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The crisis as an opportunity and a challenge

The crisis as an opportunity and a challenge

The coronavirus pandemic is putting economic models and legal practices to the test, turning up the heat on entrepreneurs and lawyers alike. What will the crisis leave us with, and which measures should we abandon without a second thought? Philipp Freund, Policy Advisor at LGP, asked strategy consultant Markus Petzl and LGP’s founding partner Gerald Ganzger about this during a video conference.

 


 

Philipp Freund: Will there be a period after the coronavirus crisis? What could it look like?

Markus Petzl: Of course there’ll be a period after the crisis. Even though many people might not be aware of it, we actually know quite a lot about the period that will follow. After all, we can draw on a wealth of experience from past crises and see what happens in a recession or a depression. This means that we have an idea of how key indicators will respond and how markets and price structures will react. It is currently much more difficult to master the crisis period itself, not least for companies, because we’re in the midst of the proverbial uncharted territory.

Gerald Ganzger: In the legal sense, too, there’ll certainly be a period after coronavirus. We are currently experiencing an unbelievably challenging period on the legal front: on the one hand, legislators have enacted or amended numerous laws at very short notice to deal with the situation. After the coronavirus crisis, we as a society will need to decide which new laws it would be useful to keep. For example, it will not be possible to switch off subsidies from one day to the next and reduced-hours working arrangements will probably have to be extended.

On the other hand, we are also witnessing far-reaching encroachments on fundamental rights, and in this respect, we lawyers (in particular) must be careful that these encroachments are pushed back as soon as possible. Moreover, it is already clear that large swaths of contractual portfolios will have to be revised. This concerns tenancy law, along with employment law (with “working from home” being key here), and, last but not least, the important concept of “force majeure” in contract law. 

Freund: Mr Petzl, can the recipes for overcoming past crises be applied to the current situation quite that easily?

Petzl: The patterns are similar in many crises: the labour market is shutting down, and after this, we can expect a discussion about what items cost a certain amount or are worth a particular value. I don’t expect to see any major changes in this regard. However, there is no doubt that every crisis also serves as a catalyst for new ideas and often helps certain technologies and instruments to achieve a broader breakthrough. In the present situation, I am thinking above all of the opportunities that digital sales channels and working from home offer companies in challenging economic times. 

These technologies were simply not available after the 2008 financial crisis and in the crises before. In the course of the current crisis, they are establishing themselves as part of a new daily routine, especially in an array of companies, and will hold up to a certain extent in the difficult economic environment of the post-crisis market, where cost is an important factor. Instead of business trips, we will see more and more video conferences, especially as air fares are unlikely to fall back to their pre-crisis levels all that quickly.

But there will also be new approaches undertaken by the state to revive the economy, such as in the form of subsidy packages. I see this as a great opportunity to put our economic cycle on a more sustainable footing, with the help of initiatives such as the EU’s Green Deal, for example, which was agreed just before the outbreak of the pandemic. The automotive industry is at a standstill worldwide, and why should we return to combustion engines after the crisis? In this respect, the crisis represents a good opportunity to break new ground.

Ganzger: Processing the coronavirus pandemic on a legal level will certainly be based on patterns drawn from the past and especially on the period that followed the financial crisis. The economy is currently experiencing damage on an incredible scale. Here, of course, many of those affected will try to reduce the damage, i.e. to find someone to share the burden of the damage with them. At the same time, the current situation places an enormous weight on small businesses in particular, and also on entire sectors, such as tourism and catering. Many will not be able to cope with the foregone profits on their own, and we’re seeing a lot of cases in this regard.

As a result, we will have to consider whether certain legal provisions for particular areas are at all crisis-proof in their present form and whether we will need to change them. I am thinking of insolvency law, which of course is not really suitable for a crisis of this nature: there are no plans to suspend insolvency cases, nor to extend the deadlines associated with them, but this will probably be necessary – if not for the current crisis, then at least so that we can be prepared for the ones to come. In terms of the new technologies mentioned above, we need to ask ourselves whether our legal system is already fit for this technology at present. There are plenty of questions to be answered, for example, in connection with data protection. A mere two years ago, the companies and individuals in question put a lot of time and effort into adapting to the EU’s General Data Protection Regulation. This General Data Protection Regulation took 9 years to be created and is now undergoing an endurance test, which shows that some adjustments will probably be necessary. We are still receiving a great deal of work on this, too.

Petzl: That said, things that used to take 9 years now sometimes proceed much faster. People spent years arguing about digital prescriptions for medication, but it was made possible within a single day, and now there is actually no reason to take it back. This is when you realise what systems can actually do, if you let them.

Freund: What will stay with us from the crisis, what can we take on board?

Petzl: The crisis is forcing us to renegotiate a great deal within society. In this respect, this difficult time also brings with it an excellent opportunity for reinvention, whether for companies or individuals.

Ganzger: Two things are sure to come up, and quickly: on the one hand, there will be an avalanche of lawsuits, and we also expect an array of class actions, and on the other hand, there is the need to adapt contracts in such a way that they are fit for crises to come. This revolves around greater flexibility in employment law or regulations in connection with force majeure. But what is particularly important to me, personally, is to make sure that we get our fundamental rights back in full, after the restrictions that have been placed on them.

Authors:

Dr. Gerald Ganzger, Managing Partner atLANSKY, GANZGER + partner
Philipp Freund, M.A., B.A., Policy Advisor, Business Development, Westbalkan & SEE Desk at LANSKY, GANZGER + partner

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