The Legal attention points
COVID-19 is heavily disrupting social and economic life. Below you will find a number of legal issues to consider in the current environment.
- Contractual Rights & Obligations
- Information Technology
- Public Procurement
- Corporate Governance
Contractual Rights & Obligations
Public policy measures put in place to contain the spread of COVID-19 result in significant operational disruption for many companies. Staff quarantine, supply chain failures, cancellations of events, sudden reductions in demand from customers are creating serious issues for companies across a wide range of sectors.
Many companies are (temporarily) unable to perform their contractual obligations and in many cases this inability has a domino-effect affecting the whole contractual chain.
Am I liable or can I hold my supplier or service provider liable for non-performance or late performance?
Review contract stipulations
Assess the consequences of late performance or non-performance due to COVID-19 under liability clauses, force majeure clauses, etc.
In many cases, the consequences of COVID-19 may fall under a force majeure clause (or in lack thereof under the legal definition of force majeure), meaning that a party cannot be held liable for its non performance. However, a force majeure event in respect of your own subcontractor/supplier may not always qualify as force majeure in your own relationship with your customer.
Identify next steps
Implement rapid actions to address current and future risks and uncertainties.
Does my insurance cover costs, damages incurred due to COVID-19?
Review insurance policies
Exclusions of insurance coverage may apply and your insurer may refuse coverage.
Assessing such refusal and, if possible, demonstrate that coverage does apply.
What if my solvency becomes impaired?
Protection against creditors
Given the pressure on the economy, there is a risk that orders are cancelled, transports cannot be executed, creating a liquidity problem. It is important to implement a strategy to be granted creditor protection for a certain period of time in order to restructure your business. More in depth restructuring scenarios can be explored.
- GDPR in itself, does not prevent to take measures to fight the pandemic. However, measures should still be GDPR compliant in order to lawfully process personal data, also in these exceptional times
- Under GDPR, the processing of personal data concerning health is subject to strict rules, also in the context of employer – employee.
- Several national European Data Protection Authorities (DPA) issued guidance, as well as the European Data Protection Board (19 March 2020).
- It is key to apply proportionality and data minimization principles. In this context, it is interesting to note that recital 46 of the GDPR mentions the control of an epidemic as an example of public interest and vital interest. The information obligation is crucial, and should amongst others touch upon the retention period.
- Many employees are working from home. Private communication networks are often less secure than professional ones, leading to cyber risks.
- Be prepared as a business to cope with cyber incidents in these times. Is your Cyber Breach Plan up-to-date and can it be rolled out and managed without all key people in the office?
- Via an Information Security Policy (“ISP”), employees are instructed to take measures when working remote (VPN, password protection, not to print confidential information, etc). It is recommended to verify whether your ISP sufficiently addresses the risks of associated with working from home.
Numerous ongoing public procurement contracts are feeling the direct impact of the Corona crisis, especially in the light of the measures to limit the spread of the Corona virus, contained in the Ministerial Decree of 18 March 2020. It is expected that the realisation of public contracts in many sectors will be slowed down or halted.
Contractors in Belgian public procurement contracts may invoke that contracts need to be revised in view of “unforeseeable circumstances”.
There are solid arguments to state that the recent outbreak of the Corona virus and its various practical and economic implications can indeed be qualified as an “unforeseeable circumstance”. Possible examples of unforeseeable circumstances are the late supply of certain materials, travel restrictions, personnel organization etc.
A revision of a public procurement contract may (amongst others) consist of (i) an extension of the execution deadline, (ii) additional compensation or even (iii) termination of the contract.
Public procurement contracts may contain an express clause on unexpected circumstances. In the absence of an express clause, contractors can rely on the default rule on unexpected circumstances, contained in the Royal Decree on the general rules for the execution of public procurement. Under this default rule, contractors should notify the contracting authority about the unexpected circumstances within thirty days after they have occurred or after the date on which the contractor should reasonably have been aware of them.
Contracting authorities could also wish to suspend temporarily the performance of a public contract.
