The Adverse Effects Of Pandemics And Force Majeure ; The Place Of Laws And Policies

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By Babatunde Oyewole

INTRODUCTION

Humanity, it seems, is fated for global emergencies. The inevitability of what can be foreseen appears, in what Sigmund Freud describes as the ego (consciousness) and superego (conscience) of man. The existence of a fate that lies ahead of us all is common knowledge, however we also can deduce, from past and present events, an indisputable truth, of its presence in our conscience. The question of what could have been done better, plagues across times, the highly privileged host of planet earth. As long as earth remains, global emergencies will always sprout. Man is at war with a superior enemy who cannot be stopped from engaging in battle, but rather conquered in the cleft of preparation. Our collective armoury is one which must be wisely selected. Amongst these powerful weapons, potent in fighting a victorious war, are the enactment and formulation of viable laws and polices to salvage the overwhelming effects of these emergencies on both human lives; property and the macro economy.

THE ADVERSE EFFECTS OF PANDEMICS AND FORCE MAJEURE ; THE PLACE OF LAWS AND POLICIES 

A glance at the back window of human history will leave us with a sequence of global emergencies. From the great plague of Marseille in 1720[1], to the Cholera pandemic of 1820[2], to the extremely deadly Spanish flu of 1920[3] and now, the novel coronavirus pandemic of 2020[4]. The socio-economic activities of world economies have been intercepted by disease outbreaks on a global scale, leaving no industry behind in this mud-fight for survival, with major blows on the oil and gas and manufacturing sectors. The outbreak of coronavirus (COVID-19)[5] and subsequent measures implemented to flatten the curve have resulted in disruptions of uneven proportions, with major economies of the world dangling on the brim of collapse or already being plunged into the undesirable phase of economic redundancy. The economy, which is the focus of this article, is an essential part of what constitutes a progressive society. To this end, many governments of the world have consistently engaged themselves in the general human rhetorical question of what could be done in cushioning the economic effect of the pandemic. Does the architecture of our jurisprudence has the requisite capacity to adequately cater for the challenges ahead? Has it meticulously played the significant role ascribed to it even at the peak of the crisis? Will the doing of businesses continue in the same way like before? Most importantly, is our economy towing the gloomy path of recession? In light of the uncertainties posed by the pandemic, many governments have formulated laws and policies to cushion the economic effects of the coronavirus on their economies.



To begin with, the disbursement of stimulus packages to citizens. At the inception of the coronavirus pandemic, several countries were forced to embark on emergency lockdown, businesses shut down and employees ordered to “stay home”, while governments responded with packages to stimulate the economy until life returns to normal. To achieve this, stimulus packages were given to citizens, some of which were the most vulnerable in those countries. The US President, signed off a $2 trillion stimulus package with promises to deliver payments of up to $1,200 to American citizens[6], the U.K gave out a total fiscal stimulus of £30 billion[7]. In the same vein, countries like France, Turkey, Spain and Italy, among others have trailed similar paths[8], recording the largest stimulus package ever in the history of those countries.According to an analysis by a think-tank, Bruegel, Germany is the country currently offering the most wide-ranging coronavirus financial aid and stimulus plan to its citizens. It amounts to more than two trillion euros ($2.2 trillion) – 60 percent of the country’s economic output in 2019. This means that the German federal and state governments are mobilizing significantly more funds than, for example France, Italy, the UK, the U.S. and even Spain severally. The idea of countries implementing policies to dish out stimulus packages is rooted in the Keynesian Economics, postulated by John Maynard Keynes, where he states that the impact of a recession can be lessened with increased government spending and lower taxes and interest rates in order to stimulate an economy out of a recession. This theory is considered a “demand-side” theory that focuses on changes in the economy over the short run.

