How would law firms advise their clients to conduct business during the pandemic and post COVID-19?

As COVID-19 continues to impact people and economies around the world, we anticipate a slow and uneven recovery, posing new challenges for most industries including law firms. However, it also presents new opportunities for lawyers to enhance resilience for the long term. To embrace the “new normal”, our firm invites clients to consider the following issues:

1. Address customer demands

COVID-19 has changed behavioral patterns of customers in many industries, and the new patterns are likely to continue post COVID-19. People are getting more used to go online for a large range of activities including shopping, managing bank and financial transactions, making payments, hosting conferences, submitting documents and making applications for various purposes. For example, in a survey titled “Future Consumer Index: How to serve the ‘Anxious Consumer’ after COVID-19” published in May 2020, approximately 44% of global consumers indicated they would be more likely to do grocery shopping online as a result of the pandemic. On the other hand, due to the social distancing requirements, people reduce their travelling and physical meetings. Thus, businesses in the tourism industry and those which sell goods and services mainly via physical stores, as well as their suppliers and sub-contractors, may have to adjust their business models, adapt to new customer behaviors and address new demands.

2. Look after your workforce

The wellbeing of the workforce is both a duty of care and a business imperative. It is important to effectively address the employees’ concerns in a timely fashion. The income of some employees in certain industries is adversely affected by COVID-19, but the employer may keep its workforce engaged by, for example, regularly updating them of the strategies to cope with the difficult times, providing the necessary epidemic prevention supplies to them and their families, and encouraging them to suggest innovative business tactics.

For an employer which adopted a remote working practice during the most severe pandemic times, it may consider continuing such practice wholly or partially post COVID-19. If so, it needs to utilize suitable technologies and working processes, including crowdsourcing, risk apps and collaboration platforms, in a way that allows its people to work efficiently in a safe environment.

3. Identify legal issues

COVID-19 has left and may continue to leave a range of legal turmoil. Identifying potential risks is critical for businesses looking to weather an anticipated storm of business disruptions and litigations. While the risk management measures may vary by sector, geography and culture, the following suggestions may assist in-house counsel to manage common legal risks:

► Analyze supply chains, identify interruptions, review contracts governing relationships with significant stakeholders (e.g., suppliers, business partners, customers and banks), as well as capture key information needed for the senior management to make informed decisions;

► Review the “force majeure” or hardship clauses in contracts and assess whether preconditions have been fulfilled for either party to invoke force majeure;

► Consider whether the standard corporate governance, legal/regulatory compliance and internal control practices can still be feasible, and if not, come up with alternative ways;

► Review employment contracts, policies and procedures, as well as local employment laws, to help ensure compliance across all employee types in all relevant jurisdictions;

► Build an effective communication and information sharing protocol within the organization even if the colleagues cannot tend to duties in the usual way, so that new business strategies and tactics, governmental requirements and subsidies, business environment changes can be conveyed to the relevant personnel within the organization;

► Evaluate the validity and enforceability of insurance contracts, and assess their coverage and limitations in a crisis context.

What technology is available to assist in-house counsel?

By embracing today’s technology-driven innovations, businesses are looking for ways to efficiently conduct high-volume, cross-border, routine and event-driven legal projects while allowing in-house legal counsel to use their time on important matters and to integrate seamlessly with other corporate functions.

A survey titled “Why the legal function must be reimagined for the digital age” published in April 2019 reveals that, even before the pandemic:

Key numbers:

With the acquisitions of Riverview Law and Thomson Reuters Pangea3, EY Law is reshaping the future of legal functions through its Legal Managed Services (LMS) by customizing technology and data-driven processes designed to control costs, better mitigate risks, and deliver value to businesses in today’s ever-changing regulatory landscape. By and large, LMS simplifies complex business processes and empowers in-house resources to be utilized in a more efficient, productive and cost-effective way.

EY Law provides legal advisory services in 80+ jurisdictions by 2,400+ lawyers. EY Law LMS team has accumulated 15+ years of experience while backed by 1,100+ professionals across 8 global delivery centers.

Our firm, LC Lawyers LLP, is an independent firm, but also a Hong Kong law firm member of the global EY network, in collaboration with other law firm members. We provide legal advisory services and support delivery of LMS.

