COVID-19 – Insurance Coverage

In times of crisis, individuals and corporations rightly turn to their insurance policies in the expectation of alleviating current and future loss. When doing so, they discover, for the first time, the policies’ exclusions, named perils, deductibles, self-insured retentions, specific and aggregate limits (and sub-limits) of coverage. On March 23, 2020, Swiss Re, the world’s largest reinsurer by market capitalization, announced a $250 million exposure to any cancellation of the Tokyo Olympics. The International Olympic Commission (IOC) is said to have an event cover that exceeds $800 million. A cover of this size was likely manuscripted by a fleet of insurance professionals who scrutinized everything down to the last comma in the last sentence of the policy. The IOC likely knows what it purchased and when and to what extent it will be reimbursed in the event of postponement or cancelation.

Most commercial lines policies, however, are issued on non-negotiated forms. Corporate policyholders have only a vague understanding of their policies’ mechanics coupled with unrealistically high expectations of coverage. This confusion typically results in wasteful litigation and sometimes judicially created a cover that insurers never intended to provide. An insurance company’s understanding of its policies and confidence in its ultimate limited exposure, will not deter what will likely be tens of thousands of lawsuits filed by individuals and businesses seeking reimbursement for the incomparable loss that is likely to result from COVID-19.

Property Insurance (business interruption) 

Currently, more than 18 states have state-wide stay at home orders and many of the nation’s largest cities are similarly closed for business. Naturally, many small business operators will remember (or be reminded) that their “business owner’s policy” may have business interruption (BI) coverage. Large corporations will have business interruption and perhaps even contingent business interruption (CBI) coverage, included in their commercial property policy. Most commercial property insurance policies provide coverage for business income loss by adding an endorsement to the insured’s property policy. Typically, such an endorsement protects the insured for losses of business income sustained as a result of direct loss, damage, or destruction to insured property by a covered peril. This type of policy would seemingly not respond to loss resulting from COVID-19. Similarly, CBI covers an insured’s business income loss resulting from loss, damage, or destruction of property owned by others, including direct “suppliers” of goods and services to the insured or direct “receivers” of goods or services manufactured or provided by the insured. The property damage to these suppliers or receivers must be of a type that would be covered by the insured’s policy had the damage happened to the insured’s property.

The current pandemic seemingly has caused no “physical” property damage, except perhaps contamination. Undoubtedly, insureds will argue that the physical contamination of the property prevents its use and is therefore covered loss. Additionally, certain businesses, including large manufacturers, have shuttered entire operations due to a single employee found to be infected by the virus. Insureds will likely draw on case law citing gas, ammonia and other air-borne hazards, as well as asbestos, and claim, by analogy, that the mere presence of COVID-19 in a structure satisfies the “direct physical loss of or damage to” requirement. At least one such case has already been filed in state court in Napa, California: French Laundry Partners LP et al. v. Hartford Fire Insurance Co. et al. (March 25, 2020).

Certain specialized insurance policies as well as endorsements to standard commercial property policies, including those used for the hospitality and healthcare industries, expressly provide insurance coverage for losses caused by “communicable or infectious diseases” without requiring physical damage to insured property. These policies and endorsements will each have their triggers, exclusions, and limits that will need to be carefully reviewed. Conversely, in 2006, the Insurance Services Office (ISO) promulgated a “virus” exclusion that is found in many commercial property policies that, if included in a policy, would seem to bring the question of coverage to an end. But, almost certainly, it will not. Those exclusions likely will be read extremely narrowly and subject to all manner of parsing. Ironically, the absence of an ISO exclusion in a commercial property policy may well be used by many insureds to claim that their policies provide “silent” COVID-19 coverage.

Some commercial property insurance policies provide coverage for business interrupted when a “civil authority” prohibits or impairs access to the policyholder’s premises. For the average policyholder, such a provision might seem uniquely suited to the current situation. It probably is not. Depending upon the specific wording, a policy’s “civil authority” coverage may or may not require that the access restriction result from “physical loss” by a covered cause of loss. These provisions typically cover instances where a Fire Department or Housing Authority, for example, condemn a building, prevent access due to hazards, or otherwise find the premises unsafe for habitation or occupation. Accordingly, federal, state, or local governmental authorities limiting access to or from businesses merely to prevent the active transmission of an infectious disease would seemingly not be encompassed by these provisions.

Liability Insurance (CGL, D&O)

Insurance companies’ exposure to third-party liability in the wake of COVID-19 will be manifold. We only touch on two of these exposures.

Cruise ships, amusement parks, movie theaters, and concert venues could all face claims by infected guests alleging that the operator failed to exercise reasonable care in protecting against the risk of exposure to coronavirus. Commercial general liability (CGL) policies, intended to protect businesses against third-party claims for bodily injury resulting from exposure to harmful conditions, often have both defense and indemnity provisions. The defense coverage in CGL policies is often triggered despite the tenuousness of the claims.