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Moving forward, the application of the Tax relief measures on companies, businesses and individuals. Mitigating measures are being adopted by tax administrations to ease the burdens on taxpayers to support businesses and individuals with cash flow problems[9]. The Nigerian Government adopted a number of Tax relief measures ranging from extension of filing deadlines for monthly value-added tax (VAT) and withholding tax (WHT), extension of filing deadline for companies income tax (CIT) returns, the due date for filing CIT returns extended by one month, filing CIT returns with unaudited accounts[10]. However, the Government rejected calls from critics for the reduction of taxes as part of the palliatives to reduce the adverse socio-economic effect of the coronavirus outbreak[11]. The Nigerian Minister of Finance, Budget and National Planning, Zainab Ahmed rather opined that, the government would be looking at the option of tax deferral than tax reduction. The minister expressed fears that if the trend continues, Nigeria might go into recession in 2020, so to prevent that, government has to take some radical and unusual decisions. The minister noted that corporate organizations and individuals could get tax relief based on their donations towards the relief fund for the COVID-19 pandemic[12], as opposed to the non-discrimination in application of Tax relief policies adopted in other nations, this is indeed radically unusual. To date, over 105 countries have implemented tax relief measures to curb the economic fallout from the pandemic ,according to the International Monetary Fund[13]PwCTax Foundation and OECD crisis trackers.

Additionally, guaranteeing existing loans issued to businesses and issuing new revolving loans. Small businesses have been hit hardest by mandatory closures and safety measures required to slow the spread of the coronavirus. Consequently, governments all over the world are issuing out policies enabling small and medium scale businesses to apply for long-term loans and even an extension for repayment of loans earlier acquired before the outbreak of the pandemic. The Swedish government, among others, established a government guarantee programme of SEK 100B ($10.9B) that will provide state loan guarantees to companies negatively affected by COVID-19 to facilitate access to financing[14]. The Estonian Minister of Finance, Martin Helme told Delfi already on March 19, 2020 that a plan to guarantee existing commercial loans issued to businesses and issuing new loans was being drafted. Over a month later, the details were published by the state-controlled foundation responsible for issuing the loans and implementing the guarantees, KredEx. Moreso, the EU announced its Corona Response Investment Initiative, making €37 billion available for crisis response which has been bolstered by another €28 billion[15]. The Central Bank of Nigeria(CBN), announced some policy measures to douse the adverse economic impacts of the pandemic on the economy which includes a moratorium of one year on all principal repayments effective from 1st March, 2020, with an interest rate reduction on all applicable CBN intervention facilities from 9% to 5% per annum. The CBN, on 2nd May, 2020, also announced that no bank in Nigerian shall retrench any staff of any cadre in the sector[16].



One of the most important policies being adopted at the International level by the International Monetary Fund(IMF)[17] is the Rapid Credit Facility (RCF)[18], of which many African countries are beneficiaries. The credit facility by the IMF is intended to provide disbursements to several African nations, as they seek to reduce the economic and financial impact of the Covid-19 pandemic.With Ghana receiving the largest sum of $1B[19]. Financing under the RCF carries a zero interest rate, has a grace period of 5½ years, and a final maturity of 10 years[20].

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In this seemingly endless battle to salvage what is left of the economy, plethora of laws have been enacted by governments. On 24th March, 2020, the Nigerian House of Representatives introduced and passed a bill titled Emergency Economic Stimulus Bill, 2020[21]. The Bill forms part of the Nigerian Government’s concerted effort to stimulate the economy and cushion the effects of travel restrictions, business disruptions from COVID-19, protect the employment status of Nigerians who might otherwise become unemployed as a consequence of managements’ decisions to retrench personnel in response to the prevailing economic realities.

In many nations, there have been the statutory declaration of “force majeure” as a means to mitigating the colossal effects of the global emergency on various sectors of the economy. Contracts and treaties have been breached and many nations are looking for escape routes, of which one of the most potent is force majeure. These clauses are designed to protect contracting parties from losses and damages which should ordinarily accrue where the performance of a contract becomes impossible to perform as a result of series of unforeseen events. As evidenced in the decision in The Mostyn‘s Case[22], that the event must be proved to be “an irresistible and unsearchable providence nullifying all human efforts. Consequently, the Iraqi government declared the Covid-19 a force majeure on all contracts being effective from 20th, February 2020[23]. Similarly, the Department of Petroleum Resources[24] announced that contractors and operators should limit their personnel and also described the situation as a “force majeure” to cushion the blows on the oil and gas sector[25]. Likewise, the Mumbai government is under pressure to declare force majeure at 12 of its major ports[26]. The China Council for the Promotion of International Trade(CCPIT)[27], has begun issuing force majeure certificates to Chinese companies[28].As of mid-February, CCPIT had issued 3,325 certificates to companies in over 30 sectors, covering a total contract value of about Rmb270bn ($38.5bn)[29]. However, what bothers the legal mind is what legal effect(s) these certificates being issued, by the CCPIT and governments of nations, have on the parties to ordinary business to business contractual arrangements? As force majeure is a contractual issue with the CCPIT and government of nations not being privy to the contracts in question. Nonetheless, governments can be said to be desperately in motion, to utilize the role that laws and policies play in dampening the economic effect of global emergencies on the economy.

