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FIDIC contracts are widely used in the international Real Estate Projects industry. Much like their national Dutch counterpart, the UAV/UAV-GC contracts, FIDIC contracts consist of General Conditions and Special Conditions regarding project-specific issues. Examples include the industry-recognized FIDIC Red, Silver, Yellow, and Pink Books for various types of construction contracts.

Template contract documents likes FIDIC and UAV/UAV-GC contracts aim to provide a set of pre-determined balanced contract conditions. The challenge with such terms is that balances can shift over time, depending on market conditions, supply and demand, and development of technology that affects what contracting parties find reasonable. Aside from adding project-specific Special Conditions, contracting parties may also decide to apply these changes to the General Conditions.

As most jurisdictions generally believe in the freedom of contract, parties are, in principle, free to deviate from the General Conditions. As a result, in 2019 FIDIC published a set of “Golden Principles” (GPs) regarding deviations to fundamental parts of the General Conditions. These GPs aim to protect the fair and balanced risk/reward allocation of the various FIDIC contracts. In other words: FIDIC views deviations from these GPs as unfair and unbalanced. Of course, FIDIC is not a judicial institution under Dutch law, so contracting parties may still deviate from the GPs. Whether certain deviations from the GPs are indeed unfair and unbalanced will ultimately be determined by the relevant court or arbitration institute, but the GPs can play a crucial role in such proceedings.

Reasonableness and fairness are core tenets of Dutch law. These values are explicitly incorporated in the Dutch Civil Code (par. 6:2, 6:248 DCC), which states that agreements which are unfair or unreasonable can be partially null and void, in order to remedy the unfair or unreasonable part and restore the fair balance between parties. 

Applied to industry-specific contracts like construction contracts, this means that Dutch courts and arbitration institutes must determine whether certain contract provisions are unfair or unreasonable. This can be difficult if the court or arbitration institute is not familiar with the practices and commercial drivers of construction projects and related contracts. In these situations, the GPs and whether parties have deviated from the GPs are useful in determining whether certain contractual provisions are unfair or unreasonable.

In today’s dynamic world, in which principals, developers, and contractors face increasing costs of building materials and labor, as well as unforeseen delays in deliveries, we may see a rise in disputes in 2023 relating to the allocation of these risks and the reasonableness and fairness of related contractual provisions.

The GPs may also have an effect beyond FIDIC contracts. Because of their generic and thus widely applicable nature, the principles may also play a role in cases involving another form of contract, like the Dutch UAV/UAV-GC. Courts and arbitration institutes may use the GPs as reference points to determine what is generally deemed to be reasonable and fair in the Real Estate Projects industry, even if another form of contract is used. Contracting parties should take this into account when entering into construction agreements.

In life (as in business), as Heraclitus said, “the only constant is change.” In today’s fast-paced economy, this axiom should be kept in mind during contract negotiations, especially in a bear market. 

Case law can be ambiguous, as it is constantly evolving and adapting to new situations, insights, and practices. COVID-19 may have been an unforeseen circumstance in leases (link in Dutch) (giving the tenant the right to demand rent deduction), but the same may not apply to a real estate investor who wants to renegotiate a purchase price. Whether COVID-19 is an unforeseen circumstance in a sale and purchase agreement (SPA) is yet unclear.

Therefore, present market circumstances call for “Anticipatory Contracting”, i.e., anticipating business risks, providing legal solutions during negotiations, identifying problems before they arise, and not relying on templates. Businesses should constantly assess and reassess the contractual risk-allocation (or lack thereof) during negotiations. We’ve seen a seller’s market changing into a buyer’s market almost overnight, between signing of the letter of intent (LOI) and signing of the SPA. Be conscious of that. And when one does commit – be it via an LOI or a more binding contract – exposure should be hedged before committing. Dated templates used in previous transactions may not cover all eventualities. 

Here are three concepts to consider in this respect: 

  1. Material Adverse Change clause (MAC clause): not all SPA templates in the Dutch Real Estate industry contain a MAC clause, use of which may provide a general safety net for parties who want to allocate the risks presented by negative business or economic developments that occur between the signing and closing of an agreement. But a MAC clause is a double-edged sword, as the other party may use it to get out of the deal. 
  2. Stipulate specific situations that do not qualify as legal grounds for either party to abort the transaction or change the conditions. 
  3. Consider hedging or insuring certain foreseeable risks, such as interest rates and building costs. Liabilities can be insured (W&I insurance). And M&A insurance advisors/brokers can advise how to structure securing insurance. The financial and insurance products available today are sophisticated and geared to real estate industry demands.

