The coronavirus pandemic and the subsequent restrictions put in place to control the spread of the virus, have caused a sudden and unprecedented financial shock to businesses in all sectors of the economy.
The full impact of the crisis will be revealed over the coming months and years, but it is clear that there are enormous challenges ahead.
While most are treading cautiously for now, as the economy unfurls from an unusual spring hibernation, there is likely to be an increase in commercial disputes and commercial litigation in many sectors.
Now that the lockdown is beginning to ease, businesses across Shropshire, Herefordshire and North Wales are considering how to get the wheels of business turning again.
In doing so, they must confront a wide range of issues. From employees coming out of furlough to operating in line with new health and safety requirements; there will be many questions to answer.
Businesses will need to re-assess their finances, the markets in which they operate, their customers and their ways of working.
‘The Great Pause’ has interrupted countless commercial agreements. Project time frames have changed, supply chains have been fragmented and contractual obligations have been un-fulfilled.
As businesses attempt to get operations back on track, many will find new obstacles in their paths.
Whatever difficulties your business is experiencing, our specialist Commercial Dispute Solicitors are experts at helping clients navigate the challenges whilst minimising the impact on your business.
You may have fallen into a dispute as a direct result of the coronavirus outbreak, or the issue may have begun prior to it and you’ve delayed taking further action until it’s all over. Whatever the circumstances are, we’re here to help you reach a positive outcome.
Companies are finding ways to return to work at different rates. Many will struggle to balance the equation of bank rolling a pre-crisis sized workforce with reduced operational capacities and lower revenue.
An increase in the number of ‘breach of contract’ disputes is therefore likely.
The Commercial Litigation Solicitors and Commercial Disputes team at Lanyon Bowdler are fully operational as we continue to help business clients meet the challenges they face.
We are available for online and telephone appointments. If you feel there are problems on the horizon, we encourage you to get in touch to discuss your concerns.
Faced with a very uncertain future, businesses and advisers are looking closely at commercial contracts to explore ways to mitigate immediate risks and minimise their exposure going forward.
Those able to reach resolutions efficiently, avoiding damaging lawsuits, will benefit from minimising their expenditure on litigation at a time when finances are already under serious pressure. Lanyon Bowdler is an award-winning Corporate & Commercial Law firm based in Shropshire, Herefordshire and North Wales.
Our Commercial Disputes & Litigation Solicitors are renowned in their field of specialism and are recognised by The Legal 500.
We can provide your business with both the commercial and legal acumen to find positive solutions where others may fail. We’ll always seek to find a resolution through negotiation and mediation first, but when litigation proves to be the only avenue, we’ll fight your corner relentlessly.
The UK legal system is designed to encourage out of court settlements, and parties will usually be required to demonstrate that every attempt has been made to do so.
One way to do this is by seeking early legal advice and possibly business mediation services. Not only can negotiations help to keep matters out of court, but they may also help to facilitate an amicable new agreement that allows both parties to move forward in business on mutually beneficial new terms.
Some of the ways this might be achieved include:
There are many options, and we can help you determine what is best for your business.
Finding an amicable solution to a contractual problem could bring some welcome relief for both parties while also maintaining the integrity of a long-term business relationship.
The threat of a wave of coronavirus-related commercial litigation is a huge risk to business in the UK, and the government is rightly concerned. If the country were to lurch into an epidemic of commercial litigation, adding to the backlog of cases already building up during lockdown, it could also mean the economy will suffer further damage from prolonged anxiety and increased risk.
All businesses must consider the future carefully. As well as your own needs, it is important to consider the needs of your suppliers, customers, and shareholders too.
Where disputes arise, the actions and approach chosen may well have long-term consequences. Businesses that are unfair, unreasonable or uncooperative in the months ahead may find their behaviour defines their business relationships for years to come.
The team of commercial law specialists here at Lanyon Bowdler are highly experienced and knowledgeable regarding commercial disputes.
Whether you are currently involved in a commercial dispute, or are worried that one might be on the horizon, please give our friendly and approachable Commercial Disputes Solicitors a call.
We will work closely with you to assess the likely outcome, timescales and costs.
The earlier we are able to help you devise a strategy, the more likely you are to find a positive solution.
It’s not about “winning”, it’s about getting the right result as quickly and cost-effectively as possible.
We are expert negotiators so we can often resolve a case without having to go to trial or even starting court proceedings at all.
