What You Can Do Now: Record, Collate and Store

What You Can Do Now: Record, collate and store

Economic Damages

That COVID-19 could be the gravest threat to the global economy since the financial crisis a decade ago – as posited by the OECD on 2 March 20201 when it issued a warning of the risk of the virus cutting global economic growth in half – is now, two weeks later, simply without question.

While global leaders, the IMF and the World Bank release billions of dollars in emergency funding, lower interest rates and relax borrowing constraints in order to tackle the spread of the virus and shore up economies worldwide, countless businesses fight for survival under unprecedented market conditions. 

What started out as a localized supply shock – with a handful of manufacturing supply chains hit by a drop in the delivery of parts from the Chinese province of Hubei early in the virus’ propagation – has now turned into a full-blown global demand shock as governments close borders to people and trade and mandate the isolation of large swathes of ‘consumers.' Airlines, travel companies, hotels, bars and restaurants, sporting and entertainment companies, retail stores and scores of other businesses are beginning to experience directly the chilling effects of Coronavirus.

Types of Disputes

In addition to potential insolvencies, lawyers are now preparing to support such businesses through the course of a wide range of commercial legal issues and disputes anticipated in the immediate aftermath of COVID-19. Included in these are potential cases related to:

  • disruptions or partial performance concerns,
  • force majeure terms within supply contracts,
  • frustration, contract delay and termination issues,
  • insurance coverage issues,
  • shareholder actions,
  • regulatory and competition law considerations, and
  • complex financing issues

Such cases may be associated with significant economic losses to be quantified as part of the legal proceedings: loss calculations of this nature will generally require a detailed articulation and assessment of ‘what might have been’ had it not been for the effects of the virus. 

What You Can Do Now: Record, Collate and Store

In this context, businesses may find it beneficial to collate and keep records of critical information which may later serve to inform possible calculations of loss or be relied upon to assess regulatory or other compliance issues as part of a dispute. 

Such information may include, for example:

  • correspondence with suppliers outlining the scale of and reasons behind delays,
  • details of increases in costs faced in seeking to fill resulting supply gaps,
  • internal meeting minutes outlining impacts or measures being taken to mitigate impacts,
  • management accounts and other financial records highlighting the effects,
  • details of investor briefings, with updates on impacts and activities as a result of COVID-19,
  • internal sales forecasts and any on-going updates to forecasts being made,
  • details of emergency measures being taken and their expected short- or medium-term impacts on the business,
  • regulator or competition authority assurances received, for example in relation to coordinated activities,
  • invoices or receipts related to any novel prices being faced or costs being incurred and
  • emails from customers cancelling purchase orders in response to Coronavirus.

Whilst it may be feasible to look back and seek to recreate a picture of the challenges faced by a business during the throes of the Coronavirus (for example by relying on the recollection of staff members or by using wider industry experiences as a proxy), contemporaneous records are generally far more valuable and credible as an evidence base in legal proceedings. Specific information and business data recorded, collated and stored today may well prove crucial to securing due compensation for damages in the future. In summary: Record, Collate and Store.

D&P dispute experts will continue to monitor commercial legal issues and disputes in the wake of COVID-19 as they arise. Please reach out to our Disputes Consulting team for any assistance you may need in relation to anticipated commercial litigation, arbitration or mediation arising as a result of COVID-19.

Sources
1. OECD Economic Outlook, Interim Report March 2020.

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