About RE-STRUC

RE-STRUC is a multidisciplinary team within Greenberg Traurig comprising different focus areas, including real estate, restructuring, including WHOA (Dutch Restructuring Scheme), financing, conflict management, alternative dispute resolution, RICS accredited mediation services, regulatory and tax. The team’s primary focus is Real Estate Restructuring and Dynamic Process Management. In Q1 2023 we will present a series of breakfast sessions. Please notify us if you are interested in joining these seminars by sending us an email.

Commercial agency agreements in the European Union apply where a legal or actual person (the agent) is vested with the power to negotiate and/or conclude contracts on behalf of another legal or actual person (the principal), either in the agent’s own name or in the name of the principal, for the purchase or sale of good and services by the principal. This GT Advisory reviews commercial agency agreements in EU competition law.

Continue reading the full GT Advisory.

On 29 April 2020 the Netherlands Commercial Court (NCC) handed down a decision regarding a contractual break-up fee in an M&A transaction affected by the Coronavirus Disease 2019 (COVID-19) pandemic. Furthermore, on 14 May 2020 the preliminary relief judge of the District Court of Amsterdam also handed down a decision related to an M&A transaction affected by the pandemic. These decisions shed some light on the legal position of parties under Dutch law in these unprecedented times.

The NCC is a separate chamber of the District Court of Amsterdam, specialized in complex international commercial disputes. Proceedings before the NCC are conducted in English and the judgment is rendered in English.

The case before the NCC (ECLI:NL:RBAMS:2020:2406) revolves around the question of whether a Transaction Agreement (TA) was reached between the parties and, if this were not the case, whether the agreed break-up fee of € 30 million should be modified or mitigated based on Dutch law due to the current COVID-19 pandemic.

Click here to read the full GT Alert, “Dutch Court Decisions on Contractual Obligations During the COVID-19 Pandemic in an M&A Context.”

The rapidly changing retail market has not yet created a new reality. The preference for online shopping and the increasing costs of wages and production continue to threaten the margins of retailers and, indirectly, rent prices. As a result, rent for retail space has been dropping for six consecutive years. Due to the increased costs of wages and production, more bankruptcies may follow the ones we have seen already in the Netherlands, and more retailers may decide to stop operating their shops to minimize losses.

In this blog post, we will focus on the obligation to operate retail space and recent verdicts relating to interoperating retail space contracts. Continue Reading Obligation to Operate: Retail Contracts in the Netherlands

Parties who do cross-border business often declare English law applicable in commercial contracts, accompanied by a jurisdiction clause making the English courts (exclusively) competent to hear claims arising out of the business relationship. In light of Brexit, the question arises what the position of decisions given by the English courts will be in the EU, and vice versa, post-Brexit. The draft withdrawal agreement published on 14 November 2018 does not offer a permanent solution. Therefore, the impact of Brexit on UK court decisions is still uncertain and could hold unexpected and unwanted consequences for parties bound by an exclusive jurisdiction clause.

Governing Law

English law is often chosen by parties to govern a cross-border commercial contract, even when parties have no connection to the UK. English law is generally considered comparatively stable, predictable, and as having an emphasis on the text of the contractual arrangements between parties. English law provides a lot of freedom to contracting parties and generally adheres to contractual obligations. There is a limited scope for public policy or similar principles to interfere with contractual obligations.

The main factors that make English law an attractive choice for contracting parties, therefore, have little to do with the UK’s membership in the EU or the influence of EU law. Most of the important contractual issues, such as offer, acceptance, applicability, and implication of general terms and conditions, breach, and damages are derived from substantive English law, and are for the most part not affected by EU law and a Brexit. However, a choice of law clause for English law currently means English law including the applicable EU law. After Brexit, EU law will no longer automatically apply, which can in some circumstances lead to a different outcome based solely on English substantive law.

Recognition and Enforcement of UK Court Decisions

Like governing law clauses, jurisdiction clauses for English courts are commonly incorporated into contracts between commercial parties who are located in different countries. English courts have a reputation for being reliable, sophisticated and, most importantly, commercially orientated. However, proceedings before English courts are generally perceived as expensive.

