The Financial Express

COVID-19 pandemic from legal perspective

Mohammad Taqi Yasir and Anam Hossain | Published: March 20, 2020 21:31:46 | Updated: March 25, 2020 21:53:14

The value of Asian stocks have decreased dramatically as a consequence of the coronavrius virus outbreak. 	— Image: Reuters The value of Asian stocks have decreased dramatically as a consequence of the coronavrius virus outbreak. — Image: Reuters

The novel coronavirus pandemic has put the global economy on hold. Stocks are crashing and countries are declaring indefinite lockdowns forcing people to remain indoors. The worst-hit are the developed countries; however, this impact is strongly felt by the developing countries too, especially those that are reliant on the aid, expertise and investment of the developed nations. This is the case particularly for Bangladesh.

Institute of Epidemiology, Disease Control and Research (IEDCR)  reported the first coronavirus death in the country on March 18 and reported cases rose to 17 on March 19. .Although we have, so far, been spared the severity of the pandemic, our economy is at the high risk of recession. With the subsisting private sector liquidity crisis, particularly in the banking and ready-made garments (RMG) sector, the coronavirus pandemic is set to worsen the situation.

The strongest impact will be felt by manufacturing and infrastructure development sector of our country. Most of the infrastructure developments and power projects are implemented in joint-ventures or in collaboration with companies and governments of the developed nations while the manufacturing industries are reliant on orders from abroad.

The inadequate medical facilities of Bangladesh to contain  corona virus is a disincentive for foreign investors or importers to perform their obligations. In fact, expats who have been on spring breaks are unwilling to return to the country and those who are currently residing in Bangladesh are trying to return to their home countries for safety.

Although, failure to perform the obligations might, prima facie, appear to be a breach of contract, they can be protected by the doctrine of force majeure. The doctrine of force majeure refers to unforeseeable circumstances or acts of God that prevent someone from performing a contract. When a force majeure situation arises, the non-performing party is either waived from its obligations or is granted extended time to complete its part of the contractual obligations. This doctrine is not a statutory concept but is rather contained as a general contractual provision which parties have been agreeing by way of convention.

The pandemic is clearly an unforeseeable circumstance and is out of the contractual parties' control. However, whether any party will be able to rely on force majeure will depend on the definition provided by the parties in their contract. If the parties have a limited and closed list, then it will depend upon the events specified in the contract.

It is important for parties to take note of the fact that force majeure clauses cannot be relied upon if there is also some other reason why performance of the contractual obligations is not achievable. Furthermore, if performance is prevented by novel coronavirus, then alternative methods of performance should be considered. If there are alternative steps, then force majeure shall not apply. Additionally, where reliance on a force majeure event is likely to have a significant impact on the other party to the contract, it is important to consider what steps can be taken to limit the impact of coronavirus. A wrongful declaration of force majeure can expose a party to the risk of breaching its contract. Notice requirements, as laid down in the contract, have to be duly complied with.

In the event a contract does not provide for a force majeure provision or a particular contract's force majeure provision does not cover coronavirus, parties can always resort to amicable discussions between them to reach a mutually beneficial solution.

However, while contractual obligations are negotiable, companies will find themselves in an extremely difficult position with their employees. Many companies in Bangladesh have announced indefinite closure while some have adopted a work-from-home policy. This may be practicable for some businesses but it is certainly not a viable solution for all companies.

Nevertheless, social distancing is being stressed as the best solution to containing the coronavirus and while companies may not be able to generate revenues for a certain period of time, they will be bound by the obligations imposed upon them by the Bangladesh Labour Act 2006 (BLA) and the Bangladesh Labour Rules 2015 (BLR).

Section 12(1) of BLA allows an employer in times of epidemic or for any cause beyond an employer's control to stop work for such period as the cause for such stoppage continues to exist. The coronavirus situation is a pandemic and is certainly beyond any employer's control. Thus, any employer whose obligations fall within the ambit of BLA will be able to stop work pursuant to section 12. Section 16 of BLA provides for the circumstances under which a laid off worker will be entitled to compensation for the period of time he is being laid off. The concerned worker's name must be on the muster-rolls of an establishment and must have completed at least 1 (one) year of service.

Where workers are laid off, the lay-off notice mentioning the number of affected workers along with a statement under the relevant BLR form should immediately be sent to the concerned inspector (Rule 25 of BLR) and a list of the laid-off workers must be kept in accordance with the relevant form.

A laid-off worker shall be entitled to compensation for all days during which the worker is so laid-off, except for weekly holidays. The amount of compensation payable shall be equal to half of the total of the basic wages and dearness allowance and ad-hoc or interim wages, if any, and equal to the full amount of housing allowance that would have been payable to him if a worker had not been so laid-off.

It must be noted that no worker shall be entitled to the payment of compensation for more than 45 (fourty-five) days during any calendar year unless there is an agreement to the contrary (section 16(4) of BLA).  However, this period can be extended for further 15 (fifteen) days or more. During such extension, the worker shall, unless there is an agreement to the contrary, be paid compensation equal to one-fourth of the total of the basic wages and dearness allowance and ad-hoc or interim wages, if any, and equal to the full amount of housing allowance (if any).

If a worker needs to be laid off for additional period after the first 45 (fourty-five) days, an employer can instead of laying off the worker, retrench the worker. Retrenchment means termination of workers on grounds of redundancy.

If any question or allegation is raised regarding the truth and impact of coronavirus, the decision of the government will be deemed conclusive in this regard. The pandemic has already caused severe losses to many companies and during such difficult times, companies must ensure they are compliant with the applicable laws. It is advisable that companies start renegotiating their obligations under any contract with other parties as invoking force majeure without giving due consideration to its ambit could be risky, Furthermore, they must also take benefit of the provisions of BLA and BLR, where applicable, for managing their employees as failure could add further concerns in the form of labour disputes.


Barrister Mohammad Taqi Yasir and Barrister Anam Hossain  are legal practitioners and are part of the Stellar Chambers.

taqi@stellarchambers.com; anam@stellarchambers.com

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