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09-Apr-2020

On 7 April 2020 Singapore passed the COVID-19 (Temporary Measures) Act, 2020 (Act) to provide temporary relief to parties who are unable to perform their contractual obligations due to the COVID-19 pandemic (COVID-19), amongst other measures. It must be noted that the provisions of the Act relating to temporary relief for inability to perform contractual obligations will come into effect from the date that the Minister of Law, Singapore, appoints by notification in their Gazette.

Contracts covered under the Act

The Act aims to cover contracts entered into or renewed before 25 March 2020 and obligations that are/were to be performed on or after 1 February 2020. Amongst others, the following (termed as Scheduled Contracts in the Act) are covered by the Act:

Ø  Lease for non-residential properties;

Ø  Construction and supply contracts;

Ø  Contracts for the provision of goods and services for events and tourism; and

Ø  Certain loan facilities granted by a bank or a finance company to SMEs (businesses with turnover of not more than S$100 million in the latest financial year) where loans are fully or partially secured against commercial or industrial   immovable property, plant, machinery or other equipment used for business purposes in Singapore; and

Interestingly, the Act aims to bring within the purview of a ‘COVID-19 event’ - laws, orders, directions of any other country which are made by reason of or in connection with COVID-19.

Reliefs provided under the Act

The Act provides several reliefs in respect of scheduled contracts, including:

Ø  Non-commencement or discontinuance of court proceedings against the counterparty or its surety or guarantor;

Ø  Non-commencement or discontinuance of arbitration proceedings under the Singapore Arbitration Act (Chapter 10) against the counterparty or its surety or guarantor;

Ø  Prohibition on enforcement of any security over immovable property as well as movable property that is used for the purposes of a trade, business or profession;

Ø  Prohibition on making applications for winding up of a party or its surety or guarantor;

Ø  Prohibition on making a call on a performance bond given in relation to construction contracts.

Additionally, the Act provides for temporary relief for financially distressed individuals, firms and other businesses by providing for modifications to several other legislations in Singapore such as the Bankruptcy Act, Insolvency Restructuring and Dissolution Act, Companies Act, Limited Liability Partnerships Act, Business Trusts Act.

The Act also provides for temporary measures for conduct of meetings, court proceedings and Syariah court proceedings, remission of property tax as well as control orders to prevent spread of COVID-19.

Mode of availing reliefs

A party that wants to avail relief under the Act is required to send a notification, called a “Notification for Relief” to the counter party seeking relief as a result of COVID-19. Upon receiving a notification for relief, the counterparty cannot take any prohibited action (detailed above) against the party seeking the relief, and any existing proceedings may be stayed. However, if the notification is disputed by the counterparty, then any such disputes will be reviewed by an ‘assessor’. An assessor is appointed by the Minister for Law, who will decide if the nonperformance was caused by a COVID-19 event and can grant the requisite reliefs.

Parties are to represent themselves before the assessor (no lawyer representation). There is no appeal from the assessor’s determination.

Duration of relief provided under the Act

These measures provided for under this Bill will not exceed more than 6 months from its commencement date (Covered Period). However, the Minister for Law may provide that the measures will be in effect for a period of less than 6 months.

Food for thought

The COVID-19 pandemic has led to a global crisis, and several parties are no doubt not going to be in a position to comply with their contractual obligations because of it. The unprecedented nature of the pandemic has plunged the general public into a state of distress, not only for their health and safety but also with respect to the welfare of their businesses and contractual relationships they may have entered. Singapore has moved swiftly to try to curtail liability and reduce the number of matters that land up in a dispute due to COVID-19. The Act aims to provides some much-needed succor to sectors that will be hit rather hard.

It will be interesting to see if India and other nations worldwide decide to take a cue from this legislation and follow suit byinitiating similar measures to mitigate disputes. It is possible that this legislation, may also give rise to other complex questions of conflict of laws, if other countries adopt differing standards or  provide varying levels of protection to affected parties.

-       Raj Panchmatia (Partner), Peshwan Jehangir (Partner), Jyoti Sinha (Principal Associate) and Anindya Basarkod (Senior Associate)

Disclaimer: This Ergo is neither legal advice nor does it seek to interpret the Singapore COVID-19 (Temporary Measures) Act, 2020. This Ergo is purely for information purposes. Please consult your lawyers for any legal advice you may require in respect to the Singapore COVID-19 (Temporary Measures) Act, 2020.

For any queries please contact: editors@khaitanco.com

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