Legal Advice Relating to COVID-19
Covid-19 crisis: Latvia
Taking into account the impact of the novel coronavirus COVID-19 on the economy, on 13 March 2020 the Ministry of Economics met with representatives of organizations and economic operators from different sectors of the economy.
Taking into account the impact of the novel
coronavirus COVID-19 on the economy, on 13 March 2020 the Ministry of
Economics met with representatives of organizations and economic operators from different sectors of the economy. During these meetings, most entrepreneurs identified two current challenges: (1) lack of operational resources; and (2) retention and dismissal of employees in critical situations.
In order to address the lack of operational resources, as a solution the Ministry of Economics proposed to develop new financial instruments in both tax and operational fields. Concerning the tax options, the Ministry of Economics offered to: (1) actively use tax holidays for up to one year; (2) assess the possibility of introducing a number of new financial instruments – extending the guarantee program and the lending program, as well as promoting venture capital investment. In order to boost the competitiveness of Latvian exporters during the crisis, export credit guarantees must be provided in Latvia.
In order to deal with employee retention matters, the Ministry of Economics proposed to reach an agreement between the government, employers and trade unions that employees can be put on unpaid leave for the duration of the state of emergency. During this period of time employees will receive compensation from the state budget, and the financial sector would accordingly freeze obligation payments until the process normalizes. It is also important to provide support for retraining of workers and to review
the procedures for paying sick leaves.
On 16 March 2020, after the meeting of the management group for the support of businesses and employment, the Finance Minister confirmed that the government plans to impose tax holidays for entrepreneurs for up to three years. In addition to the measures already mentioned, the Ministry of Finance stated that it is intended to promote bank lending. On 12 March 2020, the Single Supervisory Mechanism that supervises banks in the euro area in response to the novel coronavirus COVID-19 decided to make it easier for banks to set up and maintain liquidity and capital reserves, which would in turn increase the available amount granted as loans.
Given the significant impact on the aviation sector, the Ministry of Finance said that it could also provide support to the Latvian national airline “airBaltic”. However, currently the Ministry of Welfare is working on means to provide the state support to employers in order to ensure the sick-leave payments, which will require additional state budgeting.
It is planned to allocate one billion euros to businesses in the form of various national financial instruments in order to mitigate negative effects caused by measures imposed to curb the spread of the novel coronavirus (COVID-19).
As a result of the rapid spread of the novel coronavirus COVID-19, companies are taking various measures in order to protect their businesses and most importantly - health of their employees. These measures may include processing of travel data or health data of the employees.
In this situation, where the virus spreads rapidly, to contain it, the companies require their employees and visitors to complete a travel declaration form, thus ensuring that they have not travelled to the infected areas. In addition, the companies request to inform them if the employees experience symptoms that can be associated with the novel coronavirus COVID-19 to ensure the safety of other employees.
Despite the seriousness of the novel coronavirus COVID-19, the companies still have to comply with the GDPR. However, the GDPR should not be seen as an obstacle to the fight against this virus. On the contrary, the GDPR provides a legal ground for the companies to process personal data in situations like this without the separate consent of the data subjects. This can be applied to the cases when the processing of personal data is necessary for the companies to protect persons’ vital interests, or for reasons of public interest in the area of public health, or to comply with another legal obligation.
Due to widespread restrictions imposed on businesses, many of our clients are contemplating whether it is possible to consider these restrictive measures and the spread of the novel coronavirus (COVID-19) itself as a force majeure event. Furthermore, expecting hardship in fulfillment of already concluded contracts, many businesses will rethink their ability to offer certain goods or services.
According to the general principle stipulated in the Article 1587 of the Latvian Civil Law, an agreement concluded between parties must be fulfilled and even exceptional difficulties do not release a party from the agreement. To determine what constitutes a force majeure event, the Latvian courts have relied on a definition given by UNIDROIT Principles of International Contracts and have ruled that following preconditions must be met in order to argue that a particular event constitutes a force majeure event:
1) Non-performance was due to an impediment beyond a party’s control;
2) It could not have been reasonably expected;
3) It was not caused by the party or by a person under its control;
4) The event causes not only hardship of fulfilling the agreement but renders it impossible.