In addition to third-party claims brought against businesses, a company’s directors and officers may be subjected to shareholder lawsuits alleging that their wrongful acts (or inaction) in response to COVID-19 caused the company economic loss. A company’s Directors and Officers (D&O) policy may provide indemnity and defense from these shareholder lawsuits. Shareholders may contend that management failed to (i) develop adequate contingency plans, (ii) failed to observe protocols recommended or required by governmental authorities, or (iii) failed to properly disclose the risks COVID-19 posed to the company’s business and financial performance, generally. The majority of D&O policies exclude claims for bodily injury when afforded a “strict and narrow construction,” as they must be under the laws of most states. The “absolute” bodily injury exclusion found in most D&O policies, which excludes coverage for any claim “based on, directly or indirectly arising out of,” or relating to actual or alleged bodily injury, may permit insurers to deny coverage for shareholder claims with any connection to COVID-19. Nevertheless, such a shareholder class action has already been filed in the United District Court for the Southern District of Florida, Douglas v. Norwegian Cruise Lines et al. (March 12, 2020).

Workers Compensation and Disability Income Insurance 

There will likely be a hardening market in the wake of COVID-19 for workers’ compensation (WC) and disability income insurance. Most state workers’ compensation statutes provide that an employee is entitled to benefits for “occupational disease.” The “ordinary diseases of life” that the wider public is generally exposed to are generally excluded from WC insurance programs unless the employee can establish a direct causal connection to the workplace. Coronavirus is transmitted primarily person-to-person and seemingly would constitute “ordinary disease,” but likely not a workplace injury. Employees of hospitals, cruise ships, delivery services, and other occupations, however, who have worked throughout the spread of COVID-19 may be able to draw the necessary causal connection.

Insurers of disability income insurance will see an increase in claims worldwide. Those who contract COVID-19, exhaust the elimination period, and remain disabled, will be entitled to disability benefits. Not enough is known about the general recovery period for COVID-19 to predict the cost to the insurance industry for disabled employees. Anecdotally, the virus would appear to quickly overtake those with compromised immune systems, lead to relatively quick recovery for most of the people, and have a lasting respiratory injury for a smaller segment of the population. It is conceivable that the increased number of disability claims and length of time out of work could trigger specific and aggregate excess of loss reinsurance for certain disability carriers.

Conclusion

Clark Hill will continue to monitor and report on developments by regulators, lawmakers, and courts that may affect the insurance industry. Clark Hill’s Insurance & Reinsurance Group, consisting of more than 40 lawyers in 25 offices across the United States, is prepared to bring its regulatory, contract wording, and litigation experience to assist insurers, reinsurers, and intermediaries in identifying enterprise risk, offering defense in jurisdictions across the United States, and negotiating with state and federal regulators.

Article by David W. Centner (Clark Hill PLC)

Coronavirus (Covid-19), French continuing plans and economy

On 13 March 2020, French Ministry of Justice issued a press release just after the announcements of the President of the French Republic. The aim, due to the emergency, is to protect citizens who are the most vulnerable and to curb the epidemic. Chancery has now prepared continuing plans to allow Justice to face core obligations of the Nation.

According to a CNB (Conseil National des Barreaux) release dated 15 March 2020, the continuing plans will be triggered as from 16 March 2020 by the Ministry of Justice to avoid propagation of Covid-19. Tribunal and courts will be closed, except for cases relating to core litigations.

Core litigations are limited to (i) criminal tribunals and courts including (a) pre-trial custody (détention provisoire) and probation (contrôle judiciaire), (b) immediate criminal summary trials (comparution immédiate), (c) appearance before the liberty and custody judge (juge des libertés et de la détention), (d) appearance before the enforcement judge (juge de l’application des peines) including appeals, these latest in the events of emergency only, (e) permanence of public prosecutor’s office (permanence du parquet), (f) hearings relating to investigation chamber for custody (audience de la chambre d’instruction pour la détention) and (ii) civil tribunals and courts including (a) children’s courts and permanence in the events of emergency only (audiences du tribunal pour enfants et du juge pour enfants et permanence du tribunal pour enfants) – including educational assistance (assistance educative), (b) summary judgments (including relating to family matters), but based on emergency only, (c) civil liberties and custody judge hearings (juge des libertés et de la détention civil).

Due to the risks of contamination, instructions are, to the extent possible, to cancel criminal court sessions related to crimes (cour d’assises). It is also allowed to postpone hearings (taking into account reasonable time extension and pre-trial custody time-frame).

Legal public facilities (services d’accueil du public) will be closed as well as justice centers and legal access points. Even if justice civil servants will not be allowed to receive public, they will be reachable by phone to address emergency situations.

As far as Paris is concerned, the first President of the court of appeal of Paris issued an ordinance dated 16 March 2020 (N°105/2020) named ordonnance de roulement modificative (amending rotation ordinance), on the basis of, inter alia, the decision of the Ministry of justice dated 15 March 2020 triggering continuing plans, article L1142-7 of the French Code de la Défense and emergency. Such article not only states that (i) the Ministry of Justice ensures in all circumstances the continuity of the legal criminal services as well as enforcement of criminal sanctions, but also (ii) he participates in fighting against elements adversely affecting fundamental interests of the Nation (this including preservation of the population in and outside France, according to article 410-1 of the French Code pénal).

