COVID-19: Restrictions on Legal Activity

05 May 2020

VIRUS SNIPETS

Current restrictions on legal activity

As for other areas of commerce, a whole raft of emergency legislation is now in place to curtail normal legal activity. They are too numerous to detail, but include:

Court closures

Limited activity and business for those Court remaining open. Most non-urgent cases have been adjourned and issue of new proceedings is greatly restricted. Almost all hearings that remain will take place by teleconferencing.

In our core areas, a Temporary Insolvency Practice Direction applies to give effect to the above. Similar provision has been made for Landlord & Tenant cases.

If you are contemplating any action, please check with us first and do not rely on the official announcements. We can then advise by reference to the source legislation, which often differs significantly in detail from the broad pronouncements in Government and media publications on the subject.

Loans and deferments

No matter how urgent the immediate need may be, please remember most support currently on offer (whether through a formal scheme or by individual negotiation) is in the form of a loan or deferment. In other words it will have to be repaid at some point; it is not a grant.

Whether you are the provider or the recipient, it is particularly important at this difficult time to record clearly the terms of any support and the circumstances in which it may be called in. It is vitally important that you not only focus on the terms of support but also on the mechanism by which any future disputes will be resolved (see more below).

In addition there will inevitably be tax consequences on both sides. So the message is as ever; make sure you fully understand what is being offered / on offer including, as far as possible, any unintended consequences and take advice where necessary.

Post-virus

Although it is too early to anticipate the changes to the commercial landscape post-virus, it is already clear that business as usual will mean a new normal. We anticipate the stresses caused or revealed by the current closure will inevitably lead to an increase in relationship breakdowns both the business and matrimonial areas. Economic pressures on business are likely to lead to a reduction in employment levels and, in the longer term, increases in investment in technology and AI. A more efficient but leaner business is likely to emerge, to the advantage of some and the detriment of others.

We therefore anticipate increases in dispute resolution activity between the winners and losers in these areas.

In many cases the resolution of disputes will be time critical. The Court system was already under great strain before the virus closures and this is only likely to continue. Therefore litigants needing quicker solutions should consider using one of the forms of ADR.

Efficient dispute resolution is an area much over-looked in contract negotiation, often being dismissed as boilerplate or similar. But, particularly at a time such as now when cash is king, parties cannot afford to wait a year or more in the queue for a Court hearing. Given the use of ADR is only available by agreement in most cases, our recommendation is that the means of resolving future disputes should be clearly spelled out now in any agreement to offer or accept temporary support. The same obviously applies to all new commercial contracts including those based on standard printed business conditions.

The funding of any litigation will also be of even greater importance post-virus. We already offer advice on the financing of legal services and clients are often pleasantly surprised at the number of options that are available, which includes:

• Traditional self-funding

• Security-backed fee deferral

• Conditional fee agreements

• Loans from specialist funders

• Claims assignment

These are all horses for courses and not every option will be appropriate for each matter. However the wide range of options now available from a variety of providers makes it more likely than ever that an acceptable option will be available.

Isca Legal is able to advise on all the issues covered in this note and initial consultations are available without obligation.