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As the 2019 Novel Coronavirus (COVID-19) continues to spread across the world, the challenges for companies operating in the industrials, manufacturing & transportation (IMT) sector are increasing. Companies across all industry sub-sectors – from aviation, mobility, transportation and logistics, to industrial conglomerates, chemicals & plastics, agribusiness, and construction – are facing a number of significant business and legal issues. Here is a checklist of emerging risks and possible solutions aimed at helping IMT companies navigate the rapidly evolving situation.


The aviation subsector has been impacted more significantly than any other IMT subsector. Plummeting demand due to government lockdowns, travel restrictions, limited business travel, and general passenger concerns has had myriad consequences for airlines and aviation-related businesses. Moreover, the issues for aviation have both cause and effect roles for virtually every other sector of the global economy. Noteworthy developments and impacts of COVID-19 to this subsector include:

  • Various government relief packages and intervention schemes:
  • The US Treasury Department is providing USD 32 billion in grants and USD 29 billion in loans for passenger airlines, cargo airlines, and contractors under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. US airlines receiving aid are required to maintain service to each US point served prior to the COVID-19 pandemic, subject to limited exemptions at the discretion of the US Department of Transportation.
  • The largest European airlines remain in negotiations with their respective governments over financial relief. Some carriers such as Easy Jet and Norwegian have already received relief in the form of loan guarantees.
  • The various governments providing relief to the airlines may receive an ownership stake in exchange. The US Treasury Department will be receiving warrants in carriers that receive more than USD 100 million in grants. The Government of Italy took full ownership of Alitalia. Partial takeovers of other European airlines may also be under discussion.
  • Reduced revenue and significant financial stress, with several insolvencies already announced, and more expected in the future.
  • Hiring freezes and workforce reductions.
  • US airlines that receive economic relief may not conduct furloughs or reduce pay involuntarily through September 30, 2020.
  • Several European airlines have laid off significant numbers of employees. It remains to be seen whether government relief packages will be conditioned on employee retention, as in the United States.
  • Uncertainty over airport slot allocations and usage requirements;
  • The United States and the European Union have temporarily waived rules that require airlines to maintain certain levels of operations, until October 24, 2020.
  • There is inconsistency on this subject globally, and this relief may need to be extended.
  • Compensation and other obligations to passengers for flight cancellations, schedule changes, and disruption, such as under US DOT requirements and European Union Regulation 261.
  • Decrease in orders and deliveries for aircraft OEMs, which will in turn impact parts manufacturers.
  • Reduced airfreight capacity due to fewer passenger flights, causing supply chain and logistics disruption with repercussions beyond the aviation industry.
  • Travel restrictions, including immediate compliance considerations and adjustments to airline operating schedules, and future impacts on the restoration of passenger service.
  • Infrastructure issues, including impacts on airports, COVID-19 preventive measures, and aircraft storage.
  • Sustainability initiatives, including the impact of COVID-19 on the emissions baseline for the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”).

Cash Flow and Financing

IMT companies continue to experience cash and liquidity challenges as the COVID-19 outbreak has progressed, especially among aviation companies as well as manufacturers facing supply chain challenges, constrained demand, or both. Many companies have already fully drawn on existing credit lines and, given the cautious approach of most banks, the availability of new credit is relatively limited. Despite these challenges, IMT companies are exploring a variety of approaches to addressing cash flow. Some considerations for IMT companies:

  • Explore all possible government funding and assistance. While some packages include subsector specific relief (in particular for aviation), many governments are also providing industry-agnostic relief, including loans, grants, tax relief and other assistance.
  • Revisit banking relationships: speak with banks to understand their capacity to provide the company with emergency funding if necessary. Consider privately placed term loans within an existing bank group to lock down short-term liquidity needs. Private equity may also be a source of funding.
  • Carefully evaluate existing or pending finance transactions for provisions or triggers that may be relevant to the COVID-19 outbreak.
  • Work to access cash previously “trapped” for any number of reasons, such as due to local country rules, central banking restrictions, currency controls, local country losses or even minority shareholders.
  • Consider using supply chain finance techniques to improve working capital metrics and improve enterprise risk related to suppliers.
  • Consider alternative forms of liquidity, such as minimum sale and leaseback real estate transactions.
  • Examine the impact of low rates and depressed equities on pension obligations. Consider contingency plans for funding pension obligations if needed.