Currently, decisions from English courts are automatically recognized and can be enforced in other EU member states based on Regulation (EU) 1215/2012 (Brussels Recast Regulation). If a Brexit is ultimately avoided, the Brussels Recast Regulation will continue to apply. However, if the UK leaves the European Union, the UK will in principle no longer be subject to the Brussels Recast Regulation.

On 14 November 2018, the Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (Draft Withdrawal Agreement) was published. Title VI of the separation provisions (part three) of the Draft Withdrawal Agreement contains provisions on judicial cooperation in civil and commercial matters. Article 67 states that in the United Kingdom, as well as in the EU in situations involving the United Kingdom, the provisions of the Brussels Recast Regulation regarding jurisdiction and recognition and enforcement of decisions shall continue to apply for legal proceedings instituted before the end of the transition period. The transition period is currently set to end on 31 December 2020, but can be extended. However, the fate of the Draft Withdrawal Agreement remains uncertain, as it still needs the required majority vote in the UK Parliament to be finalized.

Without a permanent deal on this subject, decisions by English courts rendered in proceedings instituted after the transition period will only be enforceable in other EU countries under the rules each individual country applies for recognition and enforcement of non-EU court decisions. In general, this will mean that decisions from UK courts will not be automatically recognized and enforceable in other EU member states but will be subject to a stricter regime for recognition and potentially time-consuming proceedings. Furthermore, court decisions from EU member states will no longer be automatically recognized and enforceable in the UK.

Possible Solutions

To counter this, the UK and the EU could negotiate a permanent deal that involves the UK acceding to a convention on enforceability of court decisions. In this regard, there are several options. In theory, the EU and the UK could agree that the Brussels Recast Regulation will continue to apply to the UK indefinitely after the transition period. The UK could also join a convention to which the EU has already acceded. The most probable option would be the Lugano Convention of 2007, which also applies between the EU, Norway, Switzerland, and Iceland. This convention allows for enforcement on broadly the same terms as the Brussels Recast Regulation. Another possibility for the UK would be to join the 2005 Hague Convention on Choice of Court Agreements. This convention, however, applies only in case of an exclusive jurisdiction clause in a contract.

Conclusion

The exact arrangements under which the United Kingdom will leave the European Union remain uncertain. Parties involved in cross-border business who use contracts governed by English law and with an exclusive jurisdiction clause for the English courts should be aware of potential issues when it comes to recognition and enforcement of English court decisions in other EU member states after the transition period, and potentially change their contract clauses accordingly.

Legal scholars have been debating the method by which contractual provisions should be interpreted in the Netherlands since 1981, when the Dutch Supreme Court rendered its landmark Haviltex decision on the interpretation of contracts. Even though numerous relevant Dutch court decisions on contract interpretation have followed, the debate remains quite alive.

Irrespective of the applicable law, it is imperative for investors – such as private equity parties – to be precise when drafting exit provisions in joint venture or shareholder agreements. Across the ocean in the U.S., this was demonstrated in the Oxbow Carbon & Minerals Holdings, Inc. V. Crestview-Oxbow Acquisition, LLC decision rendered by the Delaware Supreme Court on Jan. 17, 2019. The Delaware Supreme Court provided guidance for investors drafting such provisions, which guidance can also be of relevance in other jurisdictions.

The Facts

A dispute arose as to whether two minority investors could force their co-investors to sell their equity interests (Units) by exercising their ‘Exit Sale Right’. The conditions for exercising this Exit Sale Right were laid down in the Limited Liability Company Agreement (Contract) entered into among all investors.

An Exit Sale was defined in the Contract as the “transfer of all, but not less than all of the then-outstanding Equity Securities of the Company and/or all of the assets of the company to any non-Affiliated Person(s) in a bona fide arms’-length transaction or series of related transactions (including by way of a purchase agreement, tender offer, merger or other business combination transaction or otherwise).” The Contract provided that the unidentified minority investors were entitled to drag the other investors in an Exit Sale.

The Exit Sale was, however, conditional, providing an investor could not be forced to sell its Units in the Exit Sale unless the investor received distributions equal to or higher than 1.5 times the investor’s initial capital contribution. This condition could not be fulfilled in relation to certain investors, each of whom obtained a minority equity interest in the company at a later time than the other investors and paid a higher price for their Units (the Small Holders).

