The Covid-19 pandemic has swept across nations and organisations leaving no sector unscathed. A year later, LEGAL BUSINESS, Onyinyechi Ukegbu, discusses the effect of the pandemic on maritime and aviation practice with Mobola Akinkugbe, Partner, AO2 Law and Head of the firm’s Transportation (Maritime & Aviation) Infrastructure and Real Estate group.
Below are excerpts…
Shipping accounts for 90% of global trade and Covid-19 disrupted this trade. What contractual issues have you seen as a result of this?
Breach of Contractual obligations by parties some of which include:
- Loading of the consignment from the seller/distributors warehouse: delays occurred as a result of the pandemic wherein safely measures had to be strictly adhered to by maintaining social distancing and the likes while some worked fell ill and had to stop work entirely. This greatly impacted the speed of the Shipping process entirely. Once the first stage of finalizing the consignment to be shipped is delayed, the contractual timeframe for delivery is disrupted.
- Implications of the Covid-19 pandemic not being expressly provided for in the Contracts and parties depending on the Force Majeure Clause.
- Employment Law issues bothering on Job security. A lot of businesses had to let go of their staff for one reason or the other, while some could afford giving the required notice, others could not, and this gave rise to termination of employment contract issues. Some businesses also hired labour during this period without giving proper employment contracts and where a dispute arises, the Staff has no contract to fall back on.
Does Covid-19 qualify as a force majeure event?
There were discussions/arguments in the legal services industry when the pandemic started. By the definition of force majeure (Black’s law dictionary), it covers any event or effect that can be neither anticipated or controlled and which affects the ability of parties to a contract to perform their contractual obligations.
Also, events that would constitute a force majeure are expressly stated in contracts and would differ based on agreement by the Parties as to what would constitute a force majeure event. Hitherto, pandemics were not expressly indicated as force majeure events in typical contracts (usually includes natural disasters- earthquakes, hurricanes, acts of government, explosions, fires, war, terrorism etc.). However, as a result of the Covid-19 pandemic, it has become typical practice for force majeure events in contracts to include events such as “outbreak”, “disease” etc.
An Interesting aspect of the discourse is that in our recent work, we now see more attention being given to force majeure clauses with parties trying to ensure pandemics are either well captured or excluded (depending on what side of the table you find yourself) in the definition of force majeure.
That said, a fundamental question that needs to be addressed when considering whether Covid -19 qualifies as an FM event is whether the pandemic has affected a party’s ability to perform its contractual obligations and where there is a link between the event and non-performance by a party to a contract, it would qualify as a force majeure event.
What changes are expected in commercial agreements? In particular, will there be new clauses in charter party agreements?
Not necessarily. One major change will be the amendment of typical force majeure events to cover diseases sch as “pandemics”. Apart from that, a general review of available clauses should be carried out on all agreements to ensure protection against unforeseen circumstances resulting in a breach of obligations are well captured.
The Nigerian Civil Aviation Authority (“NCAA”) on May 1, 2020 issued Circular 1- detailing immediate to longterm tasks airlines must put in place to transition to “normal” industry operations post-Covid by Q1, 2022. For Q4, 2020 – Q4 2021, it required airline operators to submit “safety management system implementation plans” to ensure safe operations. Can you tell us what these plans might look like?
Some safety guidelines deducted from The International Air Transport Association’s (IATA) guidelines published in August 2020, include:
- First and foremost, I believe the airline operators would impose the requirement of having a negative Covid-19 result before boarding any flight
- Regular sanitization of the airport and adequate sanitization of the aircraft after each flight.
- For flights with lay over, both passengers and crew must be sanitized before boarding the next flight.
- The Cabin Crew must at all times wear a mask and adhere to practicable social distancing
- As much as possible, limit the interaction between Passengers and cabin crew.
- In order to minimize risk of exposure to infection, access to the flight deck should be minimized and limited only to those persons who require it for the safe operation of the flight
- Installation of High Efficiency Particulate Air (HEPA) Filters in the aircrafts because the HEPA filters have demonstrated good performance with particles of the size of the Covid-19 virus
It is my hope that we if these measures are not already implemented, the Nigerian aviation sector will adopt same and even more.
Several countries around the world injected stimulus packages into the aviation sector to set off the losses calculated to amount to globally. Do you think that a similar approach is necessary in the Nigerian aviation sector?
Most definitely. A similar approach is necessary because the pandemic affected the world in similar ways. Therefore, if the aviation sector of the United States of America was affected, best believe the aviation sector if Nigeria was similarly hit, if not at a worse degree.
The government can also introduce a stimulus package for the aviation sector in Nigeria to help mitigate the effect of the covid-19 pandemic. More particularly because most people are scared to travel and without passengers travelling or sending cargo, there is no income generated. This further affects the welfare of the staff in this sector.
Foreign Direct Investment in Nigeria is expected to trend around 1000.00 USD Million this year. What more can be done with the regulatory environment to encourage FDI?
- Technological advancement in financing – The legal framework should catch up with the market as soon as possible. The gap between the adequacy of law & the market shouldn’t be too wide. A good example is the cryptocurrency debate as to whether there should be a ban on it or not.
- Coordination between agencies responsible for the issuance of licenses and permits for easy administration
- Further tax reliefs
- Easy importation of foreign currency/repatriation of Funds.
- Timing for issuances of licenses and permit
- Legislative timing is not stelar. We haven’t done well with passage of laws timeously. A good example is non passage of the Petroleum Industrial Bill for over a decade. This has stalled the FDI’s in the oil and gas industry, which has indirectly affected service industry such as the maritime sector
- Reduction of foreign exchange risks.
How has AO2 responded to the effects of Covid-19 on its operations?
We are an agile firm that has built flexi-work hours into our structure before the advent of the pandemic, so we were able to manage the seeming chaos. Team members are responsible with remote working and as a result, work is delivered timeously. The pandemic only came to test our established processes which needed a bit of fine tuning. As a firm, remote work is part of us and physical presence in the workspace is no longer compulsory going forward.
Also, we have been able to deploy state of the art technology to support our remote work structure to ensure real-time response to client’s needs. Partners and Associates are on hands with these technological tools and use it effectively to guarantee client’s optimal service satisfaction.
Some foreign law firms have taken advantage of innovations in legal tech by creating their own ALSPs or partnering with existing ones. How do you anticipate that the Nigerian Legal Sector will evolve with legal tech?
There are several areas where technology has been and can be infused in the legal sector. For instance, law firms have for some time been engaging with software such as LawPavilion, Thomson Reuters Practical Law etc. which are essential in litigation and commercial documentation, respectively. There is a popular notion that in the nearest future, technology would be used in all aspects law. Such innovations in legal tech would be a welcome development as it would serve to reduce the amount of manpower and man-hours required for certain legal endeavors. Artificial Intelligence in commercial transactions for instance would serve to reduce the time spent in drafting or reviewing contracts. Legal tech would also be a welcome development in litigation as the use of automation for instance in filing court processes would not only serve to address the backlog and difficulties associated with filing physically but would also serve to ensure a timely dispensation of justice. These are some of the opportunities for legal tech in Nigeria and an adoption of these innovative technologies would also advance the Nigeria Legal Sector.