Supply Chain

  • IMT companies have some of the most complex supply chains of any sector and thus are particularly hard hit by quarantines, travel restrictions, and other disruptions caused by the COVID-19 outbreak. Further, the IMT sector also includes companies that provide the transportation and services necessary for an effective supply chain, such as airfreight, rail, shipping, and logistics. Significant issues IMT companies are wrestling with include the following:
  • IMT companies source from and have operations in multiple jurisdictions and, due to the global nature of the COVID-19 outbreak, may have difficulty reacting to and minimizing supply chain impacts. Actions to close borders and restrict movements affect not only people, but also transportation of goods, both between and within countries. Companies will experience delays and shortages, making it difficult to resume and maintain operations even after the virus has waned in some countries.
  • Complex supply chains make it more difficult to identify where the “pinch” points are, in particular given the dynamic nature of the impacts of COVID-19 as it moves across the globe. To get ahead of this impact, IMT companies will need to continually update their supply chain risk assessment with new information.
  • Changing manufacturing locations or suppliers quickly raises additional risks, especially because of time constraints on properly vetting such supply chain shifts to ensure technical product compliance. Risks include sourcing from regions with slave or child labor, additional customs and import/export compliance, increased risk of liability for bribery and improper influence such as under the US Foreign Corrupt Practices Act (FCPA), and other issues with disreputable parties and unreliable operations.

Steps to alleviate pressure on supply chains include:

  • Conduct a full risk assessment on the impact of the outbreak on business activities.
  • Evaluate options when core supply chains are disrupted.
  • Consider whether to provide support to a supplier in resolving its challenges or whether to look for alternative sources of supply.
  • Determine if re-sourcing supply is allowed under the contract or consider trying to limit restrictions on re-sourcing as part of any renegotiation with suppliers.
  • Understand local insolvency issues that may be relevant when exercising rights against a supplier.
  • Consider whether there are alternative ways for performance of contractual obligations or other options to mitigate effects.
  • If entering into new contracts, draft provisions clearly and comprehensively to cover eventualities such as the present outbreak, and understand implications of the law governing the contract.
  • Consider the possibility of invoking force majeure clauses (see below for further considerations).
  • Monitor the announcement of any new governmental or regulatory policies.

Commercial Contractual Liabilities

The speed and complexities of the COVID-19 outbreak has impacted businesses differently, even those within the same industry. COVID-19 has particularly affected companies in the IMT sector, as many industrials and manufacturers rely on a an international network of supplier, transportation, logistics, distribution and sales counterparties (that in turn rely on more such parties) to source raw materials, manufacture equipment and products, and get them to market and ultimately the end consumer. Importantly, relationships on both the supply and demand side of IMT businesses have been disrupted by COVID-19, and what began as a disruption of supply in China and Asia has become a disruption of demand there and in Europe and the Americas, with further disruptions expected to arise as the pandemic continues its spread with new, latent outbreaks.

Parties to commercial contracts constituting the supply and demand chains are considering how their agreements allocated the risks of such a pandemic and resulting governmental actions and market disruptions. A party may invoke a force majeure (“FM”) provision to excuse delay or its non-performance based on the specific factual context, or may rely on legal doctrines (including force majeure in certain jurisdictions as well as similar legal theories such as commercial impossibility). General considerations in evaluating a party’s rights under contracts in light of disruptions and other consequences of the COVID-19 outbreak include among others:

