One year into the COVID-19 pandemic, the “new normal” is as fluid and unexpected as ever. The aftermath of the health crisis and its economic impact has not matched the initial expectations for dispute resolution: the Romanian market has not been flooded with insolvencies and commercial disputes.
Instead, several new and pandemic-driven trends are shaping the cases being brought to court in Romania. Below we discuss five hot topics in dispute resolution in this market.
1. Administrative Disputes Rule: Some 45% of all litigation in Romania involves contentious administrative files. Public authorities with control and enforcement attributions (e.g., tax, competition, consumer protection, environment, etc.) are very active, and inspections usually result in fines and other measures. Parties being investigated, for their part, generally disagree with these bodies’ decisions and file claims to have them annulled.
Last year, the authorities – ever-so reluctant and resistant to technological improvements – faced difficulties in finding ways to conduct their inspections remotely. Still, the remote investigations that did occur often resulted in administrative litigation. A frequently-made argument is that due to the lack of technical means to run remote investigations, the authorities failed to properly communicate with investigated parties, thus breaching those parties’ right (and limiting their ability) to mount a defense.
2. Public Money Spending in the Spotlight: The pandemic called for expedited solutions for state authorities to acquire the goods and services necessary to properly cope with the health crisis. This meant a great deal of public money was spent on contracts awarded under simplified procedures. Now questions are arising about the legality and transparency of these procurement procedures. The Romanian Court of Accounts (in charge of conducting financial audits of how public resources are spent) is expected to look into how public contracts were awarded during the pandemic. And, in this case, the subject does not stop at administrative or civil litigation, as criminal charges are also a plausible scenario for the actors involved.
3. Contractual Drafting Put to Test: With many disputes during COVID-19 times arising from contractual dealings, the pandemic has tested the effectiveness of contract drafting.
Some “standard” clauses (such as force majeure), though always included in contracts, had rarely been put to the test in extraordinary circumstances. But this type of clause proved to be extremely important last year, as, faced with the challenges raised by the pandemic, the parties to commercial contracts often relied on such provisions to resolve their disputes. In many cases, shortfalls in contract drafting made amicable solutions impossible, thus paving the way for commercial litigation.
4. New Types of Employment Relations: Employers had to adapt their workplaces and working conditions to the new reality. Those most impacted on an economic level resorted to various options to keep their businesses running by cutting salaries, reducing work hours, and in some instances, terminating employment contracts. Some of the employees affected by these measures reacted by filing employment claims, resulting in litigation. This includes new types of claims from employees who disagreed with certain changes in the work environment made by their employers to comply with health protection measures.
5. It Was a Close One for Real Estate: Real estate was one of the most heavily-impacted sectors at the outburst of the pandemic. During the lockdown, office and retail spaces located in shopping malls saw their darkest days. This brought landlords and tenants to the negotiating table at a time when their interests couldn’t have been more different. The dispute potential was huge as all triggering factors of any classic real estate dispute were present. But the pressure was soon released as the great majority of parties worked together to keep lease agreements going. Amicable solutions were the preferred option, so real estate litigation has not increased, which is fantastic.
Fortunately, overall, the effect of the COVID-19 situation – at least through the perspective of the amount of litigation – is not as dark as it was a decade ago in the aftermath of the financial crisis.
These sure are interesting times for dispute resolution, with parties to litigation and their consultants continuously adapting their strategies to cope with the new realities. Flexibility is key in this area, keeping all actors on their toes even in less stressful circumstances. We look forward to seeing how the causes for litigation might change in the post-pandemic world.
By Sebastian Gutiu, Managing Partner, and Nora Olah, Senior Attorney at Law, Schoenherr Romania