Arguments

As to the proper interpretation of the exit provision, the parties’ arguments could generally be categorized as follows:

  • The Blocking Argument: If an Exit Sale does not satisfy the 1.5 times requirement for any investor and that investor chooses not to participate, then the Exit Sale cannot go forward, because it no longer would involve ‘all, but not less than all’ of the then-outstanding securities.
  • The Leaving Behind Argument: If an Exit Sale does not satisfy the 1.5 times requirement for any investor, then that investor can choose to participate in the Exit Sale, but cannot be forced to sell, and the Exit Sale can proceed without such investor. The other investors which satisfy the requirement, however, can be forced to participate in the Exit Sale.
  • The Top Off Argument: Assuming the ‘Blocking Argument’ were to be adopted and the Exit Sale would not satisfy the 1.5 times return on investment, the Exit Sale should still be able to proceed if the Small Holders (being the plaintiffs) were provided an additional amount of the sale proceeds such that they receive the 1.5 times return required by the Exit Sale provisions. This would effectively mean that the Small Holders would receive a higher purchase price than the other investors.

Dutch Legal Practice

The court in first instance found a gap in the Contract and used the implied covenant of good faith and fair dealing to imply a provision into the Contract which allowed the two minority investors to complete the Exit Sale if they came up with sufficient additional funds to satisfy the 1.5 times return for the Small Holders. The Delaware Supreme Court, on appeal, found that the court of first instance erred by finding that a gap existed in the Contract and implying a provision to fill such gap. Giving meaning to all of the provisions of the Contract, the Exit Sale provisions could only mean that an Exit Sale could not proceed where it does not satisfy the 1.5 times return for any of the investors and pay all of the investors the same consideration (which would result in paying all investors the amount necessary to satisfy the 1.5 times return for any investor). The Court found that the investors, being sophisticated parties, could have anticipated the impact that the admission of new investors would have on the Exit Sale, but did not elect to alter the Contract. The Court reiterated that the implied covenant of good faith and fair dealing should not be used as an equitable remedy to rebalance economic interests.

Dutch courts are in principle reluctant to fill any gaps by way of interpreting a contract (see Dutch Supreme Court, Dec. 9, 2016, ECLI:NL:HR:2016:2821, JOR 2017/55), even though the Dutch contract law doctrine of reasonableness and fairness could expand or limit the legal effects arising from a contract, which may lead to a similar result (see Clause 6:248, Dutch Civil Code ).

What the Delaware Supreme Court decision shows, irrespective of any debate on interpretation, is that clear drafting as well as identifying and addressing all potential contingencies remain vital, not only in private equity structures but in any contractual situation. This should be kept in mind in an era of ever-increasing deal speed and desire to reduce costs.

Lessons to be Learned

The Delaware Supreme Court decision highlights the need for parties drafting exit provisions in joint venture or shareholder agreements to address all potential contingencies, summarized as follows:

  • If the exit provisions include a minimum return on investment requirement, the contract language should be clear on whether that minimum return on investment requirement creates a blocking right or a leaving behind right.
  • Determine whether you want to have the flexibility of a topping off option or if the minimum return requirement may only be satisfied upon pro-rata and equal distribution of an exit sale’s proceeds.
  • Be careful to address how any minimum return on investment requirement will apply to any potential future (minor or major) shareholders/investors.
  • Be explicit regarding what type of exit sale (e.g., assets or equity) a member can force.
  • Be explicit how a leaving behind concept would work in the event of a sale of all of the assets of the company.

Any questions regarding Delaware law may be directed to GT Delaware office Managing Shareholder Diane Ibrahim.

For more on Dutch contract law, click here.

The locked box mechanism and the completion accounts mechanism are two separate methods used to determine purchase price in M&A transactions. Parties may require a combination of the two to tailor a transaction to their needs. This may be the case where a big gap in time exists between the date of the available audited accounts and the signing date, the buyer is not comfortable using management accounts, and the parties agree to a locked box mechanism per a future accounts date. Such a hybrid mechanism requires careful drafting. This blog post briefly touches upon the characteristics and pitfalls of such hybrid mechanism.

In a standard locked box mechanism (LBM), a buyer assumes the benefits and risks of the target company as per an “effective date,” typically 1 January. The enterprise-to-equity bridge (Bridge) is negotiated between the parties and determined without any contractual framework other than a non-binding Term Sheet, using the most recent audited financial accounts. If parties can’t agree on the purchase price, then either the transaction will be aborted, or parties can bridge the gap in a different manner, e.g., by deferring part of the purchase price via an earn-out. In a standard completion accounts mechanism (CAM), parties use estimates of cash, debt and a target working capital per the (future) closing date to determine the estimated purchase price and include a mechanism for a post-closing true-up based on the actuals. LBM is typically preferred by sellers, especially private equity, as it will cater for price certainty and a clean exit, whilst CAM may give buyers more comfort that the business was conducted in a profitable manner in the period prior to the closing date.

