Ireland - An international perspective – Views on key issues from around the globe

Supply chain disruption

Many of the supply chain issues have that have been seen in other jurisdictions have also affected Ireland. Where supply chain disruption arises and a party seeks to rely on a force majeure clause, the relief available to that party will depend on wording of the clause. As with other common law jurisdictions, a force majeure clause must be included in a contract. In Ireland, there is no legal presumption of force majeure and so if a contract does not contain a force majeure clause, the Irish courts will not read one into it.

The requirements that must be satisfied before a force majeure clause may be relied upon will depend on the wording and proper interpretation of the specific clause in question. It is important to review the wording of the clause carefully to determine if it is drafted in such a way as to cover the COVID-19 pandemic.

If a party wrongly relies on force majeure as a defense, it will leave itself exposed to a claim for breach of its contractual obligations and, at its most extreme, may see the counterparty terminate the contract for breach and seek potentially significant damages as a consequence.

The doctrine of frustration can also be considered and if found to apply, frustration will bring a contract to an end. In practice, however, the bar to bringing a claim in frustration is typically considered to be very high.

Financial contracts - Termination rights and supplier obligations to supply

The obligations on a supplier will depend on the precise wording of the relevant contract. Suppliers need to review the agreed contractual terms in order to determine if there is any possible relief in event of an inability to supply (such as a force majeure clause) or if there are any other terms, or where the counterparty becomes insolvent) that can be exercised.

If it is included in the relevant contract, a supplier may also seek to rely on material hardship clauses (often seen in the chemicals sector) which can temporarily alter a party’s contractual obligations in circumstances where they are suffering from material hardship(typically financial hardship).

If a supplier does wish to exercise a termination right that is included in a contract, it is important that parties to contracts carefully consider their obligations in relation to the delivery of notices.

As new contracts continue to be negotiated in the current environment, we are noticing a trend of suppliers becoming more acutely aware of the provisions relating to certainty of supply and are actively seeking to incorporate limitations which have arisen due to the COVID-19 pandemic. As contracts become more sophisticated in this area, often with bespoke provisions applicable to the specific supplier’s business, it emphasizes the need to carefully examine the agreed contractual terms before deciding on an appropriate course of action if difficulties do arise.

Health and Safety issues

What do we foresee as being the Health & Safety risks post lockdown?

Regulatory Enforcement
Under the Health and Safety and Welfare Work Act 2005, employers continue to have a duty to ensure, so far as is reasonably practicable, the health, safety and welfare at work of their employees, in addition to the health and safety of individuals not within their direct employment but those whom might be effected by their activities.

The Health and Safety Authority (“HSA”) has published guidance for employers on minimizing health and safety risks throughout the pandemic. The immediate approach of the HSA has focused on issuing advice and guidance with a series of announced and unannounced inspections of work places taking place to ensure that the Government’s Return to Work Safely Protocol is being adhered to. In our view, less serious failures of adhering to the protocol are more likely to be dealt with by way of advice and guidance, however, where employers are connected to repeated failures. or are identified as not having managed the risks appropriately (or at all), the HSA may take action ranging from issuing enforcement notices, to stopping certain work practices until they are made safe, to closing premises and ultimately prosecution.

The HSA has issued guidance on range of areas including:-

• how to undertake a risk assessment with regard to
• COVID-19
• notification applications if an employee contracts
• COVID-19
• biological agent risk group classification
• work related stress during COVID-19
• temperature screening requirements for workplaces
• under the Protocol
• appointment of a lead worker representative

The HSA is undertaking targeted, proactive, inspection of high risk industries and workplaces including activities in the Healthcare, Construction and Meat Processing Sectors to ensure that businesses are COVID-secure. It is understood that employers are being asked to demonstrate sufficient controls in respect of monitoring, supervising and maintaining social distancing of their employees while in the workplace.

Changing Guidance
The Health and Safety Executive (“HSE”) is contributing to Government guidance as more information is gathered and further scientific evidence secured about COVID-19. Consequently employers depart, at their peril, to the updated and changing guidance. There is now an obligation to appoint a lead worker representative to work with the employer to prevent the spread of COVID-19 in the workplace. This obligation derives under the Return to Work Safely Protocol and obliges the employer to ensure that the lead worker representative receives the necessary training from the employer and that the employer should also have mechanisms in place for regular communication with the lead worker representative and to address any concerns raised.

