Freeze the deal, Freeze the contract

It goes without saying that the Covid-19 pandemic is a sanitary crisis. The emphasis should be -obviously- on saving lives in the first place. Secondly, on guaranteeing good health conditions of the population, in particular, of those belonging to risks groups. Adopting all possible necessary measures to stop the spread of the disease and control its devastating effects shall become also a necessity. As a consequence of all of the above, constrain civil rights and liberties including stopping economic activities has been considered as an unavoidable sacrifice in the balancing of interest mechanism of democratic systems all around the world, including Spain and Japan.

This paralysis of economic activities indicates a variety of legal consequences and effects to almost any legal entity. From partners in commercial projects, or parties in contracts, to litigation actors, not to mentions public administrations, authorities, large corporations or individuals in their daily life legal relationships. Accordingly, Spain and Japan have been forced to, on an exceptional basis, declare the state of alarm (Spain) and the state of emergency (Japan) substantiated on Constitutional grounds and principles. New laws and regulations needed to be promulgated with the main purpose of protecting legal and economic relations under a crisis status, with the rule of law and legal certainty as benchmarks for legislative actions.

Under this unprecedented scenario, legal advisers, acting with sensibility and empathy towards their clients, should be aware of legal problems and threats directly or indirectly related to the consequences of the Covid-19 crisis. Here is where the timing element plays a crucial role. Even if denouncing contracts for infringement, formally unilateral withdrawal or formal claim could come at first as apparently easy and rapid attainable responses, they might not be the best of all options. In the current situation, the wisely adopted “Tokyo 2020 in 2021” conclusion seems to be, by large, the win-win solution for all parties involved, when and if analogy applies. It is not Olympics cancellation but rather Olympics deferment.  Put in simple terms, do as if this period of standstill had not existed at all, for all interested parties at stake and transpose all rights and obligations to a later time. In those legal relationships in which freezing the deal or freezing the contract works as a credible solution due to the supervening cause of force majeure, parties will do well constantly to maintain the current status of legal obligations as it is.  This is also the solution laying behind the official suspension of deadlines ordered to all administrative and judicial procedures. If we can freeze the deals, the contracts and the procedures, we will all do as if this period had never legally existed, under the bona fide principle between commercial parties, which apply to Japanese and Spanish companies with common interests. With hope and commitment, the same or maybe new challenges that lay ahead of us, would be dealt with the same productive way, but just in future better times.  

Salvador Rodríguez Artacho
Partner at Hernández-Echevarría Abogados

Author: SpCCJapan