This article is written by Akarsh Tripathi, a student of Symbiosis Law School, Noida. Through this article, we will learn about the impact of the COVID-19 outbreak on global law firms and how they can strategize their work structure for the next few months.
Be it the 19th century or the 21st century, the requirement of physical interaction in the corporate or the legal world has never reduced. Even after the unparalleled development in the tech systems of the world; lawyers and other professionals prefer the in-person meeting to discuss even the smallest detail of a transaction.
However, the time has come where law firms need to adopt new practice like work from home, e-conferencing and an agile working system programmed to protect itself from the problems created by crises, like that of the COVID-19 pandemic. Law Firms across the globe are deciding to close their offices due to the coronavirus crisis. Baker Mckenzie, Blank Rome, Hogan Lovells and many other law firms have shut down most of their offices claiming that their lawyers and staff are “fully prepared to work remotely” and that their tech systems are capable of managing the disturbances. But, there still are few law firms who are not closing their law offices despite the novel corona outbreak. The Chicago office of Clark Hill has not been closed even after a case of COVID-19 positive came forward, which was in the same building at the Prudential Plaza.
Pandemic- COVID 19
Apart from the obvious health repercussions which occur due to any health disease outbreak, COVID-19 has managed to draw the attention of everyone by the means of panic and fear which has been ‘created’. The rate at which this trepidation is occurring is faster than the rate of spread of this novel virus. We use the word ‘created’ here because it is true that the only ones responsible for such panic are the public, who spread information as well as rumours. Now here comes the duty of government authorities, the World Health Organization (WHO) and various other organizations to make sure that proper and clear advisories are released. The global crisis has hampered the working of both the blue-collar as well as the white-collar sectors of the ecosystem.
Impact of Coronavirus on law firms
The outbreak of novel coronavirus has disrupted and deranged almost every industry of the world. Hotel industries, airline industries and various other sectors are facing severe impacts of the State Emergencies and lockdowns being imposed to contain the spread of COVID-19.
Such owners and operators should not face these disruptions and they shall also be excused from the performance of various contracts they are obligated to.
Even if laws vary from country to country, the fundamentals and basics are similar. A contract may not be performed due to reasons, which can be justified and thus excuse the party(or parties) from the obligation of performance of the contract. Some of them are:
Nowadays, Companies are continuously seeking the advice of law firms and in-house counsels related to matters of ‘force majeure’. The word literally means “superior force” in French. It’s a clause in a contract which helps the parties to free themselves from the liability of performance of the contract. It can be solicited in case of any unforeseeable circumstance becoming a hindrance for the parties to fulfil their contractual obligations. There is great uncertainty as to the applicability of the law, due to which various industries are consulting commercial law firms to assess the risk and liability associated with the contractual obligations.
It is important to note here that at times, such clauses are overlooked by legal counsels in the agreements, and thus during these unusual and unexpected times, such clauses shall be given some extraordinary importance and special attention.
The doctrine of impossibility of performance of a contract can be applied if there is an unexpected and unforeseeable change of circumstances due to which the contract cannot be performed. Provided that such a change in circumstances was not due to the intervention of either of the parties to contract.
For eg: There is a contract between two parties to organise an event at a club of Amsterdam. However, due to the potential threat of terrorism in Amsterdam, the authorities prohibit any such gathering, then the condition shall lead to impossibility of performance of such contract.
In addition to the doctrine of impossibility, the doctrine of frustration shall also be looked upon by law firms to consult their clients and help them in evaluating every possible outcome of their contractual compliance. Although this doctrine is sometimes called a “companion” of the doctrine of frustration, there is a difference between both of them. The doctrine can be applied and used in the case where even if a contract can be performed, the performance might produce a totally different result than that of what was agreed by both the parties.
Thus, it again falls upon the duty of the law firm and the legal counsels of the companies to utilize these defences in the best possible manner.
Law firms are continuously advising their clients about the claims that the risks associated and losses incurred by the outbreak of coronavirus is included in the clause of force majeure. However, the companies and the parties to a contractual agreement who don’t have a clause of force majeure included in their agreements are at higher risk as they have no proper excuse of non-performance of the contract, which may later make them liable for breach of contract.
Which is the most affected area of legal practice during this time?
The most affected area of legal practice due to the spread of novel coronavirus pandemic is litigation. This is because, for a hearing to take place, the witnesses, judges, lawyers and court staff are required to be physically present. Hearings tend to be postponed because of unavailability of one or more such people. This impedes the working of the court and also the work of firms to work for their clients.
