“MORE HOURS ADVISING CLIENTS THAN EVER BEFORE”: WOLEP’S BUSINESS LAWYERS SHARE THEIR THOUGHTS ON THEIR PANDEMIC CHALLENGES AND ACHIEVEMENTS»

“MORE HOURS ADVISING CLIENTS THAN EVER BEFORE”: WOLEP’S BUSINESS LAWYERS SHARE THEIR THOUGHTS ON THEIR PANDEMIC CHALLENGES AND ACHIEVEMENTS»

The past two years have been tumultuous for the economy, with many businesses being forced to recalibrate their efforts and to rethink their development in order to survive. Moreover, the myriad problems brought on by the pandemic meant that legal assistance was more crucial than ever to secure vital postponements, debt delays, tax exemptions and to preserve jobs. We talked to several WOLEP members, specialists in Business Law, about the complex problems they had to deal with, and how they managed to assist their Clients, sometimes against the odds.
First line of order in our enquiry was the attitude of courts towards Business Lawyers, in the context of the pandemic. We wanted to find out if, in light of the COVID-19 pandemic, the courts moved on to a more realistic and open approach towards the issues raised by Lawyers. Our WOLEP member from Spain, Mrs. Encarnación Gema Hervías, shed light on the matter by saying that “The truth is that the courts have limited themselves to complying with and accepting the changes in regulations that have been produced on the go during the pandemic, just like the rest of the legal agents.” However, things were strikingly different across the Ocean, with Mrs. Arydai Prado from Mexico saying that was not the case in her home country: “Unfortunately not, the courts were not more open nor more realistic”. In fact, she argued, “This pandemic showed the shortcomings in the [Mexican] justice system”. Coming back to Europe, Mr. Julien Raum of Luxembourg elaborated on the situation in his native country:

“Luxembourg has a civil law system based on the Napoleonic Code. Companies are governed by the Law of 10 August 1915, as amended, which originally took inspiration on Belgian corporate law but tends, since a modernisation in 2016, to take more inspiration in French laws. Luxembourg business law universe is based on a conservative interpretation of the law with a liberal twist in a modern and progressive environment. This creates a symbiosis between liberal views and stable legal framework that lets businesses, international or national, prosper in a secure environment. Traditionally this view is accepted and supported by a liberal jurisprudence that tends to be more business friendly than our neighbours France or Belgium.»

“The main evolution has been the modernisation of the litigation process”

According to Mr. Raum, an experienced Lawyer with a demonstrated history of working in the government administration offering legal advice to people and companies, “Business lawyers that thrive in this environment have been confronted to many challenges, especially in the courts that have seen a slight change in their liberal approach. By expectation to save businesses, courts in early 2020 tended to have a more business protective attitude. However, this evolution seems to be stopped, and we are getting back to normal”. But the WOLEP member from Luxembourg also stressed an important evolution brought on by the pandemic: “However, for a business lawyer, the main evolution has been the modernisation of the litigation process. In particular, the integration of “modern technologies” has brought some much-needed changes.”

According to another WOLEP member, Mr. Artur Cichocki of Poland, the Polish courts’ relationship with business lawyers visibly improved during the pandemic. “From my point of view, courts like institutions and judges in pandemic times are more understanding. Civil cases have started via on-line tools. Lawyers can obtain more information about cases via mobile and e-mail. These changes are good, and I hope they will stay with us after the pandemic.”

One quintessential aspect of the Lawyers’ dealings in this period was their relationship with Clients who sought their advice and help. Naturally, we wanted to find out whether the Clients’ behavior in relation to Lawyers had changed in recent years. Were Business Lawyers consulted more in light of the economic upheaval in 2020-21, and did Clients pay more attention to the Lawyer’s role in their business affairs? Again, no definite path could be detected, with the scenario differing from country to country. In Mexico, for example, “There are still many people who don’t call you until contingency is a fact in their companies”, remarks Mrs. Prado, an expert focused on Compliance, Administration, Human Resources and Business Management, based in Ciudad de México where she runs her own Law Firm, Prado & Cantú.

