Our lives have changed completely in a few days due to COVID-19 and the world’s response to it. Governments react with a multitude of regulations, which have a considerable influence on the economy especially for the Retail & Consumer sector. This affects very different areas of law. Our sector approach consists, among other things, of showing you the legal consequences in the most diverse legal areas and our contact persons for this.
This is what we want to do today in a very concrete way in connection with the economic consequences of the corona pandemic in Germany. In a nutshell, we would like to show you the variety of different topics. Not everything might be relevant for everyone, but sometimes you will be surprised at the range of topics and/or initiatives and that areas you have not considered can be of relevance.
We will try to keep you up to date with current topics and overviews of topics over the next few days and weeks. If you have any questions, you can contact your Bird & Bird contact persons as well as all listed contact persons.
Opening restrictions for shops, restaurants, hotels, gyms and other business
The restrictions for the retail, restaurant and hotel industry are considerable. A whole range of questions of administrative law relates to which business can stay open – and which not or in which way. Food retailers and other specialty retailers such as drugstores may open up longer. In some cases, the demarcation between the types of admissible business or permitted customers is not easy, and sometimes simply unclear. The situation is further complicated by diverging rules and regulations in the different federal states (Länder). In many cases, state laws allow delivery or pick up, or, in our opinion, should be interpreted as such (based on the principle of proportionality). In addition, questions arise as to how the processes in the business premises must be organised to avoid spreading the virus. In addition, there may be special local restrictions or individual approvals. Businesses may also face differing interpretations of the law by local authorities.
Our administrative law team already provides comprehensive advice on all these issues and will be happy to assist you
Production and logistics processes around the world are being affected by the restrictions imposed by the pandemic. Supply chain disruptions result therefrom. When is force majeure present and what are the consequences? Who bears what risk in the supply chain? What about contractual penalties? Compensation for damages often requires fault, who is responsible for whose conduct? When are increased delivery efforts due and what does this mean? Who bears the cost for storage? Questions upon questions. It is not only a question of legal assessment, but also of practical experience.
Our team of experts has already mastered many difficult situations with its clients and is also available to assist you with current issues.
Mobile working or working from home has proven to be a good way of maintaining operations and ensuring the ability of companies to act, at least in the current situation. Nevertheless, the consent of the individual employee or the works council is required.
Where necessary, it is advisable to extend or supplement existing regulations on home office and mobile work. In order to reflect the mutual interests and special features of these forms of work, detailed labour law regulations should be agreed.
Short-time work is the current hour's means of mitigating the economic consequences with regard to the regularly largest cost block of companies (personnel costs). The current handling by the Federal Employment Agency and the legislator makes it possible to temporarily implement measures to reduce costs in companies quickly and comparatively easily and represents an adequate compensation for the crisis situation for both the company and the workforce. However, short-time work can also only be ordered with the agreement of the employees or the works council. In order to meet the different requirements of the individual company, tailor-made solutions and agreements should be found.
The German Federal Government has adopted a programme providing for financial aid depending on the size of companies. Small companies with up to 10 employees are to receive one-off payments of up to EUR 15,000. Medium-sized enterprises with up to 249 employees and an annual turnover of EUR 50 million can take advantage of KfW loans, which can amount to up to EUR 1 billion per group of companies, subject to certain company-related ceilings. The loans must be applied for through the borrower's bank, with simplified application procedures for loans of up to EUR 10 million. For larger companies, the Federal Government intends to provide guarantees of EUR 400 billion, recapitalisation measures of EUR 100 billion and loans of up to EUR 100 billion. Clearance of these programs under EU staid aid law has been given or is expected to be given swiftly by the EU Commission based namely on the Commission’s recently introduced “Temporary Framework”.
The current crisis allows companies to enter into otherwise unusual forms of cooperation, both vertically along the value or distribution chain as well horizontally between direct competitors. In particular, if a coordinated, combined approach by several market players serves avoiding shortages of important supplies, be it of medical devises and pharmaceutical products or key products of daily use, such as food in particular, potential restrictions of competition (if any) may well be justified and thus exempted from the cartel prohibition. Antitrust authorities throughout Europe have issued a statement (via ECN, the European Competition Network) emphasising that no action will be taken against such behaviour.