RECOMMENDATIONS

Despite all the juicy policies being served by governments of many nations, some of these world powers are still on the verge of experiencing an economic fallout like they never have seen before. Well, that shouldn’t be a surprise, truth be told, who cam claim to be an expert of recovering economies from a global pandemic? Better still, the following can be implemented to mitigate the effects of the pandemic on economies. Highly important is the Digital Transformation of businesses and companies. “Necessity”, they say, “is the mother of invention”. The closure of businesses, implementation of lockdown rules and the need for provision of goods and services have indeed birthed a new era of human necessity. Majority of the businesses/companies thriving during this pandemic (Amazon, Zoom, Shopify, Netflix e.t.c), are companies that have already been digitally transformed, thus enabling a surge in demand and utilization of their services like never before. However, the fact remains that industries like the entertainment and oil and gas sectors(downstream), will probably experience some difficulties in this need for digital transformation. More so, businesses need to work on responding to the current crisis while simultaneously building to thrive in a new reality that focuses on agility and multi-stakeholder collaboration. Governments, on their own path, can  activate short-term financing mechanisms that help businesses stay afloat and retain workers during the health-care crisis. Also, they can bolster unemployment insurance and provide other safety nets that keep the most vulnerable residents from losing their homes or going hungry. More importantly, they can help ensure that hospitals get the necessary resources they need to treat patients and protect doctors and nurses. They can also work with the private sectors to ensure that testing is readily available, something that has to date hampered efforts to contain the coronavirus in U.S. Indeed, some experts believe the best economic medicine that the public sector can provide is a quick resolution to the underlying health threat with primary focus on the economy.

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CONCLUSION

As administrators of the world that houses us, it is the role of humans to defend and find the most efficient ways to better lives on planet earth. The process at which we choose to fashion a resistance and progressive habitation, whether economically or socially, are through the laws and policies we put in place, before and when the need arises. Governments across the world, are advised to engage in the enactment of laws and creation of policies with future economic betterment focus. Global emergencies, albeit undesired, are inevitable, but laws and policies are the best medium of securing the best future for the economic sustainability of people and the businesses that exist. The good news remains, these laws and policies are entrusted with the responsibility of being seers of what is and what is to come.

Babatunde Oyewole is currently a 500Level Law Student of Ekiti State University, Ekiti. He can be reached at : Oyewole.s.babatunde@gmail.com



Footnotes

[1] ‘An Epidemic Every 100 Years: Plague 1720, Cholera 1820, Spanish Flu 1920, Coronavirus 2020’ (Bengalview.com, 2020) <https://bengalview.com/English/epidemic-every-100-years-plague-1720-cholera-1820-spanish-flu-1920-coronavirus-2020/>

[2] Ibid.

[3] Ibid.

[4] (2020) <https://www.niaidiinih.gov/diseases-conditions/covid-19>

[5]On April 22nd,2020, the World Health Organization (WHO) had declared COVID-19 a global emergency,the highest level of alert.

[6] ‘$2 Trillion Coronavirus Stimulus Bill Is Signed Into Law’ (Nytimes.com, 2020) <https://www.nytimes.com/2020/03/27/us/politics/coronavirus-house-voting.html>

[7]  ‘Bloomberg – Are You A Robot?’ (Bloomberg.com, 2020) <https://www.bloomberg.com/news/articles/2020-03-11/u-k-chancellor-sunak-announces-budget-to-fight-virus-crisis>

[8]  ‘Which Countries Have Applied Measures Like Stimulus Checks And How Much?’ (AS.com, 2020) <https://en.as.com/en/2020/04/16/other_sports/1587074127_029119.html> .

