Disputes that will be the result of COVID-19
The restrictions connected with the COVID-19 pandemic will soon become a reason of many court disputes. Today, it is worth thinking about actions that will secure the company's position in the future dispute.
Our thoughts about the trend in future COVID-19 disputes
Although it has a highly subjective, we anticipate that:
1)
a large part of the disputes will end in renegotiating of the contractual terms - many contractors and creditors understand the seriousness of the situation and will not want to "kill" their potential future clients (all the more so that it may not be so easy to find new clients); in this case, sooner or later, the parties to the agreement will reach a compromise - whether by way of an annex to the agreement or settlement (including court settlement);
2)
in cases where the parties fail to reach agreement quickly - the disputes will mainly relate to liability for non-performance or improper performance of the contract, where evidence is very important - to show that
a. the non-performance of contractual obligations was actually caused by the coronavirus (an event beyond anyone’s control), moreover
b. the party has exercised due diligence to perform the contract,
3)
the disputes will therefore be lengthy and there will probably be a wave of similar litigation matters (an analogy to "currency options" litigation seems to be justified here),
4)
because the nature and scale of the problem is unprecedented, divergent rulings should be expected and it is impossible to indicate today the direction which courts will take - probably in practice, specific elements of a given factual state may have a lot of significance,
5)
some cases will be “resolved on their own” when one of the parties to the contract begins bankruptcy or restructuring proceedings,
6)
greater number of employee disputes should also be expected - as a potential consequence of employment restructuring, which many companies will be forced to do.
Our thoughts
1)
although we believe that a large part of the disputes will end without a formal court dispute, clients, conducting particularly important negotiations, should conduct them with the awareness of issues that may be important if the negotiations were not successful ("Who wants peace, let him prepare for war”),
2)
at this stage it is important to secure evidence for future litigation - it may be worth ensuring:
a. to preserve letters and other evidence of correspondence with the other party to the contract and / or entities on which the performance of the contract depended (e.g. correspondence with a Chinese supplier),
b. to preserve records of conversations and meetings - at least by sending an e-mail with a summary of the conversation / meeting and the arrangements made there,
c. to preserve correspondence with the other party to the contract, which will show that we have taken steps to avoid or limit the consequences of the pandemic on the given contract, as well as we exercised due diligence in attempting to perform it,
d. to prepare a professional analysis of the contractual situation from the business side (e.g. by preparing internal memo on the situation and causes of problems),
e. to arrange a reliable and credible valuation of expenses, costs and damages incurred as a result of a pandemic - in connection with the performance of the contract, which ultimately was performed improperly,
3)
already at this stage it is worth analyzing where the dispute would take place and what law would be applicable - this may have a considerable impact later, for example, on evidence proceedings as well as on the issue of the enforcement of a possible judgment in the case,
4)
in the next step, it is also worth considering the possible injunction order in the case - perhaps it will at least reduce damage the pandemic will bring under a given contract,
5)
remembering that these types of proceedings (regardless of whether they are conducted before the arbitration tribunal or before a common court) take a considerable period of time - it is worth analyzing a given dispute in the context of the restructuring or bankruptcy of the company - the parties to the disputed contract, which in the meantime may appear to be inevitable,
6)
in the case of employee disputes - it is worth to put more emphasis on planning and preparing in advance the procedure for the possible termination of employment contracts - the reason for most employee disputes is the mistakes that employers make at the stage of termination / termination of employment contracts.
Przemysław Wierzbicki
Leader of dispute resolution practice at KKLW Law Office
Barrister with almost 18 years of experience in litigation, restructuring advisor