Contractors/contracting authorities (where applicable) should:
- evaluate whether unexpected circumstances can indeed be invoked;
- determine if, and as the case may be, which contract revision is the most suitable;
- assess whether it is suitable to suspend the contract and if compensation of the contractor is necessary, and;
- duly notify the contracting authority.
Price revision formulas
Furthermore, the impact of the Corona crisis on price revision formulas needs to be closely monitored.
The Belgian law on public procurement states that price setting in public procurement contracts should be reevaluated in the light of certain economic and social factors. Price fluctuations in (raw) materials and fluctuations in exchange rates are very likely to occur because of the Corona virus and can trigger a disproportionate decrease of price revision formulas. Under certain conditions, such disproportionate decrease allows for financial compensation.
Contractors/contracting authorities should:
- determine whether price setting should be reevaluated; and
- assess whether the conditions to obtain a financial compensation are fulfilled.
Fines and penalties Federal government
The Federal Government has confirmed that it will not impose fines or penalties on contractors in federal public procurement contracts where the execution was delayed or halted if they are able to demonstrate that the delay or non-execution was caused by the Corona crisis.
To date, this measure has only been confirmed for federal public procurement contracts. However, it is reasonable to expect that other public authorities and bodies governed by public law will follow this example shortly.
Government contracting outline by Deloitte Legal
For a detailed look at the Impact of COVID-19 on proposals and execution regarding public procurement contracts, please consult this slide deck.
Organization of corporate decision-making
Each company has inevitably taken certain measures following the Corona virus to safeguard the health of its officers, directors and shareholders, and to prevent the spread of the virus. These measures will in some cases be of such a nature that they might have an impact on the working of decision-making bodies.
Particular questions rise on the organization of board and shareholder meetings in these exceptional times of social distancing or worse, of illness, and consequent unavailability, of board members and shareholders.
Businesses will inevitably face hurdle in the organization of the aforementioned meetings. It might be possible to hold meetings on paper, or to postpone meetings until measures would become less stringent. New technologies provide opportunities to hold virtual meetings, allow early voting by e-mail, or follow meetings via video-call. The system of proxy voting facilitates the representation of multiple persons by one single person in the room.
Preparation of the company’s annual report
For most companies, directors and officers will be in full preparation of their annual reporting obligations towards their shareholders. This year, they will face unprecedented and significant challenges in describing the circumstances significantly affecting the company’s development and in providing information on important events following the end of the financial year, now the Corona virus outbreak is extending across the globe, having major adverse economic, financial and operational impact for corporations.
The Corona impact on corporate actions
Several legal, regulatory and organizational measures have been taken as a consequence of the Corona virus outbreak. These measures will certainly have an impact on contemplated corporate actions such as restructurings, (re)capitalizations, issuance of financial instruments, etc. For instance, access to the notary public is currently limited to extremely urgent cases.
It is important to assess the impact of the measures on timelines of existing corporate actions, and to take into account the latest information when setting up timelines for new corporate actions.
Life Sciences & Health Care
Medical Devices Regulation – 1 year postponement and Union-wide derogations
On 23 April 2020, the European Parliament and Council adopted Regulation 2020/561 on medical devices. This Regulation has two main objectives.
First, it defers the application of MOST of the provisions of the Medical Devices Regulation (2017/745) by one year to 26 May 2021. This postponement will take the pressure off national authorities, notified bodies, manufacturers and other actors so they can focus fully on urgent priorities related to the COVID-19 pandemics.
In addition, Regulation 2020/561 amends Article 59 of the Medical Devices Regulation and makes it applicable from 24 April 2020 to allow the Commission to extend, in exceptional cases, the validity of a national derogation for a limited period of time to the territory of the Union ("Union-wide derogation"). National competent authorities may indeed grant national derogations to authorise placing on the market for devices for which the conformity assessment procedures have not been carried out but the use of which is in the interest of public health or patient safety or health. Now the Commission will be allowed to extend such national derogations to the territory of the Union by means of implementing acts which shall set the conditions under which the device may be placed on the market or put into service. Taking into account the current public health crisis, these measures will allow the Commission to adopt Union-wide derogations in response to national derogations in order to address potential Union-wide shortages of vitally important medical devices in an effective manner.
