// COVID-19 //

Legal measures to tackle economical challenges of coronavirus outbreak / Daily update on actions & solutions /

Due to extreme circumstances, none of us experienced before, DERLING PRIMUS lawyers hereby provide you with certain insights and most recent updates on actions in this extraordinary situation. 

N.B. Even in such extreme circumstances, assessment of each situation has to be individual.
We are at your disposal to help you cope with the challenges during this difficult time because we care for you and your business.

Pan Baltic

Due to extreme circumstances, the governments of Estonia, Latvia and Lithuania have set out the packages of temporary, timely and targeted measures to support people and businesses through this period of disruption caused by COVID-19.

Taking into account huge demand of law-savvy decisions today, under current circumstances it is nearly impossible to follow all the daily changes in the legislative framework. Thus, the following is a Comparison summary, so called pan-Baltic checklist, of the principal measures and initiatives that the governments are implementing in response to the COVID-19 (Coronavirus) crisis.

Comparison of measures taken in Lithuania, Latvia and Estonia is a united project of lawyers in Vilnius, Riga and Tallinn of the pan Baltic law alliance DERLING PRIMUS.

2020.03.26 PAN BALTIC UPDATE – checklist Support during emergency period-pan Baltic-Derling-Primus-LT-LV-EE COVID-19 checklist-vol.1

2020.03.20 PAN BALTIC UPDATE Support during emergency period / pan-Baltic comparison

  1. Employment relations – UPDATE 25/03/2020
  2. Contractual relations
  3. Corporate governance
  4. Data protection and privacy – UPDATE 19/03/2020
  5. Taxes – UPDATE 31/03/2020
  6. Relations with authorities – UPDATE 26/03/2020
  7. Public procurement – UPDATE 25/03/2020
  8. Structural Support of European Union – ADDED 25/03/2020

1. Employment relations

  • What are the employer’s responsibilities for occupational safety?
  • Are employers required to permit staff to work remotely?
  • Can an employer lay-off or furlough staff temporarily?
  • Can an employer unilaterally reduce an employee’s contractual pay (or working hours and pay accordingly)?
  • Can an employer make employees redundant due to the impact of the pandemic and emergency situation?

Obligation to ensure occupational safety: Employers have an obligation to ensure working conditions that comply with occupational health and safety requirements. Among other things, harmful biological factors in the workplace should not endanger the health and lives of employees and other individuals in the workplace. Biological factors include, inter alia, viruses, including the COVID-19 virus. In view of ensuring compliant working conditions, parties should agree on remote working where possible (see also § 3 (2) and § 8 (1) of the Occupational Health and Safety Act; § 28 (2) 6) of the Employment Contracts Act).

Distance work: The recommendation to work on a remote/homeworking basis applies to everyone, in particular, to employees who have recently traveled; according to the recommendation of the Health Board, they should stay at home for 14 days. If remote work is not possible due to the nature of the employee’s role, the employee must continue working as usual or the parties should agree otherwise.

Consultations and meetings: On the basis of recommendations of the Health Board and the Government of the Republic, face-to-face meetings and consultations are not recommended. All meetings and consultations should be conducted remotely via IT solutions, such as Microsoft Teams or BigBlueButton.

Lay-off: The employee and the employer can agree on unpaid leave; however, the employee is under no obligation to agree to this. Employees may also use their paid holidays. If the employee and the employer do not reach an agreement on unpaid leave, the employer is required to pay the employee the average wage. In accordance with the legislation in force, lay-offs are not permitted (see also § 35 of the Employment Contracts Act).

Sick leave certificate: A certificate of incapacity for work is issued if there is a real risk of infecting others or becoming infected. Until quarantine is declared in Estonia, no sick leave certificates are issued on the grounds of quarantine or the spread of the COVID-19 virus. Sick leaver certificates are not issued to employees who have travelled to Estonia, if there is no reason to suspect that they have been infected. Sick leave certificates are only issued to individuals who have been in contact with an infected person or are actually ill; therefore, a sick leave certificate cannot be used as a solution (see also § 51(1) Health Insurance Act).

Reductions in pay and working hours: Estonian legislation provides for the possibility of reducing pay (but not below €584) and working hours. The employer may reduce the pay and working hours for up to three months if:

  1. the employer is, due to unforeseen economic circumstances beyond its control, unable to provide an employee with work to the agreed extent; and
  2. the situation is economically onerous on the employer.

