Categorie: Corona

Update on state liability for damages in connection with emergency measures

Posted on by Gabriela Fuchsová

In attempt to slow down the spread of a disease COVID-19 the legislative activity of the government and respective ministries has become quite hasty and even confusing. Significant changes in emergency measures are being adopted on daily basis and every day brings new bans, precautions and exceptions from already existing exemptions.

On 23 March the government adopted resolutions Nos 279 and 280 to repeal certain measures adopted in order to slow down the spread of COVID-19, which were in effect since 6 March. The repealed measures include restrictions on the free movement in the Czech Republic, closing most of retail stores, services and catering facilities and closing of gambling ventures, casinos and other facilities, including indoor and outdoor sporting facilities.

With effect from 24 March the above-mentioned government measures were replaced with almost identical emergency measures adopted by the Ministry of Health under the Public Health Protection Act (previous government measures were adopted under the Crisis Management Act).

The public statements of government officials suggest that the different legislative procedure was chosen in order to avoid the state’s obligation to compensate entrepreneurs for damages occurred in connection with the prohibitions and restrictive measures that have been imposed.

Are the injured persons entitled to claim compensation from the state?

We believe that they clearly are, regardless of the legislative framework of adopted emergency measures. There are several arguments supporting this conclusion. The main argument arises out of one of the key constitutional principles of a democratic rule of law:

• The right to own property can be limited only for compensation.

We would like to mention the previous court decisions regarding the state of emergency. In connection with the measures adopted after the 2002 floods, Czech courts declared that:

• If the measures are adopted during and related to the state of emergency, the state liability for damages remains unaffected, notwithstanding which authority adopted such measures.

Concerning the state’s liability for the damages caused under the Crisis Act, the courts have concluded that the state is liable for the damages in case that the following conditions are met:

  1. mergency measure was adopted and executed;
  2. damage occurred; and
  3. there is a causal link between adopted emergency measure and the occurrence of damage.

Which entities are directly affected?

Mainly the entities which – due to the emergency measures – cannot fully operate and suffer significant losses, such as:

• Organizers of sport, cultural and similar events;
• Operators of fitness and wellness facilities;
• Operators of indoor and outdoor sporting facilities;
• Store owners;
• Providers of catering and dining services.

Scope of compensations

In general, damage includes both actual damage (damnum emergens) and lost profit (lucrum cessans). The actual damage comprises not only of a loss or damage to a property (e.g. expired food or unusable goods), but also the costs incurred as a result of the emergency measures or the costs of avoiding damage, costs of damages calculation or remedying them. This applies providing that the expenses incurred necessarily and effectively. The state can only be exempted from its responsibility if it is proved, that the damage was inflected by the injured party itself. In order to claim damages incurred in connection with the emergency measures the casual link has to be proved by the injured party as well as the amount of suffered damage.

In our opinion an efficient solution of state liability for damages should include compensation for loss of income suffered by the entrepreneurs as a result of the measures adopted.

What to do next?

We advise to gather and maintain detailed evidence and documentation to support possible future claims against the state.

At the moment government officials are declaring that the state is not supposed to pay any compensation for damages resulting from the adopted emergency measures.

Regardless whether the government policy remains unchanged, the claim for damages against the state has to be raised within 6 months after becoming aware of the damages. Should the state fail to pay the damages, the claim must be brought before the court. It is quite possible that the issue of state liability for the damages will by ultimately decided by the Constitutional Court.

We believe that the compensatory measures recently adopted by the government are not sufficient. More often than not they don’t aid the subjects who suffered the most from the adopted measures. And if these subjects will be forced to cease their business activities, it will constitute a major economic burden for the entire society recovering of which will last considerably longer than the consequences of COVID-19 epidemic itself.

Our law firm keeps monitoring newly adopted measures connected to the COVID-19 epidemic and continuously evaluates their impact on rights and obligations of the clients. We are available to provide details about the current situation and answer any questions you may have.

Fulfilment of contractual obligations and possible consequences

Posted on by Jessica Zenz-Spitzweg

The exceptional circumstances caused by the declaration of the state of emergency as a result of the COVID-19 pandemic have opened up the possibility of applying force majeure and rebus sic stantibus clauses to contractual relations. Being the force majeure the option most easily accepted by the Spanish courts, the implementation of said solutions must fulfil certain requirements based on the good faith of the contracting parties and on the reduction of the damage.

  1. Introduction

Since on 11 March 2020 the World Health Organization declared COVID-19 as an international pandemic, a high uncertainty has arisen in the frame of commercial and civil contracting. This situation became aggravated in Spain as a result of Royal Decree 463/2020, of 14 March, declaring the state of emergency for the management of the health crisis caused by the COVID-19 (the „Royal Decree„),being one of the consequences the appearance of situations that make it impossible (or significantly difficult) to comply with the contractual obligations and which, contrary to the administrative and judicial deadlines, have not been suspended.

This legal note is intended to provide an initial overview of situations arising from the state of emergency and other measures adopted at both national and international level.

In this sense, our starting point is the mandatory nature of contractual obligations or pacta sunt servanda and, secondly, the review of mechanisms for contractual flexibility provided for in our legal system, in order to finalize with an extract of the general principles to be applied.