Regulation 2020/561 is limited to the Medical Devices Regulation (2017/745) and does not affect the In Vitro Diagnostics Regulation (2017/746).
State aid and antitrust exemptions for Life Sciences & Health Care companies
In the fight against COVID-19, the Life Sciences & Healthcare industry is crucial. Governments want to incentivise companies to contribute at every level of the COVID-19 relevant supply chain, be it R&D, testing, or manufacturing.
In addition, it is clear that competitors at times need to co-operate more closely in order to ensure a near-perfect allocation of scarce resources. For this purpose, competitors may need to share more sensitive information than they would typically do, or they may need to coordinate their production. Under normal circumstances that would not happen for fear of infringing antitrust laws, risking crippling fines, and having to face damage claims in court.
The European Commission has created the overall framework for governments and for companies to meet these needs.
Read more in our State aid for Life Science & Health Care companies: COVID-19 update.
Guidance for 3D printing, hand disinfectants and protective equipment
On 30 March, the European Commission issued three guidance documents to assist manufacturers in ramping up production of essential medical equipment and material in 3 areas, in the context of pandemics:
- production of masks and other personal protective equipment (PPE);
- leave-on hand cleaners and hand disinfectants (gel, solution);
- 3D printing.
The Commission announced that guidance on medical devices will be made available in the coming days.
These documents also aim to assist manufacturers and market surveillance authorities in making sure these products comply with safety standards and are effective.
Commission working on proposal to stay the date of application of the Medical Device Regulation
The normal deadline for implementation of the Medical Devices Regulation (“MDR”) is May 2020 (and this was already very challenging for most companies even before COVID).
The European Commission has publically announced that it is working on a proposal to stay the date of application of the MDR with 1 year, due to the current pandemics. The Commission is working to submit this proposal in early April for the Parliament and the Council to adopt it quickly. This only concerns the MDR, not the Regulation on IVDs (for which the deadline for implementation is May 2022).
Measures to tackle medicinal products shortages in the context of pandemics
Further the publication of a Royal Decree (RD) on 24 March 2020, the Belgian Minister of Public Health can take certain measures if the following conditions are met:
- The measures are necessary and proportionate to combat the SARS-CoV-2 virus;
- The measures meet the current needs of public health and primarily aim at the adequate distribution of and access to the medicinal products.
The State is obliged to compensate the damage on the basis of the measures referred to in the RD.
The measures which the Minister can take are the following:
- Restrict or prohibit the export of a medicinal product or raw material;
- Temporarily restrict the supply of a medicinal product, including magistral or officinal preparations, to a maximum quantity per patient;
- Temporarily restrict the supply of a medicinal product or a raw material to pharmacies to a specified quantity per pharmacy;
- Temporarily restrict the supply of a medicinal product, including magistral or officinal preparations, to hospital pharmacies;
- Order the redistribution of stocks of a medicinal products or a raw material, either by way of a return to wholesalers or by way of direct redistribution to pharmacies;
- Requisition stocks of a medicinal product or a raw material with a view to redistribution;
- Authorise and regulate the delivery of medicinal products by doctors or other health professionals;
- Order that the stock of medicinal products at wholesalers can only be sold or supplied according to the instructions of the Federal Agency for Medicines and Health Products.
The RD also stipulates that art. 12 qq of the Law of 25 March 1964 on medicines is applicable to raw materials. This Article provides that marketing authorisation holders and wholesale distributors of a medicinal product shall ensure, as far as possible under their respective responsibilities, that medicinal products are continuously available to those authorised to sell them in order to meet patients' needs. Wholesalers shall supply all medicinal products to wholesale distributors within three working days, to the extent that the supply is in compliance with their public service obligations, and to persons authorized to deliver medicinal products to the public.
The measures apply as soon as the Minister's decision is notified to the person on whom the measures are imposed (individual measure) or after publication of the Minister's decision on the FAMHP website (collective measure).
The measures must be limited in time, may be renewed for a maximum period of one month and may not exceed 12 months.