Home/Lone Working
Employee safety and wellbeing will remain paramount post-COVID and employers must consider not only the risk associated with those who return to the workplace, but also of those who continue to work from home. Home working risks include:-

• unsuitable work stations
• negative impact on stress and mental health or wellbeing
• injuries when undertaking activities unsuitable for
• lone workers
• increased vulnerability to violence (this could be domestic violence at home, amongst staff or consumer to employee)
• accidents or injuries in isolated workplaces

Although much criticism has been levelled that the 2005 Health and Safety Legislation is not specifically suited to tailor for the new reality of the majority of employees working from home, employers continue to have the same health and safety responsibilities to warn homeworkers as they do for those working onsite.

As homeworking becomes more permanent, employers need to consider and assess the workstation setup and display screen equipment used and ensure risk compliance with the underlying regulations. As employers are obliged to update risk assessments when new risks become identified, there is a corresponding obligation on employers to update their Safety Statement which is a unique requirement to Irish employers.

Driving for work
When employees continue to operate work vehicle in lockdown, a return to work is likely to see more of the ‘grey fleet’ on the roads, as employees look to avoid public transport or are unable/unwilling to take part in car share schemes. Under the governing Health and Safety legislation, an employer’s responsibilities may in certain circumstances, include the time when employees are driving at work. Requirements around driving at work are often misunderstood or overlooked by employers and therefore prudent employers ought to ensure that they have the requisite risk assessments undertaken and be certain that they have adequate information, instruction and training provided to employees in respect of vehicle condition, driver working time limits and fatigue etc.

Continue to focus on your key Health and Safety Risks
Understandably employers will worry about ensuring the business is COVID secure. This may result in attention being diverted from other health and safety concerns. Under the primary legislation and indeed under the Government Protocol it is essential that employers ensure any work equipment is regularly inspected and maintained and that staff are fully trained in respect of their health and safety obligations. Any changes to any standard working practices as a consequence of COVID-19 may lead to the need for new risk assessments to be undertaken if new hazards are identified or if there is a fundamental change to a particular work process.

Civil Claims
Where employees have been exposed to COVID-19 through work and tested positive, a civil claim may be made against the employer. However, individuals are exposed to COVID-19 in general society and it is likely, for the majority, to be difficult to prove the harm was caused by occupational exposure. In settings such as retail, health and social care provisions, however, the risk of transition may be more prominent and proof of exposure easier to establish. It will be important to assess whether or not there is sufficient evidence available to establish the causal link between any breach of duty of care towards the employee and the resulting positive COVID-19 diagnosis.

It is important not just from a regulatory perspective, that employers take all reasonable practical steps to ensure the health, safety and welfare of their employees but that they also avoid breaching their duty of care in order to reduce the risk of litigation and to align with the culture of the business.

Restrictive covenant enforcement

The general position in Ireland is that restrictive covenants are void and unenforceable as restraints of trade. However, the Irish courts will permit limited exceptions to that general position, but only in circumstances where the employer can demonstrate that (1) it has a legitimate business interest to protect; and (2) the relevant restriction goes no further than is reasonably necessary to protect that interest.

In order to ensure the greatest chance of enforceability, restrictive covenants should be drafted as narrowly as possible. For example, in deciding whether to enforce a restriction, the Irish courts will examine how each of the below have been drafted and whether they go beyond what is necessary to protect the employer’s legitimate business interest:

• the conduct that is sought to be restricted
• the geographical scope of the restriction the duration of the restriction.

Employment tribunals and employee relations

The vast majority of employment-related claims are adjudicated upon by the Workplace Relations Commission (“WRC”). The claims are heard initially by an adjudicator and then on appeal to the Labour Court.

Examples of statutory claims heard by the WRC include claims for unfair dismissal, constructive dismissal, claims relating to payment of wages and unlawful deductions, claims alleging discrimination and claims relating to breaches of working time legislation. Maximum compensation varies from claim to claim but does not exceed two years’ remuneration (salary + benefits).

Claimants generally have a timeframe of six months in which they may bring a claim to the WRC.

Regarding employee relations, the Irish industrial relations system is regarded as voluntary and does not require employers to engage in collective bargaining or formal recognition of trade unions.

However, recent legislative amendments have improved the framework for workers seeking to improve their terms and conditions in circumstances where collective bargaining is not recognized by their employer. There is now a mechanism for trade unions, on behalf of their members, to have disputes regarding remuneration or other terms and conditions assessed and determined by the Labour Court.

Under the Industrial Relations Acts, it is also possible for an employee to refer a “trade dispute” to the WRC. The definition of a trade dispute is very broad and includes practically any issues related to employment. This is often the mechanism by which employees, who may not have acquired unfair dismissal rights due to insufficient service, can litigate if they are dismissed.