  1. Contractual obligations: pacta sunt servanda

From the beginning of these lines it should be noted that the general rule is that contracts have the force of law between the parties and bind the contracting partners in all aspects, a principle not modified, annulled or suspended either by the Royal Decree or by the other rules approved in the following weeks.

Spanish case law has traditionally interpreted broadly the application of this general principle in two ways: (i) first, in the event that a specific mechanism is provided for by the contract in question, this will be of preferential application (i.e., force majeure clauses) and (ii) the parties must make their best efforts to fulfil the contractual obligations.

Therefore, in case of exceptional situations that challenge the performance of contractual obligations, our legal system does not provide for automatic mechanisms of contractual modification, suspension or termination and, in view of the specific fact, the first thing to be checked is whether the relevant agreement contains a specific clause regulating the exceptional situation and, otherwise, whether it is possible to comply with the obligations, even with greater effort than usual.

  1. Mechanisms of contractual flexibility: force majeure and rebus sic stantibus

Notwithstanding the above, it is clear that we face an absolutely anomalous and unforeseen situation that leads us to wonder should the declaration of a state of emergency or the pandemic itself would constitute cases of force majeure because of their capacity to affect and alter the fulfilment of contractual commitments.

Here below are some considerations to keep in mind to determine whether we are faced with a situation for which contractual flexibility could be envisaged:

A) Force majeure

The concept of force majeure is specifically provided for by our Civil Code in article 1105: „(…) no one shall be liable for events which could not have been foreseen, or which, if foreseen, were unavoidable„.

As a result of the not very concise wording of said provision, the jurisprudence of the Supreme Court has established the following requirements for the application of force majeure: (i) unforeseeable or unavoidable event in the strict sense; that is to say, it does not apply if it is a remote event. For example, the Supreme Court does not grant this character to economic crises because it considers that they are cyclical in nature; (ii) event without a causal link to the parties, that is to say, that they have not intervened in any way; and (iii) that as a consequence of the event the parties cannot comply with their obligations by any means.

The question is therefore whether the above requirements are met in the case of COVID-19 and the restrictive measures taken in response to the exceptional situation arisen. A priori, without prejudice to the necessary analysis of the specific circumstances of each case, the situation arising from COVID-19 could lead to the application of force majeure.

Example: Contract for the provision of catering services. Requirements (i) and (ii) are met by the very nature of a global pandemic and (iii) also due to the state of emergency that prevents the holding of any type of event.

Thus, once the requirements have been met and being no longer possible to continue with the fulfilment of the contractual obligations, the order of action should be as follows:

  • Check if the contract in question contains a force majeure clause. If so, this will apply on a preferential basis to any other mechanism.
  • In the event that the contract does not contain a force majeure clause, the legal provisions must be complied with. In this regard, Article 1. 105 of the Civil Code mentioned above, stating that „no one shall be liable for events which could not have been foreseen or which, if foreseen, were unavoidable” and Article 1184 of the same legal text, providing that „the debtor shall be released from his obligations when performance is legally or physically impossible”, indicate the guideline to be followed: no one shall be liable if he cannot fulfil the obligations of a contract because he is in front of „events which could not have been foreseen or were unavoidable”, unless the law or the contract itself so provides.
    However, we deem necessary to note that the degree of foresight required with respect to the occurrence of events outside the normal course of events is not the same for a person considered from a personal or individual capacity as it is for a person from a business or professional perspective.
  • To act in good faith in the evaluation of the impossibility and, in the event of persistence, to communicate individually to the other contracting party the impossibility of carrying out the compliance, and evaluating (with diligence, transparency and good faith) the option to agree a modification of the conditions increasing terms, relaxing demands, reviewing alternative channels of compliance, etc.
  • In any case, the Royal Decree and other legislation in force must be complied with, being not offered alternatives in conflict with them.
  • Ultimately in response to the question whether force majeure is applicable to all types of contracts, it is important to highlight that our Supreme Court understands that non-compliance with a pure pecuniary obligation (i.e. regular payment of a price or amount in money) is not susceptible to be covered by force majeure assumption as the event of impossibility does not occur, since money always exists as such, which must be taken into account in those cases where the party’s obligation is exclusively pecuniary.

B) Rebus sic stantibus

Unlike the previous case, the rebus sic stantibus clause is a figure of doctrinal and jurisprudential construction, applicable when there is an imbalance or an excessive burden for any of the parties in the performance of the contract and which allows the terms of the contract to be unilaterally modified or even the call for its termination.

This remedy, undoubtedly radical in its effects and of very restricted application by the Spanish courts, is based on such an extreme alteration of the contractual circumstances that the obligations are de facto unbalanced for one of the parties.

Without prejudice to the subjective component that may impregnate the assessment of contractual decompensation, the case law emerged to date allows us to extract the following requirements: (i) the occurrence of a significant alteration with respect to the circumstances existing at the time the contract was signed and that said alteration responds to unforeseeable circumstances, which cannot by any means be attributed to one of the parties; (ii) that as a consequence of the foregoing a situation of major imbalance between the contracting parties occurs; and (iii) that it is impossible to act differently and in a less burdensome manner.

However, the jurisprudence is very restrictive to accept the rebus sic stantibus doctrine as a consequence of the radical nature of its consequences, which could lead to the unilateral termination of the contractual relationship. For this reason, Spanish courts do not admit that there is a simple imbalance between the parties, but require that such an imbalance put one of the parties in an extreme situation.

