COVID-19 Disputes: Litigation funding helps companies monetise claims in an emergency
UK & Europe
On 7 May 2020, the Government published 'Guidance on responsible contractual behaviour in the performance and enforcement of contracts impacted by the Covid-19 emergency'. In this article, we take a closer look at the Guidance and its impact.
The Guidance, which can found here, is not binding and applies only to England. Scotland, Wales and Northern Ireland may well issue their own guidance in due course.
The opening line of the Guidance best summarises its purpose: "parties to contracts should act responsibly and fairly, support the response to Covid-19 and protect jobs and the economy".
The Guidance aims to meet the following objectives:
"Responsible and fair behaviour" includes being reasonable and proportionate in responding to performance issues and the enforcement of contracts, co-operating with counterparties and seeking to achieve pragmatic and just outcomes. In particular, parties should act responsibly and fairly in relation to the following:
The Guidance states "[bad] behaviour will be bad for jobs and will impair our economic recovery".
Although Parties are "strongly encouraged" to follow the Guidance, it is not binding and is not intended to override: (i) any specific guidance issued by any government body, (ii) the parties' contractual rights or (iii) any applicable legal obligations.
This can be contrasted with Singapore, where the Singaporean Government has already made legislative changes by passing the COVID-19 (Temporary Measures) Bill which attempts to pre-emptively manage the foreseeable increase in legal proceedings.
The COVID-19 (Temporary Measures) Bill is intended to provide temporary relief for parties experiencing difficulty in performing their contractual obligations by enforcing a moratorium on the commencement or continuation of legal proceedings, although it specifically excludes international arbitrations.
This relief is only applicable to specified contracts, for example, construction-related contracts, which (1) involve a Singapore business, at least 30% of which is owned by a Singaporean national or permanent resident, (2) require performance to be in Singapore, or (3) involve Singapore properties or events.
The UK Government has left the door open to making potentially similar legislative changes, as it will "continue to review behaviours in contracting … to ensure that contractual arrangements can function effectively and maximise their contribution to jobs and the economy". There is, however, no indication at present that any such legislation will be forthcoming. In the meantime, the position under English law remains the same; that there is no general doctrine of good faith in commercial contracts.
Written by Partner David Leckie and Associates Alexander Stewart and Siobhan Neill.