Aside to the public authorities, the legal profession, as a whole, may support the economy : it can be suggested that business lawyers may wish to consider advising their clients to enter into settlement agreements (within the meaning of article 2044 of the French Civil Code) to solve pending litigations and to unlock commercial situations created by the current sanitary crisis.

This would give the economy a possibility to maintain a flow of activity.

Up to date 16 March 2020

Ashurst launches Business Consulting Service

Ashurst has launched Ashurst Consulting, a new business line providing specialist consulting services as an additional offering to its existing legal services. The new line will initially be offered in Australia.

Ashurst Consulting aims to provide holistic solutions that help clients comply with regulatory and legal frameworks in their jurisdictions and operationalize laws and regulations.

“[The new offering] will strengthen our ability to effectively manage clients’ most critical business challenges, by bringing together the technical expertise and rigour required to create value by meeting a broader spectrum of their needs,” said Paul Jenkins, Ashurst’s global managing partner .

Aside from Ashurst Consulting, the firm has launched two adjacent services: Board Advisory and Risk Advisory.

Effect On Real Estate Projects: COVID-19

Authors, Maureen Z. Ralte, Associate Partner and Gajanand Kinodiwal, Associate

Introduction:
The Real Estate industry is one of the major sectors that contribute to the overall Gross Domestic Product (GDP) of our country. According to the KPMG report titled ‘Indian Real Estate and Construction: Consolidating for growth’ presented by the National Real Estate Development Council (NAREDCO) and Asia Pacific Real Estate Association (APREA), read with CIRIL’s Half Yearly Round Off 2019 report, the Indian real estate sector is expected to contribute 13 percent to the country’s GDP by 20251.

However, since the onset of the Novel Coronavirus or ‘COVID-19’, there has been a cascading effect on the economy including the real estate sector.2

Read more here

Serbia: Economic measures in the private sector

The Government of Serbia adopted on April 10, the set of financial measures aimed at mitigating the negative economic impact of COVID – 19 pandemic and support of the private sector businesses, with an immediate effect. The most important measures include:

– State Subsidies to private sector – which includes all Serbian legal entities and entrepreneurs as well as representative and branch offices of foreign legal entities;
– Financial Program – which is aimed at providing loan facilities to private sector for the purpose of acquiring working capital and preserving their financial liquidity and which operate in the production, service, trade and agriculture sectors.

1. STATE SUBSIDIES

1.1. Qualifications criteria

– Companies which decreased the number of employees for more than 10% in the period from March 15 until April 10 (not counting definite term employments which are concluded before March 15 and expire prior to April 10) are not eligible. Users of economic measures shall lose this right in the event of decreasing the number of employees for more than 10% until October 31, 2020 compared to the number of employees on March 15, 2020 (not counting definite term employments which are concluded before March 15 and expire prior to October 31, 2020).
– Entrepreneurs who temporarily ceased their business activity earliest as of March 15 are eligible subject to fulfilling the above employment level maintenance criteria.
– Private sector businesses established and duly registered after March 15 are not eligible.
– Banks, insurance companies, voluntary pension funds, financial leasing companies, payment institutions and electronic money institutions when classified as large enterprises are barred.
– Opting for the use of economic support measures rules out the possibility to pay dividends until the end of 2020, otherwise the right for subsidies is lost.

Note: It is unclear whether, besides reduction of workforce based on redundancy (preventing redundancy was obviously one of the Government’s primary reasons for introducing subsidies), other manners of terminating employment for more than 10% employees in relevant period (e.g. termination due to breach of working duties, failure to achieve appropriate working results or even consensual termination of employment) would also make the employer ineligible for subsidies. As long as there are no official clarifications in this respect, we would advise the employers to apply extra caution whenever terminating an employee for whatever reason, in period from March 15, 2020 to October 31, 2020, in order to avoid losing rights to subsidies.

1.2. Types of subsidies

Fiscal benefits:

Fiscal policy measures comprise in deferral of maturity and payment dates for specified tax obligations of private sector, which are normally due in the period from April 1 to June 30, 2020, as follows:

(i) suspension of employment tax and social contributions for March, April and May 2020 until January 4, 2021 and repayment in 24 installments, free of interest.
(ii) suspension of corporate income tax advance payments for March, April and May 2020, normally due on April 15, May 15 and June 15 until submission of final corporate income tax return for 2020, i.e. until 30 June 2021 (except when the when fiscal year differs from calendar year). Repayment is allowed in 24 installments, free of interest.
(iii) analogue application of above tax deferral to entrepreneurs who keep accounting records.
(iv) suspension of advance payment of taxes and social contributions for March, April and May 2020, until January 4, 2021 for tax flat rate entrepreneurs (“paušalci”) and repayment in 24 installments, free of interest.

In the event employment taxes and social contributions for March are already paid, the taxpayer may use tax deferral benefit for April, May and June 2020.