The employer must notify the employee of the reduction in pay at least 14 days in advance. Unforeseen circumstances beyond the employer’s control may include, for example, a prohibition on entertainment events (see also § 37 of the Employment Contracts Act).

Redundancy: An employer may extraordinarily cancel an employment contract if continuing the employment relationship is impossible due to a decrease in the work volume or reorganisation of work or other reasons. In the current emergency situation, a number of employers may have the right to make employees redundant. If, in the employer’s judgment, this is the best solution for overcoming economic difficulties, the planning of redundancies should begin in good time (see also § 89 of the Employment Contracts Act).For further information on the effect of the emergency situation on employment relations see the website of the Government of the Republic. The Government and the Unemployment Insurance Fund are considering the possibility of paying all people at least 70% of their salaries, but the decision is still pending.

Compensation measures: For companies whose turnover and revenues have fallen sharply the Unemployment Insurance Fund compensates the wages for two months in amount of 70 percent of the average gross salary of the previous 12 months, but not more than 1000 euros. The employer is obliged to pay the employee at least EUR 150 in addition, as well as the labour taxes. The cost of the support measure is expected to amount up to EUR 250 million.

Contact persons at Derling Primus: Toomas Taube and Andres Siigur

2. Contractual relations

  • To avoid any liquidity problems in the current emergency situation, is it permitted to delay the payment of a purchasing price, interest payments or the performance of other financial obligations?
  • How can Force Majeure be proven?
  • Does the emergency situation constitute grounds for unilaterally altering the conditions of a contract?

What constitutes an event of Force Majeure, and what does not? Force Majeure means any event or occurrence which is outside the reasonable control of the debtor and which could not be foreseen or avoided. It must be borne in mind that parties may agree on conditions of Force Majeure different from those provided by law. The Estonian law allows for classifying an epidemic as an event of Force Majeure; however, whether the Covid-19 pandemic is considered an event of Force Majeure or not, depends on the definition of Force Majeure in the relevant contract (see also § 103 (2) of the Law of Obligations Act).

Effects of Force Majeure: Force Majeure excuses a party from performing its contractual obligations and restricts the use of most remedies against the party relying on Force Majeure. However, in the case of Force Majeure, the following remedies may be used against the party: refusal to perform an obligation, withdraw from the contract or reduce the price (see also § 103(2) and § 105 of the Law of Obligations Act).

Reliance on Force Majeure: Successful reliance on Force Majeure is not possible in all circumstances. First, the mere existence of a Force Majeure event may not excuse a party from its contractual obligations; the clause will require that the Force Majeure event must actually cause, prevent or be attributable to a delay or failure of a party to perform its obligations. Second, it should be borne in mind that the party that wishes to rely upon the Force Majeure must prove the existence of Force Majeure. Inability to prove the existence of Force Majeure normally results in an obligation to perform the contract. Consequently, companies should focus on information management to ensure that they are able to prove Force Majeure and draw their contractual partners’ attention to the obligation to clarify the effect of Force Majeure on performance if the party wishes to rely on Force Majeure (see also § 103(1) of the Law of Obligations Act).

Possibility of, and grounds for, unilaterally amending a contract: In accordance with Estonian law, a party has the right to request the amendment of a contract if the circumstances under which a contract is entered into change after the entry into the contract. A change in the circumstances should result in a material change in the balance of the obligations of the parties due to which the costs of one party for the performance of an obligation increase significantly or the value of that which is to be received from the other party under the contract decreases significantly. Measures to prevent the spread of the COVID-19 virus may result in a material change in the balance of the obligations of the parties. Parties have the right to amend the contract at any time in agreement with the other party (see also § 97(1) of the Law of Obligations Act).

Amendment procedure: A contract may be amended upon submission of a relevant request to the other party. A party may request the amendment of the contract retroactively, but not as of a time earlier than the time when the balance of the obligations changed (see also § 97(4) of the Law of Obligations Act).

For further information about Force Majeure, read articles by Piret Blankin available here and here.

Contact persons at Derling Primus: Piret Blankin, Margo Lemetti, Hannes Vallikivi and Karl-Erich Trisberg

3. Corporate governance

  • Is it permitted to hold a shareholders’ meeting during an emergency situation?
  • Can a general meeting be held remotely?
  • Will the sudden change in the economic situation result in additional disclosure obligations for listed entities?

General meeting: An emergency situation does not preclude holding a general meeting of shareholders.