The key features of LMS include:

► Contract lifecycle management: LMS supports the whole contracting process from pre-execution to post-execution, allowing clients to enhance efficiency, cost control, contract consistency and repository building.

► Research and regulatory mapping: The LMS’s research and regulatory mapping team helps clients to keep updated of changes in relevant laws, regulations, codes and guidelines from applicable jurisdictions around the world.

► Entity compliance and governance: The LMS’s entity compliance and governance team delivers integrated and holistic approach across the legal entity lifecycle and helps companies navigate the evolving landscape of corporate governance.

► Document review and functional analysis: LMS empowers voluminous document reviews and extracts data relevant to clients’ specific purposes. It also supports deviation analysis and risk review.

In-house counsel must ensure that their companies remain compliant with an ever‑changing regulatory and transparency landscape, while managing the day‑to‑day operations of their legal departments. For many general counsel and company directors, turning to EY Law LMS can offer a solution to some of these growing challenges.

About LC Lawyers

Key clients

1. Asia Allied Infrastructure Holdings Limited

2. Chiho Environmental Group Limited

3. Fullshare Group Limited

4. Greenheart Group Limited

5. Greentown Service Group Co. Ltd.

6. HC Group Inc.

7. Justice Without Borders

8. Li Ning Company Limited

9. Nexion Technologies Limited

10. Overseas Chinese Town (Asia) Holdings Limited

11. Tianjin Jinran Public Utilities Company Limited

Since the declaration of a state of public health emergency in the Philippines in March 2020 due to COVID-19, the Philippine government has enacted various laws and regulations that present opportunities for increased investment, provide a stimulus to improve economic activity in the Philippine market, and promote the ease of doing business in the country.

Of key importance is the Bayanihan to Recover as One Act (Bayanihan 2) which contains measures to be implemented by the government to accelerate the recovery of the Philippine economy from the adverse impact brought about by the pandemic, and encourage new and additional investment. In addition, procedural changes recently implemented by government agencies such as the Securities and Exchange Commission (SEC) and the Philippine Economic Zone Authority (PEZA) signal sustained efforts to improve the ease of doing business in the country.

BAYANIHAN 2

Bayanihan 2, which took effect on 15 September 2020, authorizes the President to exercise powers that are necessary and proper for COVID-19 response and recovery interventions. The law is effective until 19 December 2020, except for specific provisions that provide for a longer term of effectivity.

Healthcare

The healthcare industry is a key focus area, and Bayanihan 2 contains several measures to strengthen efforts to test, trace, isolate, and treat COVID-19 cases and enhance the capacity of the Philippine healthcare system.

The pharmaceutical and medical device sectors are expected to benefit from the (i) implementation of an expedited registration process for viral testing kits that diagnose Severe Acute Respiratory Syndrome Coronavirus 2; (ii) delivery of uninterrupted immunization programs against vaccine preventable diseases, including a vaccine for COVID-19; and (iii) waiver of Phase IV trials for COVID-19 medication and vaccine, which shall remain in effect until 19 March 2021.

Increased spending by the government and private sector is also expected, to fulfill the mandate of the Bayanihan 2 on the implementation of mandatory COVID-19 testing of health workers every 15 days, as well as the provision of life insurance, accommodation, transportation, and meals to all health workers. Bayanihan 2 has appropriated PHP4,500,000,000 (approximately USD 93,000,000) for the construction of temporary medical isolation and quarantine facilities, field hospitals, and dormitories and expansion of capacities of public hospitals nationwide. The government will likewise provide personal protective equipment to public and private COVID-19 referral hospitals, with an allocation of PHP3,000,000,000 (approximately USD 62,000,000) for this purpose.

To expedite the procurement of goods and services required for the government’s COVID-19 response programs, and allow a nimbler response to the pandemic by the Department of Health (DOH) and other government agencies, such procurement shall be exempt from the bidding process required under the Government Procurement Reform Act. The government as procuring entity is required to give preference and procure locally-manufactured products, by making the award to the lowest domestic manufacturer-bidder notwithstanding that its bid is 15% in excess of the lowest foreign bid.