  • Understand how a particular company and business activity has been impacted by COVID-19, or responses by governments or other market players to the evolving situation.
  • Understand the complete universe of contracts in which the company has entered, deviations from standard form templates, and the complexity and level of variability in that set of agreements as to force majeure and similar provisions, governing law, forum, and exposure to areas and industries hardest hit by COVID-19.
  • Review carefully the relevant provisions of material contracts or contracts at issue in any dispute, with particular attention paid to legal statutory provisions of the law governing the respective contract and FM provisions, including any time bars, notices or other procedural requirements.
  • Form a preliminary view on whether any FM provision is “open” or exhaustive in relation to the list of FM events and whether the outbreak and/or resulting government crisis measures are covered or excluded, and evaluate the validity of force majeure claims made by counterparties.
  • If there is a need to invoke a provision or legal theory, consider any potential obligation to mitigate the effect on non-performance and what steps should be taken, and consider starting a mindful dialogue with the counterparty as an important part of the process and overall business relationship.
  • Consider any potential flow on effects from the invoking of a claim such as termination of the contract.
  • Explore other remedies that may be available, such as contract frustration or the doctrine of changed circumstances.

Aside from a party’s legal position, there are several other important matters of concern:

  • For a counterparty who receives a FM or similar claim they do not think is valid, there is the issue of enforcement of the contract, particularly if in cross border transactions the contract does not provide for international arbitration.
  • There are the reputational risks and potential damage to long-term supply relationships with key buyers and suppliers. Even where there is no legal basis for FM or similar relief, parties who receive FM claims may wish to be flexible about amending or restructuring (e.g. by postponing deliveries) the contract to accommodate the affected party.
  • Declaring FM or receiving a FM or similar claim may impact insurance arrangements (see below).
  • Buyers who are part of a chain of supply contracts may themselves need to declare FM in response to a supplier’s declaration in order to avoid being in breach. Each contract in the chain may of course be on different terms or subject to entirely different governing laws and this can create substantial challenges for the buyer, especially where their downstream contract has less favorable (or no) FM provisions. There may also be separate time bars or other procedural requirements.
  • If entering into new contracts during this period, consider the FM provisions and provisions applicable under the governing law of the contract with particular care.


While business and health risks rightfully remain at the forefront of concerns, the COVID-19 outbreak has resulted in significant financial stress, supply chain and other operational disruptions, and may compromise monitoring and oversight capabilities for many IMT companies. These factors may work to increase compliance risks and actual and detected incidences of violations of antitrust/competition, anti-bribery and anticorruption, and regulatory and safety laws. While each company will need to calibrate its compliance program response to COVID-19 by reference to its risk assessment of particular company and industry risks, we have set forth below several key risks arising from the outbreak and the practical steps IMT companies can take to pre-empt and mitigate them.

Potential compliance risks that may be heightened in light of the COVID-19 outbreak and resulting economic downturn include among others:

  • Engaging in potentially inappropriate actions to address processes that may be stalled due to short-staffing of government offices (e.g., customs clearance);
  • Entering into anticompetitive agreements, sharing price and other sensitive information, and engaging in market allocation schemes and bid rigging as pressure to retain business grows and companies seek to avoid ruinous competition.
  • Shifting quickly manufacturing to alternative suppliers less affected by COVID-19 but with higher risk profiles, or without sufficient time to fully evaluate their risk profiles, or evaluating their compliance with industry and product regulations; and/or
  • Making improper accounting entries in order to meet investor expectations.

All of these result in increased potential liability for violations of law, and other issues with potentially disreputable parties or unreliable operations (such as internal fraud). Moreover, the likelihood of detecting compliance issues also increases, as decreased revenues may no longer mask certain fraudulent schemes, and increased employee turnover and reductions in force may increase the frequency of whistleblowing.

