Force Majeure: COVID-19 will have a significant impact on project development markets, construction and infrastructure transactions, supply contracts, and a host of other commercial transactions. As a result, companies will be compelled to assess the costs and benefits of claiming force majeure relief. Force majeure is generally found when an event is (i) beyond the breaching party’s control; and (ii) is not reasonably foreseeable. For example, travel bans imposed by governments will impact the ability of skilled labor and professionals from other countries to complete work under the project development contracts. This will cause delays and create grounds for force majeure claims. Other issues, such as scheduled maintenance, especially if governments limit gatherings to no more than 10 people, could be grounds to claim force majeure. And what happens when a contract stipulates that a project suspension notice must be delivered by hand—and people are not permitted to leave their home or offices are closed?
Financing Transactions, Mergers and Acquisitions (M&A) and Material Adverse Effect: Navigating commercial, M&A and finance agreements during these times can and will be an extremely difficult and daunting task. Whether there are potential issues of force majeure (as discussed above), questions as to the occurrence of a Material Adverse Effect, issues relating to the impossibility of performance, issues relating to disclosures and announcements, or other issues, our multi-faceted and multi-jurisdictional team can mitigate the negative consequences of these complex matters.
Insurance: Covington’s insurance practice group has helped policyholders with losses arising from hurricanes (Katrina), terrorist attacks (September 11), industrial accidents and environmental damages (Deepwater Horizon and Exxon Valdez) and numerous other large losses, and we can be helpful in issues arising from the COVID-19 pandemic. As we have described in a recent alert on insurance best practices, for entities that are considering pursuing insurance claims related to COVID-19, it will be important to document timeframes for shutdowns, supply disruptions, as well as all lost income attributable to the pandemic.
Sourcing Supplies from China and Europe: Companies in Africa are naturally looking to other markets to source ventilators, surgical gowns, masks and other Personal Protective Equipment to respond to the pandemic. Our Food and Drug Regulatory practice and our offices in Shanghai and Beijing can be helpful in evaluating suppliers, their relevant certifications and putting in place commercial contracts to ensure the timely export of materials out of Asia. We can also be helpful in this area from our offices in Brussels, Frankfurt and London in respect of exports being made from the United Kingdom and continental Europe.
Interactions with Government: As governments attempt to blunt the pandemic’s public health and economic effects, many companies are frantically working to seek the help they believe they need to survive these trying times and to preserve their employees’ jobs. In addition, companies with products or services that could assist the ability of governments to respond to the crisis are considering ways to contract with government agencies. As a consequence, many companies are more deeply engaged with government officials than ever before, including by seeking financial loans, grants, contracts, product approvals, regulatory relief, or guidance on how to operate in these times. But the basic rules covering interactions with government—including ethics, bribery, and procurement fraud laws—all remain in place. Companies that cut compliance corners now may pay a price down the road. We also have a number of former diplomats in our ranks who have experience working with decision-makers at all levels of governments in our Global Problem Solving practice.
Lessons from Other Regions: As a global law firm head-quartered in Washington, D.C., we are closely tracking federal, state and regional developments in the United States that might impact our clients. We have put together our analysis of these developments in a Legal and Business Toolkit that can be accessed here. To the degree that there might be relevance for what companies are experiencing in Africa, we would be happy to share our experience working with clients in the U.S. and other jurisdictions.
The Next Pandemic: While organizations and governments may be currently overwhelmed responding to the COVID-19 crisis, they can seize opportunities to consider how they might best prepare themselves for the next pandemic, incorporating lessons from the current and previous pandemics. Lessons already evident from this pandemic are that social and economic disruption may be prolonged, medical interventions may not exist or not be available, and that decision makers may be held to account. A review of existing or new plans should also inform broader catastrophe planning and business continuity.
For further information on any of these topics or other questions, please reach out to Covington’s COVID-19 Task Force, COVID19@cov.com, Witney Schneidman, email@example.com, Ben Haley, firstname.lastname@example.org, Mike McLaren, email@example.com, or Mosa Mkhize, firstname.lastname@example.org.
This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.