ShippingWatch

Shipping lawyers being overrun: "A bit like when OW Bunker collapsed"

The coronavirus creates a lot of work at Bech-Bruun's shipping division. Force majeure in particular can create disputes, as there are widely different interpretations from country to country, Partner Johannes Grove Nielsen tells ShippingWatch.

Ifølge Johannes Grove Nielsen, der er advokat og partner hos Bech-Bruun med speciale i shipping, så blev antallet af coronahenvendelser rettet mod advokathusets shippingafdeling mangedoblet i slutningen af sidste uge. | Photo: Bech-Bruun

While most companies are slowing down activities due to the coronavirus pandemic, the opposite scenario is taking place at law firm Bech-Bruun right now.

The firm's shipping division has been flooded with inquiries from customers since Danish Prime Minister Mette Frederiksen (Social Democratic Party) on Wednesday announced that large parts of Denmark would be shut down.

According to Johannes Grove Nielsen, partner and lawyer at Bech-Bruun and specialized in shipping, the number of corona-related inquiries at the firm's shipping division increased many-fold late last week.

Bech-Bruun has established a corona hotline for companies to call into. Telephone and video conferences are important tools for the law firm in this unusual situation.

"There's a total run on, and it's difficult to keep up. This is an abnormal situation. It's a bit like when OW Bunker collapsed," says Grove Nielsen.

Force majeure or not

But what are the companies trying to find out when they call in?

Grove Nielsen explains that many of the inquiries relate to whether the companies, which include everything from shipping companies to suppliers, can use the force majeure term if they cannot deliver on their order and thus fail to fulfill their contracts.

If you entered an agreement late last week, before Mette Frederiksen on Wednesday went on TV, one could argue that you should have anticipated how this could develop, as Italy was shut down at the time. A cautious person would have probably expected that this could develop"

Johannes Grove Nielsen, partner at law firm Bech-Bruun and specialized in maritime law

Here the law firm emphasizes one thing in particular when consulting: the time of when the contract was signed.

"You have to look at the date, the agreement, and comparing this to what a cautious individual might have been able to predict at the time," says Grove Nielsen:

"If you're a subcontractor to the oil industry, and you've signed a contract in early January when news of corona had just emerged, and you have to deliver by Wednesday, then it's unquestionably a case of force majeure. I would then process the case for free," says Grove Nielsen.

What if one imagines a contract that was signed two weeks ago?

"If you entered an agreement late last week, before Mette Frederiksen on Wednesday went on TV, one could argue that you should have anticipated how this could develop, as Italy was shut down at the time. A cautious person would have probably expected that this could develop."

Corona clause

There is a big difference between which court systems the contracts have been signed under. In Denmark there is a broad force majeure concept, while American and British practices are somewhat different, the lawyer explains. As such, it is important for the sector to understand this, as it could otherwise cost millions on the bottom line.

"There are many places that operate with a force majeure clause. These usually include something about diseases, but one needs to pay attention, as there's a difference between whether it says pandemic or epidemic. If it's based on English law, you can't use force majeure for anything if you've written pandemic and it's only an epidemic at the time," says Grove Nielsen.

As such, Bech-Bruun is telling its customers these days that they must include a so-called corona clause in order to be fully secured.

Right now we're advising companies to include a corona clause in their contracts, stating that they can deliver x number of goods, so far as the situation doesn't develop"

Johannes Grove Nielsen, partner at law firm Bech-Bruun and specialized in maritime law

"Right now we're advising companies to include a corona clause in their contracts, stating that they can deliver x number of goods, so far as the situation doesn't develop," says the partner and lawyer, adding that many inquiries also relate to how new rushed legislation in various markets impact the companies.

This also requires significant resources at Bech-Bruun, and the firm is thus keeping its offices closed as far as possible, relying instead on doing video conferences with clients as much as possible.

Grove Nielsen clearly feels how the severity of the coronavirus outbreak has reached the companies in the past week.

"Last week I got a couple of calls concerning the coronavirus in one week. This week I think we've experienced it as the bankruptcy firms had it during the financial crisis. It's a very significant and severe change," says the lawyer. 

English Edit: Daniel Logan Berg-Munch

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