At the same time, however, the competition authorities have also emphasised that they will strictly go against companies that, by coordinating among themselves or through unilateral behaviour, unreasonably raise prices for products which are of particular importance in the current crisis (such as e.g. face masks and disinfectants). The competition authorities further suggest that suppliers consider agreeing on maximum prices with their distribution partners in order to prevent excessive pricing down the distribution chain as well.
In Germany we are currently seeing projects aiming for example at a cooperation between online retailers and brick-and-mortar shops to face the detrimental impact the crisis has on large parts of the traditional off-line retail sector. Depending on the specific circumstances this may well be in line with EU and German competition law. The same applies to new forms of cooperation at manufacturer level. In any case is it advisable to assess such projects in full detail and to consider discussing them beforehand with the Bundeskartellamt or any other competent competition authority - an approach the European antitrust watchdogs explicitly invite all stake holders to follow.
Your contact:Dr. Jörg Witting
IT / data protection
Many questions also arise in the area of data protection. What can I ask whom (illnesses, symptoms, travel abroad etc.)? Here there is a considerable overlap with labour law as far as employees are concerned. However, the question also arises for visitors to business premises, for example whether access can be made dependent on a body temperature measurement. How and for how long may I then process and store the data collected? With whom may I share it? Am I allowed or even required to inform authorities, employees and/or business partners on certain matters?
Our IT / data protection team will advise you on such questions. You are welcome to contact us.
The German government has submitted a draft of a "Law to mitigate the consequences of the COVID 19 pandemic in civil, insolvency and criminal proceedings". The bill passed in the Bundestag on Wednesday 25 March 2020 and a vote is scheduled on Friday 27 March 2020 in the Bundesrat. The draft provides for the temporary restriction of the landlord's extraordinary right of termination for leases of land or premises in the event of default of payment by the tenant. Landlords may not terminate the lease due to late payment occurring from 1 April 2020 to 30 June 2020, provided that the rent or lease debts result from effects of the COVID 19 pandemic. This applies accordingly to both residential and commercial tenancy agreement and leases. However, the obligation of tenants to pay rent remains effective in principle. The suspension of the right of termination due to COVID-19-related default applies until 30 June 2022. If the tenant or lessee has not paid the arrears after this date, the landlord shall be able to terminate the contract again.
The draft law on mitigating the consequences of the COVID 19 pandemic in civil, insolvency and criminal proceedings also contains regulations under insolvency law that are intended to enable the continuation of companies that have become or are threatened with insolvency as a result of the COVID 19 pandemic. In particular, the draft provides that the statutory obligation of the management of the insolvent company or the board of directors of the association to file for insolvency is suspended until 30 September 2020. However, this does not apply if the insolvency maturity is not based on the consequences of the COVID 19 pandemic or if there is no prospect of eliminating the existing insolvency. If the debtor was not insolvent on 31 December 2019, it shall be assumed that the insolvency maturity is based on the consequences of the COVID 19 pandemic and that there are prospects of eliminating an existing insolvency. In addition, for a three-month transitional period, the right of creditors to file for the opening of insolvency proceedings will also be limited. For creditors' insolvency applications, it will then be a prerequisite for the opening of proceedings that the reason for opening the proceedings already existed on 1 March 2020.
The act on mitigating the consequences of the COVID 19 pandemic in civil, insolvency and criminal procedure law (adopted by the German Federal Parliament (Bundestag) on 25 March 2020) also contains a legal deferral provision for consumer loan agreements concluded before 15 March 2020. Consumers must pay principal and interest due between 1 April 2020 and 30 June 2020 only after a deferral period of three months from the respective due dates. For consumers to benefit from this arrangement, the payment must have become unreasonable for them as a result of the COVID 19 pandemic. This is especially the case if the consumer's reasonable livelihood is at risk. At the same time, termination by the lender due to a significant deterioration in the consumer's financial circumstances or the value of collateral provided for the loan is excluded until 30 June 2020. However, this provision does not apply if the lender cannot reasonably be expected to grant a deferment of payment and the exclusion of termination. Instalment payment transactions and financial assistance are not covered by the scope. The general moratorium on consumer continuing obligations should apply to these.