There are very few, if any, areas of commercial life which have managed to escape the impact of the Covid-19 pandemic and the measures taken around the world to seek to combat its spread. As government initiatives to support businesses around the world inevitably wind down, much of the economic effect of the pandemic remains to be felt. It is an inevitable reflection of international business that economic uncertainty and disruption gives rise to legal disputes and the need for forums for the resolution of those disputes. The London Chamber of Arbitration and Mediation (LCAM) is well placed to assist.
While the range of potential disputes is substantial, it is clear that there will be many contractual issues caused by the pandemic with parties unable to perform their obligations and others who want to escape from those obligations. Particular issues which might arise include whether or not the various governmental restrictions would amount to force majeure if a party claims that contractual performance is temporarily impossible or whether, going a step further, the contract has been frustrated by those restrictions. As the responses around the world have been very different – compare Sweden with Spain or Britain – and have fluctuated over time as lockdowns have been imposed, relaxed and then reimposed, there will need to be intense scrutiny of each factual situation to judge the impact on the particular contract. Is it a genuine case of a contract being frustrated or is it simply that the contract has become less commercially viable than one side may now wish?
In addition, many ongoing contracts, particularly of a financial nature, will include material adverse change or insolvency-related clauses which may give rise to rights to terminate or may affect the parties’ existing obligations (such as through the acceleration of loan repayment or the termination of financing). Disputes of these types are ripe for arbitration by LCAM’s experienced panel of commercial arbitrators with experience across a broad array of sectors.
Of course, a dispute is only worthwhile if the winning party can recover what is due to it. As businesses feel the impact of the pandemic, their ability to pay or comply with any award is likely to be impaired. They may well have little appetite for litigation while simultaneously seeking to deal with the challenges posed by the “new normal” we are all coming to terms with; and governments have already started to encourage parties to behave fairly and reasonably towards each other.
This is where mediation can come in. While formal processes are often binary in outcome, experienced mediators are able to assist parties to formulate bespoke arrangements – time to pay, asset transfers, additional security, revised terms – which can provide a better return than seeking to enforce an award. LCAM’s mediators offer a wealth of mediation experience which enables them to fashion these sorts of flexible, commercial settlement solutions.
Lyndsey de Mestre QC, LCAM Arbitrator and Mediator