In a hybrid mechanism, parties will use audited financial accounts (like a standard LBM) which are, however, not yet available when the purchase agreement is signed. Parties should then agree on the Bridge, and thereby the purchase price, once the audited financial accounts become available (like a standard CAM) after the signing date. Negotiation and determination of the Bridge occurs in the interim period between signing and closing when a contractual framework, in the form of a purchase agreement, for those negotiations is already in place.

Such hybrid mechanism may be desired if there’s a big gap between the date of the available audited accounts and the signing date, and a buyer has insufficient confidence in using management accounts. The audited accounts available at signing may no longer realistically reflect the net debt and working capital position of the target company at closing. Also, a buyer may not be willing to pay the seller a daily interest rate over a long interim period. The contractual provisions, such as leakage, conduct of business, warranties, and indemnities, are generally insufficient to protect parties.

Close cooperation between the parties and their respective lawyers, accountants and corporate finance advisers is required to carefully draft a hybrid mechanism. Parties should ask themselves the following questions:

  1. Type of accounts – are the accounts audited or compiled, as typically used for SMEs?
  2. Timing – what’s the timing for preparing the accounts, and when are they envisaged to be furnished? What’s the period for the buyer to review these? This must be discussed with the other advisors.
  3. Bridge items – which items will qualify as cash, cash-like, debt and debt-like items to get from Enterprise Value to Equity Value pre-closing? Parties may attach a Bridge based on the most recent available accounts to tackle any qualification discussion prior to signing.
  4. Working capital – what will be the sufficient level of working capital to be maintained by the target company at closing? Any seasonality or wind-down of a target company should be considered.
  5. True-up mechanism – what are the consequences if parties can’t agree on the purchase price pre-closing? A buyer may want to walk away. Can the buyer be forced to participate in an independent expert procedure?

On 16 November 2020, the Dutch government published a protocol to amend the “Convention between the Kingdom of the Netherlands and the Republic of Poland for the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and avoidance.” This followed the signing of the Protocol on 29 October 2020 in which the intentions of the countries were agreed upon. The Protocol will come into force when both Contracting Countries that have ratified the Protocol conform national constitutional procedures; this may not occur until 1 January 2022.

Continue reading the full GT Alert, which summarizes the Protocol.

Introduction

As many countries reach the second stage of the Coronavirus Disease 2019 (COVID-19) outbreak, privacy protections may be relaxed under certain circumstances. The European Data Protection Board (EDPB) issued a statement on the processing of personal data in this period of time, and several national data protection authorities have issued COVID-19 specific guidelines and advice. As there are considerable differences between the various guidelines, it is essential that organizations subject to these EU data protection laws become familiar with these national information and guidelines.

This guidance – amongst others – touches upon the question what employers are allowed to do and say when an employee has or appears to have contracted COVID-19.

This blog covers the following topics:

  • European Data Protection Board Guidance
  • Dutch Guidance
  • UK Guidance
  • Irish Guidance
  • Spanish Guidance

EDPB Statement: General Information About Legal Bases for Data Processing

The EDPB adopted a ‘Statement on the processing of personal data in the context of the COVID-19 outbreak’ on March 19, 2020.

In this statement the EDPB reiterates that employers and public health authorities may process personal data without consent of the data subject in case of a pandemic. The EDPB refers to several legal bases in articles 6 and 9 of the General Data Protection Regulation (GDPR).

Article 6 (1) (e) GDPR contains a legal basis for processing if it is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller (the public interest legal basis).

Article 6 (d) GDPR provides for the processing of personal data if it is necessary to protect the vital interests of the data subject or another natural person (the vital interest legal basis). Such vital interest can be found in the protection of the data subject’s or another natural person’s life, but only where the processing cannot be based on another legal basis. Generally, it is regarded as a ‘last resort,’ for instance when an individual is unconscious and in mortal danger.