Certain employment-related claims are dealt with by the Civil Courts. This includes gender discrimination, breach of contract claims and personal injuries litigation.

Impact on your insurance

1. Irish Sector - Consumer market
Irish Political and parliamentary oversight ‘Cost of Insurance Working Group’ maintaining spotlight on insurers, focusing on the consumer and impact on pricing to the consumer. There is also a pressure to keep premiums down and under review. This is to be balanced with the need to maintain supply in the market and not seeking to limit the insurer players in the market.

2. Irish Sector - Regulatory oversight CBI/Brexit
With limited budgets and profits challenged, the clear focus of insurers and brokers will have to be regulatory compliance and reporting. Keeping abreast of anticipated Brexit preparedness will be key. Our all-island Irish offering will become a key differentiator.

3. Insurers - links to Corporates
We see a huge shift to commercial and ‘balanced’ negotiations encompassing premium, rebates and claims. Corporate clients have sought our advice in preparing for these negotiations eg the Windward Project 20+ hotel portfolio. The delays in hearing of Irish test cases regarding Business Interruption, and noted delays in impact, has diluted any appetite for litigation at this time.

4. Insurance defense - Claims management
The lack of ready access to a functioning court service continues to negatively impact the defense and insurer strategy, effectively a barrier to pressing matters on. We did not see the annual uplift in settlements in July. We anticipate uptake in October to December. The business drivers for solicitors, barristers, insurers (balance sheet) and of course plaintiffs themselves, will drive this.

We have as yet not seen an uptick in ‘COVID’ claims. We see health and ‘essential services’ in terms of employers’ liability claims as the initial and first wave likely Q2/3 2021.

Increasing risk of fraud

In Ireland, a key issue for consideration and active management is businesses’ anti-corruption policies (“ABC”). As we grow used to the staff working from home, companies should ensure that they review their ABC policies to ensure that they are fit for purpose and reflect their employees current working environment. The Criminal Justice (Corruption Offences) Act 2018 places a positive obligation on companies to have an ABC policy in place and to (i) ensure it is fit for purpose and (ii) that staff receive training on it. Now is in an important time for companies to ensure that their ABC policy is a living document which reflects the current environment. Key consideration should be given to checks and balances such as the ability to sign off on agreed payments, issuing purchase orders, procurement and accepting gifts. Should you require any assistance in (i) drafting your ABC policy or (ii) updating it to reflect your current working environment please contact a member of our team.

Construction issues

The Guide has highlighted five key COVID-19 issues facing the Global Construction sector, namely:

1. solvency of contractors & suppliers
2. liquidated or delay damages
3. ongoing disruption and pressure to increase productivity
4. contract administration and assessment of contractor claims
5. negotiation or risk of increased adjudication and litigation

No matter where the contracting parties appear in the supply chain, managing these risks will be key to the ongoing ability of contracting parties to deliver projects in a timely manner and on, or close to, budget. Ireland has experienced a longer and more wide reaching impact from the COVID-19 lockdown than the UK, or indeed than was suffered in continental Europe. The full impact of the closure from 20/26 March 2020 until 18 May 2020 is, as yet, unknown. Unless the Project fell within a COVID “essential services” exclusion, it was essentially curtailed.

The primary and secondary legislation introduced over COVID-19 has not prescriptively shut down building sites but rather sought to limit the ability to have supplies delivered, to have contractors on site and even when sites re-opened, by insisting on compliance with social distancing rules.

The desired outcome is that the supply chain will see that there is a need to continue to work together and collaborate on the time and cost impact, but this is not always enshrined into the contract terms that ultimately prevail. Many contracts did not contain a “Change of Laws“; or indeed a “Force Majeure” clause referencing a pandemic type situation.

It is in the interests of the entire supply chain from funders to suppliers and insurers that a system collapse does not occur. A wide reaching financial collapse and insolvency across the Construction Sector will lead to increased costs across the board, projects being delayed and not within budget and becoming financially unviable.

Claims for Liquidated and delay cost damages will gradually evolve and hit the market in the coming months. Within reason, it will be in the wider industry interests to see the floodgates open and a myriad of claims emerge.

This will be particularly the case for Private Sector Contracts (not that Public Sector Contracts will be unaffected) - where Contract “condition precedent clauses” will be the subject of much scrutiny. Traditionally, the Construction sector sees significant claims being made for financial loss due to Contract delays, but care will be needed when this occurs with COVID-19 financial loss claims.

