13.3.2020
COV
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Legal challenges in light of coronavirus (COVID-19)

Infections with the new coronavirus are irreversibly spreading around the world and around Slovenia. Such situation creates a lot of uncertainty and fear, which is, among other things, also the result of misinformation. A mayor part of uncertainty is also caused by questions relating to law, as we are currently facing a situation that is completely new and unpredictable. Such questions range from interpretation of existing legislation to new intervention legislation that is significantly changing existing legal rules on a daily basis. Therefore, as a law office, we will provide up-to-date information on current law, thus helping to spread complete and accurate information during this crisis.

The current situation in Slovenia is changing day by day, but currently it is crucial that on 12 March 2020 Slovenia declared an epidemic on the basis of Article 7 of the Communicable Diseases Act due to the increasing number of cases of coronavirus infections. Furthermore. Decree Prohibiting Gathering of People in Educational Institutions and Universities and Independent Higher Education Institutions was also adopted (translated by the author as no official translation of the decree in English language is yet provided), which is currently in force from 16 March 2020 until 29 March 2020. On the basis of the decree it is prohibited to gather in kindergartens and all levels of the educational process in Slovenia, which effectively means that educational institutions are closed from Monday March 16, 2020 until Friday March 29, 2020.

Furthermore, on the basis of the Decree on Restriction of Certain Rights of Healthcare Professionals and Healthcare Associates, the movement of health care professionals outside the country is prohibited from 12 March 2020 onwards.

Pursuant to the Decree on Determining the Conditions of Entry into the Republic of Slovenia from the Italian Republic, with the aim to prevent of the spread of infectious disease, 6 checkpoints have been established for entry on road links with Italy, and other border crossings are closed for road transport. There are no train operations between Slovenia and Italy. Entry into Slovenia is allowed to persons who are not citizens of the Republic of Slovenia only with a certificate, not older than three days, of a negative result on the presence of the sars-cov-2 virus. If an individual does not submit such a certificate, entry into Slovenia shall be allowed only on condition that his or her body temperature does not exceed 37.5 degrees Celsius and that he or she shows no signs of upper respiratory tract infection. Restrictions do not apply to Slovenian citizens, persons with permanent or temporary residence in Slovenia, nor to freight transport.

Pursuant to the Decree on Interim Measures to Control the Spread of Infectious Disease covid-19 the provision of preventive health care services is suspended unless the suspension would have a negative effect on the patient. In some hospitals (Novo mesto General Hospital, Novo mesto Health Center and Črnomelj Health Center), non-emergency medical examinations and specialist examinations are suspended until at least 25 March 2020, while at Metlika Health Center only administrative medical assistance is performed until 25 March 2020.

Attention should also be drawn to the Decree on Prohibition of Gatherings at Indoor Public Events, which prohibits the gathering of more than 100 people at indoor events, until the risk of spreading a contagious SARS-CoV-2 disease (COVID-19) ceases.

Finally, we would like to point out that, according to our information, a large number of new emergency decrees are under preparation. In this regard, it is worth mentioning at least the new Decree on Special Measures for the Creation of Conditions Under the First Paragraph of Article 83a of the Courts Act, which establishes special rules regarding the running of procedural deadlines in court proceedings and regarding the service of court documents. More detailed information on the latter will be available in a separate publication.

Below we touch base with some of the legal challenges in the wake of the crisis emerging from the coronavirus situation.

Employees

While coronavirus will have huge impact on the economy around the globe, health and safety of employees should be a foremost priority at the time of crisis.

Employment law measures currently available to the employer (subject to change pending the adoption of intervention legislation):

Healthy employees
a) The employer may agree with employees to work from home, if possible, as a preventive measure, with 100% wage.
b) The employer can unilaterally order employees to work from home or perform other work pursuant to Art 169 Employment Relationships Act, as these are extraordinary circumstances, when the lives and health of people are jeopardized, with 100% wage.
c) The employer may order employees to wait for work at home as a preventive health and safety measure, with 100% wage compensation.
d) The employer may order employees to wait for work at home due to temporary inability to provide work or business reason on the part of the employer (lack of orders and similar), with 80% wage compensation. Pending the adoption of intervention legislation in the following days, the employer will be able to recover 40% of such wage compensation by the state.

Healthy workers in quarantine ordered by the decision of the Health Ministry
a) The quarantined employees may work from home, if possible, with 100% wage.
b) The quarantined employees who cannot perform work at home will be entitled to temporary absence from work with 80% wage compensation wholly covered by the state pending the adoption of intervention legislation in the following days.

Infected and ill employees
a) These employees are entitled to temporary absence from work 90% wage compensation due to sickness for the first 90 days and a 100% wage compensation after 90 days, at the expense of the Health Insurance Institute of Slovenia from the first day onwards.