It is also important to note that this doctrine does not apply when the contract already provides, explicitly or implicitly, for mechanisms to assume risk, or when such assumption is of the essence of the relevant contract.

Example: Spanish courts considered that some financial products offered to consumers caused extreme imbalance at the height of the economic crisis in 2008.

  1. Conclusions

The exceptional circumstances caused by the COVID-19 and the impossibility or difficulty of continuing to fulfil contractual obligations have opened up the possibility of applying force majeure or rebus sic stantibus clauses.

However, after the above analysis, we can draw the following conclusions:

  • The declaration of the state of emergency and the approval of the regulations developing it do not imply the suspension or cancellation of contracts in force, which retain their full validity and effectiveness.
  • Notwithstanding this statement, there are sufficient circumstances to be able to allege force majeure.
  • Given the force of law of contracts between the parties, the first step should always be the complete analysis of the force majeure clause that the parties would have agreed to in the negotiation of the agreement.
  • In the absence of contractual provision, the Civil Code expressly indicates that no one shall be liable for the performance of contractual obligations the observance of which has become impossible because of „events that could not have been foreseen or were unavoidable”.
  • The rebus sic stantibus clause has a very restrictive application and will come into force not for situations of impossibility of compliance but for those of major imbalance for one of the parties, as a consequence of the occurrence of unforeseeable circumstances.
  • The duty of diligence and good faith is maintained in any case and, as a general rule, any action must tend to moderate and minimize damages.

Corporate resolutions vs. coronavirus restrictions. Updated as of April 01, 2020.

Posted on by Lisa Fortmüller

Actions aimed at quelling the spread of COVID-19, such as border closures, flight cancellations and severe restrictions on gatherings and travel, may have a massive impact on business operations, especially when it comes to resolutions adopted by shareholders, management boards and supervisory boards.

If resolutions cannot be passed by the shareholders meeting or management board, it may have a significant adverse impact on the company’s daily business.

In order to address the needs of shareholders and members of corporate bodies, we wish to offer some insight on solutions that may help mitigate the impact of the state of epidemic, as well as an overview of the amendments to the Commercial Companies Code, introduced as part of the so-called “Anti-Crisis Shield” on the basis of the Act of March 31, 2020, amending the Act on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them, as well as amending selected other acts (the “Act”).

Supervisory Board

It might be easier for a supervisory board to operate if the following options are applied:
– passing written resolutions by circulation:
– voting on resolutions through electronic means;
– proxy voting (in writing).

Now, when the Act has been passed and come into force, adoption of resolutions in the manners listed above is possible with no need to define the basis for such action in the company’s articles of association (unless the articles of association expressly exclude such options).

Moreover, as a result of amendments to the Commercial Companies Code, introduced by the Act, resolutions on matters put on the agenda during a supervisory board meeting, election of the supervisory board president or deputy president, appointment of a management board member, and dismissal or suspension of such individuals can also be adopted by circulation or through electronic means.

Management Board

The Act has also modified the provisions of the Commercial Companies Code as regards adoption of resolutions by management boards. It is now allowed to:
– attend meetings through electronic means (unless the company’s articles of association expressly exclude this option);
– pass resolutions by circulation or through electronic means (unless the company’s articles of association expressly exclude this option);
– vote in writing by delegating the voting power to another management board member (unless the company’s articles of association expressly exclude this option).

Meetings of shareholders

Shareholders meetings may only be held in Poland, and should take place in the city/town where the company’s registered office is situated, or at a different location, as specified in the company’s articles of association or agreed upon by all shareholders.

Shareholders who are unable to attend a meeting in person may use the following solutions:

1) Proxy voting

A shareholder may appoint a proxy who will attend the meeting and vote on the shareholder’s behalf (unless applicable laws or the articles of association impose any restrictions in that respect).
A proxy should be granted in writing or will otherwise be null and void.
The company’s management board members and employees cannot attend a shareholders meeting in the capacity of a proxy.

2) Voting in writing (in a private limited liability company)

In the case of a private limited liability company, shareholders can pass resolutions in writing, i.e. by:
– expressing a written consent for a resolution to be adopted; or
– holding a vote on a resolution in writing, following all shareholders’ approval of such voting procedure.

A vote in writing may be held irrespective of the place where the shareholders are when casting a vote.

Not all resolutions may be adopted by circulation, though. Voting in writing is not an option in case voting secrecy is required (e.g. in case of a resolution on dismissal of a management board member or other HR issues).

3) Attending a meeting through electronic means

A shareholder may attend a shareholders meeting through electronic means (videoconference, teleconference, etc.).
The Act allows the possibility to participate in a meeting through electronic means, regardless of whether the articles of association so permit (unless the articles of association expressly exclude such option).

The following conditions apply to attendance through electronic means:
– a decision on attendance through electronic means is made by the person convening the meeting;
– the shareholders meeting notice needs to include information about the manner of participation, speaking, performance of voting rights and raising objections to the adopted resolution(s);
– real-time two-way communication needs to be ensured during the meeting, while all participants who are outside its venue must be able to speak at the meeting;
– shareholders can also participate and vote through proxies, exercising their voting rights before or during the meeting.

Detailed rules for participation through electronic means should be specified in bylaws adopted by the supervisory board (or in case there is no supervisory board in a private limited liability company – in bylaws adopted in a resolution of shareholders (which can be passed outside of a shareholders meeting).