Shareholders of a private limited company may adopt decisions without calling a shareholders’ meeting. The management board should communicate the draft decision to all shareholders by any means which leave a written record and set a time limit for comments to be submitted. Comments must be submitted by any means which leave a written record. If a shareholder fails to notify within the set deadline whether or not they vote in favour of the decision, it is considered that the shareholder has voted against the decision.

If the Articles of Association provide for electronic voting, a general meeting or a shareholders’ meeting may be held, by a decision of the management board or supervisory board, via the Internet, two-way communication or by using other safe technology. It should be noted that watching a meeting via web-stream is not considered participation in the meeting, which means that participation without voting is not taken into account. Therefore, the participants should be able to vote by mail, electronically in advance or during the meeting.

Publication of information by publicly-traded companies: European Securities and Markets Authority (ESMA) has published recommendations on information disclosure and business continuity planning in relation to the impacts of the COVID-19 outbreak.

For further information on the organisation of meetings see Andres Siigur’s comment in Ärileht.

Contact persons at Derling Primus: Andres Siigur, Hannes Vallikivi

4. Data protection and privacy

  • May an employer disclose an employee’s actual or probable COVID-19 diagnosis to other employees?
  • Can employers request or require information from an employee about potential or actual exposure to the COVID-19 virus (e.g. health certificate)?

Protection of employees’ health data: If the processing of health data is absolutely necessary to ensure occupational safety, the employer may process the employees’ health data. In such a case, all general principles of data protection, in particular the principles of data minimisation and confidentiality, are to be respected. The employer must document all activities involving the processing of personal data and decision-making processes relating to measures to control the COVID-19 outbreak in order to be subsequently able to demonstrate compliance with the General Data Protection Regulation (GDPR).

According to Article 9(1) of the GDPR, data concerning health constitute a special category of personal data, the processing of which is normally prohibited. By way of derogation, Article 9(2)(b) of GDPR permits the processing of special categories of personal data (including health data) if processing is necessary for the purposes of carrying out the obligations and exercising specific rights of the controller or of the data subject in the field of employment and social security and social protection law. The Occupational Health and Safety Act lays down employers’ obligations in relation to ensuring occupational safety. Consequently, (legal) processing of health data is permitted for the purposes of carrying out their obligations.

An employer is obliged to notify employees of cases of infection if there is a risk of an accident (regarding COVID-19 the last alternative provided for in § 15(1) of the Occupational Health and Safety Act, i.e. another incident at a workplace which may endanger the life and health of employees and those of other persons). In case of a risk of an accident, an employer is required to inform as soon as possible all employees who are or may be exposed to serious danger of the risk involved and of the steps to be taken. When notifying employees, disclosure of personal data should be avoided as far as possible (the need of disclosure must be considered on a case-by-case basis).

Requirement to provide a medical certificate: A medical certificate may be requested only in cases provided by law (§ 13 of the Communicable Diseases Prevention and Control Act). The Estonian Data Protection Inspectorate has explained that according to the legal analysis conducted so far, even in the context of COVID-19 and the emergency situation, the Government cannot create a different right of employers to process employees’ health data. In the interests of the health and welfare of themselves, others and society as a whole, both the employer and the employee should be guided by the principle that the employee voluntarily provides information about their health to the extent that the employer is enabled to organise work as safely as possible.

Contact persons at Derling Primus: Hannes Vallikivi and Margot Maksing

5. Taxes

  • Has the Tax and Customs Board provided for exceptions in declaring and paying taxes?
  • How should one act in the case of tax arrears or inability to follow the payment schedule?

Declaration and payment of taxes: No general exceptions or tax incentives have been provided for and the declaration of taxes is mandatory. However, the Government of Estonia has  established an exception pursuant to which the amount of the advance payment of the social tax of self-employed persons for 1Q of 2020 will be transferred by the state to self-employed persons’ prepayment accounts. If a self-employed person has already paid social tax in advance, he may use the funds to cover any tax liability, either immediately or in the future, and may also claim it to be transferred to his bank account.  What is more, employers are also excused from paying the social tax monthly payment, including during holidays without pay and while working part-time. The exemption was established for a definite period of time and the minimal obligation to pay the social tax does not have to be performed in March, April and May of 2020.

Tax arrears: Calculation of default interest on tax arrears has been paused from 1 March till 1 May and after termination of the state of emergency, the default interest on tax arrears will be reduced from current 0.06 percent to 0.03 percent per day. The Tax and Customs Board will have the right to further reduce the interest (down to zero) depending on the situation after the termination of emergency situation. Also, the Tax and Customs Board has stopped providing information on debtors through the public credit register and X-Road services.

