The COVID-19 (Temporary Measures) Act (the Act) will have a considerable impact on the enforcement of certain contracts and commercial disputes in Singapore for the next 6 to 12 months. The Act was passed by the Singapore Parliament, and commenced on the same day, 7 April 2020.
The key measures of the Act are:
Click below to read our industry-specific considerations:
Temporary Relief from Inability to Perform Contracts
The nature of this relief is to put a freeze on taking legal action for breach of certain contracts for the next 6 and possibly up to 12 months. The relief also provides for a binding dispute resolution mechanism to ensure that contracting parties are not abusing this system. It is important to note that these measures are only intended to be temporary and will only freeze legal rights and obligations in place while the Act is in force, allowing proceedings to be commenced, if necessary, after the COVID-19 situation is under control.
Relief only applied to certain scheduled contracts entered into before 24 March 2020:
1. A loan or finance contract where the facility is secured either, by any commercial or industrial immovable property located in Singapore, or by plant, machinery or fixed assets located in Singapore which are used for business purposes, and:
a. The borrower or "enterprise" carries on business in Singapore;
b. At least 30% of its shares or interests are held by citizens or permanent residents of Singapore; and
c. the turnover of the group to which it belongs does not exceed $100 million in the latest financial year.
2. A performance bond or equivalent for construction and supply contracts.
3. Hire-purchase agreements for:
a. commercial vehicles, or
b. plant, machinery or fixed assets located in Singapore which are used for business purposes.
4. An "event contract", which is defined to mean a contract for the provision of a venue, accommodation, amenities, transport, entertainment, catering or other goods or services for:
a. a business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering, or sporting event; or
b. the participants, attendees, guests, patrons or spectators of any of such events.
5. A "tourism-related" contract, which is defined to mean:
a. a contract for the international carriage of passengers by sea or land;
b. a contract for the provision of transport, short-term accommodation, entertainment, dining, catering, tours or other tourism-related goods or services for visitors to Singapore, domestic tourists or outbound tourists; or
c. a contract for the promotion of tourism in Singapore or the distribution for the purposes of trade or retail of products related to such tourism.
6. A construction contract or supply contract, defined by reference to section 2 of the Building and Construction Industry Security of Payment Act ("Security of Payment Act").
7. A lease or licence of non-residential immovable property.
A party to a scheduled contract is entitled to relief if they are unable to perform an obligation due to be performed on or after 1 February 2020. The inability must be materially caused by either the COVID-19 pandemic or any law made because of COVID-19. The law made because of COVID -19 is not limited to the Singapore Government and can be by any national government. The party must then proceed to serve a notice for relief on all counterparties as well as any surety or guarantor. 
If served with notice for relief the counterparty is prohibited from:
1.Commencing or continuing any court or arbitral proceedings against the party or their guarantor or surety.
2.Enforcing any security over any immovable property or over any movable property being used for the purpose of trade, business or profession.
3. Taking bankruptcy or insolvency action against the party or their guarantor or surety.
4. Seeking to repossess goods under a leasing, hire-purchase agreement or retention of title agreement.
5. Terminating a lease or licence of immovable property for the non-payment of rent or money.
6. Any action to enforce a court judgement, arbitral award or adjudication under the Security of Payment Act.
There are additional relief for specific contracts. For construction or supply contracts, liquidated damages are to be disregarded during the period that the Act is in place, if the non-performance was caused by a COV-19 event. For event or tourism related contracts any non-refundable deposit must be refunded, unless determined otherwise by an assessor (see below). Further, no cancellation fees will be payable if the inability to perform the contract was materially caused by a COV-19 event.
Breaching the prohibitions is serious and could result in a criminal conviction and a fine of up to $1000. In addition, any court or arbitral proceedings under the Arbitration Act must be dismissed by the court or tribunal. This will mean that the party would lose their substantive right to enforce the contract at all, even once the temporary freeze has been lifted.
If there is a dispute as to whether the Act applies, the Ministry of Law has been empowered to appoint a panel of independent assessors to determine any disputes. The qualifications of assessors and the process the assessors will adopt will be covered by subsequent regulations. The assessor will determine if the inability to perform contractual obligations was due to COVID-19, or in respect of event or tourism contracts, whether it is reasonable for any deposit or part of a deposit to be forfeited. The assessor's determination will be binding on the parties and will not be appealable and failing to comply with an assessor's determination is a criminal offence. Parties appearing before assessors have no right to legal representation and will each bear their own costs.
Temporary Amendments to Bankruptcy and Insolvency Laws
The Act provides temporary relief for businesses, firms and individuals in financial distress, by making the following modifications to Singapore's Bankruptcy and Insolvency laws:
Directors, partners and trustee-managers will be also be temporarily relieved from their obligations to prevent their companies trading while insolvent if the debts are incurred in the company’s ordinary course of business and during the period that the Act is in effect. Directors will nevertheless remain criminally liable if the debts are incurred fraudulently.
Temporary Measures for Conduct of Meetings
The Act allows companies to make alternative arrangements for any meetings where personal attendance is required by either a company's constitution or the Companies Act, for example a statutory meeting or the annual general meeting pursuant to s174 and s175 of the Companies Act, respectively. The key alternative arrangements to take place include allowing:
Specific details on the conduct of meetings will be prescribed in the regulations, which have not yet been released.
