India is gearing up to revive the new normal as world’s largest lockdown goes through a staggered approach as far relaxations are concerned. The legal fraternity at large is equally booted up to combat with the legal and regulatory environment India is clutched into. While there are an all-new set of compliances, notifications being issued by Center and State Governments, what also needs to be looked at is how best can law be perused to tackle the challenges businesses are facing. Lex Witness reached out to a mixed bag of veterans from the in-house and external counsel space to understand more. Have an interesting read through.
The current scenario is a temporary phase and we are sure to get out of the same at the earliest. Since, most of the companies are using technology and also guided by the techsavy in-house and external consultants I do not see any major challenges. Most of the legal and regulatory compliances are now done online. We should now start using more technology in our legal field.
All sectors of the economy are now invoking the force majeure clause and in the absence of a clear and defined legal position on this, the in-house counsel has to deal with multiple such notices by various stake holders arising under various contracts. I am sure all the in-house counsels will resolve such notices based on the facts of each such notice and the joint action of the commercial team responsible for the contracts under which such notices are issued.
Several advisories/circulars/notices (with modifications from time to time) are being issued by the Central Government and State Government/s. One need to thoroughly examine these and be guided by the advisory/circular/notice which is applicable to the company and if need be take the advice of the labour law consultants and communicate their views to the management accordingly. Law and humanity are inseparable and go hand in hand, however, it is best left to the judgment of the senior management to take a final decision pertaining to any employee related issue as it would have financial implications and it also reflects the company policy.
If there is one topic which is exceedingly debated and discussed across the world in the legal fraternity it is – ‘force majeure’ and more so in India the applicability of Section 56 of Indian Contract Act, 1872 is also being discussed, debated and researched from many angles. The applicability of ‘force majeure’ to the current scenario has to be decided based on each contract as there cannot be a common inference for all contracts across all sectors of the economy be it domestic or global.
I do not see any major change in the role of external counsel post Covid19. However, at this stage the external counsel’s advice to their clients should be more practical and realistic and should not be based on interpretations or legal theories which would later saddle the company with undesirable monetary or legal liability.
The rapid outbreak of the COVID19 pandemic and the lockdowns imposed by the government has made it crucial for the media & entertainment industry to adopt a holistic approach without disturbing the practice of social distancing. The key factor would be digitizing all key functions of a business such as execution of documents, internal approvals, regulatory filings, client meetings etc. Businesses who had already begun the process of digitizing are reaping the benefits of their foresight and businesses who have resisted digitization are now being forced to adapt. It is heartening to note that many courts have also begun hearings over video conferencing which in my opinion is the way to go in the future.
The main challenge for an in-house counsel is to ensure that business goes on as usual despite the complications thrown up by the lockdown. In the context of a music label this would require ensuring that all contracts are executed on time including backend agreements with lyricists, composers, singers and musicians. The lockdown has also provided a unique opportunity to take a macro view of the business to identify potential licensing streams on account of the increasing online consumption of content.
In India, most agreements/contracts with a continuous obligation generally contain a force majeure clause. Keeping in mind the disruption of business and other related activities caused due to COVID19, the Government of India by Office Memorandum No. F/18/4/2020 – PPD issued on 19 February 2020 has qualified the outbreak of COVID19 as a natural calamity/force majeure event. The Indian Courts usually adopt a conservative view with respect to the interpretation of a force majeure clause. In other words, unless a particular event clearly falls within the scope and the ambit of an event of force majeure as provided under an agreement/contract, the courts may not accept such an event as a trigger for the consequences of an event of force majeure. However, in a contract/agreement with no force majeure clause the Doctrine of Frustration as provided under Section 56 of the Indian Contract Act 1882, will have to be invoked. It will be interesting to note how such clauses play out in the context of film music acquisition agreements as film production has ground to a halt. Force majeure clauses will also play a role in licensing agreements where the licensee’s exploitation of content has been affected on account of the lockdown.
I expect my external counsel to embrace the new reality post lockdown and hit the ground running when it comes to filing and prosecuting matters before virtual courts. While courts today are hearing only the most urgent matters, going forward it will be imperative for external counsel to have regular infringement and contractual matters listed and heard by the virtual courts while also briefing senior counsel. It will be an interesting experience to say the least.
“Technology enables us to track natural calamities, and gives us some advance warning to put in place a business continuity plan, or even a human continuity plan. While the current pandemic took us all by surprise, we were able to embrace social distancing, thanks to our corresponding technological proximity. At home, young and old caught up on daily events over on video calls, while in business, we replaced committee meetings, review meetings, water cooler chats and elevator talks with Video Conferences. I learnt that we don’t have to be in the same room to be on the same page.