Contact person at Derling Primus: Rolan Jankelevitš

6. Relations with authorities

Notarial acts: Notaries implement special measures as they see appropriate and the opening hours and work organisation vary among notaries’ offices. Wherever possible, the remote notarisation service should be used, which enables the carrying out of notarial acts through video calls, without visiting the notary’s office. Not all services can be provided by using remote notarisation, for example real estate transactions and marriage contracts cannot be notarised remotely. The contact details of notaries are available at the website of the Chamber of Notaries.

Register entries: Electronic channels should be used to make register entries. Court offices, including the office of Tartu County Court, are open from 9:00 to 13:00 on weekdays. It is recommended that documents be submitted electronically, by e-mail, or to the court’s mailbox and that visiting the court office should be avoided. Documents can be requested from the court office in an electronic form or by mail.

Courts: While courts continue working as usual, the speed of work may be reduces significantly. People who have symptoms of coronavirus or have been in close contact with a person infected with COVID-19 are prohibited from entering a court house. Persons not involved in legal proceedings or trials are prohibited from entering a court house during the emergency. Courts deal with cases by written procedure and by using technological solutions where possible and as appropriate. A large number of hearings can be expected to be postponed, but this can be done by the court on its own initiative or at the request of a party to the proceedings. Appearing at the court without good reason is prohibited; it is recommended that all issues and concerns be discussed with the court prior to the hearing. Unavoidable acts that are carried out in writing (e.g. securing an action, provisional measures, authorisation of surveillance activities in a criminal matter, taking into, or keeping in, custody, etc.) are carried out without undue delay following the requirements laid down by law. For more details, see recommendations of the Council for the Administration of Courts, available on the Estonian courts website and an article by Sandra-Kristin Kärner on the Estonian Public Broadcasting (ERR) website.

Investigation authorities and the prosecutor’s office: The prosecutor’s office has suspended the reception of citizens, but people can contact the prosecutor’s office by telephone or email. The Police and Border Guard Board service points are open for urgent operations. It is recommended that applications for documents be made through the self-service portal or by post. A possible postponement of procedural acts must be discussed with the body conducting proceedings; however, so far the investigation authorities have been approachable and any acts requiring face-to-face contact (such as hearing of witnesses) can be carried out in a couple of weeks, after the situation has stabilised.

Bailiffs and trustees in bankruptcy: The Estonian Chamber of Bailiffs and Trustees in Bankruptcy does not accept visitors. A number of bailiffs have stopped or are stopping the provision of services to customers. Please use the telephone or email to communicate with a bailiff or trustee in bankruptcy to discuss services or appointments. Further information and contact details are available on the website of the Chamber of Bailiffs and Trustees in Bankruptcy.

Contact person at Derling Primus: Sandra-Kristin Kärner

7. Public procurement

Urgent purchases and orders: The current virus outbreak and emergency situation justify the procurement of essential goods, services and works by using negotiated tendering procedure without prior publication of a tender notice, which can be carried out fast and with minimum formalities. A negotiated tendering procedure, without prior publication of a tender notice, does not require tenders to be submitted or called for in writing; in extremely urgent situations, only one tenderer may be contacted for negotiations. It is important to note that extreme urgency must have arisen from unforeseeable circumstances beyond the control of the contracting entity. Only the contracts essential in the emergency situation (e.g. for purchasing protective masks, disinfection of premises, setting up a field hospital, etc.) can be awarded by using the exceptional procedure. Simplified rules do not apply to ‘ordinary’ contracts that are not critical.

Tax arrears and exclusion from tender procedure: The likelihood of tax arrears increases in an emergency situation. During the emergency situation, the calculation of interests on tax arrears is stopped retrospectively from March 1st until May 1st. However, the obligation to pay taxes is not lifted, i.e. tenderers can be excluded from a tendering procedure due to tax arrears even during the emergency situation. In order to avoid problems, business operators should contact the Tax and Border Guard Board to defer their tax arrears. The Tax and Border Guard Board confirms that any problems that have emerged as a result of the emergency situation will be dealt with in a flexible manner. Deferred tax arrears do not constitute a ground for the exclusion of a tenderer. According to the Ministry of Finance, if, however, a tenderer has tax arrears, and overriding reasons of public interest necessitate the awarding of a contract, and the exclusion of the tenderer would result in the contract not being awarded (e.g. if there are grounds for mandatory exclusion from the contract award of all tenderers), it is permissible to not exclude the tenderer and to award the contract to that tenderer. The Ministry of Finance’s clarifications are available on the Ministry’s website section concerning public procurement.