Get in touch with our expert Dispute Resolution Solicitors by phone or fill in our online form, and we will get back to you as soon as possible.
Commercial agreements usually contain clauses in relation to ‘force majeure’ and ‘frustration’ to form the basis of how contractual commitments may be revised or discharged in light of ‘business-interruption’ events, and it’s these clauses that are certain to come under most scrutiny now.
Where a company finds themselves unable to honour agreements, or unable to receive a product or service they expect from others, due to events such as the coronavirus pandemic, the first port of call should be the force majeure provisions within existing contracts.
Force Majeure clauses may well discharge one or both parties in an agreement from performing contractual obligations, given that the lockdown restrictions have made many normal business functions simply impossible.
However, it is up to the party seeking to rely on a force majeure clause in order to excuse the non-performance of their contractual obligations (or late performance) to satisfy the court that this is the effect of the clause.
Much will depend on:
If one of the parties puts forward a counterargument, this could potentially lead to protracted and costly legal disputes, which may ultimately only be settled by the courts.
Force majeure as a remedy for failure to fulfil a commercial obligation is by no means clear cut. Please seek legal advice about your own specific circumstances at the earliest opportunity.
Things are changing on an almost daily basis. The government and regulatory bodies are intervening at an unprecedented speed and scale. It is impossible to predict exactly how things will unfold over the coming months, but it’s clear we face a significant economic downturn that will put immense strain on companies of all shapes and sizes. Based on our experience during similar periods in our recent history, we can identify some areas of the UK economy that are likely to see a substantial increase in commercial litigation activity.
Coronavirus-related insurance disputes are likely to be wide and varied.
At present, there are concerns about the lack of positive responses from some Business Interruption Insurers in early rounds of communication.
Many businesses have found their claims on the basis of disruption from a ‘notifiable disease’ refused, with insurers claiming that the wordings of their policies do not include wide-ranging government responses to a global crisis.
The FCA intends to take a test case to the High Court to receive a court declaration aimed at resolving contractual uncertainty, so as to provide some clarification to businesses large and small.
Indeed, there may be some hope.
In a statement on Monday 1 June, the FCA said: “A number of the relevant insurers decided to accept claims from policyholders with certain policies which included particular wordings which had previously been in dispute.” However, it remains to be seen how many businesses are covered.
Events scheduled for spring 2020, ranging from private annual conferences to major events the world over, such as MIPIM and even the Tokyo Olympics, have been postponed or cancelled.
Businesses have spent significant sums on organising and planning to attend such events.
However, with staff furloughed, flights cancelled and budgets constrained indefinitely (not to mention social distancing measures limiting the feasibility of many events at all), where does this leave exhibitors, delegates, sponsors and venues?
In normal times, business customers would generally expect a full refund if an event is cancelled, but these are not normal times. There is anecdotal evidence of companies delaying refunds or attempting to reschedule the event at later dates.
Event-organisers may well have taken out event cancellation insurance, but now are locked in a dispute with their insurers. This cycle could be prolonged by a web of disputes, as organisers cannot make refunds without insurers paying out.
The coronavirus outbreak has caused major disruption in the education sector.
Universities and colleges have been forced into closing campuses and an accelerated transition to providing courses online.
Understandably frustrated by the inability to access the staff, facilities and resources they were counting on for their education and career plans, over 300,000 students have signed a petition demanding a refund of tuition fees.
The claim at the centre of their argument is that the quality of education being provided is simply not worth the fees paid.
Adding to the frustrations and debt burden, student accommodation costing between £4,000 and £8,000, paid for in advance, lies empty across the country. In a recent survey by QS, 75% of international students said they expected tuition fees to be reduced if courses were being delivered online.
Meanwhile, the government confirmed in a statement on 4 May that universities in England can still charge full tuition fees if their courses are taught online because of the coronavirus outbreak.
Further impacts could be felt if students are forced to give up their studies for financial reasons. The coronavirus emergency and lockdown has resulted in the loss of part-time jobs and problems with family income.
With Brexit finally ‘done’, the early indications were that 2020 would be a strong year for mergers and acquisition activity in the UK.
However, it was not to be.
The COVID-19 pandemic has impacted deals in a number of significant ways.
Many deals have been aborted. Other deals have been put on hold to focus on more pressing issues.
Global mergers and acquisitions reached a near standstill by the end of March 2020 as strategic buyers redirected their attention to the immediate needs of their own companies and away from longer term growth plans.