COVID-19 has and will definitely continue to impact upon contract administration and has already created a surge of previously unanticipated challenges to ensure the smooth delivery of a construction project. To meet this challenge, stakeholders with strong project management will come to the fore and thrive. There will be little room for the disorganized to survive. This will in turn lead to considerable pressure to increase and meet previously agreed programme dates, and ensure productivity.

The Government has provided some guidance for Public Works contracts, which in summary recommends that contracting parties should collaborate and work together to find consensus. Generally the view is that extensions of time will be permitted, with limited delay damages for increased overheads and costs imposed upon Contractors, in meeting shutdown costs, and also in meeting re-opening and direct costs to meet social distancing requirements on site (including reduced productivity). The Private sector is unlikely to welcome and adopt generic guidelines and levels of acceptable collaboration will depend on issues such as “need”, alternative options and/or trust between the parties and continuing relationships. Claims arising in the world of private contracts, will yet come from contractors, sub-contractors and the wider supply chain. The full impact of the initial COVID-19 impact, shut-down and new world of “working with the virus” is as yet still an unknown. The potential costs ranging from direct increases to their overhead, in terms of materials supplied, hire of plant and related costs, inability to perform other scheduled contracts on time etc.

The potential impact upon the stakeholders’ balance sheets is wide reaching, with lost/reduced profit being the most likely outcome for most stakeholders. Care will be required for all industry stakeholders, including the legal advisers, as the only outcome that is certain is that claims will be contested on all sides. The goal is not to promote disputes but to find a way to minimize claims and manage disputes to avoid insolvency and hefty legal and experts input and bills.

Real Estate

The world of commercial leasing as we have known it, is changing. What were previously unthinkable scenarios are not part and parcel of the COVID-19 world in which we are living.

Landlords are facing rent abatements demands; rent holidays, rent reductions and/or insolvency of what were previously seen as “Blue Chip” commercial Tenants. The expectation is that a commercial tenant will be in a strong financial position to meet rents and rates charges and that they will keep the premises in a good and safe condition. It is nobody’s fault, but these normal expectations are not the new reality. Risk and potential for default is the new norm.

Commercial tenants, particularly in the worst hit, leisure and retail sectors are facing reduced, or non-existent footfall, and corresponding massive drops in turnover. Commercial leases as we know them carry fundamental terms of certainty of tenure, fixed rent usually payable quarterly in advance, which is subject to rent review after an extended period of five plus years. Tenants also face the risk of significant dilapidations covenants, and are often not permitted to assign or alienate to a third party without a landlords “reasonable” consent. Reasonableness often being assessed against the financial viability of the proposed assignee and dependent upon the review of a number (usually three) of previous years trading. The tenant also expects to be given quiet enjoyment for the full term.

Despite the massive impact of COVID-19 on the landlord/ tenant relationship and the strong commercial market enjoyed in Irish cities (particularly Dublin) rents have not collapsed. There is evidence of collaboration, particularly where the tenant covenant is strong and where there is an international dimension to the relationship. The Irish landlord can frequently be divided into groups identified as either domestic/International institutional landlords or the domestic entrepreneur landlord. The ability for compromise and collaboration is heightened where a tenant seeks to alter its immediate lease terms to meet trading difficulties, where the landlord is an institutional entity and can weather the storm. Decisions can be made on a wider book value, rather than on a profit and loss cash value.

In other words the Institutional Landlord has a greater ability to assess the future viability of the tenant and it’s medium to long-term ability to recover and repay any arrears. Whereas the entrepreneurial landlord has a potentially more urgent need to immediate repayment of arrears. Where this arises the landlord then has to assess if the tenant is an insolvency risk and if it is better to have a legal battle and vacant possession or reduced terms and ongoing occupancy.

Landlord and tenant disputes are usually technical in nature and even if the issue on its face is to do with unpaid rent and/or service charges, it is possible to find that lease terms only provide for a confidential arbitration process and no ability for the landlord to issue debt recovery and/or ejectment proceedings.

In the era of COVID-19 disputes, it is more likely to see tenants invoking provisions under the lease to delay repayment, including seeking to refer any dispute to Arbitration and not the Courts.

Alternatively, if the tenant is a special purpose vehicle and there is no wider parent company guarantee the tenant may be more prepared, than heretofore to allow the Landlord retake possession and not challenge debt proceedings if the tenant has no other assets.

The other side of the coin is where the tenant (with a wider exposure and other assets or a Guarantor) has sought rent abatement/reductions and been refused, and simply sought to take matters into their own hands and pay what “they can afford”, then they risk facing winding up proceedings, which they can ill afford.