Member Article

On April 8, 2020, the federal government adopted draft wording presented by the Federal Minister of Justice and Consumer Protection for a draft bill to mitigate the consequences of the COVID-19 pandemic in event contract law in order to protect organizers of recreational events and operators of recreational facilities from considerable outflows of liquidity.

BACKGROUND

The spread of the novel coronavirus (COVID-19 pandemic) has also had far-reaching consequences in Germany that were unimaginable just a few weeks ago. Private life and large parts of the economy are impacted. A large proportion of recreational events, such as music concerts or sporting events, were canceled and recreational facilities, such as sports teams or museums, had to be closed to slow the spread of the virus. Particularly event organizers and operators are also suffering from the current containment measures. Although organizers are offering their customers the option of redeeming their tickets at a later date, it is expected that many ticket holders will demand an immediate refund of the purchase price. The same goes for operators of recreational facilities. Their members might also demand a refund of monthly fees already paid for the period during which use of the facility is not possible. Organizers, who frequently paid in advance for advertising and organization of the event, and operators are facing considerable outflows of liquidity, which could threaten their existence.

CURRENT LEGAL STATUS

The Civil Code’s general law on defective performance basically already provides the following rules for canceled events and the closure of recreational facilities: If an event is canceled due to an officially ordered closure of the event site, the performance owed by the organizer has become impossible. In this case, attendees no longer have a claim against the organizer, for instance for participating in a sporting event. Consequently, the consideration owed, i.e., the payment of the entrance fee, no longer needs to be provided. Since event tickets are usually bought and paid for in advance of an event, ticket holders are entitled to a refund of the purchase price. The same applies to recreational facilities where users would also be entitled to demand a refund of amounts already paid according to the same principles.

SOLUTION PROPOSED BY THE FEDERAL GOVERNMENT

After special provisions have already been introduced in the course of the COVID-19 pandemic for consumers, tenants and landlords, borrowers, and micro-entrepreneurs, a newly introduced Article 240(5) Introductory Act to the Civil Code is now designed to provide such a special rule for event law as well. The legislator intends to apply this “voucher solution” to protect the relevant individuals from loss of income that could threaten their existence.

Article 240(5)(1) Introductory Act to the Civil Code provides for organizers to be entitled to compensate holders of tickets purchased prior to March 8, 2020 with a voucher in the amount of the value of the ticket instead of a refund. The same applies to operators of recreational facilities. In the event of closure due to the COVID-19 pandemic, they are also entitled under Article 240(5)(2) Introductory Act to the Civil Code to compensate users of their facilities with a voucher for rights of use acquired prior to March 8, 2020. The respective vouchers are to be issued for the amount of the price paid in accordance with Article 240(5)(3) Introductory Act to the Civil Code and will need to cover the entire admission price or all other charges including advance booking fees, if any.

Notwithstanding Article 240(5)(1) and (2) Introductory Act to the Civil Code, holders of a voucher may, however, demand payment of the voucher value pursuant to Article 240(5)(5) Introductory Act to the Civil Code where the reference to a voucher is unreasonable for individuals in view of their personal circumstances (no. 1) or where they have not redeemed the voucher by December 31, 2021 (no. 2). The explanatory memorandum to the law considers the requirements of the exception rule of Article 240(5)(1)(1) Introductory Act to the Civil Code to be met, for instance, where holders of an admission ticket wanted to attend the event as part of a vacation trip and would only be able make up for the missed date by incurring high travel cost.

PROCEDURAL BACKGROUND:

The resolution of the federal government is a “draft wording” for a draft bill, which generally must first be submitted to the Federal Council before the Parliament can deal with them. To speed up the legislative process, however, the coalition factions will introduce the government’s draft wording as a bill “from the middle of Parliament,” which will enable it to pass the law more quickly.

ASSESSMENT

The legislator is attempting to find a balanced solution that takes into account the interests of both organizers and consumers. The intention is to give the affected businesses some time to recover after the massive sales losses due to the COVID-19 pandemic. For this reason, it is offering affected organizers and businesses a provision that causes deferral of the claim for repayment, which would actually exist from the beginning.