Temporary Measures for Court Proceedings
The Act will allow for non-COVID related court proceedings, to continue by providing temporary measures for witnesses to appear remotely via video-link or other remote technology. However, also note that the Singapore Supreme Court had, on 5 April 2020, issued a Registrar’s Circular adjourning all non-essential, non-urgent hearings until after 4 May 2020.
The Measures Are Only Temporary
The most important thing to note is that the measures are only temporary and will cease either when the Act expires in one year, or if the Act is repealed earlier. This is particularly relevant in the context of the relief from contractual obligations. Generally the Act does not affect the underlying contractual obligations; it only freezes the rights to enforce those obligations, for a period of time. There are two exceptions of liquidated damages for construction and supply and non-refundable deposits for event and tourism-related contracts.
The Act will extend limitation periods from when a notice of relief is served until the notice ceases to be of effect, whether due to the Act expiring, the notice being withdrawn or an assessor determining that the case is not entitled to relief.
Substantial rights can still be lost if parties ignore the Act and decide to serve proceedings. Not only does the party risk criminal sanctions but if a matter is dismissed by a Court or Tribunal it will not be possible to revive the cause of action.
The Measures for Contract Relief Do Not Automatically Apply
The measures for contract require the party unable to comply with their obligation to service a notice for relief. A party does not have to afford relief under the Act until served with a notice. The form of the notice, the timeline to respond and the timeline to request an assessment of the applicability of the Act will be covered by regulations, which have not yet been released.
The Act Does Not Apply to International Commercial Arbitration
The freeze on arbitral proceedings only applies to the local Arbitration Act. International commercial arbitrations, which are governed by the International Arbitration Act, do not appear to be covered by the Act and therefore can still be initiated or continued.
The Act Only Applies To Breaches Caused by a COVID -19 Event
The relief from contractual obligations will only apply if the inability to perform is materially caused by a COVID-19 event. It is crucial that businesses maintain or keep proper documentation of the following during this time:
When A Contract Was Entered Into Or Renewed Is Important
The Act’s temporary relief from contractual obligations will not apply to contracts entered into or renewed (other than automatically) on or after 25 March 2020. It is important to establish the date which the contract was entered into and ascertain whether the Act (and the relief which it provides) would apply.
Force Majeure and the Frustrated Contracts Act
Force majeure clauses and the Frustrated Contracts Acts will prevail over the Act. For this reason, it will be important for businesses to scrutinise their contracts for such clauses and also take an objective look at the available evidence to determine whether (amongst other things) the non-performance is materially due to a COVID-19 event or otherwise. That way, they can better understand and strategise whether they should assert force majeure and/or or attempt to show that the contract has become frustrated and/or rely on the Act.
Matters Referred To Assessors
As lawyers cannot represent parties before assessors, it is important for parties to be able to prepare and present clear evidence that any inability to perform was caused by COVID-19 or not, depending on whether you are the party seeking relief or resisting the relief being sought.
While lawyers cannot represent parties before assessors, it is still possible for lawyers to assist parties in gathering evidence and preparing submissions. However, the costs will not be recoverable from the other side if successful.
The Act does not expressly provide that an assessor’s decision is to be kept confidential, which may be aimed at creating a body of quasi-jurisprudence that can guide subsequent disputes on this issue. However, this may present problems for parties that have arbitration clauses in their contracts, as they would otherwise be entitled to expect that all disputes arising out of their contracts are kept out of the public domain.
Different Types of Contracts Can Be Added If Required
The Act provides power to the Minister to vary the schedule or add additional types of contracts if needed. Given the fluid nature of the COVID-19 situation, it should not be assumed that the list is fixed and that there could be subsequent additions if specific industries come under further financial pressures.
Be Cautious when Extending Credit
The temporary changes to the bankruptcy and insolvency laws allow businesses to continue to trade while insolvent. You may be dealing with a counterparty that is insolvent and this should be borne in mind when extending credit terms during this period.
The Clyde & Co Clasis team is advising clients on the impacts of Covid-19 across the sectors outlined in the article. If you wish to discuss pressing issues relevant to your business or would like a tailored session, please contact the relevant partner.
Full text of the bill can be found here. Our article makes references to the following sections:
 s1(2) of the Act. All statutory references in the footnotes are to the Act, unless otherwise specified;  ss1(a) and (b) of the Schedule. See also the definition of "enterprise" in s2 of the Schedule;  s1(c) of the Schedule;  s1(d) of the Schedule. See also the definition of "commercial vehicle" in s2 of the Schedule;  s1(e) of the Schedule. See also the definition of "event contract" in s2;  s1(f) of the Schedule. See also the definition of "tourism-related' contract in s2;  s1(g) of the Schedule. See also the definition of "construction contract" and "supply contract" in s2;  s1(h) of the Schedule;  s5(1)(a);  s5(1)(b);  See (b) of the definition of "COVID-19 event" in s2;  s5(1)(c);  See s5(2) and (3).;  s6;  s7;  s8(1);  s8(2);  s11 and s12;  s13;  ss13(9), (10) & (11);  s14 and s15;  s20(1);  s22(1)(a) and s24(1)(a);  s22(1)(b) and s24(1)(b);  s22(2), s24(2) and s25(2);  s27(1);  s27(2)(a)-(l);  s28;  s5(13)