Covid-19 (Temporary Measures) Act 2020: Restrictions on taking legal action between businesses

Covid-19 (Temporary Measures) Act 2020: Restrictions on taking legal action between businesses

This article is produced in consultation with Shaun Leong.

Shaun Leon, FCIArb
Shaun Leong, FCIArb, is a Partner with Eversheds Harry Elias who specializes in commercial disputes. He served as a Magistrate and Registrar of the Supreme Court of Singapore for five years, prior to joining the magic circle, and is ranked by as Singapore Business Review as Singapore’s most influential, youngest international arbitration specialist from a global firm. Shaun also sits as a Panel Arbitrator of premier Chinese and Indian arbitral institutions.

1) Under the COVID-19 (Temporary Measures) Act 2020 (“Covid-19 Act”),


Companies will be unable to take legal action for certain types of contracts against other companies for 6 months. Read on to discover how it can impact you.

To appreciate the effects of the COVID-19 Act, let’s imagine your friend has a business that operates at a rented office location.

Now, your friend has not paid the office rental because his business has stalled from cancelled orders in the wake of the COVID-19 circuit breaker.

The landlord will not be able to take legal action in the Singapore courts against your friend, who is under the protection of the COVID-19 Act.

Under this act, the landlord cannot evict your friend for missing the rental.

Your friend as a business owner could also get temporary protection against bankruptcy.

Not your situation? Explore other types of contracts that the COVID-19 Act covers.


photo credit: https://www.mlaw.gov.sg/covid19-relief/types-of-contract


2) What if businesses prefer an earlier resolution of their disputes?

a. Out of court settlement

Negotiate with the counterparty on a next best arrangement. Using the above example, this can include your friend owing the rental along with incurring late payment charges that are payable when the moratorium^ period is over.

 ^A moratorium period is a protection period where no legal action can be commenced in the Singapore courts for the time being.

b. Strategise their approach to settlement

During the 6 months that the COVID-19 Act is in place, the enforcement of certain contractual obligations for certain types of contracts are suspended.

However, companies may commence legal actions after the moratorium under the COVID-19 Act has been lifted.

Nevertheless, there are 3 ways businesses can still resolve their disputes:
i. Private negotiation between parties
ii. Mediation through a third party
iii. International arbitration if the involved parties are from different countries or where there is a cross border aspect to the dispute.
   earlier resolution disputes covid 19

3) How businesses can leverage on the Covid-19 Act 

a. For businesses that are at risk of getting sued:

 You could make use of these 6 months to find alternative ways to reach settlement eg, mediation, international arbitration. Parties may refer to the Covid-19 international arbitration protocol if they wish to consensually refer their disputes to international arbitration.

b. For businesses that are planning to take legal action against others:

Besides crying foul and threatening legal action, business owners could leverage on this crisis. This is especially true for cross-border disputes.

i. Commence legal action in a country where your opponent has assets. This is because where your legal action is successful, you would generally be able to enforce against your opponents’ assets to satisfy any outstanding damages owed to you.

ii. Commencing an application in a foreign country to freeze your opponents’ assets. This could place tactical pressure on your opponent that could be important in negotiation settings.

businesses leverage on Covid 19 act

4) How businesses can manage their risk during this time

Businesses can prepare themselves by setting aside manpower to respond to emergencies arising from COVID-19. This task force will be able to manage the company’s exposure to risk by doing the following.

a. Form a crisis committee
As news develop rapidly, the committee must be nimble to adapt to the changing landscape. The key people must have decision-making capacity, and operate on a consolidated system to navigate the business out of harm’s way.

b. Maintain a consistent messaging

It is important to have a consistent messaging for external stakeholders such as the media and regulators so as to mitigate the impact of the crisis. Likewise, having a consistent internal messaging could be equally significant (eg, to shareholders and sister companies). It just takes a single off-message in this current virtual climate for a small flame to become a major uncontrollable fire spreading globally.

c. Ready for fact-finding
The committee must be ready to respond to different scenarios, within the first 72 hours of an incident. It could be a breach of circuit breaker, a whistleblowing, key employees getting infected or the spread of fake news.

how businesses manage their risk during covid 19
Conclusion
The introduction of the COVID-19 Temporary Measures Act aims to buy time for businesses to respond to the crisis. It is in business owners’ best interest to protect themselves and manage the risk when operating under the Covid-19 Act. 

This article is produced in consultation with Shaun Leong.

Shaun Leon, FCIArb
Shaun Leong, FCIArb, is a Partner with Eversheds Harry Elias who specializes in commercial disputes. He served as a Magistrate and Registrar of the Supreme Court of Singapore for five years, prior to joining the magic circle, and is ranked by as Singapore Business Review as Singapore’s most influential, youngest international arbitration specialist from a global firm. Shaun also sits as a Panel Arbitrator of premier Chinese and Indian arbitral institutions.

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