India is a rising economic powerhouse and with the entry of Prime Minister Modi in 2014, India has built its international presence, entered in landmark economic deals and has become a regional power and major jurisdiction for multinational companies. With a population of over 1.3 billion, Modi and India needed to take proactive steps to limit the spread of COVID-19.
In what can be described as a brave but much needed move, Modi enforced a 21-day lockdown for all of India. The world’s biggest lockdown to date has meant legal teams both in law firms and multinationals, based in India and those managing people in India remotely, were forced into crisis management and how to mitigate legal risk. While other functions may be seeing their workload decrease, lawyers are facing one of their busiest times.
Areas of Law with Greatest Impact
In my conversations with legal leaders in India, and those outside with India as part of their remit, they’ve identified key areas where law firms and in-house teams will see increased demand or increased workload:
- Supply Chain Management/Disruption—The performance of services under many contracts is likely being delayed, interrupted or even cancelled due to restrictions created by COVID-19. With the country-wide lockdown, service providers may legitimately be unable to perform their contractual obligations. Some may use this opportunity to extricate themselves from an unfavorable deal and others may cite COVID-19 as a basis for renegotiation of price or other contractual provisions. And while force majeure law is embodied under sections 32 and 56 of the Indian Contract Act 1872, not every contract will result in a valid force majeure defense. In the event contracts do not have a force majeure clause, the impacted party will need to explore other avenues, including the doctrine of frustration under section 56 of the Indian Contract Act, 1872 or adjustment clauses. Companies will need to proactively revisit their contracts to assess and manage the legal risk and liabilities.
- M&A Transactions—Mergers and acquisitions are being affected. The terms of transaction will likely need to be examined as there could be material adverse change, which will result in parties needing to conduct further due diligence. Parties also may no longer be able to fulfill certain representations and certain closing conditions may not be met during this time, delaying the closing of the transaction. Whilst several measures are being initiated by the regulatory authorities to facilitate businesses with their deals, it is paramount that stakeholders are keeping up to date with daily updates and that all concerns of the impact of COVID-19 on the deal is noted in the transaction documents.
- Corporate Governance—As business continuity is essential, especially for those supplying essential material and services, the board, the management team and the legal teams need to work closely together. The board needs to stay informed and understand the material risk at hand. It needs to work together with the management teams to develop an immediate action plan to keep the supply chain moving as best as possible. Boards will need to remain cognizant of the regulatory changes, which are continuous, and make sure the business is connecting with its consumers ensuring they are aware of relevant information.
- Employment Law—The safety, travel and health of employees in all roles are paramount. In recent days, concerns have risen over migrant workers struggling to reach their homes with the travel restrictions. For those essential works (i.e., those delivering supplies), it is important they have the resources they need. Companies need to ensure they are complying with all the formal regulations including the regulations around hygiene. They also need to educate the staff without causing panic. Employees need to be aware of their entitlements during this period. For example, employees must decide on whether they grant paid leave for those unwell and employee data privacy is key, especially in relation to health issues. Open communication is key, daily check ins are important not just to check on work progress, but also their wellbeing. With lawyers being stretched, support and encouragement is paramount.
The Focus for In-House Teams
GCs need to be consistently sharing knowledge with their teams. In India, the location regulations are changing daily, if not hourly. Ensuring regular contact with teams is the only way to keep productivity as high as possible. Using technology will help. However, it is not just about crisis management; it is also about looking to the future.
India, and the world, seemingly changed overnight. Initially, Sales pushed to close deals before they no longer could do so, while legal was working hand in hand with functions like HR. Everyone was in triage mode. But as businesses move into the next phase, management of the situation – managing customer relationships, amending contracts – has become the priority:
- Parties seem understanding now that contracts need to be amended for the future, but they also need to be adjusting them for the day when they are less understanding.
- For companies providing and delivering essential materials and service, they need to ensure that employees have the resources to keep the supply chain moving while adhering to regulations.
- Having the proper documentation, particularly in complex landscapes is key. As in the point above, the right documentation keeps the supply chain moving (e.g. permissions for goods to cross state lines).
At the moment, lawyers do not have a spare moment in the day. However, this may change at any time and GCs want to ensure their teams are ready for the new normal. What do they need to do to survive Q2? Will Q3 be about recovery? If and when the lawyers have downtime, GCs will want them thinking about the future, encouraging them to upskill, take a course and/or learn a language. The GC should do the same.
Support from Law Firms
Law firms in India have stepped up to get a handle on the situation for themselves and their clients. For example, leading law firm Khaitan & Co immediately put into effect a COVID-19 crisis desk. They are holding regular webinars, publishing articles and providing fact sheets to show their clients that they are aware of the government updates, the regulation changes and the key areas they need to focus on. Indian regulations have always been a mine field, and as this is a continuously changing landscape, the law firms are playing a crucial role in supplying information and support.
For now, there are no talks of cuts within the legal sector; both multinationals and law firms are paying salaries and bonuses are being paid out. But no one can predict what India or other markets will look like when we emerge from the lockdowns. GCs need to prepare for the worst, but they are also remaining optimistic and seeking opportunities to keep their teams active and engaged.