However, this format of a shareholders meeting is not equivalent a virtual meeting. This means that the following rules apply to meetings held through electronic means:
– a meeting should be held in a specific venue in Poland, determined in accordance with the Commercial Companies Code and the company’s articles of association;
– the chairperson and the clerk (or a notary public, if the notarial form is required for minutes from the meeting) must be present at the meeting, while the remaining participants are allowed to communicate electronically;
– written minutes from the meeting are required.

In case of public companies, the Act also implements the obligation to ensure a real-time broadcast of a shareholders meeting.

Moreover, the Act includes provisions governing the manner in which companies receive, register and count electronic votes. These provisions will come into effect as of September 03, 2020, though.

4) Using the IT system

Shareholders may make decisions using the model resolution available in the IT system but this option is only available to private limited liability companies established through the IT system.

There is no need to hold a formal shareholders meeting in order to pass this type of resolution, with the only condition for its valid adoption being that all the shareholders should vote by submitting a relevant statement through the IT system.

The above-mentioned voting statements must be confirmed with an electronic signature, a qualified electronic signature or a trusted signature.

Extension of deadline for preparation and approval of financial statements in relation to CVOID-19

The Act includes solutions aimed at helping companies to meet the deadline to hold an annual shareholders meeting, at which shareholders approve the company’s financial statements for the previous financial year.

The Act includes a provision according to which the minister competent to handle public finance affairs would be authorized to issue a regulation entitling him/her to postpone the deadlines for the approval of financial statements in case of the state of epidemic threat or the state of epidemic, considering the need to ensure proper performance of obligations in that respect.

On March 2020, the Minister of Health issued a regulation specifying new deadlines for fulfillment of recordkeeping obligations, as well as obligations related to preparation, approval and publication of financial statements or information, and their submission with competent registries, units or authorities (Dz.U. / Journal of Laws of 2020, item 570), on the basis of which the deadline has been extended for preparation of separate financial statements, directors’ reports and consolidated financial documents of capital groups.

Pursuant to the regulation:
– the deadline to prepare annual financial statements, directors’ report, and consolidated financial statements / report on capital group operations has been extended by 3 months, i.e. they should be made within 6 months of the balance sheet date (if the financial year ends on December 31, 2019, the deadline is June 30, 2020);
– the deadline to approve annual financial statements, directors’ report, and consolidated financial statements / report on capital group operations has been extended by 3 months, i.e. they should be approved within 9 months of the balance sheet date (if the financial year ends on December 31, 2019, the deadline is September 30, 2020);
In case of entities that are supervised by the Polish Financial Supervision Authority, the aforesaid dates have been extended by 2 months.

The extended deadlines apply to obligations concerning the financial year ended after September 29, 2019, yet no later than April 30, 2020, whose due date did not fall before March 31, 2020.

The regulation came into force as of March 31, 2020.

Remuneration policy

According to the Act, in case of declaration of the state of epidemic threat or the state of epidemic, the minister competent to handle the affairs of financial institutions is authorized to issue a regulation specifying a different deadline for adoption of a resolution on remuneration policy for management and supervisory board’s members, as discussed in article 36 section 1 of the Act of October 16, 2019 on Amendments to the Act on Public Offerings and Conditions for Introduction of Financial Instruments into Organized Trading, and on Public Companies, and Amendments to Selected Other Acts.

In case such regulation is issued, a shareholders meeting’s resolution on remuneration policy should be adopted within the deadline specified in the regulation.

Many of the solutions outlined above may significantly facilitate and expedite the operations of corporate bodies and daily business, both during the epidemic and afterwards.

In light of the existing and planned regulations, now might be a good time to insert relevant provisions into the company’s constitutional documents, adopt the required policies or grant relevant proxies.

Our corporate law team is ready to address any questions or doubts you might have. Please feel free to contact us.

Update | Rights for debtors to refuse performance in the Corona crisis – creditors can take countermeasures

Posted on by Lisa Fortmüller

What is at issue here?

The German Bundestag has passed the act to mitigate the effects of the Covid 19 pandemic. Among other things, this provides for rights of refusal of performance for consumers and small enterprises (fewer than 10 employees and annual turnover totalling a maximum of EUR 2 million). These are to be given the right to refuse the fulfilment of the obligation to satisfy a claim in connection with a continuing obligation until 30 June 2020 if the obligation cannot be fulfilled as a result of the corona crisis or if the fulfilment leads to a threat to the existence of the debtor. The prerequisite is that the relevant contract was concluded before 8 March 2020. Generally, all agreements with continuing obligations are affected, except for rental, lease, loan and employment contracts.

What is to be done from the creditor’s perspective?

In practice, especially medium and large enterprises that have entered into continuing obligations with consumers and micro-enterprises before 8 March 2020 must therefore be prepared for defaults. Since the act does not differentiate according to which side the debtor is on, both payment defaults and default on performance can threaten companies. From the creditor’s perspective, there are now two options. Either the creditor accepts this fact and trusts that the debtor will fulfil its obligations properly. Or the creditor prefers an active approach. For example, it may make sense to renegotiate contracts that were concluded before 8 March 2020. In this way, one can evade the scope of application of the draft law. Especially as long as the debtor is still well off, he might be accept such renegotiation. After all, the parties are only renegotiating what both parties currently want.

