PETALING JAYA: As lockdowns unwind and governments and households around the world pick themselves up, many may find that the Covid-19 pandemic is evolving from a health issue to an exponentially bigger economic emergency.

If the virus has not sickened or killed you, it has prevented you from finishing that project. Or it may bankrupt your employer, and you may be jobless a few months down the road, with loans to pay.

The losses as a result of the movement control order (MCO) is estimated to be about RM98bil, if it is extended throughout May, said Prime Minister Tan Sri Muyhiddin Yassin.

On May 1, it was estimated at RM63bil. That same day, he surprised the country by announcing a conditional MCO (CMCO) effective May 4. Yesterday, Muyhiddin announced the extension of the CMCO to June 9.

The avalanche of litigation - resulting from defaults in contracts - is a looming economic and financial emergency, said the Associated Chinese Chamber of Commerce and Industry of Malaysia (ACCCIM).

Legal action committee chairman Michael Chai Woon Chew said: “The moment you get to office, you will be facing invoices for rent, contracts would have defaulted.

“We cannot delay the (tabling of this Bill) because the moment businesses reopen, these disputes will arise, ” said Chai, who is also deputy secretary-general 1.

“The saving lives part has and is in the midst of being done. Now is (the time) to save the economy. The government has to save it quickly before more businesses die.”
 

It would be costly, time consuming and unproductive for businesses to have deal with litigation, adjudication and disputes when they should be focusing on the business, he said. “I would think that the government would want a speedy recovery of the economy, ” he said.

ACCCIM, together with other associations under with the National Chamber of Commerce and Industry of Malaysia (NCCIM), have sought Putrajaya over the past six weeks to put in place laws which would give “temporary relief” by “time-freezing” contractual covenants they could not perform during the MCO period.

He said this would protect businesses from impending litigation.

“We need to time-freeze this MCO period until some normalcy returns, ” Chai said.

Other member associations under NCCIM include the Malay Chamber of Commerce Malaysia, Malaysian Associated Indian Chambers of Commerce and Industry, the Malaysian International Chamber of Commerce and Industry, and the Federation of Malaysian Manufacturers.

PM’s Department in charge of legal affairs Takiyuddin Hassan said in early May that several Covid-19 Bills would be tabled in the second July 13 Dewan Rakyat sitting, not the one-day May 18 sitting.

Senior lawyer Datuk Roger Tan said that would be too late. “If the MCO in some states or CMCO are not lifted on May 12, or are extended with the restrictions still in place, many contracts would default and lawsuits would already have started.
 

“It is imperative that the Bill be tabled before the MCO is lifted. Otherwise, the bill must contain provisions for suits already commenced to be stayed, pending the defaulting parties getting the necessary reliefs under the Covid-19 legislation. The Bill must also provide that its provisions will apply retrospectively.”

He said its enactment would save time and resources for both the courts and the contracting parties. “The Covid-19 legislation is necessary to avoid our courts being overwhelmed by commercial disputes. It must act as a strong legal shield against many legal swords that will be hurled at defaulting parties in the coming months.

“The government may also have to consider providing not just temporary reliefs but also permanent ones for the defaulting parties.

“The way forward is to avoid litigation, which can be long and protracted. This Bill will not only provide a lifeline to the defaulting parties to start afresh but also save lives.”

There have been calls since March by the business fraternity to have this legal shield to protect individuals and businesses.

“There is a lack of political will and too much politicking and political polemics at the expense of the rakyat, ” Tan said.

On whether it is possible to fast-track it even with a one-day sitting on May 18, he said it is possible to fast-track it, including through Senate, if the Bill is ready.

“This is a bi-partisan Bill to save the nation and politicians must unite for once for the sake of the nation.”

There are huge downsides in the absence of such a law. A developer contracted to complete a building fail to do so because his supplier is unable to send building materials during the MCO. The developer is slapped with late delivery charges. To cut losses, he delays paying his contractors, who missed paying his workers.

The contagion effect spreads, filtering down to the purchaser who has taken a loan.

ACCCIM’s Chai said: “It is not which sector will be most affected. Every contract will have a problem.”

But the immediate hit would be tourism, construction, retail, industrial and services sectors. “This is Visit Malaysia Year, local and foreign companies would have booked hotels, restaurants and convention centres, ” he said.

The business fraternity brought up the legal defence of force majeure and impending post-MCO litigation with the International Trade and Industry Ministry “a day or two” after the March 18 MCO.

Force majeure is a French legal defence term that refers to unexpected external circumstances which prevent contracting parties from performing their obligations.

Under this defence, the underlying event must be unforeseeable. Natural disasters, strikes and terrorist attacks are examples. Declaring force majeure may allow a party to a contract to avoid liability for non-performance.

Legal experts said Covid-19 pandemic is likely to qualify but anyone invoking that defence needed to show that it was impossible to perform their contractual duties.

But force majeure is a clause in a contract, said Chai. The stronger party may have excluded that clause during earlier negotiations, rendering the weaker party defenceless. A lot of contracts do not carry that clause.

Towards the last two weeks of March, the business fraternity got wind of Singapore’s Covid-19 Bill, then yet to be passed, and they were excited. The Singapore Covid-19 Bill was detailed and well-thought-out and they wanted to customise it.

“We raise the issue with Putrajaya to have something similar until last Monday, April 27, ” Chai said, adding that Singapore passed and gazetted it even before they “open up”.

The Singapore Parliament passed the Covid-19 (Temporary Measures) Act 2020 Act on April 7. Press reports quoting Home Affairs and Law Minister K. Shanmugam said the Bill was “put together in a matter of days.”

Its passage through Parliament was expedited through a Certificate of Urgency. All three readings were done in one sitting, debated, passed the same day, and operational almost immediately.

It involved the finance ministry, the trade and industry ministry and the private sector such as law practices and other organisations. It was “a whole-of-government effort”.

Chai said: “We are all businessmen. Our first concern is how to pay staff and outgoings. We do not want to be burdened with legal disputes through no fault of either party.

“I think the government is trying to do a balancing act. They are worried about the international business community. Some parties may want to get out of a contract. If rules are changed suddenly, Malaysia may not be considered as an international player.

“So Singapore is selective, in order to balance it. But that does not exclude the need for such legislature to provide temporary relief who do not want to contracts to default.”

Chai said the situation is dire and urgent. In an April 13-21 ACCCIM survey of 916 respondents, only 10% see the need to retain 76%-100% staff. About half would need more than six months to recover while 12.8% were uncertain.

Malaysia, under the new Perikatan Nasional government, will be sitting for its first Dewan Rakyat on May 18. Its second sitting is July 13.

https://www.thestar.com.my/business/business-news/2020/05/11/businesses-seek-early-tabling-of-covid-19-bill