Covid-19 Pandemic Measures taken by the Portuguese Government to support companies

Due to the ongoing Coronavirus – COVID 19 pandemic, the Portuguese Government has declared State of Emergency on March 18, which has already been extended till April 17. Consequently, the Government has also approved several measures in order to support companies during this specific crisis. In this short note we analyse the functioning of Courts, the general rule of law applying to the fulfilment of contractual obligations, as well as the new package of measures applicable to lease agreements and labour relations.

FUNCTIONING OF COURTS:
The declaration issued by the health authority in favour of a procedural subject, party, its representatives or agents, attesting to the need for a period of isolation due to the possible risk of contagion by COVID -19 is considered, for all purposes, a basis for the allegation of just impediment to the practice of procedural acts that must be practiced in person in Judicial, Administrative and Tax Courts, Arbitral Tribunals, Public Prosecution Office, Justices of Peace, alternative dispute resolution entities, Notary offices, Conservatories, Services and Public Entities. This declaration also constitutes a basis for justifying non-attendance in any procedure, as well as its postponement.

LEGAL DEADLINES:
All legal deadlines have been suspended, and the rules of judicial holidays now apply.
The first act which implemented the suspension of all legal deadlines - Law no. 1-A/2020, 19 March - wasn’t clear and lead to very different interpretations, if read literally, one could interpret that even urgent cases were suspended. Last Friday, April 3rd, a new Decree was approved (but not yet published in Diário da República – the Official Gazette) clarifying such cases.

Non-urgent cases:

• The processing of cases and the practice of non-urgent face-to-face and non-face-to-face acts can still occur when all parties understand that they are in a position to ensure their practice through computer platforms that enable them to be carried out electronically or through appropriate means of distance communication, namely conference call, video call or equivalent.

Urgent cases continue to be processed, without suspension or interruption of deadlines, acts or diligences, according to the following rules:

• In phases that require the physical presence of the parties, their representatives or other procedural parties, the practice of any procedural acts takes place through appropriate means of distance communication, namely conference call, video call or equivalent;
• When this is not possible, and the act concerns life, physical integrity, mental health, freedom or the immediate subsistence of the parties, the act can take place in person provided that it does not require the presence of a larger number of people than recommended by the health authorities and in accordance with guidelines established by the competent higher councils;
• If neither of the above mentioned is possible nor appropriate the suspension regime will also apply to urgent cases.

The suspension of procedural deadlines applies to all procedural acts that must be performed within the scope of the processes, procedures, acts and diligences of the judicial, administrative and tax courts, Arbitral Tribunals, the Public Prosecution Office, Justices of Peace, as well as alternative dispute resolution entities.

VALIDITY OF DOCUMENTS:
According to the exceptional measures adopted by the Government regarding the renewal of identification documents, public authorities accept, for all legal purposes, the display of documents whose validity period expires from the date of entry into force of Decree-Law no. 10-A/2020, of March 13, or in the immediately preceding 15 days.

These rules specifically apply to the following documents:

1. citizen's card;
2. certificates issued by the registration and civil identification services;
3. driving licence;
4. documents and visas related to a stay in the national territory, whose validity ends until June 30, 2020, including.

FULFILMENT OF CONTRACTUAL OBLIGATIONS/ FORCE MAJEURE:
The general rule of law is that if a party wrongfully fails to fulfil its obligation, said party becomes liable for the damage it causes to the other party.
However, the law provides that non-compliance may result from a cause that is not attributable to the defaulting party, which - given the current circumstances - may be the case of the pandemic caused by the COVID 19.
Nevertheless, it will be necessary to determine whether the pandemic caused by COVID 19 - in the specific case - made it impossible for the company to fulfil its obligations under the agreement in question.
Thus, the contractual relationship will have to be analysed in global terms in order to find out what was the impact/causal link of the Coronavirus pandemic with non-compliance with the contract.
Therefore, assuming that, in the specific case, the COVID-19 pandemic validly constitutes a case of force majeure (and, therefore, there is a non-compliance which is not attributable to the offending party), it is important to verify the consequences for both parties.

LEASE AGREEMENTS:
Until the end of COVID 19 prevention, containment, mitigation and treatment measures, the following acts are suspended:

• the effects of termination of housing and non-housing lease agreements made by the landlord;
• foreclosures on property that constitutes the defendant's permanent home.

Suspension of effects: termination of housing and non-housing lease agreements by the landlord; foreclosures on own property and permanent housing.
Ongoing eviction procedures, special eviction procedures and processes for the delivery of leased property are suspended when the tenant, due to the final court decision to be handed down, may be placed in a situation of fragility due to lack of own housing.

LABOUR:
Simplified Lay-Off Regime:
This support will be given to Companies that, as a result of the outbreak of COVID 19, are in a situation of business crisis, being considered as such:

• The total or partial closure of the company or establishment, due to the duty to close facilities and establishments, determined by the Government and under the terms of the Legislation approved, in relation to the establishment or company effectively closed and covering workers directly affected; or
• By declaration of the employer together with the certificate of the certified accountant of the company attesting:
  o The total stoppage of the activity of the company or establishment resulting from the break of supply chains, suspension or cancellation of orders; or
  o The abrupt and sharp drop of at least 40% of billing, in the 60 days prior to the submission of the application to Social Security, with reference to the same period (in case of beginning of activity, average of the last 12 months).

HOW MUCH DOES THE EMPLOYEE RECEIVE?
The employee is entitled to receive monthly an amount equal to 2/3 of the respective normal gross contribution, paid in the following terms:

• 70 %: by the Social Security
• 30 %: by the Employer

LIMITS:

• Minimum: GMMR (Minimum monthly guaranteed remuneration) (635 €);
• Maximum: amount corresponding to three GMMR (1905 €)

During the period of attribution of this support, Companies can benefit from a total exemption from the payment of contributions to Social Security (for this purpose, they must submit autonomous remuneration declarations for the covered workers and make the payment of the respective contributions).

DURATION:

• This regime will initially have a duration of one month, however, it can be extended, monthly, up to the limit of three months.

ENTRY INTO FORCE AND DURATION:

• From 27th of March 2020 to 30th of June 2020: extendable for another three months due to the weighting of the evolution of the economic and social consequences of COVID-19.

IN ORDER TO BENEFIT FROM THIS SUPPORT, COMPANIES MUST:

• Communicate to workers (after having heard the representative structures of workers, if any) the decision to request extraordinary support and indicate the expected duration; and
• Request support from the Social Security Institute, along with a:
  o Declaration of the Company and declaration of the certified accountant, both attesting the situation of business crisis; and
  o Nominal list of the covered workers and indication of their respective Social Security numbers.

In the event of a complete halt in the activity of the company or establishment, the measure will cover the entire structure in question.
If the basis is the break in invoicing, the company will continue to work, so the measure will only cover part of the workers.
Companies who benefit from this support cannot fire any workers (those covered by the support measures as well as all the other workers).

In case of inspection, the Company may need to present the:

• Accounting balance sheet from the month in which the incentive has been requested as well as the accounting balance from the same month in the previous year;
• VAT declaration for the month of support and the previous 2 months (or declaration for the last quarter of 2019 and the first quarter of 2020);
• Additional supporting elements to be decided by order of the Ministry of Labour and Social Security.

Joana Whyte
Next / Gali Macedo E Associados, Sociedade de advogados
Porto, Portugal