Effect Of Covid-19 From A Legal Perspective

April 2020

We intend to shed light on the effect of the outbreak of COVID –19 on businesses and their performance of contracts as they continue to face business disruptions amid strict measures to combat the spread the COVID-19.   

What is a Force Majeure? 

Under the laws of Bahrain, an event of a force majeure is an unforeseeable event which makes the performance of a contractual obligation impossible. All obligations are cancelled and the agreement between the parties is considered automatically terminated. 

Is COVID-19 a Force Majeure?

COVID-19 could be considered as a force majeure as it is an unforeseeable circumstance which could render the performance of an obligation impossible. The parties must assess and consider whether the performance of their obligations is rendered impossible due to the outbreak of COVID-19.

The contract doesn't include a Force Majeure provision, does Force Majeure still apply?

Whether parties can invoke force majeure provisions due to the outbreak of COVID-19 depends on the governing law of the contract. In Bahrain, the Civil Code recognizes the doctrine of force majeure and therefore even if the contract does not contain force majeures provisions, the parties can still invoke a force majeure event. 

In other jurisdictions, force majeure may not be recognized as a legal doctrine and therefore, in order for the parties to invoke a force majeure event, express clauses of force majeure must be inserted into the contract.  

Can salaries be reduced during this time?

Generally, the employer does not have the right to reduce the salary of the employee during the term of the employment contract. 

However, Article 43 of the Labour Law provides that the employee is entitled to payment of half salary in cases where he attended work and was unable to perform his job due to reasons beyond the control of his employer. Taking into consideration the situation of COVID-19 and the measures taken by the Government of Bahrain to combat the spread of COVID-19, employers may adopt Article 43 and reduce the salaries of the employees who are unable to perform their jobs. 

Can the employee be asked to take an annual leave during this time?

Yes, according to Article 59(a) of the Labour Law, an employer can require the employees to take their annual leave for the duration and on the date set out by the employer.

Can the employer lay off employees due to the situation?

This will depend whether the company is facing a perpetual loss because of COVID-19 and whether the force majeure situation led to the closure of the business or not.

Are there any specific rules or regulations issued in Bahrain to address the COVID-19 situation?

There is no specific rules or regulations issued in Bahrain that address in particular the situation of COVID-19.