COVID-19: Legal Challenges in Pakistan
The first confirmed case of COVID-19 was reported in Pakistan on 26 February 2020. As of 26 March 2020, the number of confirmed COVID-19 patients in Pakistan has arisen to 1,057. The federal and provincial governments have taken certain aggressive steps to contain the spread of the virus. These include the closure of all borders and international flight operations and a ban on the movement of people within the country and the shutdown of government offices except those providing essential services.
No one could have anticipated all this a couple of months ago. The businesses are now compelled to formulate new strategies and implement procedures to combat the challenges brought by the pandemic and to follow new guidelines issued by the government. Below, we have outlined certain significant risk factors likely to be faced by international businesses operating in or having connections to Pakistan:
Performance of Contracts
The mandatory closure of businesses, the ban on movement, the closure of borders, quarantines and other restrictive measures in Pakistan and across the world have created a crisis-like situation in the global supply chains. These measures have also impacted the ability of the contracting parties to comply with their contractual obligations.
It is advisable for businesses to make advance assessments of whether or not they would be able to fulfill their contractual obligations. Do they have a valid legal justification for non-performance under Pakistani law? Can the COVID-19 outbreak or the restrictive measures imposed by the government constitute a valid legal excuse for the non-performance of contractual obligations by a contracting party? What would be the strategy to mitigate losses?
The doctrine of force majeure is generally recognized in Pakistan. Pakistani law also recognizes the frustration of contract due to impossibility of performance. Would COVID-19 and / or the restrictive governmental measures constitute force majeure? Can these events and circumstances render the performance of contractual obligations impossible? What are the procedural requirements for a party to claim force majeure? Not raising these defenses in time or in accordance with the dispute resolution mechanism may be deemed a waiver of those defenses. Parties need to be vigilant about their rights. These are complex legal issues that require expert legal advice and a deeper appreciation of the relevant facts and circumstances of each case.
As commercial lawyers, we are fully aware of the relevant risk factors and are in a perfect position to assist the clients in making the right choices in given circumstances i.e., whether to defend the non-performance on legal grounds or to renegotiate with the counterparty in an effort to mitigate losses. Likewise, we also assist our clients in assessing the validity of the justifications provided by their counterparties for failing to perform their contractual obligations.
Dispute Resolution
The court hearings of regular cases are temporarily suspended. The courts are currently hearing only genuinely urgent cases. Although the courts are open and accepting new filings, in practice it is extremely difficult to commence fresh litigation. The travel ban and other restrictive measures taken by the government make it impracticable for the litigants to comply with the legal formalities associated with the institution of the court proceedings especially where it involves foreign litigants. The period of limitation has been temporarily extended with some limitations and some courts have also suspended the requirement of biometric verification of new petitioners.
A new or existing litigation still requires a careful reevaluation. Would a local court entertain an application for seeking an interim relief? What is the correct strategy for a party whose period of limitation is about to expire? We have experience of litigating commercial cases in the courts of all the provinces of Pakistan, the Islamabad capital territory and up to the Supreme Court of Pakistan.
Regulatory Compliance
COVID-19 pandemic has raised many concerns for companies operating in Pakistan. With the closure of workplaces and a ban on movement and gathering of people pursuant to the government’s notifications, a company may find it difficult to timely discharge its statutory obligations under company laws.
A company may not be able to prepare its audited annual financial statements, to hold its annual general meeting and to place the financial statements before its shareholders within the prescribed time. A company may be unable to hold the election of its directors or to file the required regulatory returns on time. Has the regulator allowed any concessions and relaxation to the companies amid COVID-19 pandemic? Should the company apply to the corporate regulator for an extension? Should the company disclose a COVID-19 related risk affecting its performance before engaging in securities transactions with the public? These and similar issues require careful consideration of legal issues.
Employment
Employment (labour) is a provincial subject under the Constitution of Pakistan. Each province has its own set of employment laws which can significantly vary from the employment laws of other provinces.
Provinces in Pakistan reacted differently to the COVID-19 pandemic. Some provinces with pro-labour policies were quick to introduce new regulations for protecting the working class and to order temporary closure of the workplaces except in case of businesses engaged in activities within the supply chain of certain defined essential services.
Is the employer legally required to close-down the workplace? Is the employer required to pay the employees during such closure? Can the employer compel the employees to work remotely? Can the employer downsize or terminate the employment during the period of such closure? Can the employer count the absence of an employee during the temporary closure towards his or her annual leave quota available under employment law?
We are fully up to date on the new labour regulations enacted by the provinces in the wake of COVID-19 pandemic. If you have any concerns related to your company policies, you may seek counsel from one of our experienced attorneys.
Workplace Safety
In the context of COVID-19 situation, some provinces have enacted legislations that make the employers responsible for maintaining a safe and healthy work environment failing which an employer may face criminal charges. An employer must be well aware of its legal obligations to maintain a safe and healthy work environment.
What should an employer do if the employee does not want to come to the workplace out of fear of exposure to COVID-19? Can the employer proceed against such an employee on account of his or her absence from work? What should the employer do if an employee or his or her household member has COVID-19 diagnosis or symptoms and is at risk of contaminating the workplace? Is the employer required to disinfect the whole workplace or a floor or just the workstation of the affected employee? Is the employer required to report such incidents to the regulator? Which businesses or workplaces are exempt from mandatory shutdowns?
Given the absence of well-defined safety standards, our experienced lawyers may provide valuable help and assistance to the clients to avoid and to mitigate the risks of violation of local workplace safety laws.
Government Business
Although, the government of Pakistan has ordered a lockdown and most of the government offices are closed certain federal ministries including the Ministry of Interior and Ministry of Finance are open and working. Caution is being applied and only bare minimum staff is coming to offices.
The offices which are open are only attending to urgent matters. The general public is being denied or provided limited access to government offices. The Securities and Exchange Commission of Pakistan is encouraging the companies to use its online portal and has suspended public dealings at its company registration offices. The Federal Board of Revenue, as well as, the central bank i.e., the State Bank of Pakistan has adopted similar measures.
The provincial governments have ordered a lockdown of provinces whereby only those departments and offices which are providing essential services are open. Only bare minimum essential staff is being allowed to work from offices.
The situation is changing rapidly as the federal and the provincial governments attempt to appropriately respond to COVID-19.
At Khan & Associates, we are closely monitoring the situation as it evolves. Our experienced attorneys continue to provide uninterrupted service to cater to the legal and business needs of our clients while working remotely.
If you have concerns or questions in respect of any issue affecting your business in Pakistan or you are assessing your position in general, please seek counsel from us and we are ready to provide to you all the required help and assistance to eliminate or mitigate any risks.
Please contact Mansoor H. Khan (mkhan@khanassociates.com.pk) our senior partner in the first instance.