Immediate And Long-Term Effects Of COVID-19 Pandemic On the Law And Legal Sector Hiring by law firms has stopped and they are looking for long-term solutions to work from home in a digitally secured environment

By Shardul Shroff

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The nationwide impact of COVID-19 in India started becoming significant towards the end of February and client companies and law firms started to plan on how they could work remotely from home during lockdown. Around the March 23, 2020, the Prime Minister declared that a nationwide lockdown will commence from March 25, 2020. When train travel was partially opened the nation saw a huge migration from cities to villages and towns by workers in metropolitan cities in India. Many phases of the COVID-19 lockdown were witnessed from March till the end of June where proportionate shut downs and health measures were introduced by the government of India and the state governments under the Disaster Management Act, 2005.

In the initial days, the government's assumption was that COVID-19 is likely to have a temporary impact on the country and the initial lockdowns were for short time periods. They were extended as the curve of patients contracting coronavirus increased significantly. The health reasons justifying shutdown had started impacting the economy and it became essential to restart business and trade by lifting of the lockdown in a graded manner. The current status of greater registrations of COVID-19 cases now co-exists with no lockdown in most areas in India but with lockdown and containment zones in some pockets or states where medical facilities are few or unavailable. The spread of the virus is geometrically increasing day to day.

The immediate effect of COVID-19 required employers to ensure the safety of the employees in the work place. Work continuity from home for at least professional service was to be established. The health and safety factors with rapidly increasing cases of COVID-19 necessitated the shift of a physical work place to a virtual work place and work from home. Office equipment for setting mini residential offices became an immediate necessity. The secure workplace at home needed secure Internet facilities for working from home in a hack-free, tamper-proof environment and was imperative because of data protection and privacy needs. Entire brick and mortar office have been converted to ghost like empty offices for over four months by now.

Access to text books and library and client files in a virtual or digitized form through secure Citrix systems accessible from home was another step to ensure continuity of work without business interruption from home.

The immediate effect of COVID-19 also necessitated the verification of the coverage of group medical and life insurance policies for COVID-19 as this was not specifically covered in the policies in existence at that time.

The need of secure audio-video platforms for remote communication and virtual meetings has dramatically increased on a long-term basis for rendering professional services.

The government of India and other state governments in India were alive to the problems created by the pandemic and lockdown and increasingly notified the postponement of tax and compliance filings under the Income Tax Act, under the GST laws, under the Companies Act and other laws which required continuous data updation for compliance and tax collection.

Almost every fixed filing date for tax collection and assessment stood amended and postponed so as to give assessees the benefit of force majeure causing delays in prompt filings and filing for regular compliance.

Under the Insolvency and Bankruptcy Law, the government of India issued an Ordinance on June 5, 2020 whereby it declared that no new filings of application under Section 7, 9 and 10 of the IBC Code would be permitted to be made before the Adjudicating Authority (NCLT) for defaults by corporate debtors after March 25, 2020. This meant that only prior cases of defaults which had taken place on or before March 25, 2020 and for which filings had been made prior to the Ordinance could be considered by the Adjudicating Authority (NCLT). The government gave a six months window to settle cases outside the IBC, during the six month suspension of new filings. This could be further extended by another six months up to June 5, 2021.

Prior appeals before the NCLAT and the Supreme Court of India or other high courts under IBC would continue but no new cases under the IBC would be filed. The government anticipated significant bankruptcy during the period of COVID-19 but was aware that the infrastructure for adjudication and appeals was inadequate for influx of new cases.

By now almost all the high courts and tribunals have installed new equipment for enabling virtual court hearings and the judges and the lawyers are now getting adept at such proceedings. Recently a Constitutional Bench of the Supreme Court of India conducted a full hearing on a virtual court basis.

Any Covid vaccine developed is not expected to get regulatory clearance till December 2020. In the absence of a stable vaccine there is continued uncertainty of the impact on human lives. Several offices and their staff are insisting upon work from home so that there are minimum casualties arising from working in a crowded office environment. If such a situation continues, law firms will evaluate the need to cut down on physical space as a result of work from home policy. This would give them a good budgetary uptick because rent costs would be minimized on long-term basis.

Employment of new lawyers in law firms has also diminished as the financial impact of the COVID-19 on the legal sector and on the economy generally are unpredictable. Assessments by national economists as have been publically made indicate that the country will have a negative growth (less than zero GDP) in 2020-21 and this may continue in the next few succeeding years.

Shut down of factories and migration of the skilled workforce have impacted the production capacity of the manufacturing sector. With reduced turnover in manufacture and trade, the capacity of industry or trade to pay for their fixed costs and variable costs without impairment is expected to be seriously affected. This in turn will impact the legal sector especially in connection with litigation practice and other routine practices.

Wavy Line
Shardul Shroff

Executive chairman, Shardul Amarchand Mangaldas & Co

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