This fiscal benefit is used by the taxpayer, upon its own discretion, and it is performed by filing monthly tax return (PPP-PD) for employment taxes and social contributions by entering January 4, 2021 as payment date for the month when support measure is used. Finance Ministry is expected to provide further instructions clarifying technical aspects linked to use of this benefit.

Direct cash subsidies

Direct cash subsidies are provided exclusively for the pay out of salaries and are payable to specially designated bank account opened with commercial banks. This measure is different for micro, small, medium sized enterprises (“MSMEs”) and large enterprises. Classification of businesses for this purpose is done on the basis of 2018 financial reports while all companies incorporated in 2019 and 2020 are considered as small enterprises.

(i) MSMEs, entrepreneurs, farmers are entitled, per each full time employee, to cash subsidies corresponding to minimum wage in March 2020 (app. EUR 260) payable in May, June and July 2020 while taking account of reported number of full time employees in PPP PD form for March, April and May.
(ii) Large enterprises are entitled to cash subsidies corresponding to 50% of minimum wage in March 2020 (app. EUR 130). Subsidies are payable per full time employee referred to paid leave either based on employer’s decision due to temporary interruption or decline in business or administrative decision brought due to disease (Articles 116 or 117 of Labor Law). As for MSMEs, payment of subsidies is envisaged in May, June and July 2020 based on the same principle.

In respect to part time employees, subsidies are payable in proportion to the time spent at work and reported in the PPP-PD tax return.

VAT exemption for donations

During the state of emergency, all traffic of goods and services free of charge, provided to the Ministry of Health, Republic Health Insurance Fund and other public health institutions is exempted from VAT. The Decree has retroactive application and takes account of transactions effected as of March 15. VAT taxpayers are required to keep special records which include identification data of the party receiving donation and value of goods and services.

Cash incentive for Serbian Citizens

Upon lifting of the state of emergency, one-time cash support in the amount of EUR 100 in Serbian dinar countervalue shall be paid to each adult citizen of the Republic of Serbia.

1.3. Procedure and deadlines

Businesses decide upon their own discretion whether or not to use available measures. Entities which decide to take benefits may opt for a 1 to 3-months period by filing adequate PPP PD return in April, May or June. For instance, entities wishing to use measures for a 3-month period should file PPP PD latest on April 30, 2020.

The subsidies are to be paid on the employer’s special bank accounts opened for this purpose. All employers having bank accounts in more than one bank need to notify the Tax Authority on-line until 25 April at the latest, in which bank the special purpose account shall be opened.

2. FINANCIAL PROGRAM

Financial Program is aimed at providing loan facilities to entrepreneurs, cooperatives and MSMEs for the purpose of acquiring working capital and preserving their financial liquidity and which operate in the production, service, trade and agriculture sectors.

The program is realized through the Development Fund of the Republic of Serbia which is accepting applications latest until December 10, 2020 and subject to availability of funds. Decisions of the Fund ought to be made by December 31, 2020 while the final deadline for realization of approved funds is March 31, 2021.

The following terms and conditions apply for the loans:
– Maintenance of employment level in line with the report of the Central Registry for Social Insurance on number of definte and indefinite term employees as of March 16, 2020. Difference of maximum 10% at the moment of applying for funds and during the loan period is tolerated.
– Loan duration of maximum 36 months including up to 12 months grace period and up to 24 months repayment period.
– 1% interest rate
– Loans are granted and repaid in local currency in monthly installments.
– Minimum amount of loan:
o RSD 1,000,000 (app. EUR 8,547) for companies, and
o RSD 200,000 (app. EUR 1,709) for entrepreneurs, cooperatives and business entities registered with relevant registries.
– Maximum amount of loan:
o RSD 10,000,000 (app. EUR 85,470) for entrepreneurs and micro enterprises,
o RSD 40,000,000 (app. EUR 341,880) for small enterprises, and
o RSD 120,000,000 (app. EUR 1,025,641) for medium enterprises.
– Collaterals are determined depending on the value of the loan.
– Applicant must not be subject to bankruptcy, liquidation, reorganization or restructuring measures.

Sincerely,

NKO Partners

Uncertain Times: Tax Planning Considerations

Amidst these unprecedented and uncertain times, the question that often arises is what should one do regarding their own taxes? It is during times like these that tax planning becomes so much more important and critical. In this article, we will discuss some common tax planning techniques that should be considered.

For some historical context, in 1949, to pay for post-war expenditures, the government of Canada and its provinces levied a personal marginal tax rate of 84% for all income over $400,000. Currently, the highest combined federal-provincial marginal tax rate on ordinary income is 53.53% in Ontario. The government of Canada has so far pledged $82 billion to fight COVID-19, which the Parliamentary Budget Officer projects would create a $112.7 billion deficit in 2021. Based on history, it might be reasonable to expect that the government will increase marginal tax rates to recoup its expenditures and balance the budget.