For the legal industry, technology has been at the forefront of service delivery, with focus on finding digital solutions to serve our internal and external customers. Digital solutions which strive to achieve efficiency and simplicity. This pandemic brought this line item in our goal-sheets right to the top. In the next few months, we can expect to see several disruptive lawtech initiatives covering processes and people making a quick transition from conference rooms to on-ground implementation. This situation is a great reminder to shred legacy processes, reduce unnecessary inefficiencies and improve productivity, and embrace the new and collaborate in order to achieve higher level of efficiencies.
It has been very gratifying to see the government, and various authorities, innovate to enable digital execution of documents, electronic payment of stamp duty, and many such initiatives
I personally had the opportunity to be part of a high court hearing conducted over video conferencing. It worked seamlessly. Through technology, we could communicate between the business and legal teams, AoR and the arguing counsels. With inputs flowing in in real-time to the counsels, and images of senior counsels standing in their living rooms to plead for the entire duration of the hearing, it was evident that the screens before us didn’t compromise the essence of the hearing.
The lockdown is the least of our problems. It is when WFH is no longer a reality and we seek to return to the “new normal” that we will realise how much has changed. The challenge for an in-house counsel remains the same – at least in the broad description – to effectively handle business expectations. In the changed world, this would entail a combination of;
As a law firm, we see this situation as an opportunity to cement relationships and work more closely with existing clients, to tide over issues thrown at us in the AC (After Covid) world.
The Global Pandemic seems to have brought about a digital transition in the day-to-day activities and there is a paradigm shift in the pattern of conducting business.
Considering many corporate entities are functioning in a restricted manner, their main focus should be to ensure that all the pending contractual deals are fully executed. This can ensure continuity of business as and when the lockdown opens.
Transactional lawyers would agree that the main challenge of in-house counsel is to ensure that the contracts are conscientiously drafted to capture the intent of the Parties and neither party gets an opportunity to wriggle out of its obligations.
Vide Order dated 29th March 2020, though the Ministry of Home Affairs have directed that all employers shall make payment of the wages to the workers without any deduction for the period for which the establishment is under lockdown, however I am of the opinion that in accordance with the existing legal framework it would be prudent to speak to respective employees and take their consent, in the larger interest of the organization.
Additionally, in-house lawyers can help in laying down Standards of Practises in line with the exiting government notifications, to ensure that the companies are conducting business within the legal framework.
As the globe is battling against Covid-19, the legal fraternity especially the transactional lawyers in corporate set up have scaled up to the multifarious challenges faced by them for end-to-end closure of deals.
Let us accept this fact that this is a first of kind of a situation wherein transactional lawyers are not just making sure that the Force Majeure clause clearly spells out the natural catastrophe but also with an hawkeye scrupulously and with lucidity cover “Practical FM period”, “Right to Invoke the Force Majeure”, “Suspension”, “Roles of Parties during FM Period”, “termination”, “effect of termination”, in order to ensure that neither Party is able to frustrate the intent of contracting Party to conduct business with right spirit. I am of the opinion that the Party having “balance of convenience” should be the deciding party.
The external counsel are expected to gear up in terms of advising their existing clients on the notifications and advisories issued by the Government from time to time, which impacts the business and that would enable the companies to take an informed decision.
COVID-19 was declared a pandemic by the United Health Organization on March 11 2020. The general counsel’s and his team highly sort after people during these difficult times as they have a significant challenge to keep their factories and offices compliant all times with the currently updated notifications.
This repository has been devised to ensure easier access and simplified categorization of information to help businesses undertake informed decisions. Following are some of the noteworthy attributes to help you maximize your takeaways from this repository:
To help all the legal teams across the length and breadth of India, we at UnComplycate have created a comprehensive repository of all COVID-19 notifications issued by Central and State governments till date – this can be accessed at http://www.uncomplycate. com/covid19/.
The unprecedented pandemic has a multi-facet impact upon the world that has led to the nation-wide lockdown. In such a situation, vis a vis the corporate world, the spotlight will be on the in-house legal counsels of every organisation. Their challenges will range from re-negotiation of various forms of commercial real estate contracts to ongoing M&A deals to supply agreements or drafting of the work from home policies for the employees to the protection of the confidential data of the organisation while the employees are working from home. Based on the current scenario, it is certain that they will have to face the issues pertaining to the restructuring of the salaries of the employees to be paid during this pandemic. Further, the changing regulatory norms throw big challenges upon the in-house teams as they have to ensure cognizance of the regulatory changes. In such a situation, it is imperative for in-house counsels to perform triage.
