Most countries at the meantime are suffering from a disease that is considered as a global pandemic by the world health organization (WHO), an unprecedented disease with no cure yet, known as Coronavirus or COVID-19.
Coronaviruses are a huge family of viruses attacks human and animals, causing symptoms in humans ranging from common cold all the way to more dangerous Diseases such as Middle East Respiratory Syndrome (MERS) and Severe acute respiratory syndrome (SARS). However, the recent disease which discovered lately (COVID-19) is considered much more dangerous from the previous Coronavirus diseases.
Passing on countries around the world and their efforts in fighting this pandemic, which has major effect on a lot of life aspects, that will result in a huge shift in life as we know it and changing the inevitable.
Coronavirus from a legal perspective:
Saudi Arabia did not experienced crisis like COVID-19 crisis in the past that resulted in suspension of all daily life activities, which is explains the absence of any Saudi legislation that clearly stipulates what should be done in such situations.
In order to shade more light on the matter and to have more legal insights about the consequences of this crisis, Legal Illuminations Initiative (LII) invited the lawyer and legal advisor Mr. Tamim Al-husainan to give his legal opinion on the subject.
The first question was about the legal dimensions of the precautionary measures that has been taken by governments in their fight against covid-19:
Alhusainan answer was that this crisis happened unpredictably which caused damages to countries, economically, socially and politically. From a legal prospective, every country took precautionary measures that consistent with their constitutions and customs in order to prevent the wide spread of the disease and enhance the public health.
But by speaking about the Saudi Arabia’s efforts and its role in protecting human rights how it was enhanced with the spread of covid-19:
Alhusainan said “the kingdom and its leadership have an eminent role in saving lives and stabling public health, which clearly demonstrated in all the precautionary measures and the issued decisions that we see for the first time in the history of our country, such as curfew and other novel decisions that shall prevent the spread of the novel coronavirus COVID-19 to save citizens and residents.
Moving on to the current situation and the consequences of current legal commitments such as contracts, agreements and other sources of commitments during this crisis, is there any cases where the principle of force majeure can be applied?
Force majeure principle “according to the global agreed criteria by the global trade authorities and commercial arbitration centres is define as " unpredictable condition makes the execution of an obligation impossible" and it's main legislative requirements are:
First: unpredictability of the condition, second: render the execution of the obligation impossible, which means it cannot be prevented.
Third: did not caused by the obligee.
Thus, the widespread of COVID-19 can be described as force majeure that the country never been through before and the legislator did not detail nor interpret the definition of force majeure to be brought down into the current situation.
Therefore, there must be a collaboration between employers and their employees in order to reach a settlement over this pandemic. On the other hand, there is a debate between experts over the Unliquidated obligations due to the force majeure, such as wedding halls fees some experts said that contracts should be avoided entirely because both parties will not be able to benefit from the subject of the contract, whereas other experts stated the it should be avoided entirely due to the force majeure.
Away from legislation, many experts discuss the penalties of violating the precautionary measures imposed by the government to contain the spread of Coronavirus, how do you see these measures and the consequences of violating them from a legal point of view?
Competent media platforms have clearly and explicitly set out through its social media platforms, detailed penalties for violating the precautionary measures such as fines, and imprisonment in case the violation has been repeated, which are found in the interest of citizens and residents, and everyone must abide by it.
On the other hand, health has the largest share of interest in such situations, so how is the public health, and its essential part of maintaining public order under the Corona pandemic is protected?
It is always protected by self-preservation and abiding by what is included in the royal decree by King Salman bin Abdulaziz Al Saud and his decision of imposing curfew on 27th Rajab 1441H corresponding to March 22nd 2020, which is stipulates "... as preserving public health has become one of the most important duties on the people of this country or who lives on its land, everyone must fulfill their duty by staying in their homes and not expose themselves or their countries to the risk of spreading this pandemic”.
Conservation of public health is classified as one of the most important duties of all citizens and residents.
Finally, there has always been a historical reference for the Kingdom to classify crises but did the force majeure and emergency circumstances have a clear legislative basis or legal precedents in the Kingdom before this crisis?
In fact, the Kingdom did not clearly pass by the force majeure before with the same spread of precautionary decisions such as closing the two holy mosques, suspending movement across borders, isolating the thirteen regions from each other, suspend receiving all internal and external flights, and closing the educational corps altogether temporarily, as I think there will be reconsidering to the laws in the future and modifying them in a way that suits nomenclature and circumstances of force majeure as what we go through and detail its legal consequences.
And yes, there is some precedents that has been decided in this regard, but it is not the same as adopting the current force majeure, also, all laws combined are nothing but a protection and preventive measures to preserve human life, and we all hope that health and well-being return to us.