Businesses no longer required to seek KNF’s approval for offering memorandum in case of “rolling” offerings – relief for businesses amid coronavirus epidemic

Posted on by Lisa Fortmüller

In the Supervisory Impulses Package for the Security and Growth of the Capital Market, the Polish Financial Supervision Authority (KNF) announced relief for businesses regarding (among others) the offering documents processing. As promised, the “Anti-Crisis Shield,” adopted on March 31, 2020, amends applicable regulations regarding the obligation to submit an offering memorandum to KNF in the case of the so-called “rolling” offerings.

Based on the revision of the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies of July 29, 2005 (Dz. U. / Journal of Laws of 2005 no. 184, item 1539, as amended) (the “Public Offering Act”), which was enacted on November 30, 2019, a public offering of securities addressed to fewer than 150 natural or legal persons per a Member State, qualified investors excluded, in the case of which the number of persons to whom it is addressed plus the number of persons to whom such public offerings of the same type of securities were made over the preceding 12 months exceeds 149, requires the publication of an offering memorandum, which needs KNF’s approval.

In other words, offerings made over a 12-month period are added together. If the number of addressees of such offerings exceeds 149, an offering memorandum regarding the offering, approved by KNF, must be published (the Public Offering Act provides for one exception – an offering addressed exclusively to the holders of same-type securities originating from the same issuer or to entities which received offerings of purchasing the issuer’s bonds as part of debt conversion following a purchase of other bonds of the same issuer created earlier.

In accordance with the act amending the Act on Special Solutions Related to Prevention and Combating of COVID-19, Other Infectious Diseases and Crisis Situations Arising from them as well as amending selected other acts (Dz. U. / Journal of Laws of 2020, item 568), if the state of epidemic threat or the state of epidemic is announced, offering memoranda regarding this type of public offerings will not require KNF’s approval. The requirement is to be suspended until the state of epidemic threat or the state of epidemic is cancelled and a month thereafter.

This will significantly facilitate and expedite the procedure faced by the issuers seeking to raise capital by way of several offerings addressed to fewer than 150 persons (qualified investors excluded).

If you have any questions, do not hesitate to contact us.

Is your business in the Czech Republic adversely affected by coronavirus or respective preventive measures?

Posted on by Gabriela Fuchsová

Then, the Czech support loan program “COVID II” is just for you. The acceptance of applications for the program commences already tomorrow, on 2 April 2020. We will be happy to assist you with their express processing!

The Ministry of Industry and Trade of the Czech Republic has announced another supporting loan program “COVID II”. It is designed to support small and medium enterprises and self-employed persons operating within the Czech Republic. Its purpose is to eliminate the impact of the coronavirus on the entrepreneurs in the Czech Republic. The program will enable access to operational financing. It is intended for those whose economic activities are restricted due to the coronavirus or related preventive measures.

The program has several advantages. The Czech-Moravian Guarantee and Development Bank will provide guarantee for commercial loans up to 80 % of the principal. It will also provide financial contributions to cover interests up to CZK 1 million. The guarantee period will be up to 3 years, free of charge. The maximum amount of the loan can be up to CZK 15 million.

Entrepreneurs can finance the costs of wages and energy, payments of rent, payments of supplier-customer invoices, pre-financing of receivables, or acquisition of material, inventory and other small assets.

The program is financed from the EU structural funds within the Operational Program Enterprise and Innovation for Competitiveness. Therefore, it is not intended for the implementation of projects in the capital city of Prague. However, applicants based in Prague may also apply if the funded establishment is located outside the capital city.

The program starts already on 2 April 2020. It can be expected that the funds from the program will run out rapidly. Therefore, we recommend to entrepreneurs to take fast action.

We offer you a legal assistance and representation in the express processing of documents and applications for receiving a guarantee for commercial loans. We offer our services for a special price of EUR 800 plus 0.25% from the amount of actually provided facility line (excluding VAT). We will be also pleased to provide you with legal assistance and representation in arranging commercial loans with the relevant banks. The price of these services is negotiated individually depending on the specific circumstances of the credit case.

If case of any questions regarding COVID II loan program, please do not hesitate to contact us. We will be happy to assist you.

Amendments to GEO no. 30/2020 on technical unemployment measures during the state of emergency

Posted on by Ana Pandelea

On 30th March the Romanian Government published in the Romanian Official Gazette GEO no. 32/2020 that amends, among others, the initial regulation on technical unemployment measures adopted in the context of COVID-19 epidemic by GEO no. 30/2020.

The amendments brought by GEO no. 32/2020 have the declared purpose of simplifying the conditions and formalities that need to be fulfilled in order for the employers to get the technical unemployment indemnity granted by the Romanian state.

1. Changes to the conditions that must be fulfilled by the employers in order to benefit from the indemnity granted by the state

Who shall benefit from the technical unemployment indemnity granted by the Romanian state? The employees of the employers that temporarily reduce or discontinue their activity, partially or totally, due to the effects of the COVID-19 epidemic, during the state of emergency, subject to an affidavit given by the employer in this respect.

The following documents are no longer required:

  1. the certificate of emergency situations is no longer required for the employers deciding the total or partial discontinuity of their activities based on decisions issued by the competent public authorities as per the applicable legislation;
  2. the affidavit from which to result the decrease of incomes of minimum 25% in comparison to the average incomes afferent to the period January – February 2020 and the lack of financial capacity to pay all employees, for the employers that are reducing their activities due to the effects of COVID-19 epidemic and that are not having the financial capacity to pay all the salaries to their employees.