Planning Tips That You Should Consider During Covid-19

Estate Freezes

Inter-generational transfers are generally taxable under Canadian law. However, an estate freeze is a common tax planning strategy that allows a taxpayer to “lock in” the current value of businesses and capital properties so that  future growth or appreciation is shifted to the next generation or to other family members. It is also a great strategy to minimize any capital gains on the death of the taxpayer. As the COVID-19 pandemic has significantly affected many businesses and the value of capital properties (such as marketable securities and real estate), the value that a taxpayer may be able to “lock-in” should be relatively low. However, a qualified valuator should be consulted in this regard. Freezing the value of the property while it is low reduces the owner’s capital gains, and can increase the gain that is transferred to family members tax-free.

Capital Gains Strip

The current corporate and personal income tax rate structure has created a significant incentive for shareholders to extract value from closely held corporations in the form of capital gains, as opposed to dividends. In general, taxpayers who expect to withdraw surplus income from their corporations in the short term might benefit from implementing a surplus strip.

A number of techniques have been developed, and aggressively implemented, to convert dividends into capital gains. The infamous 2017 consultation paper would have introduced an anti-avoidance rule to restrict the effectiveness of these transactions; however, the Liberal Government aborted this measure in the face of significant public backlash. Nevertheless, officials at the Department of Finance have publicly stated that they remain concerned with surplus stripping, and there is talk that a more targeted form of the rule might be introduced. Now, the deficits associated with COVID-19 expenditures might provide an even greater impetus to enact legislation to curtail this strategy.

Trigger Capital Gains (if any)

For those lucky ones who still hold assets with accrued capital gains, in light of COVID-19, there is a reasonable expectation that the capital gain inclusion rate will be increased from its current 50% (with perhaps some form of de minimis grandfathering). From a tax planning perspective, it may be an opportune time to trigger a capital gain before any changes to the Income Tax Act to avoid exposure to the higher capital gains inclusion rate.

Utilizing Losses

As a reminder, any net capital losses realized may be applied against capital gains and may be carried back 3 years and forward indefinitely. Similarly, non-capital losses may be carried back 3 years and forward 20 years and may be applied to other sources of income.  The Income Tax Act contains complex rules that restrict when losses may be realized and utilized. As such, we urge you to contact a member of our Tax Department to discuss your particular circumstances.

Loss Consolidation

No formal mechanism exists to transfer losses between corporations under Canadian law. However, Canadian courts and the administrative policy of the Canada Revenue Agency sanction the use of several forms of transactions to consolidate or transfer losses among related or affiliated groups of Canadian corporations. Selecting the appropriate method will depend on the particular facts and circumstances of each case. As a result, we recommend that you contact a member of our Tax Department to discuss which loss utilization technique is appropriate in your circumstances.

For more information about dealing with COVID-19, please visit our COVID-19 Resource Center.

SSEK Legal Alert

SSEK Legal Alert is a monthly survey designed to keep our clients up to date with the latest legal developments in Indonesia. To subscribe, visit our website at www.ssek.com.

GENERAL

Presidential Regulation (“PR”) No. 76 of 2019 dated November 13, 2019, regarding Ratification of the Agreement Between the Republic of Indonesia and the Republic of Tajikistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Income Tax. This Regulation came into effect on the date of its enactment.

PR No. 77 of 2019 dated November 13, 2019, regarding Ratification of Multilateral Convention to Implement Tax Treaty- Related Measures to Prevent Base Erosion and Profit Shifting. This Regulation came into effect on the date of its enactment.

Government Regulation (“GR”) No. 88 of 2019 dated December 26, 2019, regarding Occupational Health. This Regulation contains provisions on illness prevention, health improvement and disease management. It came into effect on the date of its enactment.

GR No. 90 of 2019 dated December 31, 2019, regarding Procedures for the Application, Examination and Settlement of Appeals at the Trademark Appeals Commission. This Regulation sets out procedure for the Trademark Appeals Commission. It implements Articles 32 and 34 of Law No. 20 of 2016 regarding Trademarks and Geographic Indicators. This Regulation came into effect on the date of its enactment.

GR No. 89 of 2019 dated December 31, 2019, regarding Amendment of GR No. 59 of 2001 regarding Non-Governmental Consumer Protection Institution. This Regulation amends GR No. 59 of 2001 so that non-governmental consumer protection bodies must now register and report their function to the relevant regional governments. It came into effect on the date of its enactment.

GR No. 5 of 2020 dated January 20, 2020, regarding Trade Information System. The trade information system collects, manages, delivers, processes and disseminates integrated trade data and/or information to support trade policy. It provides updated and accurate trade data and/or information, and quick data and/or information on trade policy and management, with the aim of improving quality of service by the central and regional governments in the trade sector. This Regulation came into effect on the date of enactment.

GR No. 3 of 2020 dated January 20, 2020, regarding the Amendment of GR No. 14 of 2018 regarding Foreign Ownership of Insurance Companies. This Regulation introduces a new threshold for foreign ownership of conventional/sharia insurance/reinsurance companies, as well as insurance/reinsurance broker companies and insurance lossappraisal companies, and sharia insurance/reinsurance companies resulting from spinoffs. This Regulation came into force on the date of its enactment.

