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The COVID-19 Pandemic and Cross-Border Litigation

Oct 27, 2020

The massive disruption that is the COVID-19 pandemic has left in its wake unfulfilled commitments, broken agreements, and economic loss. There has also been a surge in pandemic-related litigation, much of which occurs between domestic parties. However, thanks to worldwide travel and our globalized economy, international litigation is also on the rise.

Cross-border disputes arising from the pandemic can generally be sorted into two categories: failure to deliver a product or service for which the plaintiff has paid, or failure to adequately protect the plaintiff’s health against the pandemic.

International travel disruption

Much of the pandemic-related cross-border litigation is related to travel. Cancelled airline flights, shuttered resorts, cruise-ship outbreaks, and postponed or cancelled events have left large groups of people shortchanged and seeking compensation.

The lawsuits often concern refunds, a particular challenge during the pandemic because defendants may find themselves in an unusual and nearly impossible bind: Plaintiffs’ money has already been spent on operating costs while pandemic restrictions continue to leave the defendant unable to deliver what customers have paid for, and without the requisite liquidity to cover multiple customers’ claims. As a result, many travel-related businesses have decided to — or have been forced to — eschew cash refunds in exchange for credits against future purchases. This practice is being contested in numerous class action suits.

In the airline industry, where credit refunds have long been common practice, the practice is less welcome than ever with future travel plans being so uncertain. (Some companies are racing to insert new contractual fine print to shore up their right to issue credit refunds.) Customers’ dissatisfaction is further compounded by some airlines going so far as to time-limit the credit, requiring plaintiffs to use it soon or lose it, pandemic concerns notwithstanding.

Universities with international students

The pandemic is also posing significant problems for universities — 70 in the U.S. alone are being sued for a slew of different reasons. There are class action lawsuits by students and families seeking reimbursement for room and board costs after dorms and dining halls closed due to infection concerns. There are also those who consider a remote education substandard and are now suing for the return of tuition. And in cases where universities did not shut down, families are suing for exposing students to unsafe conditions.

Foreign students faced an additional problem when campuses started to shut down: some found themselves stranded with nowhere to live, unable to return home due to airline shutdowns. Confronted with unexpected housing expenses, their families may also choose to pursue legal action.

Special problems for international businesses

In a global pandemic, international supply chains are especially vulnerable and cross-border legal disputes seem inevitable. Any link in the chain can fail to meet its commitments, which can have a cascading impact through a complex web of companies in a number of different countries. Thus far, many of the businesses responsible for supply chain failure have relied heavily on force majeure clauses in their contracts.

Then there are insurance issues. Insurers themselves are struggling to satisfy an extraordinary number of claims and are seeking to avoid approving payments wherever possible. This has led to some surprising denials. Lloyds of London, for example, is being sued by several U.S. movie theaters for the underwriters’ assertion that COVID-19 is not mentioned specifically as being covered in a policy, even though the plaintiff asserts that pathogens in general are covered.

Jeopardizing litigant safety

The manner in which companies endeavor to keep their customers safe is another area where litigants are pursuing restitution. (We’ve already noted universities’ exposure.) As an example, 800 passengers filed a class action against the Princess Line’s Ruby Princess over the crew’s handling of an onboard COVID-19 outbreak back in March. (Previous suits regarding the company’s Grand Princess outbreak were dismissed.)

For U.S. citizens who seek to assign blame for the entire world’s safety, there’s the Foreign Sovereign Immunities Act. This legislation from 1976 empowers Americans to sue foreign sovereign nations in American courts. Indeed, there is a suit pending against the city of Wuhan in China for failing to immediately disclose the seriousness of COVID-19. Another suit alleges that China has been hoarding medical supplies.

A long road ahead of us

Unfortunately, COVID-19 is still surging around the world. With Europe experiencing a second wave and the United States already in its third wave, we don’t expect COVID-19-related litigation to diminish anytime soon. Domestic and cross-border disputes will continue to take place so long as products and services remain undelivered and health concerns remain unanswered.

 

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