ("clauses pénales"), termination clauses  ("clauses résolutoires") and clauses providing for forfeiture ("clauses prévoyant une déchéance") intended to sanction failure to fulfil an obligation within a specified period of time, if the latter has expired during the Special Period (see above) defined by the Order;
• the extension of contract termination dates when these termination dates were to occur within a specified period and during the Special Period as defined by the Order;
• the extension of the time limits for issuing administrative authorisations, appeals against administrative authorisations and administrative supervision, when these events was to take place during the Special Period defined by the Order.

In these conditions, this Order could have an impact a construction contract.

Additionally, there is no doubt that the above-mentioned COVID-19-related regulations issued by the French Government could be interpreted as a "Change in Law", especially when Parties are using international construction contracts standards or forms to rule their projects. 

Indeed, and for instance, FIDIC's Rainbow Suite, addresses the issue within its most used forms, the Red, Yellow and Silver Books. 

Firstly, it shall be stressed that the very nature of these COVID-19-related regulations fall within the definition of "Laws"  provided by Sub-Clause 1.1.49 of the 2017 Rainbow Suite, which explicitly encompasses "all national (or state or provincial) legislation, statutes, acts, decrees, rules, ordinances, orders, [...] and other laws, regulations and by-laws of any legally constituted public authority" (highlighted by us). 

Furthermore, Sub-Clause 13.6 [Adjustments for Changes in Laws] unambiguously states in its first indent that "the Contract Price shall be adjusted to take account of any increase or decrease in Cost resulting from a change in [...] the Laws of the Country [...], which affects the Contractor in the performance of its obligations under the Contract". Likewise, the second indent specifies that should the contractor suffers delay and/or in increase in Cost as a result of any such change in Laws, the latter shall be entitled to an Extension of Time and/or payment of such additional Cost, provided he follows the claims procedure set forth in Clause 20 [Employer's and Contractor's Claims] et seq. 

There is therefore no doubt that, should a COVID-19-related regulation incurs, by its very nature and the obligations or prohibitions it bears, a duly substantiated temporal and financial impact on the performance of a construction contract, such impact shall be qualified as a "Change in Law" entitling to extension of time and adjustment of the contract price.

Several additional or ancillary topics are worth addressing in this current section.

Firstly, one should mention, among other COVID-19-related regulations having an impact on the construction sector, Order No. 2020-319 of 25 March 2020 on various measures to adapt the rules governing the award, procedure or execution of contracts subject to the code of public procurement and public contracts that are not covered by it during the health crisis caused by the COVID-19 epidemic. 

The new measures developed within this Order apply to contracts in progress and concluded during the crisis period, i.e. from 12 March 2020 until the end of the crisis (Article 1 of the Order).  Two situations can therefore be distinguished:

1. During the awarding phase, the buyer can now: 
   1. extend the deadlines for receipt of applications and offers in ongoing procedures (Article 2);
   2. adjust the competitive tendering procedures mentioned in the consultation file for companies (Article 3); and
   3. extend contract that have expired by an amendment (Article 4);
2. During the contract operation phase, it is worth highlighting:
   1. the possibility of amending the conditions of payment of the advance by means of an amendment (Article 5); and
   2. the absence of penalties for late payment if the delay is linked to the crisis (Article 6).   

Nevertheless, we are of the opinion that the abovementioned operation phase shall be the most affected by the measures borne by Order No. 2020-319 of 25 March 2020.

Moreover, following the possibility to shut down construction sites left open by the above-mentioned Decree no. 2020-293 of 23 March 2020, French professional building organizations are not only calling the French Government to officially halt non-urgent building sites and works, but are also requesting some guidance from the latter: in this respect, a guide of "good practices" has been announced and shall be issued shortly.  In the meantime, the aforementioned professional building organisations are also issuing their own guidelines (e.g. the most vivid and notable example being the guide entitled "What legal solutions to Coronavirus? Public and private contracts" issued, on 16 March 2020, by the French Building Federation).  

Furthermore, and more broadly, when probing actors of the construction sector, and in particular those involved in the renewable energies industry, concern is now the order of the day.

To relieve the latter, the French government has notably begun to postpone the timing of certain calls for tenders to build power plants. At the global level, a slowdown in installed capacity is expected as early as this very year.

Delays in supply, lack of manpower on construction sites, road transport problems, etc., the last few weeks have been a nightmare for manufacturers and operators of photovoltaic and wind farms, and the Syndicate des Énergies Renouvelables fears that administrative authorisations for works will expire before the construction sites are completed, projects will lose access to a guaranteed feed-in tariff due to a lack of compliance with deadlines or delays in connection to the grids, which could weigh on the profitability of projects. 

It should be noted that, even if it is possible to transfer several responsibilities to the companies working on the site (contractors, etc.), the project owner retains a residual responsibility for the health and safety of all the employees of such companies. Additionally, the project owner will be responsible for ensuring that health and safety rules are complied with during and after the outbreak and, as such, he will also need to adapt measures as the epidemic progresses. 

On the banks' side, reticence is also beginning to be felt: since the beginning of the COVID-19 crisis, some photovoltaic power plant projects have seen their proposed credit rates revised upwards, while the players have responded to calls for tenders taking into account very favourable financing conditions.

Within the public authorities, however, the message is intended to be reassuring.  In terms of deadlines, in onshore wind energy, the government has already decided to split in two (2) the last call for tenders which was to be closed in early July 2020 for seven hundred and fifty-two (752) Megawatts, part of the volumes to be offered in November 2020 to give key-players the necessary time to reorganize themselves. In photovoltaics, similar measures could be taken. 

The sector should still blame the blow. In wind energy, the research firm Wood Mackenzie estimates that four point nine (4.9) Gigawatts will not finally be connected to the grids this year at the global level, a revision of six point five percent (6.5%) of its forecasts.