Financial measures

Government institutions are given key roles in the recovery process, with Land Bank of the Philippines and Development Bank of the Philippines directed to introduce low interest and/or flexible term loan programs for

operating expenses available to businesses affected by the pandemic. The Small Business Corporation is also directed to expand existing loan programs for Micro, Small and Medium Enterprises (MSMEs), cooperatives, hospitals, and tourism enterprises affected by the pandemic, while Philippine Guarantee Corporation is directed to issue an expanded government guarantee program for non-essential businesses, and give preference to critically impacted businesses, MSMEs, cooperatives and activities that support DOH initiatives towards ensuring an adequate and responsive supply of healthcare services. The Bangko Sentral ng Pilipinas (BSP or the Philippine Central Bank) is encouraged to adopt measures, including the relaxation of regulatory and statutory restrictions and requirements for a period of not more than one year from their date of effectivity, to encourage the banking industry and other financial institutions to extend loans and other forms of financial accommodation to help business recover from the economic effects of the pandemic, and to enable the banking industry to manage appropriately its risks and potential losses.

Bayanihan 2 also encourages BSP to permit private banks and financial institutions to: (i) reallocate any unutilized loanable funds to housing loans; and (ii) grant subsidy to home loan borrowers. This is expected to boost demand for home loans, and ultimately benefit the real estate sector.

Liberalization of incentives

Bayanihan 2 authorizes the President to liberalize the grant of incentives for the manufacture or importation of critical or needed goods, including healthcare equipment and supplies, to carry out the policy of the new law, by implementing exemptions from import duties, taxes, and other fees.

The Department of Trade and Industry (DTI) is permitted to suspend any applicable export requirements for enterprises that produce critical medical goods.

E-commerce and logistics

In order to boost e-commerce, the new law authorizes the President to direct DTI to undertake massive promotion of online commerce and offer assistance to those engaged in e-commerce (including internet retail, digital financial services, digital media, and ride-hailing). This is expected to further promote the use of digital technologies in the Philippines, and the widespread use of online transactions. The logistics industry, which is already adapting to the increasing volume of online transactions, will benefit from the general directive in Bayanihan 2 for the President to ensure the availability of essential goods, in particular, food and medicine, by adopting measures to improve the national end-to-end supply chain.

Infrastructure

Bayanihan 2 assigns to infrastructure a key role in rebuilding the Philippine economy, with emphasis on accelerating construction of critical Information and Communications Technology (ICT) infrastructure to support the growth of the digital economy as well as remote work and education.

Players in the ICT industry are expected to benefit from the three year suspension of requirements to secure permits and clearances for the construction of ICT infrastructure, except for the building permit and the height clearance permit. In addition, Bayanihan 2 contains a general directive for the streamlining of regulatory processes and procedures for the development of digital, internet and satellite technology infrastructure.

The new law is also expected to help address the existing infrastructure backlog in the country. It authorizes the President to direct the Department of Public Works and Highways (DPWH) and other government agencies to expedite the implementation of infrastructure programs and projects. All permits and licenses for infrastructure flagship projects are deemed waived for a period of one year from the effectivity of the new law, except for permits relating to environmental laws, health, and occupational safety. It also authorizes a waiver of permits for private projects that are nationally significant or those with high economic returns or employment potential.

The emphasis on lifting the permit requirements for infrastructure projects is a welcome development, in view of the prior regulatory environment that required numerous approvals to be obtained from various government agencies, which caused delays in the kick-off and completion of these projects.

Other measures

Bayanihan 2 includes other measures that are intended to accelerate the recovery and bolster the resilience of the Philippine economy.

The new law permits any net operating loss for taxable years 2020 and 2021 to be carried over as a deduction from gross income for the next five consecutive taxable years immediately following the year of such loss, which is an improvement over the three year period provided under tax regulations.

In order to promote business continuity and spur economic transactions, Bayanihan 2 exempts mergers and acquisitions (M&A) with a transaction value below PhP50,000,000,000 (approximately USD1,000,000,000), which are entered into within a period of two years from the effectivity of the new law, from compulsory notification and clearance requirements under the Philippine Competition Act, prior to consummation. Further, all M&A shall be exempt from the Philippine Competition Commission’s (PCC) motu proprio power to review mergers and acquisitions for a period of one year from the effectivity of Bayanihan 2. While many M&A will benefit from these provisions from the perspective of reduced regulatory filings and timelines prior to completion, concerns have been raised that these exemptions may be counterproductive in light of the role of merger control in ensuring a competitive economy.

