In Europe, the legal issues arising from the pandemic generally parallel those arising in the United States. And as in the United States, additional unexpected issues might arise, so watchwords for businesses should include “Take nothing for granted.”
The following are some high-level points to keep in mind:
Employment: Immediate issues presented to employers include complying with their obligations to safeguard their employees, such as alerting them of and protecting them from dangers; ensuring business continuity, generally including working remotely; paid leave for employees not working (including full or partial sick leave); and possible dismissals. These measures must comply with country-specific requirements in Europe.
Tax and payroll charges: European governments are planning and implementing a myriad of tax deferral and relief measures designed to alleviate short-term cash flow issues as well as losses caused by the massive economic disruption in progress and to delay some filing deadlines. Only when details become available can these measures be assessed.
M&A and P/E: Impact of the pandemic will include heightened due diligence on relevant issues; increased attention to reps/warranties on issues possibly impacted by COVID-19 and to material adverse effect language; and, potentially, hesitation to use locked-box pricing mechanisms, which are largely used in European deals and generally assume continuity of profitability. There may be attempts to renegotiate some deals signed but not closed, in particular those with material adverse effect clauses (although material adverse effect language may exclude the pandemic). Perhaps most important for this sector, distress of some strategic players or investors may create attractive acquisition opportunities.
Securities regulation: Impact of the epidemic will have to be taken into account in complying with disclosure rules applicable to listed companies throughout the European Union (EU), including timely disclosure of significant nonpublic information and presentation of risk factors and future outlook (specifying assumptions used). Audit trail and voice-recording requirements will continue to apply to staff working remotely.
Financial and other contracts: In case of a current or expected breach, relief available will depend on the basic tools of contract analysis: the facts, applicable contractual language and applicable law. Note that in civil law systems, force majeure might excuse nonperformance whether or not the contract includes a clause to that effect.
Insurance: Most business interruption policies will not cover pandemic-caused losses, but wording should be reviewed before deciding not to make any claim. Event cancellation coverage may provide relief to some. If a company’s actions or failure to act in connection with the pandemic could be subject to litigation, coverage under errors and omissions, directors and officers, and other liability policies should be reviewed carefully.
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