If you look at it from a black and white perspective, it is easy to state that the Covid-19 brought health and economic woes. These two situations are indeed true and were the major problems of the disease. However, the impact of the pandemic cut far deeper as it affected all areas of life and still does the date. The initial upsurge of the disease, now known as the first wave, led to a shutdown of businesses, companies, and firms.
These shutdowns in companies led to tons of broken contracts, and obligations especially in the better part of 2020. These broken obligations and breach of contracts, while they were inevitable, led to a lot of dispute and is still leading to disputes between the parties of the contracts.
While some of these have been resolved via compromise from both parties, the majority of them have lingered on such that arbitration has been employed to solve them.
In arbitration, disputes triggered directly or indirectly by the pandemic are referred to as Covid-19 related disputes or covid-19 arbitration disputes. As it stands, tons of covid-19 related disputes have been resolved through arbitration, are currently pending, and will soon be addressed.
The trend is not likely to change anytime soon as there is still a level of restrictions between countries, and the different waves of the virus have not been helping matters. This article will be considering some of the arbitration Covid-19-related disputes that have been handle and are yet to handle.
Majority of disputes were from the first wave of the virus due to its sudden emergence and the little time it gave contract parties to incorporate its involvement when signing contracts. A couple of disputes arose from subsequent waves, and all will be considered in full.
List of Covid-19 Arbitration Disputes
Almost all companies were affected by the Covid-19, with some industries getting massive hits, such as aviation, real estate, Fintech, Oil, retail, and manufacturing and distribution firms. These industries and others have been the major players involved in covid-19 related disputes. Most of the issues revolve around force Majeure, Frustration, Material Adverse Change (MAC), and other areas where a particular party bonded by law to fulfill an obligation can be excused.
Force Majeure is a situation that some Jurdistictions such as Japan and China recognize in their laws (Civil laws). It is characterized by circumstances beyond a party’s control that make it unable to fulfill the obligations that were agreed in a contract. With Force Majeure, such a party can be excused. In other Jurdistiction that practices common laws, a contractual provision must have been included in the contract for the party to claim unforeseen circumstances as the reason for obligation failure.
There is no doubt that the first wave of Covid-19 falls under unforeseen circumstances, and there will be little arguments if it could lead to the failure of obliging contracts that require crossing borders.
However, there have been situations where a party obligated to fulfill a contract could not and, due to coincidence with the covid-19 surge, could cite the pandemic lockdown for soft landing. The other party obviously not agreeing, has mostly dragged the dispute to the arbitral tribunal for a fair resolution to be reached.
Frustration, also similar to force Majeure, is an excuse that a party in a contract can site for obligation relief. When unforeseen situations arise that frustrate the delivery party’s effort to deliver, such as closure of manufacturing plants and restrictions on getting raw materials that facilitate the production and delivering of goods and services as agreed contractually, the Frustration excuse is a good one to go for.
However, citing the frustration excuse in the second and third wave of the pandemic has led to a lot of disputes, as expectant parties in the contract believe that the possibility of the covid-19 leading to Frustration has already been handled.
Material Adverse Changes
MAC clauses give the seller the ability to renegotiate business if there are likely Materially adverse effects that could affect the business before it is closed or if such may happen in the nearest future to cause losses. Sellers prefer to have a MAC clause to avoid uncertainty and prevent buyers from damaging their reputation.
Extreme fimacial Burden
Disputes can arise between a supplying and a buying party if the former finds the ability to fulfill a contract impossible or extremely negative due to the changes caused by the Covid-19. Both parties may feel in the right and could seek out court resolution methods.
The covid-19 is not over yet and clearly, which means that there will still be more dispute arising from it. The goal, however, is to ensure that there is an amicable compromise in which both parties’ interests are protected.
If you are caught up in any of the mentioned disputes or any other Covid-19 Arbitration Disputes, and you need the counsel of a professional arbitrator, it is essential that you go for a proven arbitration firm with skillful professionals.
Rattsakuten is one of the top arbitration firms that have built a solid reputation for helping clients get the best out of a dispute. If you or your firm are having a Covid-19 related dispute, then this firm will use its team of experienced and highly skillful professionals to help you with as little damage as possible. You can give this firm a call so you can commence the process of resolving your case.
Rattsakuten is a leading law firm focused on Commercial Arbitration and Dispute Resolution. Based in Sweden, Rattsakuten handles dispute resolution and Arbitration matters before the SCC (Swedish Chamber of Commerce), ICC, HKIAC, and several other Arbitration tribunals.