As it is no secret to any follower, the pandemic of the Coronavirus (COVID-19) has negative economic consequences that the world has begun to feel the severity of it since the beginning of the year. With the disease spreading rapidly across world continents, the question has become repeated about the depth of this economic crisis, its potential time span, and the episodes of this disease. and the global economic shocks that it makes and continue around the clock.
However, instead of dwelling into expectations and growth figures that may be incorrect, it is good first to try to understand the nature of this economic crisis and to surround its instruments and how it impacts different sectors, and the differential of this impact among countries according to the characteristics of their economies.
Corona from an economic prospective:
Assisted by experts in economy, LII begin exploring the economic effects of COVID-19 from a global economic prospective.
The economic crisis that the world is currently live in as a result to COVID-19 pandemic, has unique features that distinguish it from any previous economic depressions.
First, the factor of the economic shock, which has two sides, a shock in supply because of the drastic reduction in industry, production chains and shipping. On the other hand, a demand shock due to the precautionary health measures that imposing limitation on people’s movement, alongside suspension of schools, traveling, and a lot of other economic activities.
Second, the crisis started in China, which noun as the world’s factory because of its economy which, Be some estimates, worth nearly 10% of the total world economy. All of these factors, plus the critical role of China in the global supply chain system, developed an apprehension about the negative effects that might impact large number of industries.
Third, the global economy in general, and in industrial countries in particular, was not in its best conditions prior to COVID-19 crisis, it is quite the opposite, they were suffering because of the reduction in the industrial movement and the fluctuation in the global trade. High sovereign debts, on the other hand, and low interest rate before the crisis meant that the incentive policies in those countries were limited.
The combination of all those factors, in additional to the transmission of the disease’s core from China and Asia to Europe and America, and the varying measures that were taken by countries to control the infection, such as the suspension of daily activities, travel, transportation except for emergency situations, and the suspension of several major events and festivals, transformed the apprehension into a real fear from getting into a general economic depression similar to what happened in 2008 or maybe more catastrophic.
Instruments that affect the economy:
The wide spread of the virus affects the economy through several instruments, which can be summarised in:
-Home Quarantine for millions of people around the world:
Stay at home means that people will spend less on all means of transportation, restaurants, hotels, shopping, entertainment activities, travel, and education. Reduction on using transportation also means reduction on using all kinds of fuel including oil, which have a negative effect on the countries exporting it, such as the Gulf countries. Also, countries such as Italy and Spain where tourism represents 20% of its economy, will be affect by the quarantine more than the other countries.
Finally, countries where consumption per Capita is high compared to its economy (nearly 65% in the USA, 70% in Eygpt, between 50% and 60% in Europe) will be more affected than other countries such as Saudi Arabia where the consumption per Capita is between 30% and 40%.
- The drastic reduction in industry and production Chains:
Large number of industries were closed because the wide spread of COVID-19 in the country, which accompanied by a disarray in the global production lines due to the interconnected modern global economic system and the dependence of the modern industries on sophisticated chain of intermediate specialised products. Countries which export heavy and light industries and technology products, for instance Germany and South Korea, will be affected by the reduction of demand and inactivity of production chains, for example, car manufacturing industry is at the top of the industries list that will be negatively affected by the reduction.
Moreover, the deceleration of large economies (China, the USA, the UK, Italy..) mean that their import rates of industrial products or the intermediate specialised products will be reduced drastically, and because a lot of industries depend on row materials such as oil and minerals, then any reduction in manufacturing will result in reduction in the demand on row materials which will develop even more negative effects on the main source of income for a lot of developing countries like Gulf countries, African countries, and countries of south America.
- The global on stock markets, security exchange, and sovereign det:
Investors’ fear of the crisis escalation has reflected on the stock markets around the world and resulted in major losses to companies. Similarly, the financial burdens accumulated on the general budget of many countries in their endeavor to combat COVID-19, which increased the costs of financing its debts resulted in a decrease in their economies’ opportunity to heal and grow in the near future.
- The impacts on labour market:
Due to the reduction in demand on many products and services, and the global decline in private sector’s profits, a lot of employees have been discharged like what happened in the US when, over 6 million people applied for unemployment compensation just in two weeks, which is unprecedented in the history of the United States.
High number of unemployed people or a cut in their wages means a shrink in their purchasing power, which aggravates the crisis even more, and when companies declare bankruptcy the problem of supply become bigger and there where domino effect take place.
All of these factors and instruments of impact will inevitably lead to a sharp decline in the global economic activity. Expectations vary from day to day due to the acceleration of news about the spread of COVID-19 and the increased severity of the precautionary measures.