The new law also authorizes the President to direct all government agencies and local government units to act on all pending and new applications for permits, licenses, certificates, clearances, authorizations and resolutions within a non-extendable period of seven working days, in order to support business continuity and encourage resumption of all economic activities. This shortens even the periods provided under the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, and should provide motivation for government agencies to permanently streamline their internal procedures. While this provision in Bayanihan 2 does not appear to be effective beyond 19 December 2020, it is hoped that a similar directive will be contained in subsequent legislation.

PROCEDURAL CHANGES

Government agencies, particularly the SEC and PEZA, have implemented procedural changes to accommodate continued transactions despite current quarantine restrictions, and to assist enterprises under the regulatory mandate of these agencies.

SEC

The SEC, which is the primary regulator of corporations in the Philippines, has continued to improve its package of online services by launching the Interim Registration System to facilitate the registration of corporations under the Revised Corporation Code, as part of its efforts to digitize and streamline its operations. The regulator is also clearly shifting away from the prior requirement for in-person filings, by promoting the use of the SEC Express Nationwide Submission system, that allows General Information Sheets and Audited Financial Statements to be submitted to the SEC by registered mail or by courier service.

The SEC has also issued guidelines on the holding of stockholders meetings and board meetings by remote communication, to amplify the provisions of the Revised Corporation Code on the holding of such meetings. This is a welcome move, in view of the current difficulties in holding in-person meetings.

PEZA

PEZA has extended the availability of work from home arrangements for PEZA-registered entities, to the extent of 90% of the entity’s revenue, until 12 September 2021. Prior to the pandemic, PEZA-registered entities were generally required to perform all activities from within each entity’s registered site. This special permission for remote work arrangements is a significant break for the business processing industry in the Philippines, with many firms having transitioned from on-site to remote operations in March 2020.

With respect to its internal procedures, PEZA has allowed certain filings and other submissions to initially be made by email, to accommodate continued transactions with the agency despite quarantine restrictions. PEZA’s efforts clearly show an intent to modernize its procedures, and expedite the processing of transactions with the agency.

While the pandemic has resulted in severe challenges to the Philippine economy, regulatory changes as well as procedural changes implemented by government agencies are shining a light on the path to recovery.

Bayanihan 2 provides new investors as well as existing players in the Philippine market with several avenues for new and additional investment, particularly in the industries discussed above. While many of the provisions of the new law are not stated to be effective beyond 19 December 2020, this new legislation signals significant policy changes by the Philippine government, and it is expected for the next piece of pandemic recovery legislation to build on the gains of Bayanihan 2.

Nitin is the Head of the Firm’s International Arbitration Practice and the Tax, SST & Customs Practice. Nitin’s main area of practice is in international arbitration, focusing on oil & gas, energy, construction and engineering, and infrastructure projects. Nitin also specialises in income tax and customs litigation and disputes.

Nitin has more than 30 years’ experience representing major governmental organisations, multinational corporations, national and international contractors, sub-contractors, financial institutions and high-profile individuals in arbitration, litigation, income tax and customs disputes.

Nitin has acted as counsel or sat as arbitrator in disputes arising from projects in or arbitrations seated in Malaysia, Singapore, Korea, London, Switzerland, Vietnam, United Arab Emirates, Sudan, Paris and Algeria under ad hoc and institutional rules such as AIAC, ICC, SIAC, and LCIA rules. Nitin has also acted as counsel in benchmark income tax disputes on major points of tax law.

He has been consistently ranked by Chambers & Partners as a leading lawyer (Band 1 from 2013-2020) who is very polished and sought-after, and by Asia Pacific Legal 500 as a leading dispute resolution, and real estate and construction lawyer who is very highly regarded for construction disputes. Most recently, Nitin has been recognized as an Elite Practitioner by Asialaw 2020.

How has your role / involvement in client facing work changed since becoming managing partner/setting up your firm?

Over my 35 years of practice, the primary focus of my role has certainly shifted. Client relations have become far more important than they were before. A significant part of my work now revolves around maintaining existing client relationships and creating new ones.

