According to the World Health Organization, the coronavirus is a large family of viruses, that causes illness ranging from the common cold to more severe diseases such as Middle-East Respiratory Syndrome and Severe Acute Respiratory Syndrome and death. It is a strain that was discovered in 2019 and has not been previously identified in humans. Corona Virus is zoonotic, this means that it can be transmitted.
The virus is a new disease and the medical practitioners are still learning how it spreads as at the time of writing. The virus is thought to spread mainly through close contact or through respiratory droplets produced when an infected person coughs or sneezes.
The first confirmed case of the disease in Nigeria was announced on the 27th of February, 2020, when an Italian citizen in Lagos tested positive. The coronavirus was declared a public health emergency of international concern on the 30th of January, 2020 and subsequently a pandemic by the World Health Organization on Wednesday 11th of March, 2020. This has resulted in many governments worldwide taking drastic steps to contain the disease. Governments and Central Banks have rolled out measures to shore up the global economy from the worst effects of the virus but this hasn’t prevented the surge of losses.
The European Central Bank announced it would buy more than $800 billion worth of bonds to slash the cost of borrowing for the Eurozone government and companies and in turn encourage spending. The bank of England also announced billions of dollars worth of purchases of its bond and a second emergency interest rate cut for good measure. The US Federal Reserve also took steps to support popular money market funds which investors have been selling off recently.
In this article, I will be considering the economic effects of the disease, with specific reference to contracts and the laws guiding labor in Nigeria. Throughout this disease degenerating in February, the global stock market has taken a major blow, losing more than 20 percent of its value. These stock market piles have alarmed passive investors whose portfolios track the movement of the index and the expert investors are also struggling. Thus, the rally in bonds seems to be ending as investors brace for the next stage of the coronavirus. Even Tesla has suffered a very severe blow.
The entertainment sector, for instance, has canceled Coachella, the English Premier League, Formula 1, UEFA champions league and the NFF in Nigeria just announced the ban of any form of training including street football. The implication of this is that for betting companies, for companies with distribution rights, for the clubs and the fans, over 30 billion USD will be on hold.
As at the time of writing, The Aviation Industry has suffered over 50 percent of its value going to the trains, with different countries imposing travel restrictions and outright bans. In Nigeria specifically, about 6 domestic flights have been canceled. The implication of this is, the airport officials, the import and export, the shares and stock of the aviation industry remain on hold or plummet downwards.
The price of oil also fell by 15% on Monday. This is as a result of the effect of the coronavirus, global demand fell due to the curtailing of movement.
As economic activities slow down, job losses are likely to occur. This could range from airline attendants to shop assistants who may have little or no savings to cushion the effect.
The question is therefore whether the severity of this outbreak is sufficient to enable employers and employees to temporarily or permanently be excused from the performance of their contractual obligation, my answer is, “it depends”.
This depends on the policy that the organization the person is working in has adopted. For example, some organizations have policies that provide for an exemption from work or working remotely while others don’t. For the organizations that have these policies, the severity of the situation would be considered and employees may be exempted from work either on the condition of not being paid during the period of absence or for the more generous organizations, to be paid. Some employers may decide to pay only for the number of hours that have been spent doing work. For the organizations that do not have such policies, the workers would have to rely on government or public orders. In Nigeria for instance, there is a standing order for all educational institutions to be closed for the next 30 days. The teachers, lecturers and other employees may still be paid because this would be considered under force majeure which we will discuss shortly.
Secondly, the Nigerian Employee Compensation Act would come into play. The employee compensation Act provides an open and fair system of guaranteed and adequate compensation for injury, disability, death or disease arising out of or in the course of employment. This law applies to both the public and the private sectors and it means that if an employee who is forced to come to work contracts the virus, the employer will be liable. The Nigerian Social Insurance Trust Fund Management board is empowered to implement this.
Thirdly, occupational health and safety may also be considered. In Nigeria, this is regulated by the factories Act, Cap F1 LFN 2004. Though there have been several attempts to repeal this act and enact an Occupational Safety and Health Bill which is at the second reading since 2017. This Act may be moribund, however, the Nigerian government has since domesticated the ILO’s National policy on occupational safety and health No.155. This legislation advances the belief that safe and healthy working conditions are crucial to the attainment of social justice and economic growth.
Force Majeure
This is a legal doctrine under which a party may be relieved from liability or non-performance. When “acts of God” such as floods, earthquakes, wars, terrorism, government restrictions, and other unforeseeable circumstance occur. If parties wish to protect against unfortunate circumstances that may occur, they may provide expressly for this in their agreement. In the absence of an express provision, there may be little the law can do to come to the aid of a party whose ability to perform its contractual obligation is impacted by external supervening events. The exception to this may be the doctrine of frustration. Force majeure is an unforeseeable circumstance that prevents someone from fulfilling a contract the following elements must exist to constitute force majeure.
- The act must have been beyond the control of the party.
- The act must not be reasonably foreseeable by the affected party.
- The effect of that act cannot be avoided by the affected party.
In some jurisdictions, force majeure is a general concept and courts may declare that a particular event such as the coronavirus pandemic is a force majeure event, however under English Law which Nigeria has inherited, force majeure is a creation of contract as discussed above. Thus, depending on the manner the clause is framed, whether it is stated as “unprecedented circumstances” like the present situation or specifically listing the contents. Where it is stated as “unprecedented circumstances, the court may be generous enough to include the COVID-19. Sometimes, just the Phrase force majeure is used, in this case, the word may be void for uncertainty, however, depending on how compelling your argument may be, it might potentially be held to cover a range of matters.
Given the unprecedented nature of the coronavirus and the speed at which it is spreading around the world, the actions of the government suggest that the coronavirus may constitute an event under any force majeure clause.
However, it must be stated that just because a force majeure event has occurred, it does not necessarily mean that parties would be protected from liability for failing to perform their obligations under a contract.
Thank you for taking the time to read.
Ndam Nander Esmeralda
NYSC Associate at Paul Erokoro SAN and Co.