Nonetheless, the global economy may dwindle this year 2020 with the possibility of negative growth in America, Europe, countries of South America and a number of developing countries such as Russia, Brazil and some of the Middle East countries. After that, and if the disease was controlled, the global economy may resume its positive growth next year 2021.
The amount of contraction of the global economy may outstrip the contraction that occurred during the 2008 financial crisis, and unemployment rates could rise as much as 20% in some major countries such as America and the European Union.
- The economic effects on Saudi Arabia:
The kingdom is not isolated from the world, and the disease has infiltrated our homeland. However, thanks to Allah the disease is not spreading as fast as in other countries, major instruments that have direct effect on the local economy include:
· Price drop in goods (oil) due to the drastic fall back in the global demand on petrol and its derivatives (gas for cars, aircrafts, trucks…etc.) which affects the country’s income.
· The consequences of the country’s drastic actions to limit the spread of the disease (such as curfew, remote wokr, and reducing the number of hours for outdoor activities), which has similar effect to what was mentioned previously.
· Huge draw back in the numbers of pilgrims (due to health restrictions) that affects the trade flow and other services, especially in the two holy cities Makkah and Madinah.
· The generally affected private sector, due to the lack of trade for the luxury goods, restaurants, hotels, and other services.
· The need for extra financial support for the medical sector to fight the disease, provide enough medical equipment, and increase the health security in airports.
· Financial requirements to reduce the negative effects on the economic status and the monetary sector (as explained in the announced measures).
- Measures and policies to mitigate the negative economic impact:
The primary goal of any measures taken by countries is to reduce the negative impact of the crisis, also, there is no way to incentivise the demand for travel or hotels as long as the virus is not contained because the precautionary measures to limit movement, which is the reason for the negative impact on the economy, therefore, countries find themselves in front of two options:
Either to accelerate decisively and take early tough measures to control the spread of the disease, while withstanding some economic damage in the short term, or negligent precaution measures to limit movement for fear that the economy will be disrupted and pay the price twice after that.
What is should be learned from other countries’ experiences in the last short period; that those who have taken decisive measures from the beginning (such as Singapore, Hong Kong and Saudi Arabia) now appear to be in a much better position in terms of infection control and heading towards improvement in both health and economic fields.
Whereas countries that was late to take such measures (such as the USA, Italy, and the UK) they are now paying the bill twice in both health and economic fields.
Thus, the top priority for the countries now is to try to control the spread of infection and reduce the number of people with the disease as much as possible, which is a healthy and economic priority at the same time.
Then come short-term priorities such as mitigating the impact of the crisis on the private sector, by Reducing bankruptcies that inevitably lead to layoffs in massive numbers and threatening to collapse the economy, especially in countries whose heavily dependent on the private sector.
Countries have also resorted to a mix of fiscal stimulus packages, and it offers to maintain a stage of economic and banking integrity that allows the economy to resume its growth when the crisis ends.
- Economic measures taken by the Kingdom of Saudi Arabia:
The Kingdom of Saudi Arabia was a pioneer in both health and economic measures. In addition to the packages in the precautionary measures to contain the disease, the government has announced various packages aimed at protecting the private sector, especially small and medium enterprises, such as exemption from some fees, delaying the payment of bank payments, exceeding the financial compensation for expatriates, bear 60% of the salaries of private sector employees in effected sectors, and many other measures that the reader can refer to in the newspapers or (in the appendix to this report if desired).
- Many studies and many analysts have linked the impact of this pandemic on their minds to one question:
What after the pandemic?
This pandemic may lead to a permanent change in a number of aspects of the modern economy:
- Remote working may become necessary and legalized in many sectors to reduce costs.
- Seeking more automation: The pandemic has shown that labor-dependent factories are at risk of stopping, given the spread of epidemics and their duration.
- A decline in the pace of globalization and an attempt to settle some stages of production in many countries, with an attempt to converge in the health aspects, epidemiological research and others.
- These changes may lead to an increase in production costs in some sectors, which may be reflected in inflation in the long run.
- Many countries will be forced to review spending priorities in light of the increase in their budget deficits.
Although many of the aspects presented in this report related to the pandemic are connected to the legal and economic situation, everyone intensified efforts to work to overcome them with the minimum possible amount of damage, and from this standpoint, the efforts of the Kingdom of Saudi Arabia and all government agencies, especially health staff, must be commended.
Those who make great efforts to preserve the health of the citizen and the resident, exerting their souls in facing this delicate stage, stressing that the continuation of hard work at this difficult time is only achieved by solidarity, cooperation, positive spirit and enhancing individual and collective awareness, otherwise It shall be bound by the directives, and instructions issued by the concerned authorities in order to face this pandemic.
May God bless us and you, and protect everyone from all evil and harm, and may God protect the Saudi Arabia and its people.