Measures for employees due to the closing of schools, kindergartens and nurseries
a) The employees who, due to the nature of his work, are unable to perform work at home may, on the basis of a statement provided, exercise the right to absence from work because of force majeure. During such absence, the workers are entitled to at least 50% wage compensation, but not less than 70% of the statutory minimum wage.
b) The employees may, in agreement with the employer, agree on flexible working time or work from home, if possible.

Ensuring healthy and safe working conditions on the premises
The employer is obliged to guarantee health and safety at work, including, as an example:
• Instructing the employees on how to prevent infection;
• Installing hand sanitizers on the premises.
• Discontinuing unnecessary travel and social connections.

The employer is advised to regularly monitor the conditions and updates from the authorities and to follow the actions of the competent healthcare institutions.

Contractual obligations in general

The new health situation has reached a level where many contractual obligations were or are expected to become affected in various ways. Contracts may contain various clauses for such situations, most notably Force Majeure clauses, as well as MAC/MAE clauses. Spread of COVID-19 may or may not be regarded as a FM/MAC event under a contract.

Sectors will be affected differently, timing can also be a factor, for example before or after the World Health Organization declared the disease to be a pandemic or the Slovenian Government declared an epidemic. For the time being, the duration of the crisis (in Slovenia) gives little support to any assertion of a FM event. MAE may fare differently, as it is already clear some sectors (most notably tourism) in Slovenia will suffer greatly and may have to deal with a prolonged drop in revenues and liquidity.

General legal provisions that may be relevant in addition to contractual provisions include:

a) Rebus Sic Stantibus – Art 112 et seq. of Slovenian Obligations Code (“OZ”) – generally allows a party to request (in court; i.e. not by mere correspondence with a counterparty) a change in contract provisions if the changes in circumstances compared to when the contract was entered into, are such that they warrant, according to general perception, equitable adjustment/termination.

There are further conditions for the clause to be applicable, such as predictability of changes in circumstances, ordinary business risks.

At this time it seems at least in Slovenia, rebus sic stantibus is not yet warranted except perhaps in exceptionally afflicted sectors. Across our network, we are seeing similar requests in the desire to initiate discussion on long term contracts that one or the other party is commercially not happy with.

b) Impossibility – Article 116 et seq. OZ – If fulfilment of a contract becomes impossible through no fault of a party, the contract will terminate.

Although CoVID-19 will generally not cause such circumstances by itself, the measures enacted by the public authorities might (e.g. border closure, public gathering bans etc.).

This concept too will more likely be used in the coming weeks and months. We have not yet seen this being asserted more generally but circumstances might change as more public restrictions are to come into force starting with 16 March 2020, including the shut down of all schools, kindergartens, closure of border with Itay, to name just a few.

c) Imperiled fulfillment defense – Art. 102 OZ – If one party’s condition (e.g. financial condition) deteriorates materially, the counterparty may suspend performance of its obligations until the other party either performs its part or offers collateral.

As more time passes and if the crisis does not abate, we will expect liquidity and financial conditions of many companies, particularly SMEs.

Loans to alleviate financial consequences of spread of COVID-19

Slovenian export and development bank (Slovenska izvozna in razvojna banka – SID) to step up financial support amid COVID-19 crisis

SID together with the Ministry of Economic Development and Technology is offering financial products in amount of 800 million EUR to large enterprises as of April 2020 as coronavirus crisis deepens.

The financial stimulus is intended to assist business in combating liquidity problems, including shortfall of distribution of services and products, demand downturn, supply chain shortfall, investment difficulties. Financial aid is to be offered in case of refinancing of outstanding loans.

SID will also adjust and re-evaluate terms of financing of existing clients affected by the crisis (i.e. adjustment of financial covenants, collateral, moratorium, extension of maturity etc.).

Existing financial products will be updated to provide emergency short term liquidity, working capital, offered to expanded sectors affected by the crisis (tourism, catering etc.).

Insurance services for exporting enterprises will be also be supplemented, offering pre export credit insurance (depending on circumstances of individual cases) to cover risks arising out of SARS-COV2 crisis.

Small to medium enterprises can benefit from the portfolio guarantees as part of the Fund of Funds offered by SID thus facilitating access to financing sources. Further information can be found at: https://www.sid.si/novice/ublazitev-financnih-posledic-sirjenja-virusa-sars-cov2-v-gospodarstvu

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Authors: Aleksandra Jemc Merc, Senior Partner, Ožbej Merc, LL.M., Senior partner, , , Aljaž Cankar, Senior Associate, Nina Bakovnik, LL.M., Senior Associate