INDEMNIFICATION FOR SUSPENSION OR FORCE MAJEURE IN PUBLIC CONTRACTS IN ALGERIA

Unlike several other Countries, which went for an explicit declaration of Force Majeure, Algeria opted for setting aside fines and penalties for delays in the Public Contract, through an Instructions to the Wali sent by the Prime Minister on 15th of April.

Such Instruction legitimated an option already undertook by several Public Contracting bodies: the suspension of the contracts through an ODS d’arret

Which challenges are the foreign companies facing now in Algeria?

Indeed, the commercial operators active in the framework of Public Contracts in Algeria are suffering heavy losses due to the actual circumstances and in complying with the necessary measures taken by the Government in order to fight the spreading of Covid-19. 

That is represented mainly in major unexpected costs, direct and indirect damages and the ongoing expenses even in case of suspension of the activities, usually represented mainly by wages and banking fees. 

The effects of suspension in a Public Contract

Here, we have to refer mainly to art. 34 of the CCAG (Cahier clauses administratives générales) providing that in case of suspension of the works imposed by the contracting Party, the contractor has the right to receive a compensation on the prejudice duly proven.

It is worth to note that only strictly direct damages are usually kept in account. Again, if the suspension will last in total (even in case of the addition of multiple periods of suspensions) more than one year, the contractor will have the additional right to terminate the contract. 

It is essential not to wait until the end of the crisis. Indeed, it is the duty of the contractor to notify promptly the contracting party about the prejudices suffered, under a short deadline and in the prescribed forms.

And what if a Company already invoked Force Majeure?

Although in the practice, the results of the two options can be assimilated (no liability for the delay and compensation, persistence of the duty to pay the dues originated before the occurrence), it is worth to note that there could be a conflict between the remedies for suspension provided by the CCAG and the contractual provisions. Indeed, the Force Majeure clause of a contract could provide the contractor with broader categories for indemnification.

Again, there could be some remedies provided by some Bilateral Investment Treaties (BITs), where Algeria undertook to grant full protection and security to the investors in case of Force Majeure events, leading potentially to an extension of the categories of the prejudices subject to indemnification.

In addition, the BIT prohibits treatment less favorable than that offered to national or third-party foreign investors.

Furthermore, it is worth to underline that with the issuance of an ODS d’Arret, all the works in the scope of a contract will be suspended, while under Force Majeure, only the obligations set forth in the contract which result impossible to perform will be targeted.

In that case, we highly suggest proceeding with an assessment in order to understand how the different provisions will relate and coordinate each other, with the aim to obtain the most satisfactory result.

Which solutions in case the contractual conditions became too burdensome?

Besides the recognition of actual and direct damages thanks to the provisions of CCAG, it is worth to underline that if the balance of the contract is altered and became, if not impossible, extremely burdensome, it could be possible to ask the contracting Party for it rebalance.

This could claim under the general theory of public contracting, but also based on the international principle of hardship, briefly enounced under art.

107 of the Civil Code. In that case, normally the unit prices could be increased until the neutralization of the disequilibrium. 

In order to have higher chances to invoke successfully such right, the respect of formalities, especially during the crisis, must be absolute and a company should prepare a pertinent detailed file in compliance with the local usages.

Indeed, one of the requirements is to prove that an excessive burden has been met and not only a higher, but tolerable burden, since in this latter case it will be considered implicit to the entrepreneurial risk and it will not entitle to any compensation.

So how a Company should proceed now?

We highly suggest now to be proactive and promptly perform several actions. In particular, you should draft a detailed report of the prejudices suffered, proceed with the draft and notification of formal letters and communication, within the deadlines, with a particular attention to the wording and in compliance with the local usages.

In addition, it is worth to understand if your specific case falls into the scope of a Bilateral Investment Treaty. Again, it is suggested to assess which are the remedies provided for Force Majeure in the executed contracts.

Finally, in case the contract became too burdensome and the conditions changed dramatically, it would be useful to claim for a rebalance.

In lack of the respect of all the provided deadlines, formalities and local usages, it is likely that a request for indemnification will be set aside.

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