In practice, it means that a threshold for proving a force majeure event is rather high. If a party would argue that measures imposed by the government to curb the spread of the novel coronavirus (COVID-19) has created a force majeure event, that party would also have to prove that it could not have expected these measures at the moment of concluding the contract and that such measures render performance of the obligation impossible. For example, a passenger transportation company could argue that it cannot fulfil a transportation contract due to a ban on cross-border passenger services; however, a company contracted to deliver goods could not argue the same, since the Latvian authorities have not stopped the movement of goods.
Each situation would be judged individually, depending on specific circumstances of the particular case. In any case, the counterparty must be promptly noted of the alleged force majeure event, and the arguing party should carry out all reasonable steps to mitigate any negative consequences of non-fulfilment of its obligations.
Restrictions on public gathering and in-person meeting have caused some questions on possibility to conclude agreements by electronic or other means. Few contracts in Latvia require written form (e.g. a contract on sale of real estate
property, employment contract, etc.), and even those contracts can be concluded by an electronic signature. A document signed by an electronic signature, compatible with the EU regulation on electronic identification and trust services for electronic transactions in the European Single Market (eIDAS),
shall be considered as having the same legal effect as a written contract. Therefore, even cross-border contracts can be signed via electronic means.
While negotiating future contracts, businesses should carefully consider risks associated with continued implementation of measure to curb the spread of the novel coronavirus (COVID-19), especially drafting provisions regarding force majeure events, changes in applicable laws, materially adverse changes, and other important aspects. Existing contracts should be negotiated with counterparties, and settlements may be reached instead of lengthy court proceedings, especially since court operations have also been severely limited.
Banking and finance
As the novel coronavirus (COVID-19) continues spreading, there will be an increased focus from regulators on the contingency plans for the financial sector. The regulators will expect that banks will take all reasonable steps to continue meeting their obligations, asses their operation risks and determine steps they need to take in order to ensure full support to their customers.
At this point banks emphasize using their online services and strongly discourage in-person visits at banking premises. Furthermore, it has been stressed by the Finance Latvia Association that existing obligations against the bank must be duly fulfilled. The association advises any commercial entity or private individual experiencing difficulties in their loan repayment to communicate with the bank in order to achieve the best solution.
Considering the widespread consequences that companies and individuals will suffer due to imposed restrictions, it is almost certain that the government will have to reconsider existing regulations or impose temporary measures to support financial sectors and their customers. The banks will have to adapt the new environment and reconsider available support measures.
One of the areas affected the most by the state of emergency measures is employment. The employers are advised to offer their employees a possibility to work from home. However, several industries have been strongly limited in their ability to sell their goods or offer services, which results in downtime for employees.
The Labor Law does not provide much flexibility for the employers in the downtime period in relation to working time and payment system, nor does it release the employer from the obligation to pay salary in full amount to the employee during such a period. If it is possible in a particular situation, the employer can order the employees to work from home.
Apart from encouraging working from home, the employers may seek other solutions to overcome the workforce related challenges. For example, the employer may consider temporary ordering the employees to perform work that is not included in their employment contract (job description). Moreover, the employer may reconsider their working time and remuneration systems, and introduce solutions like part-time work or scheduled working hours. More fundamental changes, like introducing aggregate working time arrangement, may also be considered. Furthermore, the employees could be encouraged to use their accumulated vacation time in order to minimize negative impact on business continuity.
Even if these measures are not sufficient and the employees must be dismissed, the employer may do so on the grounds of reduction of the number of employees. Depending on the number of dismissed employees, collective redundancy provisions may apply.
Also, in case of a suspicion of infection with the novel coronavirus (COVID-19), the employer may consider relieving the employee from his or her duties or order the employee to have a health check. These measures serve not only as a protection for the potentially sick employee, but also for the whole staff.
As the novel coronavirus (COVID-19) continues spreading across the world, the state authorities have decided to change their work and customer service procedures; however, no common practice has been established yet. It has resulted in some differences among the public sector institutions.