Due to the global outbreak of novel coronavirus, the U.S. Supreme Court has decided to postpone the hearing until further notice, and hearing on urgent matters will be done in Court. Many other jurisdictions including that of India’s have decided to close the courts until further notice. The European Court of Justice and the General Court of the European Union has also closed its doors and will hear only urgent matters, with the aim of reducing in-person interaction in courts and avoiding public gatherings.
Effect of COVID-19 on the Recruitment Prospectus
When we talk about the financial difficulties faced by global law firms and various other impacts of this pandemic, we should also need to look upon how the lawyers, paralegals and any other legal professionals are affected due to the chaos occurring within the firm. Although law firms are currently coy about their plan of action with regards to any hiring freeze, it can easily be predicted that sooner or later, law firms will start considering pay cuts of partners and even associates. The most vulnerable are the underperforming attorneys and the lawyers who are close to their retirement age.
There are many issues which haven’t been discussed yet and need proper study so as to clear the ambiguity present in the legal system. Some of these issues which are faced by companies and law firms are based on the following questions:
- Giving more validity to Electronic Digital Signatures: Since people across the world have begun to adopt the practice of work from home, there needs to be more recognition given to e-signatures, for instance, giving them cross-border validity so that people or organisations from two different countries don’t face problems in entering into transaction amid the quarantine laws and lockdown imposed in their countries.
- Issues in the Insurance Sector: The losses faced by companies during this time are often covered by some or the other insurance policies. However, disputes may arise regarding the applicability and relevance of such risk and losses covering insurance policy.
- Uncertainty of the legal implications: Even if we discuss and plan out many strategies and analyse its effect on the law firms, we need to understand the fact that the impact of COVID-19 is uncertain. No plan is tried and tested. There are critical questions which law firms are finding answers to, like for instance, how long will it take for them to get back at their earlier pace? When will the courts and the judicial system be back on the tracks?
Whether the current situation is boon or bane
Throughout the world, lawyers and legal counsels have begun to suffer from some kind of economic crisis. This is not because of a lack of demand for such professionals but because of the delayed payments made by clients and companies. These companies are trying to minimize their expenses as a result of the devastating economic impacts caused by the coronavirus pandemic. Due to such reductions in the legal fees of law firms and in-house counsels, the lawyers and legal professionals take a hit and suffer financial havoc created.
Much to our surprise, there is still a rising need for legal personnel to consult companies during and after the outbreak. There has been a sudden upsurge for the demand of lawyers and law firms, to help clients with their queries, in finding them ways so that they can back out from the contract they were legally obligated to, or so that they can ensure that their deals and agreements don’t fall apart. Many mergers and acquisitions especially the ones involving China-based companies, and which were in the middle of their transactions are worried about the disruptions caused to them and are thus modifying their M&A clauses. This is done to ensure that no one backs out of a deal by using the spread of coronavirus and the pandemic as an excuse.
Thus, we can say that this current is having both a favourable and an unfavourable impact on global law firms. On one side there is a hit which has been taken by law firms, and on the other hand, there is a rapid increase in the demand of law firms, to consult companies and industries regarding their mitigation of legal liabilities and obligations.
We need to be ready with solutions and strategic planning to address the risk issues which may arise due to the rapid spread of a global disease that, at this point of the time, has no vaccine and cure. Also, it is not only the law firms which need to take action but the judiciary and legislature should allow practices ensuring the smooth functioning of these corporate law firms, lawyers and other professionals who are connected with the legal strata.
- Firms need to restrict any international travel and any non-essential domestic travel of their employees.
- All in-person meetings should be replaced with e-conferencing systems.
- Firms should also create a strategic plan, which helps them in dealing with any kind of future scenarios and difficulties.
- An expedition of the development of tech systems is required in law firms so that lawyers and clients don’t face any difficulties despite the lockdowns and quarantine imposed throughout the world.
- The communication channel needs to be improved within the law firm, and within the different law firms, where everyone including the clients, lawyers, in-house counsels, etc are kept in a loop so as to discuss any legal issues which one may face due to this pandemic.
The impact on law firms should neither be underestimated nor overestimated, as the crisis may hit any law firm at any time, and to any extent. Thus, it is more reasonable for global law firms to make sure that they are able to deal with the anxiety and panic amongst their clients. At the same time, they need to prepare themselves to minimize the health risks within the law firm.
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