The Corona-virus outbreak came to light on December 31, 2019 when China informed the World Health Organization of a cluster of cases of pneumonia of an unknown cause in Wuhan City in Hubei Province. When it started to spread across the world, WHO declared it as “pandemic” and the virus was then named as SARS-CoV-2 while the disease is called COVID 19. It is a group of related virus that affects the respiratory system of the body. Corona-virus in humans can range from mild to lethal: the mild includes normal viral, cold and cough while the lethal means SARS, MERS and COVID 19.
But along with the health care issues, there have been legal implications of COVID 19 throughout the world. In the situation of quarantine and lockdown, there are legal issues that are still to be dealt with. And is the India ready to resolve issues in this pandemic situation. There are many implications like Force Majeure Clause in contract, Disaster Management Act, Court Proceedings etc.
What Is the Impact of COVID 19 On Worldwide Economy?
As stated by United Nations, worldwide economy would shrink up to 1% in 2020 due to Corona-virus pandemic. The pandemic is disrupting the global supply Chain And International Trade As All The Countries Have Closed National Borders For Imports And Exports Of Product. Also Stated By UN Department Of Economy And Social Affairs (DESA), That All Over Businesses Will Loose There Revenue, There Will Be Sharp Increase In Unemployment And Lastly There Would Be A Transformation From A Supply-Side Shock To Wider Demand-Side Shock For The Economy. It Is Very Evident Now That Global Economy Is Grinding To A Halt. There Is Fear That Global Economy Will Step Into Recession If The Virus Stays For A Long Time. IMF Has Estimated That The GDP For 2020 Is 1.6% Compared To Last Year’s GDP Of 2.9%.
Due To The Pandemic, OPEC Has Proposed To Curb Oil Output And Thus There Has Been A Fall On The Prices Of Oil With Small Decline On The Demand Of Fuel Is Also Expected In This Situation.
The Indian Market Has Also Been Badly Impacted Through This Virus. As Most Of The Components For Various Industries In India Was Supplied From China And Since The Pandemic The National Borders For Trade Has Been Shut Down Many Industries Are Affected By This. Some Of The Industries That Are Affected Are Pharmaceuticals, Automobile, Mobile Phone Industry, Pesticide Industries And Jewellery Making Industry Are Facing Loss.
Legal Implications of COVID 19
– Disaster Management Act
Indian government has declared the disease as notified “disaster” under the Disaster Management Act, but still an overarching law governing public healthcare is a glaring gap in India’s fight against the COVID-19 pandemic. Kashish Aneja, a global health lawyer associated with WHO, highlights four major gaps plaguing the Act. These relate to rights of health-care personnel, travel restrictions, privacy rights, and investments needed to meet the health-care challenge.
– Implications On Contract
Due to the pandemic, there has been a supply chain disruption Caused by COVID 19 Outbreak. It is very likely that the performance under many contracts will be delayed, interrupted or canceled. In this context, it is very important that we determine if COVID 19 will be considered as a Force Majeure.
In India, the Department of Expenditure, Procurement Policy Division, Ministry of Finance issued an Office Memorandum on February 19, 2020, in relation to the government’s ‘Manual for Procurement of Goods, 2017’, which serves as a guideline for procurement by the government. The Office Memorandum effectively states that the COVID-19 outbreak could be covered by a Force Majeure clause on the basis that it is a ‘natural calamity’, caveating that ‘due procedure’ should be followed by any government department seeking to invoke it.
Force Majeure is embodied under Section 32 and Section 56 of Indian Contract Act, 1872.The occurrence of a Force Majeure event protects a party from liability for its failure to perform a contractual obligation.
Some of the very vital aspect that has to be kept in mind before considering force majeure are:
· Outline of force majeure
· Reviewing of the force majeure clauses thoroughly.
· Imposition of duty of diligence under a contracts means reasonable diligence is important.
· To qualify for a force majeure, the event has to be unforeseeable or not reasonably foreseeable.
· Notice has to be provided to the other party to invoke a force majeure.
· It has to be decided by both the parties whether they want to keep the event on hold till the force majeure is resolved or cancel is forever.
· Lastly, the parties has to read the contract’s dispute resolution clause properly as in both the cases of both having or not having force majeure clause.
– Insolvency Of A Company
Due to this pandemic, companies are facing a rise in financial distress as they try to mitigate the financial impacts of supply chain issues along with lower customer demand. Those companies with higher debt levels are finding the existing credit lines at this time when they are needing to pay the supplier who were able to deliver on time while not receiving customer payments. Therefore, companies will seek for formal or informal protection from their creditors and in more distressed situations there will be increase in insolvency rate.
– Corporate Governance and Disclosures
Against the setting of the COVID-19 outbreak, it is important that the board of directors comprehend the extension and degree of their statutory and fiduciary duties. Directors are required to practice sensible consideration, ability and persistence, and to act to the greatest advantage of the organization.
Some of the matters the board of directors should look into are:
· Foremost thing the board should approach with the management team is to evaluate the business continuity risk. Mitigation of the risk involved is very important in this situation.
· Board has to ensure that management team has to put in place fast-action-plan. Both the management team and the board has to make this plan and has to properly execute it.
· Listed entities would need to ensure that if there is a material effect on the business or operations of the company like closure of an important manufacturing facility due to supply chain disruptions, the required intimation needs to be sent to the stock exchanges where the company’s shares are listed.
· The organization would need to painstakingly screen in the event that it is in consistence with different money related contracts under the acquiring archives and furthermore survey the need to change such terms with the loan specialists.
– Conferencing Of Court Proceedings
Every crisis brings in its wake, opportunities. COVID-19 can be leveraged to bring about greater use of technology in the legal system-from the apex court to the grassroots layers of the legal system. A limited experiment is being carried out in the Supreme Court and High Courts for introduction of technology to make access to the system easy and affordable to litigants. This will help inculcate technology into the legal system more easily than ever imagined. Also the budding lawyers are tech savvy and they will have knack of technology based proceedings. Larger allocation of outlay specifically for technology upgradation, which can reduce the pendency of cases drastically. But we also have to keep mind few more important things before going for technology based court hearings, like, the digital platforms should not be subject to hacking, cyber threats and manipulation by vested interests. There should be strong cyber security systems in place.
Due to the pandemic, in coming months India will be riddled with number of cases related to COVID 19, like manpower rationalization, closure of business units, disruption in supply chain and non-performance of contracts, etc. COVID 19 will be affecting the legal system all around the world and in coming years we will see some stringent laws related to pandemics. But with all these legal issues India laso has to review the colonial act – Epidemic Disease Act,1897. The Epidemic Diseases Act, 1897 was designed to put government machinery into action once there is a considerable threat of a dangerous epidemic disease and not as a code for establishing general public health systems.
Under the Indian Constitution, public health and sanitation are the responsibilities of the state and local governments while the union government manages port quarantine, inter-state migration and quarantine. Only about eight states and union territories in India have legislation for public health.
But the question that arises is whether this Act is capable enough to fight a Pandemic. The Epidemics Diseases Act does not balance the rights of individuals with the power of the State. The government can, however, still utilize learning from its own past as well as current practices to make effective regulations.
Prajna Priyadarshini is a student at KIIT School of Law.
The views of the author are personal only. (if any)
Source: Jus Weekly, May 20202, Issue 1