In addition, all the employees of the employers mentioned at point 2 above shall benefit from the indemnity granted by the state (contrary to the previous regulation that capped the granting of indemnity only to maximum 75% of the employees having individual employment agreements active at the date of entering into force of the initial GEO no. 30/2020).

2. Clarifications on the amount of the indemnity granted to the employees for technical unemployment

In case the employer’s budget for personnel expenses allows it, the indemnity for technical unemployment granted by the Romanian state may be supplemented by the employer with amounts representing the difference up to minimum of 75% of the base salary corresponding to the occupied job, as per the general rule provided under art. 53 para. (1) of the Romanian Labour Code.

3. Additional provisions regarding the employees having concluded multiple individual employment agreements

In case an employee has multiple individual employment agreements concluded and at least one full-time agreement is active during the state of emergency, the employee shall not benefit from the indemnity granted by the Romanian state.

In case an employee has multiple individual employment agreements concluded and all of them are suspended due to the state of emergency, the employee shall benefit from the indemnity afferent to the individual employment agreement providing the most advantageous salary rights.

4. Changes in the procedural aspects for benefiting from the indemnity

The employers shall electronically submit with the competent employment agencies (i) a request signed and dated by the legal representative of the employer  together with an affidavit and (ii) the list of persons who shall benefit from the indemnity assumed by the legal representative of the employer, as per a template that will further be adopted by order of the ministry of labour and social protection and published in the Official Gazette.

The employers shall be held responsible for the correctness and the truthfulness of the data contained by such documents.

Please note that the templates provided under the initial GEO no. 30/2020 are no longer valid.

5. New terms for payment of indemnity by the state / employer

The term for payment of the indemnity by the Romanian state to the employer was modified to 15 days as of submission of documents by the employer (the initial term provided under the previous regulation was of 30 days as of such submission of documents).

The employer shall pay the indemnity to the employees within 3 days as of receiving the amounts from the state.

6. Provisions related to other beneficiaries of the indemnity granted by the state

Other professionals (such as individual companies or self-employed persons) and the persons having concluded individual labour agreements (Romanian: conventii individuale de munca) under Law no. 1/2005 on the management and functioning of cooperatives, that are discontinuing the activity due to the effects of the COVID-19 epidemic, during the state of emergency, shall benefit from a monthly indemnity amounting of 75% of the medium gross salary provided by Law no. 6/2020 on the state social security budget for 2020, based on an affidavit.

The natural persons obtaining incomes exclusively from copyrights and neighboring right, as regulated under Law 8/1996 on copyright and neighboring rights, that are discontinuing the activity due to the effects of the COVID-19 epidemic, during the state of emergency, shall benefit from a monthly indemnity amounting of 75% of the medium gross salary provided by Law no. 6/2020 on the state social security budget for 2020, on the basis of the documents requested by the National Agency for Payments and Social Inspection.

Also, GEO no. 32/2020 provides certain rules regarding sportsmen.

Amendments to public procurement law in view of “Anti-Crisis Shield” – UPDATE

Posted on by Lisa Fortmüller


As part of the so-called “Anti-Crisis Shield,” March 31 saw the Polish President sign an act (the “Act”) that contains modifications related to the public procurement law (“PPL”). Below you will find a summary of changes to the previous version of the “Anti-Crisis Shield” (the “Draft”) that we discussed in our alert of March 24, 2020.

  1. PRECLUSION OF THE APPLICATION OF PPL ACT – article 6 section 1 of the Act

    The Act does not introduce any modifications to the Draft. PPL will not apply to orders for services or deliveries which are necessary to prevent COVID-19 if the disease is highly likely to spread in a fast and uncontrollable manner, or if required for the purposes of public health protection. Please note that pursuant to article 46c of the Human Infections and Infectious Diseases Prevention Act of December 05, 2008, “public procurement regulations do not apply to orders for services, deliveries or construction works, issued with the aim of preventing or combating the epidemic within the territory covered by the state of epidemic threat or the state of epidemic.”
    This provision specifies a clearly broader range of orders that are exempt from the application of PPL during the epidemic since it includes construction works.

  2. AMENDMENTS TO PUBLIC CONTRACTS

    2.1. It is possible to modify an agreement executed under PPL in terms of deadlines and remuneration. Also, the Act precludes liability of contracting authorities (incl. those that award utility contracts) for refraining from determination and pursuit of contractor’s financial obligations (e.g. contractual penalties), or for introduction of amendments to agreements – upon the conditions specified in the Act. Both these solutions have remained unchanged from the Draft.

    2.2. The deadline has been extended for a party to a public contract to respond to the other party’s notification about the impact (whether actual or potential) of circumstances related to COVID-19 on proper performance of the agreement. The current term is 14 days from receipt of a notification, along with justification (and evidence, i.e. relevant statements or documents). The previous deadline was 7 days.

    2.3. On a side note, it is worth adding that in order to introduce amendments to a public contract, it is necessary for parties to reach an understanding and enter into an amending annex. This means that claims of one of the parties do not automatically lead to amendments. The same is true for changes that could be related to the current COVID-19 threat.