[9] ‘Tax Administration Responses To COVID-19: Measures Taken To Support Taxpayers’ (OECD, 2020) <http://www.oecd.org/coronavirus/policy-responses/tax-administration-responses-to-covid-19-measures-taken-to-support-taxpayers-adc84188/>

[10]https://news.bloombergtax.com/daily-tax-report-international/insight-covid-19-pandemic-nigerias-fiscal-and-economic-measures

[11] Chike Olisah, ‘FG Rejects Calls For Tax Reduction, Offers Tax Relief For Donors To Intervention Funds’ <https://nairametrics.com/2020/04/08/fg-rejects-calls-for-tax-reduction-tax-relief-for-donors-to-intervention-funds/>.

[12]ibid.

[13]https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19

[14]https://www.whitecase.com/publications/alert/covid-19-swedish-government-financial-assistance-measures

[15] ‘How The EU Is Helping Cushion The Blow From COVID-19’ (World Economic Forum, 2020) <https://www.weforum.org/agenda/2020/03/the-european-commission-how-we-are-helping-citizens-and-businesses-across-the-eu/>

[16]Abiola Odutola and Abiola Odutola, ‘CBN, Bankers’ Committee Order Banks Not To Lay-Off Any Staff’ (Nairametrics, 2020) <https://nairametrics.com/2020/05/03/breaking-cbn-bankers-committee-order-banks-not-to-lay-off-any-staff/#:~:text=The%20Central%20Bank%20of%20Nigeria,time%20or%20part%2Dtime).&text=CBN%20solicits%20the%20support%20of,the%20COVID%2D19%20pandemic.%E2%80%9D>

[17] The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

[18] The Rapid Credit Facility (RCF) provides rapid concessional financial assistance with limited conditionality to low-income countries (LICs) facing an urgent balance of payments need.

[19]Andrew Mizner, ‘African Countries Receive IMF Support For Covid-19 | ALB Article’ (ALB Legal and Business Issues from Africa, 2020) <https://iclg.com/alb/11307-african-countries-receive-imf-support-for-covid-19>

[20]‘IMF Rapid Credit Facility (RCF)’ (IMF, 2020) <https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/08/Rapid-Credit-Facility#:~:text=The%20Rapid%20Credit%20Facility%20(RCF,urgent%20balance%20of%20payments%20need.&text=The%20RCF%20places%20emphasis%20on%20the%20country’s%20poverty%20reduction%20and%20growth%20objectives>

[21] Fraser Allan, ‘Nigerian Emergency Economic Stimulus Bill: All You Need To Know | ICLG.Com Briefing’ (ICLG.com/briefing, 2020) <https://iclg.com/briefing/11493-nigerian-emergency-economic-stimulus-bill-all-you-need-to-know>

22 (1928) A.C. (57) , [93]

[23] ‘Iraq Declares Covid-19 A Force Majeure For All Contracts’ (Offshore Technology | Oil and Gas News and Market Analysis, 2020) <https://www.offshore-technology.com/comment/iraq-covid-19-force-majeure-contracts/>

[24] The Department of Petroleum Resources is the regulator of the Nigerian Oil and Gas Industry.

[25] (2020) <https://www.dpr.gov.ng/reduce-workforce-at-project-sites-dpr-tells-operators/ https://www.dpr.gov.ng/reduce-workforce-at-project-sites-dpr-tells-operators/>

[26] National and others, ‘Government Under Pressure To Declare Force Majeure At 12 Major Ports’ (@businessline, 2020)<https://www.thehindubusinessline.com/economy/logistics/government-under-pressure-to-declare-force-majeure-at-12-major-ports/article31193372.ece>

[27] China Council for the Promotion of International Trade (CCPIT) is the Chinese national foreign trade and investment promotion agency Founded in 1952.

[28] ‘CCPIT Issues Force Majeure Certificates To Foreign-Funded Enterprises To Cope With The Epidemic’ (En.ccpit.org, 2020) <http://en.ccpit.org/info/info_40288117668b3d9b01711b60896d07e4.html>

[29] ‘China Issues Record Number Of Force Majeure Certificates’ (Ft.com, 2020) <https://www.ft.com/content/bca84ad8-5860-11ea-a528-dd0f971febbc>

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