On 20 March 2020, the European Commission, the European Medicines Agency (EMA) and national Head of Medicines Agencies (HMA) have published new recommendations for sponsors on how to manage the conduct of clinical trials in the context of the coronavirus disease (COVID-19) pandemic. The guidance provides concrete information on changes and protocol deviations which may be needed in the conduct of clinical trials to deal with extraordinary situations, e.g. if trial participants need to be in self-isolation or quarantine, access to public places (including hospitals) is limited due to the risk of spreading infections, and healthcare professionals are being reallocated. This guidance includes a harmonized set of recommendations, to ensure the utmost safety of trial participants across the European Union while preserving the quality of the data generated by the trials. It also advises how these changes should be communicated to authorities. There is specific advice on the initiation of new clinical trials for treatments of COVID-19, and in particular on the need for large, multinational trial protocols. This is in line with the call issued on Thursday by EMA’s human medicines committee (CHMP) for robust trial methodology in clinical trials for potential COVID-19 treatments or vaccines.
The Belgian Federal Agency for Medicinal and Health Products issued guidance on patient access to Investigational Medicinal Products in the context of pending clinical trials where a patient cannot access the hospital, or where this is not advisable (also in the context of potential overload at the hospitals due to the coronavirus crisis) the IMP can be sent directly to the patient. This process happens under the principal investigator’s liability. The guidance clarifies that the sponsor of the clinical trial cannot intervene in this process, for confidentiality and integrity reasons. This specific process must be documented and be entirely traceable.
An export authorisation is now required for export outside the EU of personal protective equipment (protective spectacles and visors, face shields, mouth-nose protection equipment, protective garments, gloves) in accordance with the Commission Implementing Regulation 2020/402 of 14 March 2020 (which applies for 6 weeks).
Telehealth and teleconsultations
How will the crisis shape the world, and LSHC business, of tomorrow? How will it change our regulatory frameworks? Digital health, in particular telemedicine and teleconsultations have never been more relevant. Belgium traditionally has been reluctant in embracing such applications (contrary to neighboring countries). It will be interesting to see how their use during this crisis will impact the future of healthcare. In a recent advice on the pandemics, the Belgian Order of Physicians addresses teleconsultations, referring to its previous advice of 21 September 2019, which provides that these should only replace face-to-face consults when justified by “particular circumstances”. The current pandemics qualify as such circumstances, which allow physicians to make a certificate on the basis of a phone call anamnesis with the patient. The physician should balance the risks between a teleconsultation and a face-to-face consultation (case-by-case). If the physician considers that a phone call is sufficient to assess the risks for the patient, the medical community and society, and if s/he has serious reasons to consider that the patient is capable of taking care of her/himself at home, a certificate can be issued on this basis.
Medical devices and CE marking
Medical devices and CE marking in times of pandemics - exceptional circumstances call for derogations from the general rules. European commission Recommendation 2020/403: where national market surveillance authorities find that personal protective equipment or medical devices ensure an adequate level of health and safety, they may authorize that they be made available on the Union market, even though the conformity assessment procedures (including affixing of CE marking) have not been fully finalised. Such authorization is for a limited period of time and while the necessary procedures are being carried out. Art. 11.13 of the Medical Devices Directive (Art. 59 Regulation) indeed allows EU Member States to authorize derogations from conformity assessment procedures in the interest of public health.
Global supply chain and medicinal products shortages
EMA, the European Commission and national competent authorities in the Member States have organized the first meeting of the EU Executive Steering Group on shortages of medicines caused by major events to discuss measures aimed at addressing the impact of the outbreak of COVID-19 on the supply of medicines in the EU. The group will support coordinated actions to address the potential impact of the outbreak of COVID-19 on the supply of medicines in the EU.
Implementation of the Medical Devices Regulations
MedTech Europe calls on the European Institutions to postpone implementation of the new Medical Devices Regulation and In Vitro Diagnostics Regulation and resume it 6 months after the present crisis has passed. The pandemic indeed severely disrupts healthcare stakeholders’ efforts to implement these regulations (respectively by 26 May 2020 and 26 May 2022).
European standards for medical supplies
Certain European standards were made freely available to facilitate increase of production for certain medical supplies - this concerns filtering masks, medical face masks, eye protection, protective clothing, surgical clothing, medical gloves and similar products.