The important factor that has to be taken into consideration before any organisation initiates litigation proceedings is the language of the contract executed between the parties. The parties to the contract are reviewing their contracts so as to seek some relief by invoking force majeure or by taking resort to section 56 of the Indian Contract Act. For instance, if they are going for litigation under force majeure clause then they should ascertain that whether such a clause includes pandemic or epidemic or any other relief. Further, in the realm of M&A, one of the clauses which is close to force majeure clause is the material adverse effect. The corporates should certain that whether the material adverse effect clause provides the remedial measures such as revaluation of the company or termination of the agreement. Further, corporates can be hopeful for favourable orders as the current trends show that the Indian Judiciary is providing dispensation to distress companies during the COVID-19 times.
Corporates, before initiating any litigation, must conduct a check or discuss with their lawyers to detect the genuineness of claims and must avoid unnecessary litigation at any cost while strategizing. With regard to ongoing/ pending litigations, corporates and their in-house counsels must be prepared with all the necessary documentation which they might require to present or file before the courts vis-à-vis the matter. This will encourage speedy proceedings.
Responding to legal and regulatory requirements should be the key business continuity plan of India Inc. All companies must perform a risk assessment with the help of their lawyers to ascertain what kind of material disclosures they are required to make before various regulators in order to be compliant with laws at all times. Further, this is the best time to take a stock of all pending/ongoing litigation matters and prioritise them based upon the severity. Furthermore, it is also the best time to analyse if the present situation can help in resolving certain matters amicably.
The best practices that in-house counsels should opt for in the post COVID-19 situation depend upon the approach they are following now. Inhouse counsels and their teams should constantly share knowledge and keep themselves abreast of the changing regulatory norms. This will help them to keep their productivity high during the COVID-19 phase and post that as well. Further, the in-house counsel team should be ready with the identification of risk areas and a plan to implement the same. This will ensure speedy implementation once we come out of the lockdown phase.
The pandemic COVID-19 and lockdown order issued by the Govt. of India by exercising power under the Disaster Management Act, 2005 has caused unprecedented disruption and great hardship to the business, which has also posed challenges for an in-house counsel on compliance front as well as on the litigation side. The task of in-house counsel has increased manifold’s, they have to ensure compliance of all legal obligations in a quick, efficient and cost-effective manner and to take lead role in providing complete, accurate and timely legal advice along with possible course of action in the contractual disputes. It’s time to carry out legal audit of all pending litigation to iron out the possibility of amicable resolution because once the Courts reopen nothing substantial is going to happen in old matter. The present situation also warrants in house counsel to review all the existing contracts to safeguard the interest of the business and also tailored the future contract in a fashion to cover the situation like present one. It’s time for in house counsel review privacy policy for the employee’s required to work from home, the insurance policy to cover the loss on account of business interruption and safety/risk involve at work place.
The unforeseen COVID-19 pandemic has severely impacted contractual obligation either by making performance difficult or impossible and on account of that there will increase in commercial litigations involving tenancy dispute, supply chain contract, import, export, cancellation of event, procurement contract, infrastructure related contract, leave & License etc. The parties may delay and/or seek to avoid performance of their contractual obligations and/or terminate contracts, by invoking force majeure by alleging that the COVID-19 has legitimately prevented them from performing their part of obligations. The parties may also use the present situation as an excuse to wriggle out from the contractual obligation because of some commercial difficulty. However, COVID -19 is unlikely to give a valid force majeure defenses under every contract. It will depend on a facts, circumstances, legal analysis and construction of the contract to find out whether pandemic COVID-19 is covered under force majeure clause or not. It will be ‘your interpretation’ vs. ‘my interpretation’.
If a contract does not contemplate the occurrence of an event that renders the performance of the contract impossible in that circumstances party may invoke doctrine of frustration.
In the context of merger & acquisition and financial agreement the parties may take plea of ‘Material Adverse Change’ or ‘Material Adverse Effect’ on account of COVID -19, which depend upon construction of the specific clause in the contract.
In the present scenario while facing the contractual dispute one should access the impact of COVID-19 on the business & performance of contractual obligations, a force majeure event immediately intimated to other party by way of notice along with future course of action, all possible steps required to be taken to mitigate the effect of non-performance, one should try to negotiate if there is possibility of performance, the beneficiary must restore the advantage/benefit obtained under the contract before the occurrence of event and assess legal risk and remedies in terms of dispute resolution clause of the contract.
Corporate should develop a good litigation hygiene, by directing all the stake holder of the business to keep all the documents in digital form in consultation with in house legal team and where there are chances of any dispute all the communication be issued after getting it vetted from legal department so that all the legal requirement get fulfilled. Corporate should trained all stake holder of the business to prepare them for virtual court hearing and conference with the counsel/ Sr. counsel and to meet out the future exigency if required. It’s time to carry out legal audit of all pending litigation to iron out the possibility of amicable resolution because once the Courts reopen nothing substantial is going to happen in old matter.
