Battening down the hatches

Businesses, the banking sector and judiciary – in SA and elsewhere – are scrambling to restructure as the Covid-19 storm gathers strength across much of the planet. And Legalbrief reports that there was an interesting twist to the pandemic saga yesterday when Chief Justice Mogoeng Mogoeng said courts need to be available for the next three weeks to ensure that citizens and businesses have the right to challenge the lockdown rules. Such challenges must be possible, even under a state of emergency, which gives the government powers beyond those it now has under the declared national state of disaster, he said in a note to judges. In a state of emergency, the Chief Justice wrote, the Constitution specifically empowers courts to judge the validity of that declared emergency, and ‘related matters’. ‘Courts therefore have to stay open in case members of the public want to bring one challenge or another in relation to the constitutionality or the validity of the measures being implemented.’ In a press release yesterday, the Office of the Chief Justice confirmed the new arrangements, but did not mention potential challenges to lockdown rules, Business Insider reports. ‘Broadly, the courts will, as an essential service, remain open for the filing of papers and hearing of urgent applications, bail applications and appeals or matters relating to violations of liberty, domestic violence, maintenance and matters involving children,’ the release said.

The SA Reserve Bank yesterday announced additional measures to add liquidity to the financial system, including a further expansion of refinancing operations and a programme to buy government securities in the secondary market. Business Day reports that investors and companies have been dumping investments like government bonds in favour of cash, creating a liquidity squeeze in parts of the system. The cost of government borrowing has also rocketed in the past two weeks with yields spiking as sellers struggled to find buyers. An initial set of measures for the money market were announced last Friday, also aimed at increasing liquidity, or the amount of cash circulating in the banking system. In addition to the Bank’s main seven day refinancing operations, it will also now offer a refinancing operation with a term of three months.

Government has been quick in formulating ways in which to maintain business viability so as to minimise the effects of Covid-19 and to ensure swift and effective healthcare service in the country. To this end, the Minister of Trade, Industry & Competition has issued various regulations and exemptions from the Competition Act in response to the declaration of the national disaster. These regulations and exemptions – which will remain effective until the national disaster status is rescinded – include:

* Consumer/Customer Protection and National Disaster Regulations, effective 19 March 2020; and

* Exemption for the Banking Sector Regulations, effective 23 March 2020.

In an analysis on the Legalbrief site, Baker McKenzie Johannesburg’s Lerisha Naidu and Sphesihle Nxumalo discuss these regulations and exemptions.

Consumer/Customer Protection and National Disaster Regulations: The Minister has promulgated these regulations following concerns that companies may seek to charge higher prices for goods – given the tight supply-demand balance caused by the pandemic. These regulations relate to ‘excessive pricing’ by dominant firms during the disaster. The authors note that the Competition Commission has engaged with retailers in the healthcare sector and agreed that they will notify the commission of ‘unusual increases of prices’ by suppliers. Dominant firms should thus guard against inflating prices beyond acceptable standards.

Exemption for the Banking Sector Regulations: Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures during the disaster period. However, the co-operation envisaged between the banking sector players should not extend to communication and agreements in respect of prices (price-fixing). The Minister of the Department of Trade, Industry & Competition and the Minister of Finance will jointly play a key and central role in the implementation of this block exemption.

In the US, the Chickasaw Nation Department of Commerce and the Choctaw Nation of Oklahoma have filed identical lawsuits against AIG firm Lexington Insurance Company, certain underwriters at Lloyd’s of London and several others over their supposed all-risks policies after the two tribes were forced to shut their casino operations amid the coronavirus pandemic. A report on the Insurance Business Mag site notes that the plaintiffs argue that their insurance includes coverage for business interruption and interruption by civil authority. ‘The Nation seeks a declaratory judgment from this Court declaring the policies cover the Nation’s losses and expenses related to the Covid-19 pandemic and infection and the defendant insurers are responsible for said losses and expenses,’ reads the Chickasaw court filing.

The Department of Justice (DOJ) has asked Congress to grant the US Attorney-General emergency powers to ask federal judges to pause court proceedings during the Covid-19 pandemic, notes a Jurist report. Federal judges already have the power to pause court proceedings in their individual courts during emergencies. However, the DOJ contends that this proposal would make the pause consistent throughout the judicial district. The proposal would allow the Attorney-General the same powers during future emergencies. The proposal presents civil rights concerns as it affects pre-arrest through post-trial procedures. Many critics such as Norman L Reimer, the National Association of Criminal Defence Lawyers executive director, share concern over the proposal violating habeas corpus rights. The proposal could pause arraignment proceedings and calls for possible teleconferencing in place of in-person arraignment.

In an acknowledgement that the justice system cannot continue to operate normally during the Covid-19 crisis, England's Lord Chief Justice has announced that new trials will be halted in the Crown Court until specific arrangements have been made to ensure buildings are safe. According to a Law Gazette report, Lord Burnett of Maldon said his ‘unequivocal position’ was that no jury trials or other physical hearings could take place unless it was safe for them to do so. No new trials will start this week and jurors summoned are being contacted to ask them to stay at home, although they may be called in to start a new trial later. Burnett said all hearings in the Crown Court that could lawfully take place remotely should do so and other hearings not involving a jury should continue if arrangements could be made to ensure distancing.

Meanwhile, UK companies are pausing before enforcing some contractual rights in favour of a collaborative, pragmatic approach to issues caused by Covid-19. So said Clare Francis, of Pinsent Masons, a commercial law expert, speaking on the Brain Food For General Counsel podcast. A report on the Out-Law.com site she said companies were not rushing to strictly enforce every contractual right they have in response to coronavirus problems. ‘We are seeing businesses taking a pragmatic view of the situation,’ she said. ‘We are seeing businesses work together in order to help resolve the issues they face and keep everyone going.’ Francis said most companies were prioritising staffing and supply chain issues, as without these elements in place no business activity could continue. But she said most companies in the UK would already have a plan they could rely on when it comes to prioritising and taking action.

And UK companies may have to delay issuing their annual reports to give their auditors sufficient time to complete a high-quality audit despite coronavirus-related disruption, the Financial Reporting Council (FRC) has warned. A report on the Out-Law.com site notes that the regulator has issued new guidance to auditors facing practical difficulties in carrying out audits as a result of the pandemic. It also announced that it is holding weekly calls with the largest UK audit firms at which it is monitoring the impact of Covid-19 on financial reporting. In its guidance, the FRC emphasised that the outbreak ‘should not undermine the delivery of high-quality audits’. Audit firms may need to consider developing alternative procedures which will allow them to gather sufficient, appropriate evidence to support their reports despite current restrictions on travel, meetings and access to company sites in some jurisdictions, it said.