Disha Agarwal | ICFAI Hyderabad | 21st June 2020
Covid-19 has had a drastic impact on the legal sector of every country. In the wake of this pandemic, it becomes highly essential to modify the laws to suit the changes brought in by Covid-19. Huge number of pendency of cases, loss of livelihood, frustration/non-performance of contracts, cancellation of projects, unprecedented unemployment etc are few of the consequences of this pandemic. This article provides an analysis of the impact on few sectors of the law.
Role of technology:
Due to the outbreak of Covid-19, On 6th April 2020, a notification was passed by the Supreme Court setting out guidelines for the conduct of court proceedings virtually on important/urgent matters and subsequently various states passed necessary notifications abiding by the virtual court proceedings as directed by the Supreme Court. This situation has forced the Indian Courts to gradually make a paradigm shift from the traditional courts to the virtual mode of court proceedings. The guidelines passed by the Supreme Court includes awareness of access to technology, technology upgradation to facilitate the proceedings, participation of common people along with the parties involved. With the modifications made in the technology due consideration has also been given to protect the digital platforms from hacking, cybercrimes etc.
As the courts are only hearing important/urgent matters, limitation period in all the cases have been extended until any further notice by the Supreme Court. Due to the present circumstances, it will be hard for the litigation sector to recover from the quantity of delayed cases in the future as India already has a huge backlog of pending cases.
Mergers & Acquisitions:
The Covid-19 crisis has affected M&A transactions deeply. They are seeing a tough time in honouring agreements or putting them on hold. Cross- border transactions have also been severely affected. In this context, it is likely to review the material adverse effect (MAE) clauses in respect of transactions relating to mergers and acquisitions. The scope of MAE clauses is different according to the different type of transactions. MAE/MAC clauses typically state that any event, occurrence, fact, condition, change, development that had reasonable material adverse effect either individually or in aggregate, on the target company’s position affecting it financially, its assets, liabilities, intellectual property etc. Also, there is an inability to continue or honour present business agreements due to the material effect. Taking this as a defence many transactions will be put on hold by the party facilitating the merger or acquisition. Steps will be taken by the appropriate authorities governing the acquisition or merger by taking up cases through virtual means, getting approval from the board through remote e-voting etc. Considering that parties will not be able to fulfil all the formalities certain closing down requirements have to be relaxed. Therefore, it is important that necessary updates are maintained by the parties and the appropriate authorities of the impact of Covid-19 on their noted transactions and the market conditions respectively.
Competition Law:
In the wake of Covid-19 pandemic it becomes essential to analyse the market in terms of the provisions of Competition law. To analyse the impact of Covid-19 it is important to consider the concept of coordinated behaviour between the suppliers/competitors. The competitors may collaborate for legitimate reasons to fulfil the demand of the people. As lockdown was imposed for a period of 60 days and all the sectors were closed except outlets for essential commodities. It was seen that many few geographical areas were over-stocked while on the contrast few geographical areas faced shortage of supplies. However, in the interest of uninterrupted supply and access to consumers, coordinated behaviour though illegal per se under Competition law is essential during such emergency. Various countries have relaxed provisions under Competition law in order to facilitate proper distribution and meet demand effectively. The Australian Competition and Consumer Commission (ACCC) has granted temporary leave/permission to retailers to share data, stock/supplies in order to meet demand. The Federal Trade Commission and the U.S. Department of Justice Antitrust Division have issued guidelines facilitating collaborations in order to ensure health and safety of its citizens. The Indian Government has so far not passed any exemptions with respect to the application of Competition law. Such an exemption for an interim period will allow the competitors to collaborate for the purpose of meeting demand in respect of essential commodities, medical supplies, R&D to develop vaccines etc. It is also pertinent to note that such relaxations can lead to exploitation in the form of dominating practices, cartelisation etc. A great initiative that was taken up the Indian Government was by covering masks, sanitisers under the ambit of essential commodities and putting a cap on the maximum price. Therefore, strict set of guidelines, thresholds are to be set in order to regulate the market dynamics effectively.
Indian Contract & the Force Majeure clause:
The principle w.r.t Force Majeure clause is that the party who has an obligation to perform the contract is given exemption due to the occurrence of any event it is no longer under the control of the party and relives the party from performing it. It has an obligation to prove that it took all the reasonable steps to honour the commitment of the contract. Due to the impact of Covid-19 globally, commercial contracts through out the world has disrupted. Therefore, parties are taking the defence of FMC clause. The Ministry of Finance, Government of India clarified with respect to ‘Manual for Procurement of Goods, 2017’, and stated that due to the disruption of supply chain because of the spread of Covid-19 such a scenario will be covered under FMC clause and the doctrine of Force Majeure can be invoked in the bonafide interest. Similarly, the Ministry of New & Renewable Energy with respect to ‘solar project developers’ declared that contractual obligations disrupted due to Covid-19 will be covered under Force Majeure clause in order to provide financial security.
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