Judicial Alternatives for the COVID-19 crisis

The post-COVID-19 world brought a Herculean challenge to the sciences in health, economics, and sociology. In the legal field, it is no different. We need to identify the legal tools needed to tackle this pandemic, which will drastically affect business activities and people's behavior.

Since late March, trade in goods and services has been increasingly affected by the issuance of several normative acts that prevent or restrict its activities, with the exception of those expressly indicated. Industry may continue to operate, but with a great deal of difficulty - such as the lack of inputs, increased costs, labor restrictions, and liquidity issues. Contracts with the Government may be suspended or interrupted based on an express legal provision (Law No. 8666, art. 78, XV).

Possible government resources should not be enough to stave off the acute crisis in the business environment. Media reports say that Brazilian public banks will provide around R $ 145 billion to companies in the country in an attempt to prevent the economy from paralyzing. However, these resources tend not to reach medium and small companies (“Aid from a public bank against viruses may not reach small businesses” - Folha de S. Paulo, 03/22/2020) - which are already strangled and will not be able to provide guarantees for loans in this market.

Therefore, Brazilian companies will have a unique challenge: to survive or to die. They will need to go to court or other forms of dispute resolution to maintain their activities, lengthen debts, rebalance contracts and relations with their employees. They must go through what we call “bet-the-company” litigation (“Bet-the-company litigation” - Valor Econômico, 02/28/2020).

One of the keys to these discussions consists in demonstrating the occurrence of unforeseeable circumstances or force majeure, that is, a situation in which the contractor is not in control of the circumstances, extrapolating the “business risk.” In effect, the pandemic resulting from COVID-19 and its economic and financial effects seem to us to constitute a fortuitous or force majeure situation.

Although such figures may have distinctions in the academic field, the legal consequences that result from them are the same. Among them, release the part of indemnity due to possible damage (CC, art. 393) and authorize the termination of contracts of continuous or deferred execution (CC, art. 478).

The situation resulting from the COVID-19 pandemic can also break the presumption of parity and symmetry that the law presumes in civil and business contracts, authorizing, in theory, judicial review (CC, art. 421-A).

Other traditional legal remedies may be considered to deal with the crisis, such as judicial reorganization. It is possible, however, that the requirements for this legal benefit might be relaxed by the Courts in the face of the new reality.

It is true that, as in other scientific areas, there is no infallible formula in the legal area to face the acute and unexpected crisis resulting from COVID-19. However, it is necessary to start from the beginning to analyze the possible hypotheses to at least minimize it and allow the continuity of business activities.

We are attentive to all the developments of this crisis and its legal impacts, ready to collaborate with any guidance or action.

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