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The increased importance of law during the coronavirus crisis

The application of national emergency powers acts also impacts international business activities.
Yellow Aalto flag. Photo: Juha Juvonen / Aalto University
Photo: Juha Juvonen / Aalto University

The importance of the law increases in many crisis situations, such as the current coronavirus crisis, which has extensive impacts also on different areas of business life. Legal know-how is needed both in the regulation of societal emergencies and also when business operators try to work out their post-crisis responsibilities. History has also shown that, in many cases, some of the regulations introduced during the crisis period continue to be applied afterwards as well. For example, the financial crisis led to extensive regulation of the financial sector, which then continued also after the crisis.

‘The coronavirus crisis also shows how in law and legal research both the international perspective and the internal perspective of the state are of central importance. A specific feature of the coronavirus crisis is that different countries have closed their borders and started to apply their own national emergency powers act, which are significant also for the regulation of international business responsibilities. This national legislation differs significantly even between EU countries,’ explains Kari Hoppu, Professor of Business Law at the School of Business.

Force Majeure clauses and national provisions

Companies control their contractual risk by including in contracts clauses which limit their liability. One form of limitation of liability is Force Majeure clauses. In addition, some states, but not all, have provisions in national law on the effects of Force Majeure on contractual relations. From the point of view of a company engaged in international business, their legal position depends on which state it is whose laws are to be applied to any particular contract. This legal position differs particularly between continental European civil law states and Anglo-American common law states.

Professor Kari Hoppu explains that the coronavirus crisis is causing significant disruptions in contractual relationships between companies. This is evident both in international business and in domestic agreements.

‘In international business, the challenges are related to contract matters such as supranational supply chains, while in domestic contracts a common issue has been the obligation of restaurants to pay rent if business activities are prohibited. It is therefore expected that the importance and interpretation of Force Majeure clauses will take central place after the coronavirus crisis in studies of businesses’ responsibilities both internationally and in Finland. In addition, companies must be able to get out of the Force Majeure situation in a legally correct manner.’

Professor Kari Hoppu has studied the topic and written an article entitled ‘The interpretation of Force Majeure situations in the context of COVID-19’, which will be published in the June 2020 edition of the legal journal Degensor Legis in Finnish.

Take part in Professor Kari Hoppu's webinar on the interpretation of Force Majeure clauses on Wednesday 6 May at 1 pm: https://aaltowebinar.page.link/biz

The webinar is in Finnish and is open to everyone and free of charge.

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