Recital 46 of the GDPR explains that the above-mentioned legal bases can go hand in hand:

‘Some types of processing may serve both important grounds of public interest and the vital interests of the data subject as for instance when processing is necessary for humanitarian purposes, including for monitoring epidemics and their spread or in situations of humanitarian emergencies, in particular in situations of natural and man-made disasters’.

Where it concerns health data, which qualify as a special category of personal data, the employer or public health organization can rely on the same legal bases; articles 9 (2) (c) and 9 (2) (g) GDPR are the counterparts of the public interest and vital interest legal bases as referred to above.

In addition, pursuant to article 9 (2) (i) health data may also be processed if this is necessary ‘for reasons of public interest in the area of public health, such as protecting against serious cross-border threats to health or ensuring high standards of quality and safety of health care and of medicinal products or medical devices’ (the public health legal basis).

The EDPB also lists several core principles that must be taken into account in the context of the COVID-19 outbreak. Personal data which is necessary to pursue the objectives should only be processed for specified and explicit purposes and the data subject must receive transparent information on the processing activities and their main features.

Lastly, the EDPB answers specific questions, which are particularly relevant for employers. The answers to these questions demonstrate that the national law of the member states is decisive to determine the employer’s obligations.

The EDPB’s answer to the question ‘Can an employer require visitors or employees to provide specific health information in the context of COVID-19?’ is as follows:

The application of the principle of proportionality and data minimization is particularly relevant here. The employer should only require health information to the extent that national law allows it.

In addition, the question ‘Can an employer disclose that an employee is infected with COVID-19 to his colleagues or to externals?’ is answered as follows:

‘Employers should inform staff about COVID-19 cases and take protective measures but should not communicate more information than necessary. In cases where it is necessary to reveal the name of the employee(s) who contracted the virus (e.g. in a preventive context) and the national law allows it, the concerned employees shall be informed in advance and their dignity and integrity shall be protected.’

The Netherlands

The Dutch data protection authority (AP) published an approach towards an employer’s obligations on its website, which was updated several times. The approach has been criticized by some for limiting an employer’s options to obtain information and prioritizing an employee’s privacy.

Generally, an employer is not allowed to check whether its employee is contaminated with the COVID-19 virus. This is only allowed if the employee works in the health sector.

In addition, an employer may not request any information about the nature and causes of a sickness notification. Consequently, it may also not register such information as it is not considered necessary. This applies to a bone fracture, a cold, and to COVID-19. While most employees may feel obliged to inform their employer about the nature of their sickness (especially in times of a pandemic), such limitation may preclude an employer from ensuring the health and safety of its employees.

The AP advises that instead, an employer may request a company doctor to test an employee in cases of suspicions of COVID-19. The AP specifically states that an employer may also request its employee to contact such company doctor.

If the doctor suspects a contamination on the basis of this test, it will file a report to the regional health service. This service will then discuss the required next steps with the employer. Note that, with this mechanism, the employer only indirectly receive information about the employee’s illness. The company doctor is allowed to process and register health data, as required under Dutch law, and as this is necessary for reasons of public interest in the area of public health (article 9 (i) GDPR).

Recently, the AP added that an employer may also request the employee to check its health during work hours, for example by measuring its temperature. This is specifically the case if the employee does not work from home.

In addition, the AP notes that under the current circumstances, an employer may send employees home if they are sick, and if the employer suspects that the employee is sick (the employee has flu or cold symptoms for example).

According to the AP, the question ‘what can I say about someone’s absence to its colleagues?’ is that it remains up to the employee what it wants to share. The employer may inform colleagues about an expected absence duration, but the AP reiterates that the employer/employee relationship is not considered equal. The AP advises that an employer must make sure that the employee does not feel any pressure to provide further information (such as its name and details of the illness).

The AP adds that the current situation requires specific and far reaching measures. The employer is encouraged to monitor the advice of national and regional health services closely.

United Kingdom

The UK’s Information Commissioners’ Office (ICO) provides information on its website about ‘Data protection and coronavirus: what you need to know.’ The information is set up in a Q&A form.

The ICO answers the question ‘As a healthcare organization, can we contact individuals in relation to COVID-19 without having prior consent?’ as follows:

‘Data protection and electronic communication laws do not stop Government, the National Health Service or any other health professionals from sending public health messages to people, either by phone, text or email as these messages are not direct marketing. Nor does it stop them using the latest technology to facilitate safe and speedy consultations and diagnoses. Public bodies may require additional collection and sharing of personal data to protect against serious threats to public health’.