GR No. 1 of 2020 dated January 8, 2020, regarding the Organization of Special Economic Zones. This Regulation addresses several matters, including the proposal of special economic zones (“SEZs”) by the Special Economic Zone Board, zoning regulations for SEZs, requirements for the incorporation of SEZs, the construction and operation of SEZs, and the management of SEZs. It came into effect on the date of its enactment.

GR No. 6 of 2020 dated January 27, 2020, regarding Construction and Installations at Sea. This Regulation includes provisions on the function, type, requirements, placement, demolition, monitoring and evaluation of construction and installations at sea. It came into force on the date of its enactment.

Football and administrative decisions

French regulation of football is permeated with administrative law. This is particularly true in respect of decisions and sanctions applicable to football clubs.

This is the reason why the Conseil d’Etat remains one of the ultimate French jurisdictions entitled to control the regulation produced by French agencies dedicated to football. In this perspective, the Conseil d’Etatoverseas the production of norms in the field of sports law and can be considered as the key team player in this wide and complex legal environnement.

In a very interesting case, available at the beginning of March 2020, the Conseil d’Etat (Conseil d’Etat case, Fédération Française de Football, Req. 424347) confirmed the possibility for the executive committee of the FFF (Fédération Française de Football) to accept the propositions of the CNOSF (Comité National Olympique et Sportif Français) given in the course of a conciliation and to additionally ask the DNCG (Direction Nationale du Contrôle de Gestion) to convene and to take other substitution administrative measures. In such a context, to create rights with a decision qualifying as an administrative decision (acte unilatéral), the FFF has to take a new decision containing its own legal and fact reasons (motifs de droit et de fait), this later cancelling the first one of the DNCG. This decision of the Conseil d’Etat deals with not only the way a decision qualifies as an administrative act, but also with the way the administrative judge will control its legality under the hierarchy of norms. What can be the intensity of this control over the administrative act (see e.g. Didier Truchet, Droit administratif, puf, 8th ed. 2019, p. 237, n°723 et seq.) ? This case illustrates, amongst others, the power of regulation of the administrative judge and his key function in the football economy.    

In this case, for financial reasons, the first measure ruled by the DNCG prohibited Racing Club de Lens from accessing Ligue 1. The DNCG is an entity granted by law an independent power of assessment ensuring the administrative, legal and financial control of sport associations and companies. More precisely, the aim by law of the DNCG is not only to ensure the financial sustainability of associations and companies but is also to encourage the respect of sport equity and to contribute to the economic regulation of competitions. Albeit considered as independent, the DNCG does not have the legal personality and forms part of the FFF.

After a mandatory conciliation before the CNOSF on 25 July 2014, other measures were instead proposed by such entity: (i) limitation of the number of employees and / or (ii) recruitment control. On 28 July 2014, the executive committee of the FFF thereafter decided to accept these other administrative substitution measures and additionally asked the DNCG to convene in order to determine how Racing Club de Lens would play in Ligue 1. In such a context, this latest decision was challenged by a relegated team from Ligue 1 to Ligue 2 (Sochaux) (being ranked 18 after the championship and hoping staying in Ligue 1).

Such claim is dismissed by the Conseil d’Etat for the second time.

One of the main subjects arising from this case and developed in the report of the public draftsman (rapporteur public – see conclusions M. G. Odinet, rapporteur public available on the website of the Conseil d’Etat) deals with the qualification of the second decision dated 28 July 2014 issued by the FFF and the correlative cancellation of the first decision dated 26 June 2014 of the DNCG.

To rule the case, the Conseil d’Etat uses the manifest error legal means (erreur manifeste d’appréciation) to control the legality of the new decision issued by the FFF after the conciliation on 28 July 2014, and dated the same date.

In this respect, the Conseil d’Etat followed the conclusions of the public draftsman: the executive committee of the FFF did not take an inconsiderable risk in cancelling the first decision of the DNCG dated 26 June 2014 and in deciding instead on 28 July 2014 the limitation of the number of employees and / or the recruitment control. No EMA (erreur manifeste d’appréciation) can derive from this new decision.

Even if not raised in the present case, it might be argued that a claim based on the lack of interest to act (intérêt à agir) of Sochaux could also have solved this case. In this perspective, the interest to act of Sochaux could have successfully been challenged in the first instance as these two teams were playing in different leagues. In this perspective, it is not because Racing Club de Lens would have stayed in Ligue 2 (due to financial reasons) that Sochaux would had won the right to stay in Ligue 1. Assuming that Racing Club de Lens would have stayed in Ligue 2, due to financial reasons, another team of Ligue 2 woud had been upgraded instead of Racing Club de Lens and Sochaux would had gone to Ligue 2 anyway, due to its bad ranking in Ligue 1. In other words, it might be argued that the financial difficulties of Racing Club de Lens do not have an impact on the ranking of Sochaux in Ligue 1, but, instead, have an impact on another team of Ligue 2. As such, Sochaux could also have lost the case on the ground of lack of grievance (défaut de grief) of the FFF decision. In addition, it can also be argued that Sochaux cannot be considered as representing the collective interest of the whole profession. 

