Patricia Motilla, partner in charge of Culture, Sports and Entertainment at Andersen Tax & Legal, and Almudena Santaeufemia, senior associate in the area, analyse the situation of contracts in the cultural sector at the current health crisis and whether or not force majeure is applicable, in line with the obvious need for specific measures demanded by the sector.

Since the first Government announcement and with each extension that it has announced by decreeing the State of Alert, there have been cancellations or postponements of all cultural events, theatres, concerts, festivals, cinema..., with the consequent economic impacts that affect the various parties involved in them.

However, the lack of box office revenue is not the only impact for these cultural operators; there is another, quieter and less well-known but equally burdensome consequence for the cultural producer, namely breaches of contract with artists and with premises already booked and reserved in advance.

It is well known that breaches of contract trigger legal actions that may result in compensation for the party in breach. But, in the face of a pandemic, is there a breach of contract, is it necessary to expressly comply with the agreed considerations, and who should be responsible for dealing with the compensation arising from breaches of contract?

In the value chain of a cultural piece: producer, actor, exhibitor; is it fair that the producer, in addition to losing the box office revenues, is obliged to pay compensation for being forced to cancel an event and not being able to comply with the commitments established in the contract?

And, on the other side of the coin, is it fair that the artist does not receive the agreed compensation because the event has been cancelled for reasons beyond his control? The magic words should be "force majeure" but let's see if magic works in these cases.

Doctrine and jurisprudence define as force majeure that event which is unforeseeable or which, even if it had been foreseen, would have been unavoidable. It seems reasonable to argue that any postponement or cancellation of a cultural event imposed by the authorities by COVID-19 would be considered force majeure and that the liability arising from the contractual relations could be exonerated on the grounds of force majeure, since the measures established by the authorities prevent compliance with the terms of the contract.

In order to assess whether or not artists and exhibitors are entitled to receive the agreed consideration in the event of cancellation, it will be necessary to comply with the terms of the contract, which, although they usually provide for good faith negotiations, in many cases the cultural producer has to cross a rocky road when international operators are involved.

At this point we must ask: what about insurance, when do insurance companies act? Well, to assess whether the insurance company assumes the economic impact of the cancellation of the event, not only by the lack of box office revenues, but by the payment of the accrued benefits, again we must be at the reading of the contract, we must analyse the insurance policy in its "exclusions" section.

And here we see that insurance companies generally expressly exclude "the pandemic" from force majeure risks, automatically annulling the guarantees of the contracted policy.

We find ourselves with a cultural businessperson, who not only runs out of box office income, but also, despite the existence of force majeure, is forced to deal with the economic obligations arising from contracts already signed.

Our culture is dying, and it is urgent to take protective measures from the Public Administration in the face of an exceptional and unpredictable situation. The corresponding Ministries must urgently activate measures that allow companies in the cultural sector to moderate and manage the losses caused by the costs of cancellation or postponement of the event.

You can see the article in Audiovisual451.