In the News: Coronavirus spurs legal and regulatory responses; Hong Kong introduces quarantine

February 10, 2020 | BY

Vincent Chow

Coronavirus continues to stifle business in China; lawyers and regulators respond with guidance and measures; Hong Kong introduces quarantine for mainland travellers

Police stand guard outside the Lady MacLehose Holiday Village, a temporary quarantine camp for the Wuhan coronavirus, known as 2019-nCoV, in Hong Kong, China, on Thursday Jan. 23, 2020. Photographer: May James/Bloomberg

Lawyers issue coronavirus guidance for businesses

The coronavirus originating in Wuhan that has spread to at least 27 countries and territories has significantly disrupted business operations in China and beyond as employees have been ordered to work from home and numerous cities have been put on lockdown. Since the beginning of the outbreak, the legal community has been quick to provide legal advice to businesses including employment and contractual advice now that the public holidays for Chinese New Year have ended.

Jeanette Yu, a Shanghai-based partner at CMS, wrote that in Shanghai, employees' work during the extended holiday, whether from home or not, must either be paid for as overtime or compensated later in the form of leave. On the other hand, in Beijing, the period of extended holiday from Feb. 3-7 is designated as working days so no overtime pay needs to be arranged for employees' work during the period. She wrote in a separate alert that businesses may consider suspending operations even after the end of the extended holiday. If operations are resumed within one month, the company must pay employees normal salaries, according to a special coronavirus notice issued by the PRC Ministry of Human Resources and Social Security on Jan. 24. If business is suspended for more than one month however, employees are entitled to just living allowances depending on the city in question.

China's Contract Law (中华人民共和国合同法) states that parties may terminate a contract in an event of "force majeure," defined as "objective circumstances which cannot be foreseen, avoided and overcome." According to Morrison & Foerster's Beijing-based partner Paul McKenzie and Hong Kong-based partner Timothy Blakely, if a party cannot perform a contractual obligation under such circumstances, the party will generally be partially or fully exempted from contractual liability in proportion to the circumstances of the force majeure under Chinese law. They recommend referring to the language of the contract as the starting point for assessing whether a force majeure remedy is available. An explicit force majeure clause that captures the coronavirus and its impact is likely to also outline the remedies available and the steps needed to invoke those remedies. However, even if the coronavirus epidemic does not meet the criteria of a force majeure event according to a particular contract, parties may still have recourse in accordance with the "changed circumstance" doctrine, whereby a contractual party may petition the courts to modify or rescind a contract. They highlight the fact that the Supreme People's Court confirmed that force majeure applied to the SARS epidemic in 2003.  

More from CLP:

Force majeure: PRC Contract Law

Employment contract: PRC Employment Contract Law

Hong Kong introduces quarantine for mainland travelers

Hong Kong began quarantining all travelers from mainland China entering the special administrative region from Feb. 8 in response to the coronavirus outbreak. The 14-day quarantine period applies to local residents as well. The quarantine measures were introduced through the chief executive Carrie Lam's special powers under Hong Kong's Prevention and Control of Disease Ordinance.

Those not showing any symptoms are required to self-quarantine. Travelers with nowhere to stay are being quarantined in designated facilities. Anyone who breach the restrictions will face a prison term of up to six months, a fine of up to $3,200, or both. Hong Kong recorded its first death from the virus on Feb. 4 and now has close to 40 confirmed cases. Public hospital workers have also been striking due to calls for a complete border shutdown. The Hong Kong government has closed down several major border crossings with the mainland but have stopped short of a complete shutdown.

Hong Kong law also provides for force majeure remedies in the event of contractual non-performance. However, in their client alert, the Morrison & Foerster partners point out that force majeure only applies in Hong Kong if the parties have an explicit force majeure clause in their contract, although the city's common law "doctrine of frustration" may provide relief nevertheless. Clauses identifying "disease", "epidemic", or "quarantine" would be explicit enough, in addition to more general events such as "acts of God" and "acts of government". The partners suggest assessing the epidemic holistically, both in terms of the outbreak itself as well as the government actions as a result. 

More from CLP:

Growing epidemic: In the News: Coronavirus Spreads

PBOC encourages bond issuance in response to virus

China's central bank has announced a raft measures to support the economy in response to the coronavirus epidemic. It said that it will support the issuance of bonds by Chinese financial institutions including financial bonds, asset-backed securities and short-term financing bonds.

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