Supreme Court: Force Majeure May Release a Party From Liability for Delay but Does Not Extinguish the Underlying Obligation
⚖️ Ukraine | Commercial Disputes | Force Majeure
Case Details
Case No.: 910/4843/24
Court: Supreme Court, Commercial Cassation Court
Decision Date: 4 December 2024
Case Category: Commercial Law
Subject Matter: Recovery of Debt and Contractual Penalties
Sub-Subject: Force Majeure / Delay in Performance / Ground Handling Services / Wartime Airport Closure
Claim: Recovery of principal debt, penalties, 3% annual interest and inflation losses
Force Majeure Events: Russia’s military aggression against Ukraine, introduction of martial law, closure of Ukrainian airspace and airports, suspension of civil aviation
Evidence: Force majeure certificate issued by the Kyiv Chamber of Commerce and Industry
Key Issue: Whether force majeure releases a debtor from the obligation to pay for services already received or only from liability for delayed performance
Outcome: The Supreme Court upheld the lower courts’ conclusion that force majeure excused the defendant from liability for delayed performance, but did not eliminate the underlying contractual debt.
Background of the Dispute
A state enterprise brought commercial proceedings against a Ukrainian company seeking recovery of outstanding contractual debt together with financial sanctions.
The claim concerned payment for ground handling services previously provided to the defendant.
The claimant sought recovery of:
the principal debt;
contractual penalties;
3% annual interest; and
inflation losses.
The commercial court partially allowed the claim.
The appellate commercial court upheld that judgment.
The dispute subsequently reached the Commercial Cassation Court of the Supreme Court.
The central issue was the legal effect of force majeure on the defendant’s payment obligations and its liability for delayed performance.
Suspension of Business Does Not Automatically Extinguish Contractual Obligations
The lower courts found that the defendant had failed to provide sufficient evidence that it had properly paid for the ground handling services received from the claimant.
The defendant relied on the suspension of its activities and the consequences of Russia’s full-scale invasion.
The courts, however, drew an important distinction.
The fact that a company has suspended or ceased its business activities does not, by itself, release it from contractual obligations already assumed.
Likewise, the absence of flights does not automatically eliminate an obligation to pay for services previously provided under an agreement.
The underlying contractual debt therefore continued to exist.
Force Majeure and the Underlying Debt Are Different Legal Questions
The Supreme Court’s approach highlights an important distinction in Ukrainian contract law.
Force majeure may affect liability for breach without extinguishing the underlying obligation itself.
In practical terms, a debtor may remain required to pay the principal amount owed under a contract while being released from certain consequences of having failed to make that payment within the original contractual deadline.
This distinction is particularly important in wartime commercial disputes.
A party cannot assume that establishing force majeure means that all contractual liabilities and payment obligations disappear.
The precise legal consequence depends on the nature of the obligation, the circumstances preventing performance, the contractual provisions and the applicable statutory rules.
Article 617 of the Civil Code: Exemption From Liability
The Supreme Court relied on Article 617 of the Civil Code of Ukraine.
Under that provision, a person who breaches an obligation may be released from liability if it proves that the breach occurred as a consequence of an accident or force majeure.
Force majeure therefore operates primarily as a basis for exemption from liability for breach where the statutory requirements are satisfied.
It does not automatically cancel the contract or extinguish an obligation that can subsequently be performed.
This was critical in the present dispute.
The Defendant Established Force Majeure Affecting Timely Performance
The courts found that the defendant’s delay occurred as a consequence of force-majeure circumstances.
Those circumstances included:
Russia’s military aggression against Ukraine;
the introduction of martial law;
closure of Ukrainian airspace;
closure of Ukrainian airports; and
suspension of civil aviation.
These events directly affected the environment in which the defendant conducted its aviation-related business.
The existence and relevance of the force-majeure circumstances were also supported by a certificate issued by the Kyiv Chamber of Commerce and Industry.
The courts therefore concluded that the defendant had established a sufficient basis for exemption from liability for improper or delayed performance of the relevant contractual obligations.
Force Majeure Did Not Cancel the Obligation to Pay
The defendant’s successful reliance on force majeure did not mean that it no longer owed the principal debt.
The Supreme Court agreed with the distinction made by the lower courts.
The contractual obligation to pay for services received remained in force.
What changed was the defendant’s exposure to liability arising from its failure to perform that obligation within the agreed period.
Accordingly, force majeure provided grounds for exemption from liability for the delay but did not extinguish the payment obligation itself.
This distinction has significant practical consequences for both creditors and debtors.