    2.4. It has been expressly stated that COVID-19 circumstances discussed in the Act cannot independently serve as the basis to exercise the contractual right of rescission.

  3. CONTRACTING AUTHORITIES’ LIABILITY

    There have been no changes to the provisions involving the preclusion of contracting authorities’ liability, arising from the Liability for Breach of Public Finance Discipline Act, for amendments to a public contract and refraining from determination and pursuit of claims arising from non-performance or improper performance as a result of circumstances related to COVID-19.

  4. NATIONAL APPEALS CHAMBER AND INSPECTIONS

    There are new regulations related to the National Appeals Chamber.

    4.1. During the state of epidemic, declared due to COVID-19, the National Appeals Chamber does not hold any sessions and hearings
    in the presence of parties and participants to the appeal procedure.

    4.2. The Act does not interrupt or suspend the period for submission of an appeal, meaning that contractors that want to use legal protection measures will be bound by the dates specified in PPL. In case of an appeal, the standard term will be 5 or 10 days of knowledge about the basis for appeal submission.
    We recommend filing appeals online, using a qualified electronic signature.

    4.3. The Act does not suspend the inspections of prior public contracts co-financed by the European Union, which are conducted by the President of the Public Procurement Office with respect to contracts whose value is equal to or higher than: (i) EUR 20,000,000 for construction works; and (ii) EUR 10,000,000 for deliveries and services. A post-inspection report should be delivered within 14 days of receipt of all relevant documents (or 30 days – in case of a particularly complex inspection).

We reiterate all our recommendations for contractors and contracting authorities, related to the current situation, as provided in the previous alert .

We are ready to assist you in evaluating your particular situation. Please feel free to contact us any time by email or telephone.

Impact of the COVID-19 Epidemic on Dispute Resolution

Posted on by Gabriela Fuchsová

The epidemic of COVID-19 disease and the government emergency measures are already affecting the functioning of courts in the Czech Republic. In recent weeks, the courts have adjourned most of the hearings that did not have to be scheduled without delay. [1] An adjournment is likely in particular in proceedings involving a large number of participants or witnesses. In practice, this means that under the current conditions, it is not possible to expect an early ruling, especially of those disputes before courts that require an oral hearing being scheduled.

Current restrictions on the functioning of courts. In addition, courts have reduced physical contacts with members of the public, which is manifested, for example, by limitations to the possibility to inspect the court file or the complete closure of the court building. Inspection of the file can only be carried out at most courts in urgent cases and urgency must be demonstrated in each case. The buildings of the Constitutional Court and of the Supreme Court are completely closed to visitors. In addition, some courts have introduced special makeshift mailboxes to minimize contact with visitors and have stopped accepting cash at the court cash register.

No rapid improvement in scheduling hearings in individual proceedings can be expected after the state of emergency is over. The courts are preparing for a sudden increase in the bailiff and insolvency agenda. It is also likely that there will be an increase in claims (in particular against the state for compensation of damages caused by the emergency measures, as described in another newsletter issued by our law firm). The expected outcome will be an increased caseload of Czech courts and ensuing extension of the duration of court proceedings in the Czech Republic. However, this can be a serious problem in a situation where at least one of the parties to the dispute has an interest in a quick decision of the matter.

Be careful, all deadlines apply regardless of emergency! Nevertheless, the chairmen of regional courts have asked the Ministry of Justice to set rules governing the suspension and discontinuation of time limits during the period of the state of emergency (possibly even retroactively as of the date of the declaration of the state of emergency).[2] The chairmen of regional courts propose the suspension and discontinuation of time limits in all areas of law, namely the following time limits:

  • substantive time limits (e.g. statutes of limitation);
  • procedural time limits (e.g. time limits for replying to a motion);
  • time limits for issuing a decision or another measure.

The Czech Bar Association also supported the request of the chairmen of regional courts.[3] However, the standpoint of the Ministry of Justice to this request is not yet known.

What is the alternative to court proceedings during the state of emergency? Also under state of emergency, there is an alternative to the standard legal process, namely online dispute resolution (also referred to as „ODR”). Generally, the advantage of online dispute resolution is the speed of such proceedings [4] and lower costs associated with raising a claim.[5] Currently, an undisputed advantage is that online dispute resolution does not require parties to the dispute to meet in person. Thus, unlike usual court proceedings, online dispute resolution can also take place under the current extraordinary conditions.

What are the forms of online dispute resolution? On the Internet, disputes can be resolved both in arbitration and by mediation. Procedures for online dispute resolution may be determined by the parties to a certain extent, in an arbitration agreement or in a mediation contract. In the case of proceedings before the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic, the Rules for Online Arbitration issued by the Arbitration Court shall apply. [6]

When it is suitable to choose online dispute resolution? Online dispute resolution can be recommended especially for disputes between entrepreneurs. As mentioned above, online dispute resolution is particularly useful in cases where the dispute needs to be decided quickly and it is not suitable to wait for an end to the state of emergency. Additionally, online dispute resolution is also possible in disputes among entrepreneurs and consumers, which can however only be initiated by the consumer in certain cases. [7]

How can we help you? Our law firm has extensive experience in representing clients in alternative dispute resolution. Our team of attorneys-at-law also includes (i) mediators registered in the list of mediators maintained by the Ministry of Justice and (ii) arbitrators registered in the list of arbitrators maintained by the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic. If you wish, we will be pleased to assist you in the above alternative ways of online dispute resolution.