“Clients do not pay us to be technology whizzes – they seek our legal expertise” 

 A more upbeat tone was struck by Mr. Raum, who, while acknowledging the “unsecure pandemic environment”, considers the relationship between Clients and Business Lawyers in Luxembourg to be growing in positive ways.

“Luxembourg Business clientele is composed of professionals with a high degree of specialization who tend to focus on their main activity. It has always been one of my priorities to support companies and individuals in all circumstances from the birth until the end of the life of their start-up, company, or commercial activity in a way to give them freedom of mind regarding any legal activity. Therefore, I pride myself in having a relationship to all my clients that involves me well beyond classic normative legal counselling. This approach has proven to be the right one in an unsecure pandemic environment”, explains Mr. Raum.

“What undeniably changed is the technology aspect and how I interact with my clients. While I always remained up to date with changes in technology and always offered clients distance consultations, virtual meetings have never been common. Since the beginning of the pandemic virtual meetings are standard while face-to-face interaction with clients are diminishing. I consider this evolution as positive.

However, it is important to keep in mind that our clients do not pay us to be technology whizzes – what they seek from us is our legal expertise”, concludes Mr. Raum.

The Client-Lawyer landscape also showed signs of transformation in Spain, where, amid the “chaos” of regulations, Mrs. Hervias noticed an enhancement of the role Clients assign to their Business Lawyers. «The changes regarding the obligations and duties of the employers during the pandemic have been a bit chaotic, since the regulations have been changing throughout these last two years, so we lawyers had to adjust our advice to businessmen along the way. I did notice an increase in consultations and doubts from clients”, argues Mrs. Hervias, a specialist in Banking and Finance, Corporate Governance and Civil Rights from Almería, Spain.

Changes in the Client – Lawyer dynamic were also perceivable in Poland, where Mr. Cichocki noticed “a change in the behavior of clients. They are thinking more about the consequences of the pandemic times for the future. They started thinking how they can protect their businesses. Some people now think about running a business in a different scope, e.g. instead of a restaurant, they think about opening a shop etc. They use a little more the services of Lawyer.”

The issues Business Lawyers and Law Firms had to deal with during the pandemic were manifold, with Lawyers being required to up their game, a challenge worthy of such a versatile profession. Furthermore, specifics such as national legislation but also the globalization of legal services came into play as well. Mr. Raum explains: “Luxembourg occupies an almost unique position in the extent to which it serves international customers across a host of services. Thus, 75% of all the financial centres income is from international customers. In this, it differs from all other financial centres in the European Union (EU-wide average is 14%). Therefore, Luxembourg legal universe is more sensible to non-national evolutions.

Luxembourg business model is directly directed towards international actors, Luxembourg knows that reactivity is key. During the Pandemic this benefited hugely to the Luxembourg legal landscape. Luxembourg government could not only react rapidly towards its Covid-19 barrier measures but also regarding the key Corporate Governance elements impacted by the restrictions to keep business running as “nearly usual”.” Indeed, the flexibility and reactivity of the State helped Business Lawyers in Luxembourg in assisting their corporate Clients in a seemly manner: “The main obstacles were due to internal organization, and we were able to assist our clients in a way that these obstacles never hindered corporate life.”

“A culture of prevention” 

“We had to update our knowledge along the way and adjust it to the ‘covid’ or ‘post-covid’ regulations”, recounts Mrs. Hervias. Self-actualization was key, she says, as “We tried to be up to date with all the news and changes that have occurred, and we have dedicated more hours of advice than before”. As for Mr. Artur Cichocki, a member of the Warsaw Bar Association, he raised the issue that the pandemic disrupted the cashflow of not only Clients, but Lawyers too, a problem he tried to mitigate by giving his Clients some leeway and being empathetic: “I had a lot of problems with the timely payment of my invoices. That is why I spoke with my clients and arranged for them to pay my fee in smaller installments.”

Importantly, the role of a Business Lawyers is also to advise their Clients towards building healthy enterprises. As such, Mrs. Prado considers prophylaxis a clear component in the arsenal of a Lawyer: “We are talking about a culture of prevention. This is the only way, you cannot avoid risks, but you certainly can reduce its impact.”