By this decision, the Conseil d’Etat hopefully confirms the latitude of French sport agencies vested with public power prerogatives (prérogatives de puissance publique), but remains, with the ECHR (European Convention of Human Rights) one of the ultimate regulation entities.

Up to date 10 March 2020.

Indonesian Visas in the Time of COVID-19

On 11 March 2020, the World Health Organization (“WHO”) officially announced that COVID-19 had become a global pandemic. Following this announcement, as with many other countries, Indonesia enacted regulations to govern the traffic of individuals entering and leaving the country. These regulations specifically mandate limitations and exceptions for the granting of Entry Permits for foreign visitors, Emergency Stay Permits (Izin Tinggal Dalam Keadaan Terpaksa), Limited Stay Permits (Izin Tinggal Terbatas or “ITAS”), Permanent Stay Permits (Izin Tinggal Tetap or “ITAP”) and Re-entry Permits for foreign visitors currently in Indonesia and expatriates currently abroad whose Indonesian permits are to expire soon.

Please visit the website of the Indonesian Directorate General of Immigration, imigrasi.go.id, to access the abovementioned regulations as well as the Indonesian Director General of Immigration circular letter and the Indonesian Ministry of Foreign Affairs’ announcement regarding this matter, all of which need to be read collectively to determine the required steps in terms of visas during the COVID-19 pandemic.

Entry Permits 

In response to the COVID-19 pandemic, the Government of Indonesia has suspended the granting of Visit Visa Exemptions (Bebas Visa Kunjungan) and Visas on Arrival (Visa Kunjungan saat Kedatangan) to foreign visitors visiting Indonesia from any country. Foreign visitors may still visit Indonesia on a different valid visa issued by an Indonesian representative in their country, after satisfying several requirements provided under Indonesian Minister of Law and Human Rights (“MOLHR”) Regulation Number 8 of 2020 on the Temporary Termination of Visit Visa Exemption and Visa on Arrival and the Granting of Emergency Stay Permits (“MOLHR Reg No. 8/2020”). However, this exception does not apply to foreign visitors who have traveled to certain areas/countries in the last 14 days. These countries include China, South Korea (specifically Daegu City and Gyeongsangbuk-do Province), Iran, Italy, the Vatican, Spain, France, Germany, Switzerland and the United Kingdom.

Emergency Stay Permits

As stipulated in Article 4 of MOLHR Regulation Number 7 of 2020 on the Granting of Visas and Stay Permits in Order to Prevent the Coronavirus Outbreak (“MOLHR Reg No. 7/2020”), an Emergency Stay Permit is applicable to (a) any foreign citizen currently in Indonesia; (b) foreigners who hold a stay permit of another country; or (c) the spouse or child of a citizen of a country other than Indonesia whose visa (any visa) (i) has completely expired and can no longer be extended, and (ii) cannot fly back to their country due to the COVID-19 pandemic. As further affirmed by the Director General of Immigration in Circular Letter No. IMI-GR.01.01-2114 Year 2020, Emergency Stay Permits are applied differently for foreigners who arrived in Indonesia before and after 5 February 2020.

Limited Stay Permits, Permanent Stay Permits and Re-entry Permits

MOLHR Reg No. 7/2020 and MOLHR Reg No. 8/2020 stipulate exceptions and procedures for extending an ITAS/ITAP permit for holders currently in Indonesia and currently abroad. For individuals currently abroad whose visa is to expire soon, a Re-entry Permit may be granted after satisfying certain requirements.

These exceptions and visa requirements are subject to future changes based on the situation with the COVID-19 pandemic. There may be additional requirements to obtain new visas/visa extensions in practice.

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user’s own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

By (SSEK Legal Consultants)

Rights and Liberties, Liability of the French State and Judicial Review

On 24 December 2019 the Conseil d’Etat ruled that indemnification can be granted under French law on the ground of a prejudice suffered due to the application of a law ruled contrary to the Constitution by the Conseil Constitutionnel.

The Conseil d’Etat now leaves the door open to a new possibility for indemnification, within the framework of a QPC examination (Question Prioritaire de Constitutionnalité)) or by application of Article 61 of the Constitution (subject to conditions). Based on the hierarchy of norms, this new kind of liability of the State is stated in three decisions dated 24 December 2019 (req. N°425981, N° 425983 and N°428162).

This new regime lives now next to the already existing liability due to the application of the law (responsabilité du fait des lois) based on equal treatment before public burdens (principe d’égalité des usagers devant les charges publiques).

A QPC is a question raised by a tribunal or a court aiming at determining the conformity of a law to the Constitution. Article 61-1 of the French Constitution states in this respect that during an instance before a tribunal or a court (private or public), a plaintiff can support the view that a law contravenes rights and liberties guaranteed by the French Constitution. In such a situation, the Conseil Constitutionnel can be seized after remand of the case by the Conseil d’Etat or the Cour de Cassation.

The general principle under French administrative law is that the French State can be sued simply because of the application of a law, provided that (i) the plaintiff has suffered a prejudice qualifying as important and specific (grave et special) and (ii) the law in question does not exclude the possibility for a plaintiff to be indemnified. This type of liability is applicable even if the French State is not considered as being in default with the application of the law and is named liability without misconduct (responsabilité sans faute de l’administration).

