Extraordinary circumstance COVID – 19

COVID-19: CURRENT ECONOMIC AND LEGAL IMPACTS

The extraordinary social and economic circumstances caused by the outbreak of COVID-19 have confronted the entire society and business sector with various challenges and complex problems. Due to the uniqueness of this new situation, a series of regulations and state measures have been passed, which require correct interpretation.

Our law firm actively monitors the current affairs in relation to the abovementioned issues.

Bellow you can find an overview of separate legal chapters in which we have shortly presented the consequences of the current situation in relation to the legal and economic framework of business operations.

    COURT PROCEEDINGS

    After several months of extremely limited and slow activities, the courts currently schedule and hold hearings under special circumstances.

    In addition to the standard protective measures (wearing masks, disinfection of hands and measuring of temperature), on the basis of the Personal Identification No (OIB) judicial police officer check if persons entering the court building need to be in self-isolation.

    The current epidemiological situation has once more confirmed the importance of the application of modern technologies in the operations of the judiciary. Under the latest amendments to the Civil Proceedings Act from September of last year the possibility of conducting hearings by audio-visual means has been envisaged.

    However, certain courts, still only rarely use the mentioned possibility of remote holding hearings and adducing evidence by using audio-visual devices. The decision on the conduct of hearings in the described manner depends exclusively on the technical possibilities of each court and the discretion of the court conducting the proceedings.

    We believe that the adaptation to the current situation by conducting hearings through audio-visual means constitutes a necessity in order to continue the functioning of the entire judicial system, as well as for the purpose of observing the right to trial within a reasonable period of time.

    ENFORCEMENT PROCEEDINGS

    The situation caused by the epidemic had resulted in the suspension of enforcement proceedings during these extraordinary circumstances, with certain exceptions (e.g. child support, unpaid salaries or severance pay etc.)

    The duration of extraordinary circumstances had been determined for the period of three months, with the option of extension for another three months. Under the decision of the Government of the Republic of Croatia from July, the duration of extraordinary circumstances prescribed under the Act on Interventional Measures in Enforcement and bankruptcy Proceedings during Extraordinary Circumstances the duration of extraordinary circumstances had been prolonged until 18 October 2020.

    In accordance with the mentioned Act, notaries had stopped all actions in enforcement proceedings until 18 October 2020.

    Since the period of suspension of enforcement proceedings has expired, the continuation of enforcement shall be performed in the three following stages:

    1st stage 19 October 2020 – cases received by 30 June 2020 will be delivered;
    2nd stage 20 November 2020 – cases received by 31 August 2020 will be delivered;
    3rd stage 20 January 2021 – cases received by 18 October 2020 will be delivered.

    In addition to the aforementioned, amendments to the currently valid Enforcement Act have been announced.

    MEASURES TO HELP THE ECONOMY

    From September to December 2020, measures of job preservation aid will be in force for employers whose economic activities have been impaired due to the extraordinary circumstances caused by the epidemic (COVID-19).

    The measure refers to transportation, storage, hospitality, event, art and entertainment activities (National Classification of Activities – Classes H, I. J, M, N, R and S) and comprises aid in the amount of HRK 4,000.00 per full-time employed employee.

    All employers, regardless of the activity they perform who employ up to 10 employees and cannot perform their activities in accordance with the Decisions of the Civil Protection Headquarters (national, county, local self-government unit) or whose operations are in any way limited due to the Decisions of the Civil Protection Headquarters (national, county, local self-government unit), provided that their income has dropped by 50%, can apply for aid in the amount of HRK 2,000.00 per employee.

     

    LEGAL AND LABOUR RELATIONS

    Although the new situation presents a great challenge for both employers and employees, there have been no amendments of labour regulations. The employer must take into account which decisions may be carried out unilaterally, and for which the consent of the parties is necessary, whereby he cannot disregard the role of the works council. i.e. of the union representative (if they operate with the employer).

    It is important not to leave the full potential of labour law regulations unutilized, but for it to be thoroughly used by the involved parties, not only during the COVID-19 outbreak, but also during the drafting of employment contracts and internal regulations, i.e. during the comprehensive regulation of employment relations, which is only possible if the legislation takes account of the reality and practical requirements of business operations.

    LEASE ARRANGEMENTS

    Contractual relationships in Croatian law is largely determined by the legal principle that agreements need to be adhered to (Latin pacta sunt servanda), i.e. that contractual parties are obliged to meet their contractual obligations.

    The problem is that as of the conclusion of an agreement until its application, the legal and economic environment may drastically change due to extraordinary circumstances which could not have been foreseen at the time of the conclusion of the agreement, as is the case with this pandemic, and due to which the fulfilment of obligations has become overly hindering for one party or would incur extremely large damage to it. The law stipulates an option for the inflicted party to request for the agreement to be amended or even cancelled (Latin rebus sic stantibus).

    The fulfilment of legally stipulated requirements is appraised on a case-by-case basis, taking into account the contractual obligations and particular circumstances of the lessee, since this provision could not be applied to lessees whose business had not been significantly affected by the extraordinary circumstances arising from this socio-economic crisis.

    Apart from the aforementioned legal instrument, the lessee could also invoke force majeure, to try to exempt himself from the liability for the damage caused to the lessor by the non-payment of lease.

    In any event, the specific contractual relationship and the situation of the parties need to be reviewed in order to establish their positions in the new situation and to find an appropriate solution.

    ADDITIONAL INFORMATION

    Hanžeković & Partners continuously monitors the decisions of the Government, along with the legislative amendments passed in order to mitigate the consequences of the COVID-19 epidemic.

    We are at your disposal for all legal issues arising from the current socio-economic situation, as well as all legal issues in relation to the aforementioned, so feel free to contact us at: hanzekovic@hanzekovic.hr.

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