Aziza Atta, a senior lawyer and Of Counsel with Egality Law, discusses some of the legal and business implications of the COVID-19 pandemic. Aziza is a UK qualified corporate and commercial lawyer with over 19 years of legal experience of advising multinationals, regulatory institutions and governments in the UK, Europe, Central America, Middle East, Ghana and Nigeria. Aziza worked for international law firms Freshfields Bruckhaus Deringer and Norton Rose Fulbright for many years. She speaks German, French, Spanish and English.
The global crisis set off by COVID-19 has triggered a dramatic health pandemic across the globe. Businesses internationally have also felt the impact significantly. On 23rd March 2020, the Director-General of the World Health Organisation confirmed that more than 300,000 cases of COVID-19 have been reported across the globe and the current pace at which these cases are being reported is accelerating.
It is now more important than ever for businesses to strategically address business risk issues as they emerge. The COVID-19 epidemic has caused major disruptions for businesses worldwide. Amidst all the uncertainty emerging as regards the impact of COVID-19, we seek to highlight some legal issues that may arise during this pandemic and provide initial legal guidance on approaches that businesses could consider in order to be more resilient against the current pandemic.
Supply Chain Disruption
The COVID-19 outbreak is disrupting supply chain and manufacturing operations globally. Several businesses will be investigating the possibility of making business interruption insurance claims due to the interrupted supply arrangements and lost revenue. The coverage for such insurance generally applies to business interruptions such as fires and floods etc. These are known as standard ‘force majeure’ scenarios. A ‘force majeure’ clause, is a clause in a contract that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise. The specific language of the insurance policy will play a huge role in the applicability of the coverage to the COVID-19 outbreak. The governing law that applies in the particular agreement will also have a significant impact on the interpretation of the force majeure clause.
The applicability of business interruptions insurance to a public health pandemic such as COVID-19 is uncertain and needs to be explored on a case by case basis. As a result, there is likely to be considerable litigation on the applicability of force majeure clauses in relation to this crisis. A re-drafting of force majeure clauses that seeks to encompass public health pandemics such as COVID-19 will also be required.
The first step for businesses confronted with this challenge is to obtain legal advice on the legal obligations under the contracts concerned. Businesses can then explore renegotiating contractual agreements in order to maintain business arrangements.
The economic downturn caused by COVID-19 also means that employers are having to review their work operations and their employment policies in order to deal with the current business reality. The sorts of issues that employers will require advice on are:
Business will be seeking advice with regards to measures to be put in place to ensure workplace safety in view of the current health pandemic. Employers will want to know what they should be doing in the workplace in order to reduce the spread of COVID-19. To what extent are safety measures imposed enforceable, such as the wearing of masks?
Businesses need advice on drafting and implementation of remote working policies, monitoring employee productivity and conducting live meetings to ensure business continues.
Work Hours and Salaries
Due to the current situation, businesses will be questioning whether they can reduce wages and working hours in order to cope with the economic downturn.
Many businesses will be reviewing their health insurance plans and sick leave requirements as a result of COVID-19.
Some businesses may be grappling with how to handle the situation of an employee who is stranded in a location due to work or vacation.
Businesses will need to consider re-positioning themselves and renegotiating contracts in view of the fact that commercial property and rental rates may decline. Loan agreements may also need to be renegotiated due to the inability of tenants to make lease payments or the fact that the business has had to shut down during this pandemic and cannot sustain payments by operating remotely.
Force Majeure provisions may become more standard in lease agreements in order to alleviate the predicament of tenants who find themselves bound by leases that are no longer economically tenable. Rent suspension provisions may also be extended.
The economic crisis triggered by COVID-19 is changing rapidly everyday with more cases being reported daily. It is essential for business to think strategically about short-term, medium term and long-term measures to cater for their workforce and sustain their business.
In order to keep you abreast of the impact of COVID-19 on your business from a legal perspective, we will be providing regular legal updates on issues affecting businesses during the current pandemic.
24 March 2020
Of Counsel, English Qualified
+233 242 524 662