Most of the state authorities have cancelled their in-person appointments (e.g. Customer Rights Protection Centre, Enterprise Register, Building Authority, etc.). While some of the state authorities such as the Office of Citizenship and Migration Affairs will retain only those appointments which have previously been scheduled. However, the state authorities can still be reached via phone or electronic means if there is a need to receive any kind of consultation.
Regarding notary services, it has been communicated that most of the notaries are available remotely and all notarial consultations are available in video conference calls. Until 14 April 2020, it is possible that there will be some other restrictions regarding in-person visits; therefore, before visiting the notary, we highly advise you to contact your notary to make sure that he or she will provide consultations.
As the state authorities currently do not provide in-person appointments for document submission, in case of necessity all documents, which need to be submitted to the state authority, shall be signed with an electronic signature or submitted using the e-services portal www.latvija.lv by clicking on the “Application to institution” link.
In order to contain the spread of the novel coronavirus (COVID-19), the Republic of Latvia is implementing special restrictions on travel, i.e. starting from 17 March 2020 at 00.00 (EET) till 14 April 2020 (the date could be extended if the situation in Latvia does not improve) all international passenger transportation (e.g. through airports, ports, by bus and rail transport) to and from Latvia will be suspended. Starting from 17 March 2020 at 00.00 (EET) foreigners whose permanent residence is Latvia shall be authorized to return to Latvia by a personal vehicle unless other countries have imposed an entry/exit ban that prevents a foreigner from leaving the country, in which he or she is staying.
At the same time, Latvian embassies have cancelled the on-site reception, which means that foreigners cannot receive short-term and long-term visas for entry into Latvia. Moreover, the submission of documents for temporary residence permits (TRP) has been cancelled as long as the state of emergency is in effect in Latvia (for more information we suggest to contact the relevant embassy).
In addition, the Office of Citizenship and Migration Affairs (OCMA), which is the Latvian immigration authority, has limited on-site reception, as well. It means that, e.g. labor calls and invitation letters can only bse submitted via the portal www.latvija.lv, or signing documents with an e-signature and sending them via e-mail. Foreigners can visit OCMA only if he or she has a prior appointment with this authority.
As with other state institutions, the courts have been affected by the recent measures adopted to limit spread of the novel coronavirus (COVID-19). Courts will strongly limit the amount of visitors it receives and in-person activities.
It has been decided that most of the oral court hearings shall be postponed until the end of the state of emergency. However, this regulation does not apply to the cases involving significant interests protected by the law or cases involving the objective urgency, i.e. arrest, restriction of the capacity to act for a person due to mental disorders, etc. The necessity to postpone an oral hearing of the case, when it is already scheduled, will be evaluated separately, and the court will inform the involved parties if such a decision is made. After the closure of the state of emergency the postponed cases will be heard as a priority.
It should be taken into account that courts will not accept any in-person visitors during the period of the state of emergency. Furthermore, courts will prioritize serving the most important functions in order to ensure public order and to serve the best interests of society.
Consumer rights protection
It already can be predicted that turbulences caused by the state of emergency measures will create disputes between sellers of goods, service providers, and consumers. Many businesses will be unable to perform the agreed contracts, causing a challenge under consumer protection laws and regulations. The immediate impact is felt by the travel industry whose ability to operate and offer travel services has almost completely been eliminated.
In case the tour operator cancels the planned trip, the traveler is entitled to a refund of any advance payment for the trip (for example – flight or hotel, or flight and hotel). In a case when unavoidable and exceptional circumstances (i.e. emergency situations set by the local government) are met at or near the travel destination, which significantly affects the contract, the traveler is entitled to refuse to go on a trip. In such a situation the traveler is entitled to a non-payment of the termination fee and a refund of any advance payment made for the trip (excluding any compensations).
If the traveler has purchased a package travel, i.e. flight and hotel, and if the emergency situation has been set by the local government, the return of the traveler cannot be ensured as specified in the package travel contract. The tour operator shall provide accommodation for up to three nights and shall cover the costs of the necessary accommodation.
In addition, each traveler shall check the insurance policy and its applicability in the emergency situations.