Legal issues around the COVID-19 Pandemic

The pandemic threatens - in addition to health as the greatest good of every human being - especially entrepreneurs and tradespeople as well as employers and employees, landlords and tenants. High losses and considerable damage have been recorded or are to be feared.

In dealing with the Pandemic and its consequences, numerous legal questions arise, the answers to which are not always easy in view of the novelty of the facts and which also cause a certain amount of uncertainty among market participants. At the same time, much is in flux and the government and legislators are trying to mitigate the economic consequences for market participants with a variety of measures, including legislative measures.

Our article attempts to provide an overview of the current and possible future legal conditions and opportunities for market participants – with an attempt of taking into account recent developments in a dynamic environment.

Our article was originally prepared on 26 March 2020. We have updated it in a number of relevant places to cover developments up to 15 April 2020.
More in particular, the updates made relates to:

• solutions for insurance issues which have been and may be emerging at the “political level”, as has been the case for restaurants, etc. in Bavaria
• further details with respect to the scope of application and issues discussed in the context of the provisions related to lease agreements as well as the potential applicability of the concept of frustration of contracts (clausula rebus sic stantibus) and recommendations made by real estate industry groups and associations
• impact that the Pandemic may have on dividend distributions and responsibilities of the management bodies in that regard, including reciprocal effects for state backed loans.

We have refrained from a complete update. For fur-ther details with respect to the topics covered, we refer to our more recent articles.

In its current version, our article discusses the following issues:

• key legislative measures
  Act on the Establishment of a Non-Legally Capable Special Fund "Economic Stabilization Fund - WSF
  COVID-19 Pandemic Act
• Check your supply contracts and other contractual relationships
  Force majeure notifications by suppliers
  Problems within supply chains
  Specific regulations for consumers and micro-enterprises
  Specific regulations for tenants
  Insurance coverage in the COVID-19 environment
  Amended: Emerging “political solutions” in the field of insurance
  Legal changes to consumer loan agreements
  Risk Allocation in other contractual arrangements
  Risk Allocation in lease agreements
  Amended: further details with respect to the scope of application of the new rules, applicability of the concept of frustration of contract, statements made by industry associations, calls for further amendments
  Reproduction of the wording of Art. 5 COVID-19 Pandemic Act 
• Manage Your Workforce
  Organization of personnel and tasks
  Reduction of personnel costs by applying for state aid, e.g. short-time work
  Making provisions for the future
• Ensure liquidity – avoid Insolvency
  Suspension of the duty to file for insolvency
  Management liability
  Reproduction of the wording of the COVInsAG
  Review of existing financing arrangements
  The German Protective Shield
  The protective shield set up by the Federal Government – Grants and Subsidies 
• Make use of special company law provisions
  Law on measures in company, association, cooperative and residential property law to combat the effects of infection with the SARS-CoV-2 virus
  Reproduction of the text of the law on measures in the law on companies, associations, cooperatives and condominiums to combat the effects of infections with the SARS-CoV-2 virus 
• Amended: Avoid liability risks
  Criminal law risks in the event of untruthful statements in the context of applications for subsidies, etc.
  Interactions between managerial action and funding 
• Take into account transitional provisions
  Reproduction of the wording of the provisions of Article 6 of the COVID-19 Pandemic Act