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Corporate lawyers in high demand as coronavirus hits businesses

Corporate lawyers are experiencing a surge in work due to the coronavirus as companies seek ways to back out of contracts or prevent deals from falling apart.

Lawyers said they were experiencing increases in calls and client queries of 25 per cent or more as a result of legal issues stemming from the outbreak.

“We’re in uncharted territory here,” said Aoife Keane, a disputes partner at Seddons. “As far as I can remember nothing has had the same ramification for business to business contracts and the supply chain.”

Companies have been calling on force majeure clauses in contracts that allow them to renege on or delay orders, with a record number enforced by Chinese companies in the last few weeks.

Large international law firms including Skadden, Paul Weiss and Linklaters said their lawyers were fielding calls from clients with disrupted supply chains or mergers and acquisitions that were under threat.

Companies have also been inquiring about adding standalone “coronavirus” clauses to their employment policies, which take into account quarantine leave, sick pay and the obligations on employers to protect their workers.

These would set out different rules to normal company policy around sickness and absence, and deal with issues such as worker pay and leave in situations where workers chose to self isolated.

The increase in demand is complicated by the fact that some law firms have been forced to temporarily shut down their own offices and work from home to counter the spread of the virus.

Baker McKenzie briefly closed its London office after concerns over the health of an employee, while US firm Quinn Emanuel shut its New York office for a week after a partner tested positive for coronavirus.

This week Linklaters said it was asking half its London office to work from home on Thursday and Friday in order to “stress test” lawyers’ ability to work remotely and use new technology installed in the last two years. Hogan Lovells also said it was asking staff to test working from home in its US and UK offices over the next two weeks.

A research note published this week by Skadden pointed to Valeritas, a medical technology company in New Jersey, which filed for bankruptcy in February citing a supply chain problem exacerbated by coronavirus.

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“Force majeure clauses vary widely in terms of the kind of event they cover,” said Miles Robinson, a Mayer Brown disputes partner. “It’s not as though a factory has burnt down. You might be struggling to get workers in but to what extent can you prove that’s preventing you from performing? “

Elsewhere, companies are revising M&A documents to prevent acquirers from backing out of deals by excluding the virus from so-called material adverse change clauses.

In February, digital broker E-Trade filed a document in the US relating to its tie-up with Morgan Stanley. E-trade stipulated that “epidemic, pandemic or disease outbreak (including the Covid-19 virus)” would not count as a material adverse effect and halt the deal.

“It will take months before this really ramps up and parties end up in litigation,” said Ms Keane of Seddons, “but I certainly see a lot of that on the cards.” She said some companies had added pandemics into their force majeure and M&A literature in the wake of the Sars epidemic but the average business “just hasn’t thought that through”.

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