In terms of legal work, I am a dispute resolution lawyer. In addition to appearing as counsels at all hearings, my role is more supervisory and strategic, with most of the initial “grunt” work being delegated to a highly motivated and capable team of younger partners and associates.

I am concerned that many of the tasks currently performed by lawyers could in the near future be replaced by emerging AI technologies. It is therefore crucial for younger lawyers to adapt and upskill in a manner that allows them to focus on those aspects of practice which are more difficult for AI to replace. In particular, I believe that law will remain a “people profession” at its core, and clients will always have a need for trusted (human) legal advisors. In the future, the most successful lawyers will be those with strong EQ skills, combined with the ability to think laterally to provide legal solutions, rather than merely regurgitating the law.

What are the biggest challenges facing firms in Asia Pacific and specifically the market in which you operate in?

In the latter half of the 20^th century, newly independent countries continued to follow trade patterns established in the middle of the century. Malaysia’s biggest trade partners and investors were the US, Europe, and Japan, with its immediate neighbors Indonesia and Thailand being less important. In this century however, intra-Asia Pacific trade will become increasingly important, a trend accentuated by the significant opportunities created by China’s Belt and Road Initiative (“BRI”).

The significant challenge for Asian law firms will lie in the ability to re-engineer ourselves to operate efficiently across borders, in order to compete with the large Anglo-American law firms. Critically, this will involve gaining a greater appreciation of the differing legal systems and cultural nuances across the region. Monocultural law firms will have to learn how to create and maintain strong cross border alliances if they are to thrive.

The global pandemic has clearly changed the way in which organizations tend to operate. What impact has this had on your clients and your approach to advising clients?

It is a truism that the global pandemic has forced all businesses to accelerate existing trends driving new methods of working, communicating and collaborating. Antediluvian senior practitioners like myself, in positions of authority, have had to embrace the unfamiliar world of technology in order to properly service clients.

The legal profession is by its nature conservative and resistant to change.  A lawyer from the 1970s would not see much difference in the workplace of 2019, except perhaps computers on every desk. She would recognise the piles of dusty files and mounds of paperwork. The enforced lockdowns and working from home have compelled lawyers to migrate from dependence on the physical, to acceptance of the virtual (for example, in documents, meetings and hearings). A paperless office – indeed, the idea of not having a permanent office at all – no longer seems like a mere pipe dream.

The process in Malaysia is being accelerated by initiatives implemented by the new Chief Justice to make courts paperless. All cause papers, submissions and authorities in the appeal courts must now be filed online only, with hearings during lockdowns being conducted entirely online. This commendable initiative will compel litigation lawyers, traditionally averse to virtual environments, to also move towards a paperless future.

The Government has had to issue guidelines, directives and rulings at short notice, to respond to the rapidly changing exigencies caused by the pandemic. Because regulations, standard operating procedures, and guidelines on the pandemic are promulgated online (often at short notice, through a variety of media, and not always with absolute clarity), we have had to rapidly disseminate our advice to clients through a variety of virtual media (including the now ubiquitous Zoom webinars).

What do you do differently from other firms? What do you think separates you from your competitors?

As one of Malaysia’s largest law firms providing personalised legal representation since 1902, our long heritage assures clients that they are in the capable hands of experienced legal practitioners.

Additionally, we have advised or led on contentious and non-contentious matters in jurisdictions outside of Malaysia or requiring foreign law advice.  As the only firm in the country to be selected as a member of Multilaw and Interlaw, each of which is an international network of prominent independent law firms, we have access to lawyers in more than 150 cities worldwide.

Are clients looking for stability and strategic direction from their law firms – where do you see the firm in three years’ time?

Clients no longer resort to lawyers to seek purely legal advice. Those times have long passed. Instead, it is now common for clients to expect their lawyers to provide strategic, practical direction on the issues they face and ways they can propel their businesses to greater success.

We expect continued strong demand in the Malaysian market, coupled with increased regional opportunities driven by BRI related projects. A sharp economic rebound is expected, once the pandemic is brought under control. The future looks bright. To quote Lord Birkenhead, I believe that for lawyers “… [t]he world continues to offer glittering prizes to those who have stout hearts and sharp swords”.