Modification of a public contract: The usual procedure under the law on obligations applies to the content and performance of public contracts. Therefore, it is possible to claim Force Majeure if problems occur with the performance of a public contract (for details see paragraph 2 of this document). Modification of a public contract, including extending its duration and scope, is allowed only on the grounds provided for in the Public Procurement Act (see § 123 of the Act). The emergency situation does not change this. In an unexpected and critical situation, a public contract may be modified for reasons of unforeseeable circumstances. The modification must be caused by circumstances unforeseeable to a diligent contracting authority or entity where the overall nature of the public contract is not altered and the value of any modification does not exceed 50 % of the original value of the public contract. A contract cannot be indefinitely modified by 50 %; each individual modification must be the result of unexpected and unforeseeable circumstances.

Review procedure and hearings: Similarly to legal proceedings, disputes relating to tendering procedures should normally be heard at a public hearing. This is certainly not recommended in an emergency situation. While the Public Procurement Review Committee has not published any guidelines similar to those issued by the courts, it can be assumed that the Committee will try to resolve as many requests for review as possible in a written procedure. This is permitted if, in the opinion of the Review Committee, circumstances of essence to the adjudication of the case can be established without holding a hearing. Therefore, it is in the interests of public health, of the health of all of us, that all requests for review are as precise and comprehensive as possible to enable the Committee to review the case without holding a hearing.

Contact person at Derling Primus: Priit Lember

8. Structural Support of European Union

Implementing projects and communicating with implementing agencies: Regardless of the declared emergency situation, beneficiaries must bear in mind that operations are mostly carried out as usual. However, the implementing agencies have made some changes to the procedure of processing applications. For example, implementing agencies are not currently conducting on-site inspections. The beneficiaries must therefore be aware of the possibility of delays during the processing of the applications, especially with the payment claims that depend on the on-site inspections. In such cases, and also in general, it is worth communicating with the implementing agencies. In some cases, exceptions are made to the payments that depend on the on-site inspections, e.g. making the payments without the on-site inspections and the on-site inspections being carried out only after the emergency

Eligibility of costs: If the beneficiary needs to incur any additional expenses to properly implement the project, including those related to the impact of emergency situation, these expenses need not necessarily be avoided. Such expenses may include, for example, the costs of postponing events, seminars, supply chain failures, or expenses due to labour movement restrictions. Expenditure related to the spread of Covid-19 shall be considered eligible if it is incurred after 1 February 2020. However, it should be borne in mind that, as usual, the beneficiary must comply with certain conditions. Expenses related to Covid-19 shall be considered eligible if (i) the beneficiary has made every effort to recover or avoid the costs incurred and (ii) the beneficiary provides supporting documents to implementing agency.

Extension of eligibility period: In addition to costs, the emergency situation may give rise to problems which may hinder the implementation of the project. When the timely implementation of the project may be at risk, one should react promptly. In order to extend the eligibility period of the project, an application to amend the grant decision should be submitted to the implementing agency. It should also be borne in mind that, for certain operations, there are additional conditions for amending the grant decision which must also be met.

Compliance with financial correction decisions: Regardless of the emergency situation, the beneficiaries must also be aware that the implementing agencies will continue to impose financial corrections when needed. Where the decision to impose a financial correction is based on a circumstance not related to the emergency, the decision on the financial correction shall be taken irrespective of the emergency situation. If the beneficiary encounters problems with the repayment of the amount due, the beneficiary can (i) apply for suspension of the recovery until the end of the emergency, (ii) in the event of persistent insolvency, request a deferral of recovery or (iii) propose to the implementing agency to suspend the implementation of a previously agreed financial decision deferral payment schedule during the emergency situation.

Contact persons at Derling Primus: Margo Lemetti and Priit Lember

We work online. For your business decisions with confidence please contact us for a legal advice, via any platform: e-mail | phone | Microsoft Teams | Skype | WhatsApp…

None of the above? Simply e’mail us riga@primus.legal, vilnius@primus.legal or estonia@derling.ee & we will reach you out a.s.a.p.
You may also follow us on Facebook or Linkedin to receive relevant notifications.