“We now advise Companies to include clauses referring to possible future states of alarm or closures due to the pandemic”  

Last but not least on the WOLEP agenda for this feature article was a question springing from the observation that many Clients consider provisions in commercial contracts to be redundant, yet they sometimes prove vital – it was the case in this pandemic. We therefore asked the WOLEP experts how much importance has the law in their country attached to the protection of the contracting parties, how has force majeure been applied and whether the legislator has given Lawyers room for maneuver during the state of emergency / lockdown period.

“Well, the pandemic has highlighted the importance when drawing up a contract and the importance of reading each clause, especially in insurance contracts, supply contracts etc. In Spain, the situation has changed a great deal during the pandemic. We had a first state of alarm, followed by two more, in which many businesses were forced to cease, a state of alarm that the Supreme Court has subsequently declared invalid”, details Mrs. Hervias. “Therefore, now it is time to demand accountability from the State and claim what we can for the damage that has been caused to our economy, and this is why the work of lawyers and getting good advice is vital. In terms of hiring, we now advise our clients which are companies to include clauses referring to possible future states of alarm or closures due to the pandemic, so that everything is well-connected”, the Business Lawyer from Andalucía explained.

 Another well-documented problem in the industry was breach of contracts, a key issue highlighted by Mrs. Prado from Mexico. “During this pandemic we have learned about breach of contracts, but still have to work on this matter, and avoid confusions”, she points out.

Even if legal precedents were invoked during this pandemic, in order to argue force majeure, in Luxembourg it is still not clear if the effect of COVID-19 constitute such an event, stresses Mr. Raum. “Unless an agreement specifically disapplies force majeure, it would usually apply to all contracts governed under Luxembourg law. Although force majeure is not clearly defined in the Luxembourg Civil Code, one may infer its existence if the following criteria are fulfilled: an event external to (i.e., beyond the control) the parties to the contract; an unforeseeable event (that could not have been foreseen when the contract was signed); an unavoidable event (the effects of which could not be avoided through appropriate measures)”, our expert emphasizes.

“Precedents show that courts have been reluctant to characterise epidemics as force majeure” 

“Once these conditions are met and the defaulting party has proven that it cannot, under any circumstances, execute its obligation, the contract will either be suspended or terminated depending on the terms of the contract and the duration of the force majeure event”, draws attention Mr. Raum.

It is not a foregone conclusion that courts will allow the unilateral termination of a contract in light of COVID-19, he stresses: “Whether the effects of COVID-19 constitute a force majeure shall be determined on a case-by-case basis. Previous French and Belgian cases in which epidemics were used to justify a force majeure event show that courts have been reluctant to characterise these events as force majeure (the events not being viewed as unforeseeable and/or unavoidable and/or external in the circumstances at stake – e.g., Chikungunya epidemic, H1N1 flu pandemic, Dengue fever outbreak, SARS epidemic, plague epidemic).

Considering the above, it should be stressed that the current pandemic does not automatically entitle a contracting party to a unilateral termination of its obligation and that every situation should be thoroughly assessed on a case-by-case basis.»

A similar point was made by our WOLEP member from Poland, Mr. Artur Cichocki, a specialist in New Technology Law. He told WOLEP that “There is a concept of “force majeure” in the Polish Civil Code, but so far I have not heard anyone successfully invoking it and winning a lawsuit. The pandemic changed it diametrically, there are already lawsuits in court referring to the pandemic as a force majeure. From a practical point of view, I know that both parties to the contract try to negotiate it more often. If, for example, the seller is not flexible, he may lose the customer, so he often makes concessions. It seems to me that mediation would be more useful here than litigation, it is faster and cheaper.”

It is obvious, from the insights above, that Business Lawyers had a lot to contend with during these complex past couple of years, while it is also safe to say that their professional standing will only continue to grow in the post-pandemic reality.

As WOLEP continues to expand its horizons, we will regularly feature expert analysis of economic, societal, legal trends and industry developments that our members deal with in their activity, thus further encouraging professional networking and collaboration within our network.

Fuente: Wolep