Coronavirus Outbreak – Seven legal implications in Thailand

Legal stress test in the new Coronavirus world – this is not a drill

CoronaAlliance: This article structures the legal implications of the pandemic in seven categories. It gives an insight into the dynamic situation under which the legal considerations and assessments are made. #CoronaAlliance

#1. Contractual default allows the contracting party to fail to perform or to terminate contracts concluded and obligations entered into. Similar effects result from the loss of the basis for the transaction. Removal of the underlying business logic, a material adverse change (MAC) or material adverse effect (MAE), etc. require that the essential basis of the transaction had ceased. These contractual disruptions can be caused by a loss that has actually occurred, an impending loss, or at least an increase to greater risk. Also, the need for quarantine and the involved waste of precious lifetime is a commercial disadvantage. Under these circumstances, staying in a high virus risk country and carrying out risky activities may be deemed relevant for the contractual default. The common-law doctrine of frustration states that if a contract becomes impossible to perform through no fault of either of the parties it is automatically terminated. Other consequences might result from the contractual representations and warranties, covenants, termination rights, and other conditions.


#2. Act of God, respectively force majeure is currently the subject of lively and controversial debate. A detailed discussion of the force majeure aspect can be found in the following section. This topic is discussed and explained at “The force majeure trillion-dollar question: Coronavirus outbreak as an act of God?” 

#3. Workplace matters concern, on the one hand, the employee’s duties and, on the other hand, the extent of the employer’s authority to issue instructions and duty of care. This concerns the extent to which the employee must expose himself to an increased risk of infection, for example as a result of business trips and by remaining at work. The effects of absence from work are relevant to the employer. This applies, for example, to the question of whether force majeure can preclude continued payment of wages in the event of a plant closure or to stranded employees abroad. The question also arises whether the employer can prohibit travel to high-risk countries and ban employees to return from high-risk locations to their workplace. With the shutdown of businesses, employers have certain options to introduce a compulsory leave policy for forced annual holidays, policies for working from home at a reduced work time and salary, and redundancy schemes and certain other measures in case of a suspension of the business. 

The employer bears the risk that the employee cannot be employed profitably. Business-related dismissals follow the traditional principles of Thai labor law. They are typically associated with substantial severance payments. The waiver of severance payments will usually not be justified by force majeure. The scope of application for force majeure is likely to be limited to late salary payments, an extended right of direction of the employer, and the circumstances relevant to the change from the office to the home office. A more detailed overview is available at “Workplace, employment and labor laws“. 

#4. Public order limits the freedom of contract and intergovernmental legal assistance. Based on the ordre public principle, a court can refuse to recognize contractual agreements or arbitration awards. The main case in practice may be the non-enforcement of foreign arbitral awards by Chinese courts, as the acceptance of force majeure has been wrongly refused. As a consequence, force majeure under Chinese laws can be enforced, even if the contracts are not governed by Chinese laws and the court proceedings took place outside of China. Chinese courts typically not only deny to enforce foreign judgments, but they also can choose not to enforce foreign arbitration awards on public policy grounds. 

#5. Insurance: The implementation of insurance claims is subjected to a stress test by the virus. In individual cases, the insurance policies have complex content and supposed insurance coverage may turn out to be problematic in an incident. Insurance cover may fail due to certain conditions that are not suitable for the case of a virus infection. in addition, depending on the case, an arbitrary increase in risk may be assumed, for which the insurance clause has provided an escape clause. 

#6. Data protection and privacy enjoy certain protection and recognition in peacetime. To the extent that this is in conflict with the defense, prevention, and cure of viral infections, these legal interests will in all probability fall by the wayside. This will include an assembly ban, What remains are cases in which the virus is used as an alibi and a pretext for encroaching on civil rights. On the corporate level, disclosure requirements request public companies to report and publish the impact of the outbreak on the company. 

#7. Criminal laws and law enforcement are a necessity to limit the consequences of the virus pandemic. This concerns the establishment of compulsory quarantine for super spreaders and suspected cases, the severe punishment of virus criminals as well as the imposition of entry and exit bans. Under infectious disease regulations promulgated in 2015, a substantial fine is due for not giving true information about visiting high-risk countries, about contact with infected persons, for not accepting treatment and not going into quarantine or going under observation. Declaring a state of emergency might be a further option and even martial laws can be applied.

Case studies under Thailand’s laws and international regulatory frameworks

Non-transfer condo units: 50% of foreign buyers of Thai condominium units are Chinese. 50% of these condo transfers are expected to disappear in the first two quarters of 2020 as a direct or indirect consequence of the CoronavirusOutbreak. “The Chinese are reluctant to complete transfers” –Thaiger Magazine. Multiple off-plan condominium developments are approaching completion, and Chinese buyers are unable or unwilling to transfer. Chinese buyers who made a reservation in Q4/19 are requesting a refund and withholding their investment. What is the best strategy for the Chinese condo investor? Can the condominium developer forfeit the deposits? How should the condominium sales and purchase contracts be adjusted to protect the developer? #wouldyouliketoknowmore

IATA Rules: Many business travelers and tourists consider air travel, which has already been booked long-term, too risky in view of the coronavirus outbreak. The IATA (International Air Transport Association) regulations give passengers only limited rights to cancel booked flights under force majeure conditions. A successful claim requires a proper procedure.

#CoronaAlliance – legal support and assistance in the management of the Coronavirus crisis

PUGNATORIUS Ltd. is the Bangkok-based specialist provider of transactional legal and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property developments and acquisitions. The law firm sees the pandemic as a challenge to protect and enforce the legal and economic interests of international clients in a dynamic situation with high-quality and pragmatic advice and action. 

CoronaAlliance: As a founding member of the CoronaAlliance, the law firm advises on the legal implications of the Coronavirus outbreak as well as on tax planning opportunities. It also provides consulting on short-term and long-term measures to avoid or mitigate the damage to companies, individuals, and institutions. It provides guidance in the transition process to the post-pandemic world to protect clients’ assets, wealth, and business. #CoronaAlliance #PostPandemicWorld

The professional services linked to the effects of the outbreak of COVID-19 are explained at “Legal support and assistance regarding the effects of the #coronavirusoutbreak”.

Disclaimer: A little knowledge is a dangerous thing. This low-resolution high-level outlook constitutes neither legal advice, nor an attorney-client relationship, nor equips with the insights, tools or skills to do this without the CoronaAlliance. Don’t wait for the storm to pass, learn to dance in the rain.

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