Xerox recently withdrew its $34 billion offer for HP, after having postponed meetings with HP shareholders to focus on coping with the coronavirus pandemic, and other major deals have been dropped due to a failure, caused by the impact of COVID-19, to meet various closing conditions.
With so much uncertainty on the horizon, many nervous investors are attempting to withdraw from previously agreed merger and acquisition deals.
For the deals that have stayed on course, the process is of course taking longer than usual. Buyers are looking more closely at how the virus might affect the financial conditions and future prospects of the target company, and contractual agreements surrounding termination, force majeure and penalties are being carefully considered.
For the acquiring company, the real work starts after a deal closes. But with travel restrictions and social distancing measures in place, the usual process of integrating the target company’s staff with the new owner’s and executing plans for improvements, will be more or less impossible at the moment.
COVID-19 is likely to have a major impact on the private M&A market but it will take months for that to unravel. For strategic buyers, this may well represent an opportunity to acquire companies in distressed sectors such as retail, leisure, travel and construction.
The Competition and Markets Authority (CMA) is concerned that some businesses may be taking advantage of the coronavirus outbreak. Following over 20,000 complaints, the CMA is looking closely at businesses that may be refusing refunds, intentionally creating complex refund procedures, charging high cancellation fees and pressuring customers into accepting vouchers instead of cash refunds.
Despite the challenges posed by the coronavirus-related restrictions, there are no special measures in place relaxing consumer law requirements and business will face serious consequences for breaching them.
Some businesses may find the integrity of their products is called into question under the Consumer Rights Act (2015), about claims made in their marketing material.
If products have not performed as expected, particularly for products relating to health and safety, such as PPE, manufacturers could be drawn into disputes and litigation. Where procurement of these products has been made by local or central government, claims could run into huge sums.
These are particularly concerning times for both landlords and tenants of commercial premises, and there is a lot to consider.
What happens to my commercial lease if my business is forced to close due to COVID-19?
Can I use ‘force majeure’ as a reason to not pay my rent?
Will my insurance protect me?
These are difficult questions to answer, as so much depends on the nature of the individually negotiated contracts, each with different terms and conditions.
Under the newly introduced Coronavirus Act 2020, tenants are given temporary protection against forfeiture by landlords for non-payment of rent. This does not mean the tenant is not liable for the rent. It simply means that a business cannot be forced out of the building for unpaid rent during the ‘relevant period’, which is from 26 March to 30 June 2020 unless extended by the regulations.
Cash flow problems are likely to exert pressure on many commercial tenants.
While there is no obligation for them to do so, landlords may come under pressure to negotiate lease terms. This leaves landlords with a difficult dilemma as vacant properties are an unattractive proposition leading into a recession.
The impact of COVID-19 on your commercial lease will largely depend on the terms of the commercial lease itself.
For expert advice, contact our team of Commercial Property Solicitors today. We will firstly work with you to identify your contractual issues, set out your options, and help you devise a strategy to achieve the best possible outcome.
Liquidity problems may arise for a business involved in, and already committed contractually to real estate deals including:
This may give rise to disputes and litigation, which may ultimately turn the lights off on many projects before they were ever fully turned on.
In the long term we would expect to see repossessions of commercial property, terminations of leases, renegotiations of existing agreements, litigation, and also corporate insolvency restructuring measures.
Although the construction industry in the UK has been permitted to continue operating, COVID-19 is having a major impact on the supply chain, planning and inspection timetables, and new challenges to ensure the health and safety of the workforce.
These issues have led to many contractors being unable to fulfil their contractual obligations.
Disputes have already broken out between workers and employers, suppliers and contractors, clients and builders.
As different stakeholders interpret the government guidelines differently, opposing strategies clash on sites across the country.
Subcontractors, fearing they will be in breach of contract if they don’t send workers to site, face an angry backlash from staff who feel it's unsafe.
Lanyon Bowdler is a leading full-service corporate & commercial law firm with well-established offices of highly experienced Commercial Dispute Solicitors in Shrewsbury, Hereford, Telford, Oswestry, Bromyard, Ludlow and Conwy.
As a leading national law firm, we regularly act for clients nationally on Commercial Litigation issues.
We can represent you wherever you live in England, Wales or Northern Ireland.
For more information about how we can advise you on all areas of commercial law, speak to our experts today.
Please contact us by phone or use the online enquiry form and a member of the team will get back to you