The Ministry of Commerce, Industry and Tourism (the “Ministry“) issued Decree 797 on June 4, 2020 (the “Decree“) to temporarily regulate the unilateral termination of business leases by lessees as a consequence of sanitary emergency derived from COVID-19.
This rule was especially aimed at all those leases, which due to the health emergency would not have been able to exercise their economic activity, such as (i) nightclubs, billiards, casinos, bingo halls and video game terminals; (ii) gyms, swimming pools, spas, saunas, wellness centers, sports courts, amusement parks and playgrounds; (iii) cinemas and theaters; (iv) religious services involving crowds; (v) accommodation and food services; and (vi) public or private events involving crowds. In the case of unilateral termination, the lessees will only be obliged to pay the value corresponding to one third of the liquidated damages clause agreed in the contract.
On September 17, 2020, the Constitutional Court declared the Decree unconstitutional for the following reasons: firstly, it stated that the Decree did not overcome the trial of non-contradiction; and secondly, it held that, the Civil Code and the Commercial Code contain multiple mechanisms aimed at overcoming unforeseeable circumstances in the development of a contractual relationship that make the government intervention unnecessary. The contractual autonomy can only be affected in true situations of asymmetry, concluded the Constitutional Court.
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