Principal Debt and Penalties Must Be Analysed Separately
The judgment demonstrates why claims arising from wartime non-performance should be divided into their individual components.
A creditor may seek:
payment of the underlying contractual debt;
contractual penalties;
statutory interest;
inflation losses; or
other consequences of delayed performance.
Force majeure may affect these claims differently.
The existence of force majeure therefore does not necessarily produce an all-or-nothing outcome.
The principal obligation may remain enforceable even where the debtor establishes grounds for avoiding contractual or statutory liability associated with the delay.
Closure of Ukrainian Airspace Was Directly Relevant
The factual context of this dispute was particularly important.
The defendant operated in a sector directly affected by the consequences of the full-scale invasion.
The closure of Ukrainian airspace, termination of civil aviation operations and closure of airports were not merely general adverse economic circumstances.
They directly affected aviation-related commercial activity.
This distinguishes the case from disputes where businesses rely only on a general deterioration of economic conditions, loss of customers, lack of funds or non-payment by their own counterparties.
The Supreme Court accepted the conclusion that the identified wartime events had made timely performance of the relevant obligations impossible.
The Supreme Court’s Decision
The Commercial Cassation Court upheld the decisions of the lower courts.
The Supreme Court confirmed that the courts had correctly applied Article 617 of the Civil Code of Ukraine and Article 218 of the Commercial Code of Ukraine.
The Court agreed that:
the defendant remained subject to the underlying contractual obligation;
suspension of its activities did not automatically release it from that obligation;
absence of flights did not, by itself, extinguish the obligation to pay for services already received;
the defendant had established relevant force-majeure circumstances;
those circumstances included Russia’s military aggression, martial law, closure of Ukrainian airspace and airports, and suspension of civil aviation;
the force majeure prevented timely performance of the contractual obligation; and
the defendant could therefore be released from liability for the relevant delay.
The Supreme Court consequently left the lower courts’ decisions unchanged.
Why This Decision Matters
The judgment is particularly relevant to foreign creditors, suppliers, investors and companies dealing with Ukrainian counterparties during the war.
It clarifies a point that is frequently misunderstood in commercial disputes:
force majeure does not necessarily eliminate the debt.
Instead, it may protect a debtor from liability arising from delayed or improper performance while leaving the principal contractual obligation intact.
For foreign businesses assessing a force-majeure claim made by a Ukrainian counterparty, it is therefore necessary to ask separate questions:
Does the underlying obligation still exist?
Was performance merely delayed or permanently impossible?
What specific event prevented timely performance?
Is there a causal connection between that event and the breach?
Does the contract address the consequences of force majeure?
Was proper notice given?
Is there a relevant Chamber of Commerce certificate or other evidence?
Which elements of the creditor’s claim constitute the principal obligation?
Which elements constitute liability for breach?
Can performance resume after the force-majeure circumstances cease?
These distinctions can materially affect the amount ultimately recoverable.
Force Majeure Is Not the Same as Lack of Funds
The decision should also be distinguished from situations where a debtor simply lacks sufficient financial resources.
Ukrainian law generally does not treat lack of funds, absence of necessary goods on the market or default by the debtor’s own counterparties as force majeure.
The debtor must establish an extraordinary and unavoidable circumstance and demonstrate its effect on the particular contractual breach.
In the present case, the courts found such a connection between the extraordinary wartime restrictions affecting the aviation sector and the defendant’s delayed performance.
Lions Lawyers’ Analysis
The practical value of this decision lies in separating three concepts that are often incorrectly combined:
the contractual obligation → breach of that obligation → liability for the breach.
Force majeure may affect the third element without eliminating the first.
That distinction should be considered both when drafting contracts and when structuring litigation.
For a creditor, it may mean that a claim for the principal debt remains viable even where claims for penalties or other consequences of delay encounter a successful force-majeure defence.
For a debtor, establishing force majeure does not necessarily mean that the underlying debt disappears. The legal argument should identify precisely which consequence of non-performance the force-majeure event is said to exclude.
For foreign companies contracting in Ukraine, force-majeure clauses should therefore specify whether qualifying events suspend performance, extend deadlines, exclude liability, affect interest and penalties, permit termination, or ultimately discharge particular obligations.
The wording can become decisive when wartime circumstances interfere with performance.
Lions Lawyers advises Ukrainian and international clients on commercial disputes in Ukraine, including force majeure, debt recovery, contractual penalties, wartime non-performance, aviation-related disputes and cross-border contractual claims. We provide full-service legal representation as well as standalone Ukrainian-law opinions for foreign companies, creditors and international counsel assessing contractual rights, force-majeure defences and litigation risks in Ukraine.
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