Contract disputes
COVID-19, and the related government restrictions in many countries, has presented difficulties for commercial parties in complying with their contractual obligations – many suppliers have been unable to operate at their usual level, or at all, and customers have faced cash flow issues meaning they are unable to meet their payment and/or minimum spend obligations.
As commercial parties are unable to meet their contractual obligations, there will undoubtedly be a continued increase in the level of contractual disputes.
In addition, the contractual terms that have become relevant as a result of the pandemic (such as force majeure clauses, material adverse change provisions, and relief events) have been the subject of limited case law in the past. With parties increasingly seeking to rely on those provisions and limited guidance on how they are to apply it is likely that parties will have to turn to courts and tribunals to determine their disputes and provide future guidance.
Governments are currently trying to limit the plethora of cases likely to arise as a result of the pandemic, for example, through the non-statutory guidance applicable in England encouraging parties to act responsibly and fairly in managing their contractual relationships, and the legislation in Singapore temporarily protecting parties who are unable to perform their contractual obligations. However, those efforts will not be able to discourage or prevent parties from enforcing their rights indefinitely.
Insolvency
With companies facing cash flow issues and unable to make payments of debts, the number of insolvency actions has already increased. That is likely to continue as the full impact of the pandemic, and related restrictions, are felt upon the market.
In the UK, the Corporate Insolvency and Governance Bill (CIGB) has been published. As well as bringing into force permanent reforms to insolvency which had been previously delayed, the CIGB will temporarily suspend the provisions of the Insolvency Act relating to wrongful trading, introduce a moratorium on forfeiture of commercial leases for non-payment of rent, and void winding up petitions and winding up orders made between 27 April and 30 June 2020 (unless a petitioner can show that COVID-19 has not had a financial effect on the company or that the ground for winding up would have been satisfied anyway).
Although the temporary measures are intended to give companies time to recover after the restrictions are lifted, it is likely that when they expire many insolvency proceedings which have been on hold will be pursued.
Data breaches
The COVID-19 pandemic has caused many companies to quickly increase their technology capabilities to enable business to continue while customers, clients and employees are at home during lock-down. However, in many instances, companies were unable to take all the necessary steps to ensure compliance with the data protection regime. This has led to an array of issues and an increase in data breaches through unsecure and untested software and an increase in data-theft.
While the Information Commissioner’s Office (ICO) has indicated any steps taken by the regulator will be taken in an “empathetic and pragmatic way that reflects the impact of coronavirus”1, the ICO has made clear that data protection regulations still apply. Organisations are and will be required to take steps in the post-COVID era to ensure that issues that have not been addressed are rectified. In order to prevent future claims from employees, customers, and regulators, time should be invested by organisations now. In addition to training and implementing appropriate security measures, companies should be carrying out data mapping and running data processing impact assessments.
Although organisations may argue that COVID-19 required them to increase their technological reliance at unprecedented speed, there will be no excuses for data breaches in a post-pandemic world.
Tax disputes
In the wake of COVID-19, governments will likely look to aggressively collect more tax revenue to offset the financial support they’ve been providing to businesses and individuals during the crisis. This, in turn, will lead to a greater number of disputes as companies seek to resist government actions.
In addition, as businesses change the way they operate and adopt new business models there will likely be more disputes with tax authorities relating to the treatment of new transactions and business models. There may also be uncertainties around how certain existing transactions are treated from a tax perspective, which will lead to further disputes.
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