_____________________________________________________________________________

[1] Courts postpone hearings to May, measure temperature of visitors or don’t allow members of the public to enter their buildings [online]. Česká justice [cit. March 25, 2020]. Available at: https://www.ceska-justice.cz/2020/03/soudy-odrocuji-jednani-na-kveten-meri-lidem-teplotu-nebo-do-budov-nepousti-verejnost/
[2] Procedural deadlines need to be urgently addressed, the chairmen agree. They are also preparing for quarantine [online]. Česká justice [cit. March 25, 2020]. Available at: https://www.ceska-justice.cz/2020/03/lhuty-rizeni-se-musi-urychlene-resit-shodli-se-predsedove-pripravuji-se-i-karantenu/
[3] The Czech Bar Association supports the suggestion of the chairmen of the courts for a speedy resolution regarding the time limits [online]. Česká justice [cit. March 27, 2020]. Available at: https://www.ceska-justice.cz/2020/03/cak-podporila-vyzvu-predsedu-soudu-k-urychlenemu-reseni-lhut-rizeni/
[4] For on-line arbitration, the whole procedure usually takes a maximum of 35 days – see JANKŮ, Martin. Rozhodčí řízení před Rozhodčím soudem při HK ČR a AK ČR [online]. Bulletin advokacie [cit. March 25, 2020]. Available at: http://www.bulletin-advokacie.cz/rozhodci-rizeni-pred-rozhodcim-soudem-pri-hk-cr-a-ak-cr?browser=mobi
[5] Eg. the fee for on-line arbitration before the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic is 3% of value of the object of the dispute. – cf. https://www.soud.cz/sazebniky#online-spory
[6] Available here: https://www.soud.cz/rady/zvlastni-dodatek-radu-pro-rozhodci-rizeni-online-2017
[7] cf. Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online consumer dispute resolution. Available here: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32013R0524

Personal data processing during the COVID-19 outbreak

Posted on by Gabriela Fuchsová

The European Data Protection Board (the “Board”) has issued a statement on personal data processing in association with the outbreak of the COVID-19 infection (the “statement”). In its statement, the Board has stated that the fight against the infection is most certainly in the interests of all humankind, but that administrators and processors must still adhere to the fundamental data processing principles set out in the General Data Protection Regulation (the “GDPR”) and secure adequate protection of all the personal data of the data subjects even in these exceptional times.

The Board’s statement also deals with the processing of personal data associated with the infection on the part of the public health authorities and employers, amongst other things. According to the Board, GDPR also covers exceptional situations and it enables processing which is in line with national law. In the case of employers, the Board has stated that the processing of any such data may be necessary for compliance with employer’s legal obligations associated with securing health and safety in the workplace. The statement also draws attention to the possibility of processing so-called sensitive personal data (which includes data on an individual’s state of health) in cases where the processing is necessary for reasons of public interest in the area of public health or for the protection of the vital interests of the data subject.

However, the Board calls upon employers to exercise restraint when processing sensitive personal data. It has especially emphasised the principles of proportionality and data minimisation. According to the Board, the employer may only process any sensitive personal data, if it is obliged to do so according to national law or if the national law enables it to do so. The Board has also appealed to the principle of integrity and confidentiality, whereby employers should not provide more information than is actually necessary in a specific case (for example, not providing the identity of any infected employees to the other employees when adopting protective measures, unless it is absolutely necessary to do so).

The Office for Personal Data Protection (the “Office”) has also issued statements on the processing of the health data of employees by employers in association with COVID-19 infections on its website. It has essentially permitted said personal health data processing with reference to the legal obligation of employers to provide a safe working environment and working conditions which are conducive to good health by means of the suitable organisation of occupational health and safety practices and measures aimed at preventing any risks. It is because GDPR enables the processing of sensitive personal data, if it is necessary for the purposes of carrying out the obligations of the controller in the field of employment. At the same time, however, the Office recommends proceeding in cooperation with the public health authorities. Like the Board, the Office has also stated that, if an employer informs the other employees of a potential risk (for example, that there is an infected person in the workplace) within the framework of the performance of its obligations, said employer should only provide this information about a specific individual at the extent which is necessary for the protection of health and always so that the dignity and integrity of the person in question is not impugned.

The Board’s statement further resolves the use of mobile location data to determine the positions of individuals by the governments of the member states for the purpose of monitoring, controlling or mitigating the spread of the infection. According to the Board, the public authorities should attempt to process any location data anonymously (i.e. process data aggregated in a way that individuals cannot be re identified). Each member state should adopt the appropriate legislation to process any non anonymised data. In this regard, we hereby state that so-called tracing has been made possible in the Czech Republic by Government Resolution no. 250 dated 18th March 2020 in association with the subsequent exceptional measures of the Ministry of Health dated 19th March 2020.

Based on these decisions, the Ministry of Health or the authorised regional hygiene stations can request mobile telephone operators to provide data on the movements of infected individuals based on the location data acquired from their mobile phones. The individual in question must give explicit consent for this to happen.

If you have any questions pertaining to personal data processing connected with the COVID-19 infection in your company, please do not hesitate to contact our specialists Matyáš Kužela or Tomáš Zwinger. They will be happy to help you set-up the data processing so that it is fully in line with GDPR.