The ICO also confirms that an employer can tell its staff that a colleague may have potentially contracted COVID-19. However, the ICO emphasizes that ‘you probably don’t need to name individuals and you shouldn’t provide more information than necessary.’

It makes it clear that the organization has ‘an obligation to ensure the health and safety of your employees, as well as a duty of care. Data protection doesn’t prevent you doing this.’

Furthermore, the ICO advises that an employer is allowed to share employees’ health information with authorities – even though it is unlikely that this will be requested. The ICO emphasizes that it remains of importance to collect only strictly necessary data and to ensure that the information is treated with appropriate safeguards.

Interestingly, the ICO notes that it will not ‘penalize organizations that we know need to prioritize other areas (than data protection practices, red.) or adapt their usual approach during this extraordinary period.’

Ireland

The Irish Data Protection Commission (Commission) emphasizes the employer’s obligation to protect its employees.

With regard to article 9 GDPR, the Commission notes that it is likely that Article 9(2)(i) GDPR and Section 53 of the Irish Data Protection Act 2018 will permit the processing of personal data, including health data, once suitable safeguards are implemented. Such safeguards may include limitation on access to the data, strict time limits for erasure, and other measures such as adequate staff training to protect the data protection rights of individuals.

The Commission concludes that an employer may process health data of its employees, if it is necessary and proportionate to do so. The legal basis for this processing is found in article 9(2)(b) and the obligation of an employer to protect its employees under the Irish Safety, Health and Welfare at Work Act 2005.

In addition, the Commission explicitly states that in light of this employer’s duty of care:

  • employers would be justified in asking employees and visitors to inform them if they have visited an affected area and/or are experiencing symptoms; and
  • employers would be justified in requiring employees to inform them if they have a medical diagnosis of COVID-19 in order to allow necessary steps to be taken.

Lastly, the Commission notes that an employer should avoid naming any individual employee that has contracted the virus. Rather an employer should inform its staff that there has been a (suspected) case and request the staff to work from home. This last part was clearly written in the first stage of the pandemic.

Spain

In its extensive report , the Spanish data protection agency (AEPD) touches upon the vital interest legal bases in articles 6 and 9 GDPR.

With regard to this legal basis in article 6 GDPR, the AEPD notes that this also aims to protect the vital interests of ‘another natural person.’ Consequently, this legal basis may be sufficient for the processing of personal data aimed at protecting all those persons susceptible to being infected in the spread of an epidemic, which would justify, […] in the widest possible way, the measures adopted to this end […]. This interpretation is clearly broader than the generally accepted interpretation.

The AEPD notes that this legal basis does not work where health data are concerned. The AEPD is then the first national authority that refers to article 9 (2) (b) GDPR, which provides a legal basis for processing of health data without consent, 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 law.

A Spanish employer is subject to a Spanish law on the prevention of occupational risks. This law requires each worker to ensure its own and others’ safety and health at work. Consequently, they must immediately report any situation that reasonably involves a risk to that safety and health. This also includes any suspected contact with the virus. The employer must then process such data in line with the GDPR.

As possible legal bases for data processing in light of the COVID-19 pandemic, the AEPD lists:

  • the established article 9 (2) (g) and 9(2)(i) GDPR (the public interest and public health legal basis)
  • article 9 (2) (h) – the processing is necessary to carry out a medical diagnosis, or evaluation of the worker’s work capacity
  • article 9 (2) (c) (the vital interest legal basis), but only in the event that the data subject is not physically or legally capable of giving their consent.

The APED reiterates that Spanish laws contain provisions that allow processing of data in emergency situation. So, in order to protect the public health, the ‘different public administrations, who may adopt the necessary measures to safeguard said essential public interests in public health sanitary emergency situation.’ An assuring message from the AEPD, including its notion that all data protection principles (laid down in article 5 GDPR) must be respected.

The AEPD concludes with the highly relevant recital 54 GDPR:

“The processing of special categories of personal data, without the consent of the interested party, may be necessary for reasons of public interest in the field of public health. Such processing must be subject to appropriate and specific measures in order to protect the rights and freedoms of natural persons. […] This processing of health-related data for reasons of public interest should not result in third parties, such as businessmen, insurance companies or banks, treating personal data for other purposes”.

Final note

It is expected that other national data protection authorities will also provide specific Coronavirus Disease guidance. Naturally, we will keep you updated on the latest developments.