Coronavirus: companies being 'pragmatic', not jumping straight to litigation

Out-Law News | 20 Mar 2020 | 10:37 am | 2 min. read

Companies are pausing before enforcing some contractual rights in favour of a collaborative, pragmatic approach to issues caused by coronavirus, officially Covid-19, an expert has told the Brain Food For General Counsel podcast. 

Clare Francis of Pinsent Masons, the law firm behind Out-Law, is a commercial law expert who is advising businesses on their response to the crisis. She said that companies are not rushing to strictly enforce every contractual right they have in response to coronavirus problems.

"We are seeing businesses taking a pragmatic view of the situation," she said. "We are seeing businesses work together in order to help resolve the issues they face and keep everyone going."

"For example we have seen some businesses decide they could serve legal notices but they don't want to do so because there is the longer term relationship between them and their customer and they want to be seen to support that customer where they can," said Francis. "Those softer considerations are vitally important at this stage, there's a longer term view than just dealing with the emergency knee-jerk reaction of the disruption to businesses.

Francis said that most companies are prioritising staffing and supply chain issues, as without these elements in place no business activity can continue. But she said that most companies in the UK would already have a plan they can rely on when it comes to prioritising and taking action.

"One thing we have seen GCs turning to to help with prioritisation is their Brexit plans," she said. "Many of the issues with coronavirus are very similar: where am I going to get my labour from? Do I have labour shortages? How is my supply chain affected, and how can I move goods and services in an effective manner? Looking at their Brexit plans they have done some of that prioritisation and worked out where the biggest impact on their company may well be."

Douglas Alexander, a senior fellow at Harvard Kennedy School, former UK minister and an advisor to Pinsent Masons, said that the public policy response to the crisis would have consequences that nobody, not even those taking the decisions, will be able to foresee.

"This Covid-19 virus is going to change not just the way we work but the way a lot of our society and our economy is organised," he said. "I was in the British cabinet from 2005 until 2010 so I was with Gordon Brown as he led the British government's response to the global financial crisis."

"I would say hand on heart as someone who was in the cabinet at that time none of us fully appreciated the extent to which the post-crisis world will be fundamentally different to the pre-crisis world and I have to say that is my sense in relation to the crisis that we're in the earliest days of at this stage," said Alexander.

He said that if the financial crisis challenged governments to be the banker of last resort, and that this crisis will challenge governments to be the insurer of last resort.

Francis said that pandemics and force majeure clauses would probably be given much more attention in future contracts.

"It's not something the vast majority of contracts anticipate – even if they refer to a pandemic it was probably included without envisaging a pandemic of this scale or with the type of government intervention we've seen," she said.

Francis and Alexander were speaking to a new monthly podcast produced by Pinsent Masons which will guide general counsel and heads of legal through major commercial issues