The India Inc under the supervision of in-house legal team review all the contract which got delayed, abounded, breached or not fulfilled and ensure that all the correspondences exchanged related to the said contract with the parties fulfill all the legal requirement. A check list be prepared under the supervision of the legal team for all compliances to be made in time line manner under COVID-19 and on account present business disruption. That on account of recent trend of work from home India Inc. reframe the Privacy Policy for the employee and also informs the client about the same. That on account of the business interruption caused due to COVID-19, lockdown and risk there is need of review insurance policy to have the maximum coverage.
It’s time to bear more pain for lesser pain in the future. Due to pandemic in all possibility the physical interaction with client is not possible to the extent which used to happen earlier and therefore, it’s time to prepare for virtual meeting and conference. It’s time to switch over to technology and to re-skill & re-tool adequately and properly to integrate and link all information of process owner/ stake holder, harmonize procedure by using digital platform. Counsel should try to make system to proceed with digitization of all cases pending before different courts and keep themselves updated with e-filing/ virtual hearing procedure because once the lockdown is lifted nothing is going to normalize immediately and on & off lockdown will be imposed. By the passage of time the litigation as well as compliances related works are bound to increase, they must be vigilant to grab it by keeping themselves updated about the law and its impact on the business of the client.
The Novel Coronavirus (COVID-19) has affected almost every country in the world and India is no exception. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. To control the spread, the Indian government has imposed a mandatory countrywide lockdown. The current efforts of the Indian government to contain the COVID-19 pandemic have been fruitful so far. However, there are fundamental challenges in areas of disaster management and health infrastructure.
The most widely used law regarding pandemics in India was enacted during British rule. The Epidemic Diseases Act, 1897 has been enforced for COVID-19 but has outdated scope to handle emergencies of this scale and complexity. The parliament and law makers should utilise this opportunity to discuss and pass necessary laws without delay to empower the state and central governments to take necessary actions to curtail the pandemic.
The human and economic toll of the outbreak has already eclipsed other major crises in recent memory and has changed the world fundamentally. With nations in lockdown to protect their people and businesses on hold, the wheels of economic growth have been brought to a halt. The business community is currently faced with unforeseen financial, manpower, demand, supply and litigation risks, in addition to the other challenges it faces from the coronavirus pandemic. Many industries like hotels, airlines, travel, entertainment, retail & manufacturing in non-essential goods/services segment, auto, construction continue to be worst affected.
Among other issues, the crisis is compromising the ability of parties to perform contracts. The unfolding situation is implicating previously seldom-used contractual excuses in a variety of commercial contexts. Many employees continue to work from home and businesses have adopted technology, developed alternate processes for continuity and some have also taken other aggressive measures to contain cost and preserve their existence. These disparate benchmarks continue to create challenges for courts, institutions, executive and administration who are assessing the proper response to an evolving situation and only time will tell us how they resolve them. But like everything else, this too shall pass. And when it is gone, the countries with proper plans will take a lead. We have to make sure we are ready for the “new normal” post- coronavirus.
There are many steps that we can take now to make sure when the lockdown is lifted, our systems are ready for economic growth. If we can do scenario planning, as a country, we will win. Lifting the lockdown will be not be an easy process. It is a bumpy road ahead but if we can plan for it in advance and tackle major issues, we will be on the right path towards rebuilding India.
There are several issues that an inhouse counsel would have to deal with in the current scenario. However, two of the biggest challenges that they will have to face could possibly be Contractual Issues and Managing the legal and compliances for the company.
Companies would now need to review existing contracts where COVID-19 has or will impact performance. Some of the possible issues that might get into litigation could possibly be issues related to force majeure, impossibility or impracticality of performance, or frustration of purpose as a defense to non-performance. The solution for these issues would highly depend on the courts’ interpretation of the evidence provided by the parties and the legal merits of each given case.
For corporate houses, this period can serve as the best time to undertake a review of the status of the litigation matters, legal compliances etc which were required to be made by them so that they identify the loop-holes and rectify them upon cessation of the lockdown.
India Inc. is intensely examining the legal landscape due to the COVID-19 situation. One of the possible priorities for India Inc. will be to look for more cost-effective solutions in the legal and regulatory domain.
The key approach for us currently is ‘responsiveness’. We are trying to identify the legal issues that our clients may face, analyzing the situation strategically and thoughtfully and are accordingly providing timely solutions. Use of technology in the legal profession is also something that will increase and Firms will need to reinvent themselves technologically and get the necessary ISO and Data Security certifications to give clients a sense of security about their data.
www.grandmasters.in | 8 Years & Counting
www.rcls.in | 8 Years & Counting
www.itlegalsummit.com | 8 Years & Counting
www.bfls.in | 8 Years & Counting
www.maels.in | 8 Years & Counting
www.plcs.co.in | 8 Years & Counting
Copyright © 2020 Lex Witness - India's 1st Magazine on Legal & Corporate Affairs Rights of Admission Reserved
