Breathing Space : A Concept Note on the effect of the pandemic on commercial contracts
"The challenge we face is how to act with sufficient strength and speed to prevent the recession from morphing into a prolonged depression made deeper by a plethora of defaults leaving irreversible damage".
Concept Note 1
A concept note on the effect of the 2020 pandemic on commercial contracts
The Breathing Space Concept note arose out of a meeting on 7 April 2020 hosted by the British Institute of International and Comparative Law, attended by Lord Phillips of Worth Matravers, Lord Neuberger of Abbotsbury, Sir David Edward, Sir William Blair, Professor Spyros Maniatis, Professor Malik Dahlan and Keith Ruddock.
It was felt that in the emergency situation created by the COVID-19 pandemic, a universal challenge, a debate should happen as a matter of priority on the necessary contribution of the law to safeguard commercial activity, minimise disruption to supply chains, and ameliorate the adverse effects of a "plethora of defaults", by encouraging a legal environment which is conducive to optimism and a global recovery.
The group called for a 'Breathing Space' in commercial contract disputes arising from the Covid-19 pandemic. Their thinking was outlined in concept note 1
Concept Note 2
28 September 20:
Today we are publishing an updated version which reconsiders the issues against a more detailed comparative context.
Following the introduction of the initial concept note BIICL released Concept Note 2 in May 2020 it showed in detail which steps should be taken to minimise the risk of a deluge of disputes and to increase the prospect of constructive outcomes.
Concept Note 2 argues, among other things, that the best policy approach in the case of many contracts is for the law:
- To support negotiated solutions to make viable contracts blighted by the pandemic work;
- To bring contracts made unviable by the pandemic to an end in an equitable manner;
- Where negotiation fails, to encourage parties to undertake mediation or other alternative dispute resolution methods;
- Where court proceedings are needed and cannot be safely carried on in person, to encourage online hearings - these will have a much more important role in the future even when no longer necessary for health reasons, and will help to avoid a backlog of cases clogging up the system.
Concept Note 3 on the effect of the 2020 pandemic on commercial contracts
This Concept Note is a continuation of BIICL's "Breathing Space" series, which considers how the legal and business communities might respond to the COVID-19 pandemic in order to foster economic recovery. Concept Note 2 looked more closely at the private law response to the pandemic, specifically in the context of contractual disputes, and how existing legal principles may be applied in the context of COVID-19 related disputes, as well as how existing dispute resolution mechanisms may effectively be used to achieve negotiated solutions.
In Concept Note 3, we build on this theme and propose a set of practical guidelines which might be adopted to encourage a more conciliatory approach to contractual disputes that may arise, and which seek to avoid and/or minimise protracted legal disputes, without prejudicing or altering parties' legal rights. The 'Guidelines' set out how corporates and particularly those who are conscious of Environmental, Social and Governance (ESG) requirements and their reputations can manage legal disputes responsibly.
These are practical guidelines that could be followed by business' in the event that Covid-19 impact gives rise to disputes, both in terms of potentially avoiding traditional formal dispute resolution processes and using other dispute resolution methods. They also focus on how to conduct legal disputes most constructively if these prove unavoidable. The guidelines are deliberately framed so that they can be used in all jurisdictions and legal systems.
The guidelines have been drafted by Helen Dodds, formerly Global Head of Legal, Dispute Resolution at Standard Chartered Bank, Guy Pendell of CMS Cameron McKenna Nabarro Olswang and Mr Justice Adam Johnson of Herbert Smith Freehills and have had input from various BIICL senior members including Sir William Blair.
Read the transcript of Sir William Blair's remarks, Commercial Contracts and the Pandemic, delivered at the Joint Centre for Corporate and Commercial Law and Cambridge Private Law Centre Webinar on 17 November here.