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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | abril 2020
The pace of change has never felt as fast. We have considered some of the legal implications, outlined key considerations for UK boards, looked at force majeure and frustration under English law and some of the key issues for the construction sector and issues concerning construction sites.
It is clear that, post-COVID-19, the landscape will look very different indeed. Concentrating on the issues in real time, managing relationships with clients/contractors is more important than ever before.
The UK Government recently published two procurement policy notes. These ‘PPNs’ provide public sector organisations (referred to as “contracting authorities”) with best practice guidance. As they cover goods, services and works contracts, they apply to the UK construction industry and its supply chain.
PPN 01/20 acknowledges that, in order to respond to Government’s COVID-19 measures, contracting authorities will need to consider taking a number of actions which may require them to procure goods, services and works with extreme urgency. PPN 01/20 clarifies that, in exceptional circumstances, this is permissible under current public procurement regulations and provides associated guidance. PPN 02/20 acknowledges the huge impact that COVID-19 is having on businesses of all sizes and that many contractors and suppliers are beginning to struggle.
Both guidance notes encourage authorities to circulate the documents internally and to forward them to the organisations for which they are responsible. Both PPNs are stated to have immediate effect; the intention is that the relief provided to suppliers by PPN 02/20 should continue at least until the end of June.
Although the guidance is aimed at authorities and bodies within the public sector, the key messages will be of interest to the private sector: PPN 02/20 is focused on providing assistance to suppliers who are most at risk.
Authorities are encouraged to protect cash flow as much as possible and to continue to pay suppliers, even if service delivery is disrupted or suspended. This might include a range of approaches that includes advance and interim payments, payments being made on order (not receipt) and against revised timescales. Authorities are asked to accelerate their payment practices.
In addition:
The PNN states that all suppliers are expected to operate with integrity; where suppliers are found to be taking “undue advantage”, authorities will be able take action to recover payments made.
In order to benefit from the new payment measures, suppliers will be required to operate on an open book basis and to provide the authority with supporting documentation (including ledgers, cash-flow forecasts and balance sheets), as required and requested, to demonstrate that payments made have been used as intended (that cash is flowing through the supply chain).
Authorities are being told to accelerate their payment practices. The guidelines given include:
In addition to providing guidance on payment terms, PPN 02/20 encourages contracting authorities to look at ways of varying the terms of its contracts before seeking to invoke their rights to suspend and terminate contracts. The aim behind the guidance is that the suppliers are able to resume normal contract delivery once the outbreak is over. Accordingly, changes to be made to the original terms need to be considered on a case by case basis, limited to the specific circumstances of each situation and temporary in nature.
These may include:
The PPN notes that, despite the exceptional actions it recommends, risks still exist: these will need to be managed by contracting authorities on a case by case basis.
The steer being given is that contracts should return to their original terms as soon as the impact of the COVID-19 outbreak on the relevant agreement is over. Amendments made to the contracts must be formalised in writing and the variations limited to the effects of the pandemic.
To maximise prospects of mitigation during these times of uncertainty and distress, keeping lines of communication open remains critical.
Following the issue of PPN 02/20, the Government has also issued specific guidance in relation to PFI/PF2 projects which we have considered here.
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