COVID-19: impact on the legal landscape


Worldwide, countless races have been postponed pending COVID-19 – so too it seems has the race to the courthouse…

Much to the surprise of many, there has been a temporary, but relatively significant, lull in disputes activity since the coronavirus pandemic hit the UK with full force in mid-March. Whilst this may seem counterintuitive, given the major business disruption caused by COVID-19, most companies are bogged down in crisis mode and have little bandwidth to initiate legal proceedings. Research indicates that the number of new claims filed in the English courts more than halved in the month leading up to Easter, suggesting that those with potential COVID-19 related claims are still digesting the immediate impact of the pandemic. General legal activity is also down, as perhaps unsurprisingly, "non-essential legal spend" is one of the first things on the budget chopping blocks for many businesses. Research from the Law Society in the UK indicates that almost three-quarters of small law firms may have to shut up shop in the next six months as a result of the coronavirus pandemic.

However, once the initial wave of chaos begins to pass, and companies emerge from survival mode to survey the damage, it is reasonably safe to assume a resurgence in legal activity.  That begs the question – which pockets of the legal landscape are likely to take centre stage in the latter half of 2020 when the business world looks to allocate the losses sustained during the pandemic?

The central protagonist is set to be claims for breach of contract for non-performance which will inevitably be met with arguments of force majeure or frustration (on the basis that the pandemic prevented or rendered impossible the performance of certain contractual obligations). There will no doubt be many consequential claims against the insurers of contract breakers who refuse to pay out, and indeed against insurers generally where they refuse to cover claims under policies for business interruption.

Support acts are likely to include a range of fraud related claims which may be expected as a consequence of the hasty and en masse move to remote working, creating prime conditions for data security breaches.  Phishing campaigns are already rife, home networks are likely to be less secure than company networks, and as the number of hardware devices proliferates, so too does the opportunity for data breaches.

Finally, as the workforce begins to return to the office (albeit in limited numbers and most likely on a staggered basis), expect a slew of employment related claims caused by an inevitable "trial and error" period during which employers strive to deliver safe working environments, measured against what may be uncertain and evolving standards.

Anticipating something of a déjà vu of the 2008 financial crisis and a flurry of litigation, senior figures in the legal industry such as Lord Neuberger and Lord Phillips (both former Presidents of the UK's Supreme Court) are advocating alternative methods of dispute resolution. Companies are being encouraged to renegotiate in order to preserve deals (to the extent possible) and perhaps more importantly, the business relationship, so that future deals can be struck. It's clear however that some countries would prefer not to rely on peoples' capacity for conciliation. For instance, Singapore has imposed a moratorium on legal actions relating to a party's inability to perform obligations under certain types of contracts, and France has passed legislation suspending particular penalties for non-performance. In the UK, the Financial Conduct Authority is hoping to minimise court traffic by seeking rulings on whether certain commonly used wording in insurance policies would exclude cover for COVID-19. Although these official and unofficial measures may moderate the upswing in disputes activity, we can expect to see people making their way to the starting blocks relatively soon.  

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The rapid global spread of the Covid-19 virus has resulted in significant market volatility and is placing an immense strain on the business community. Get guidance and practical advice on key operational and legal issues.

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