This possibility started in France at the beginning of the 20th century (Conseil d’Etat, case Couitéas – 1923), with the admission of liability without misconduct of the French State due to an administrative decision of non-enforcement of judicial decisions. In such a case, in the general interest, the French State may decide not to enforce a judicial decision, but in turn, has to indemnify the plaintiff. The ground for indemnification is the breach of equal treatment before public burdens principle (principe d’égalité des usagers devant les charges publiques). This principle is taken from the French 1789 declaration of the human rights and the citizen: each member of the community has to bear a certain amount of public burdens, but equal treatment shall prevail.

This principle has expanded thereafter with the admission of such a claim against a law (and not against an administrative decision only) by the Conseil d’Etat in 1938 (Conseil d’Etat, case Société la Fleurette – 1938). Such a case establishes that, in the silence of the said law, a plaintiff shall not bear a charge created by a law that he/she would not normally lie with, it being specified that, in the event of silence of the said law, such law shall not be considered as excluding the liability of the French State (Conseil d’Etat case Coopérative Agricole Ax’ion – 2005).

The liability of the French State can also be triggered due to its obligations to ensure the application of its international conventions, to indemnify all the prejudices resulting from the application of a law passed illegally because contrary to an international convention (e.g. ECHR) (Conseil d’Etat, case Gardelieu – 2007).

Now, according to the new decisions of the French Conseil d’Etat dated 24 December 2019, the other grounds for indemnification are (1) that the decision of the Conseil Constitutionnel does not decide that no indemnification shall be granted either (i) by excluding it expressly or (ii) by letting alive all or only a part of pecuniary effects caused by the law, that an indemnification would challenge, (2) the existence of a prejudice and (3) the link between the prejudice and the unconstitutional application of the law.

As a consequence, a plaintiff may be indemnified in the following conditions : (i) no express exclusion of indemnification by the Conseil Constitutionnel (ii) no all or part of pecuniary effects left alive by the Conseil Constitutionnel that an indemnification would challenge (iii) and (iv) a link between the prejudice and the unconstitutional application of the law.

According to the decision of the Conseil d’Etat, certain pecuniary effects of the law declared unconstitutional may prevail upon an indemnification. In this respect, it is reasonable to think that an administrative judge would apply an economic balance check between the necessity of indemnifying the plaintiff and the profit of letting alive all or only a part of pecuniary effects caused by the unconstitutional law. An economic balance check is already applied in other circumstances (expropriation with the application of the théorie du bilan coûts / avantages), by the Conseil d’Etat (Conseil d’Etat case Ville Nouvelle Est – 1971).

In this perspective, it is reasonable to think that the application of an unconstitutional law may survive if it is more interesting from an economic point of view. This mentioned carve out is quite important as it gives the possibility to the Conseil Constitutionnel to let alive, even if the law is declared unconstitutional, and then cancelled, parts of its pecuniary effects.

In addition to the breach of equal treatment before public burdens principle (principe d’égalité des usagers devant les charges publiques), it can be suggested that other principles may underpin this kind of liability: preservation of legal safety (sécurité juridique) and /or  granted rights (préservation des droits acquis), and / or economic balance check, to take into account all the adverse financial effects that an indemnification would cause.

The claim for indemnification can obviously be barred by effluxion of time, it being specified that the 4 (four) years period during which such a claim can be brought only starts if the prejudice resulting from the application of the law may be known in its reality and its scope by the plaintiff, without the possibility for him or her to be regarded as ignoring the existence of his / her right to claim until the declaration of unconstitutionality.

The indemnification request has to be brought before the administrative judge (Tribunal Administratif). It remains however to be seen whether legal practioners will try to use these decisions of the Conseil d’Etat to sue the French State before the judicial order (ordre judiciaire). Under French law, the French Conseil d’Etat is the highest court entitled to address administrative cases and is part of the administrative order (ordre administratif) whereas the judicial order (ordre judiciaire) is composed of judiciary tribunal and courts (jurisdictions judiciaires) and is competent for private matters. How dealing with the fact that a tribunal or a court may apply deliberately after the declaration of unconstitutionality a law previously declared unconstitutional outside the scope of the carve out of the ratio decidendi of the Conseil d’Etat? Would Article 141-1 of the Code de l’organisation judiciaire, which gives competence to the judicial order in the event of indemnification of a prejudice due to malfunction of judicial public service, apply? It is reasonable to think that such indemnification would not be allowed even if legal practitioners may wish to test it, and may be, open this possibility, for the residual adverse effects on the plaintiff of the law declared unconstitutional.

A lack of indemnification by the French State may also give rise to a lawsuit before the ECHR (European Convention on Human Rights), a plaintiff would still have in fine, the right to be indemnified on the basis of the application of a law declared unconstitutional. From a theoretical point of view, and on the basis of the hierarchy of norms, letting a country member of the European Council apply a law declared unconstitutional could raise issues.

Up to date 24 December 2019.