The legal implications of the coronavirus
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Rany Sader & Lana Fadel
SADER & Associates, Beirut
rany.sader@saderlaw.com
As Covid-19 continues to spread, health anxieties have also developed worldwide. However, fears have not only been related to health: it appears that Covid-19 has also had great legal consequences. This article will focus on the legal implications of Covid-19 for the entertainment industry in Lebanon.
Covid-19 has caused several prolonged disruptions to all industries around the world and the entertainment industry seems to have been majorly affected by the virus. Supply chains have been disrupted; contractual obligations have been interrupted; travel restrictions have been imposed; events have been cancelled and force majeure instances have even been documented both regionally and internationally, due to the virus, raising severe legal implications for the entertainment industry. All of this could lead to legal allegations. The entertainment industry encompasses several areas, such as film; television; radio; music; the literary publishing industry; and entertainment events, among others. Some have been affected more than others; some are trying to adapt; and some may yet face greater consequences. Here are few instances, which convey how some areas of the entertainment industry have been impacted, particularly in Lebanon:
Film
Most, if not all, independent film boutiques have reduced their operations, resulting in producers and technical workers accepting half their usual wages. Lebanon had been hit by economic collapse prior to the virus; the appearance of Covid-19 at the same time has thrown the industry into breakdown.[1] Myriam Sassine, an Aboutt producer (a well-reputable production company in Lebanon) mentioned in an interview: ‘We were preparing for a new crisis, but we didn’t expect the whole world to stop with us.’[2] This portrays how much the film industry was already struggling in Lebanon and now, with Covid-19, only time can determine the level of damage caused.
Television
Ever since the rise of Covid-19 and the enforcement of lockdown, the television industry has faced a drastic drop in its programmes as the majority of shows have stopped filming since Covid-19.[3] Ramadan is a well-known season for television series and soap operas to take place and, unfortunately, this year, media channels have been faced with massive gaps in their scheduling, raising concerns about filling those gaps.
Advertising
With no shows airing, media channels are calling for greater levels of advertising. However, the issue here lies with a gap between supply and demand: audience size has increased exceedingly over the past two months, in contrast to a very minimal budget spent on advertising, with the virus disrupting all business operations.[4]
Literary publishing
The literary publishing field is perhaps the area of the entertainment industry that has adapted to lockdown best. The e-publishing field has proven to be the domain most prepared for crisis, ever since the rise of technology and social media, which has worked in its favour. This has been considerably obvious in Lebanon. For example, Al-Nahar newspaper has shifted to online publishing, along with many other Lebanese news providers.
Entertainment events
The majority of events that were scheduled to take place this year (whether in Lebanon or elsewhere in the world) have been either cancelled or postponed. Lebanon, as mentioned above, was already trying to deal with an economic crisis, which had already had an impact on the entertainment industry. However, Covid-19’s global scale has challenged Lebanon’s entertainment industry further still.
Two award-winning films, 1982 and All This Victory, were set for theatrical release and aiming for the Cannes Film Festival, an event that is no longer taking place this year.[5] That being said, with the rise of the points mentioned above, the entertainment industry has not only been affected financially: entertainment companies are also experiencing significant legal concerns, with events being cancelled and employees laid off. They may also be failing to meet contractual obligations, all of which fall under the title of force majeure.
Entertainment companies facing force majeure
When it comes to cancellation of events or force majeure, certain aspects that simply cannot be overlooked: cancellation and force majeure occurrences are usually merged and include contractual obligations that may bind parties to reconsider.
Article 50 of the Lebanese Labour Law states that: ‘An employer may terminate some or all the employment contracts in the company in an organisation where a force majeure or economic or technical circumstances require such termination. This can be done through reducing the size of an organisation, replacing a production system with another or eventually shutting down.’ For issues pertaining to salaries, the code referred to in Lebanon is the Obligations and Contract Law.
Where the cancellation of an event takes place due to Covid-19, or where an employee has been faced with force majeure amid the virus, the first step would be to take a close look at the signed contract and examine its clauses. Although having an epidemic clause in the contract is usually very rare, the issue is subject to interpretation of the relevant wording. However, when it comes to force majeure clauses, if it does not include any related provisions, the matter is then dependent on the governing law of the contract.
A force majeure clause is usually always found in a contract signed by two parties. This describes the reasons that a contractual term may be discontinued, such as: 'malperformance'; breach of contract; exceeding the set duration; or cancellation of the event. However, as force majeure clauses are open to interpretation and reasons for discontinuation depend solely on the individual case, the following should be considered:
- emergency clauses;
- government decision interference/change in law;
- delay 'incompensation';
- extended periods; and
- notice requirements.
There are many other points that could be taken into consideration and it is advisable that an expert looks into the matter.
Prior to cancelling an event, it is important to look into alternatives that would perhaps involve fewer legal implications, once clauses have been breached. You might consider postponing the event, for example. At the moment, several world events have been postponed, such as the Olympics games, which were to be held this July in Tokyo. Many other events have been postponed, rather than cancelled, until further notice, all as a result of Covid-19. Some organisations simply cannot afford to cancel an entire event, which is absolutely understandable, given the consequences that follow a cancellation. It is, therefore, essential to try to look into alternatives, before jumping to a conclusion that will create financial difficulties.
Such financial difficulties are undoubtedly an issue that every Lebanese entertainment company (and individual) would rather avoid, especially if that cancellation could result in insolvency and affect stakeholders. Entertainment companies in Lebanon, therefore, should consider proactively engaging with their stakeholders (such as creditors) on key issues, in order to re-negotiate the terms of the contract, avoid continued losses and keep the business afloat. This process is usually called the waiver of the contract rights or forbearance. It is also important for financiers to understand the situation, as they may not want to finance for long. Engaging with them is crucial.
Additionally, stakeholders such as suppliers and customers cannot be overseen, as their involvement relies strictly on the terms of contract signed. It is their prerogative as to whether or not they are willing to protect your company’s finances.
That being said, communicating with stakeholders (and your relationship with them) will determine their flexibility and attitudes in a pandemic such as Covid-19. While this is not always strictly a question of financial matters and does not always have legal implications, it is important to be aware of the risks of litigation in times of crisis. Examining the alternatives and engaging a lawyer to analyse your contract and develop a legal strategy, are important. This may help protect your company, enabling the proper procedures in the event that one of your stakeholders is not willing to compromise.
Notes:
[1] Joseph Fahim, 'Coronavirus and movies: How it's hurting the Middle East film business' (Middle East Eye, 7 April 2020), see www.middleeasteye.net/discover/coronavirus-middle-east-film-business-covid-19, last accessed 29 July 2020.
[2] Ibid.
[3] Marwa Hamad, 'Ramadan shows stop filming due to COVID-19' (Gulf News, 25 March 2020) see https://gulfnews.com/entertainment/tv/ramadan-shows-stop-filming-due-to-covid-19-1.70613001, last accessed 29 July 2020.
[4] Jim Waterson and Mark Sweney, 'Covid-19 leaves news and entertainment industries reeling' (The Guardian, 17 April 2020), see www.theguardian.com/media/2020/apr/17/how-covid-19-turned-the-uk-news-and-entertainment-industry-upside-down, last accessed 29 June 2020.
[5] Joseph Fahim, 'Coronavirus and movies: How it's hurting the Middle East film business' (Middle East Eye, 7 April 2020), see www.middleeasteye.net/discover/coronavirus-middle-east-film-business-covid-19, last accessed 29 July 2020.