It is therefore crucial that IMT companies ensure their compliance programs continue to operate appropriately, even during this time of crisis. This includes:

  • Closely monitoring adherence to supplier standards and controls, such as by:
  • Monitoring current suppliers’ compliance to the company’s code of conduct and relevant laws; and
  • Considering previously-vetted and trusted suppliers that can meet production/sourcing needs, if a need to change suppliers arises. If the company needs to appoint new suppliers, it should conduct anti-bribery/corruption and restricted parties screening as part of the supplier qualification process.
  • Regularly communicating with employees and third parties about:
  • The particular compliance challenges associated with the outbreak and how to tackle such challenges;
  • The company’s commitment to a culture of ethics and compliance, notwithstanding times of financial stress and economic uncertainty;
  • The importance of strict accounting controls and keeping accurate books and records; and
  • Reporting hotlines which employees and third parties can use to report suspected misconduct.
  • Maintaining monitoring and oversight to keep conduct in check and to swiftly identify and address potential violations.


The COVID-19 outbreak raises challenging issues for IMT employers. IMT companies are dealing with workforce changes to manage costs, health and safety concerns, remote working, and shifting locations and functions of employees. Aspects to focus on include:

  • Examine procedures and policies around reductions in pay, lay-offs (furloughs and RIFs), paid time off, short time working, and other shifts in workforce utilization and employment
  • Present a considered and consistent approach to paying employees affected by COVID-19 or who are being quarantined; explore applicable state aids, short time working possibilities, or compulsory vacation/unpaid leave.
  • Maintain a safe working place, whilst at the same time maintain volume and standard of operations.
  • Minimize exposure to liabilities:
  • Protect the health and safety of employees (in particular vulnerable employees such as those with disabilities or caring responsibilities for vulnerable relatives);
  • Protect the health and safety of vendors, customers and persons liaising with the company; and
  • Protect employees affected by travel bans or who have been quarantined abroad.
  • Review applicable government health alerts, track travel and health restrictions.
  • Maintain communication with employees.
  • Facilitate remote working where possible.


IMT companies are encountering myriad tax issues as they attempt to address cash flow, operational changes, and supply chain disruption. Key developments and considerations related to tax include:

  • Governmental intervention that may include tax policy and tax administrative measures designed to support companies struggling with cash flow or tax compliance obligations, such as stimulus packages with tax relief, deferral of tax payments and relaxation of filing obligations, accelerated payments of refunds, mitigation of penalties, and the introduction of debt payment plans.
  • Tax implications of new business opportunities, changes in operations, or manufacture of new products, such as IMT companies shifting to manufacture products they previously did not produce, such as medical supplies.
  • Tax and transfer pricing considerations as IMT companies respond to supply chain disruptions and corresponding losses, such as:
  • Correctly categorizing losses and ensuring losses are not trapped or lost.
  • Recognizing the tax deductibility relevance of a decision taken in relation to loss by one entity in the group in a different country to where the loss was actually suffered.
  • Reviewing transfer pricing policies more generally to see how they will be affected by the economic downturn including reviewing the adjustment of benchmarks, sharing of losses, treatment of exceptional costs and intragroup subsidies.
  • Identifying potential customs duties as a result of transfer pricing adjustments made in response to the current situation.
  • Reviewing existing advanced pricing agreements because critical assumptions linked to economic conditions may trigger advance pricing agreement renegotiation or even termination in some cases.
  • Potential tax implications arising from employment and workforce-related issues, such as:
  • Key personnel being located in another jurisdiction for an extended period (permanent establishment risk), especially when performing essential business functions.
  • Layoffs, furloughs, and other changes in workforce.

Antitrust & Competition

With rare and very limited exceptions, competition law remains fully applicable also in times of crisis such as the COVID-19 outbreak. However, IMT companies should be mindful of practical challenges ahead and, temporarily, changes in terms of enforcement priorities. Please find below an overview of the most relevant issues for IMT companies:

  • M&A Activity and Merger Control

Some competition authorities have suspended their review process or have ordered their staff to work from home, and IMT companies should factor this in their transaction planning. Authorities in many jurisdictions throughout the world have suspended functions, announced that delays should be expected, and encouraged companies to delay non-urgent notifications. Further announcements of a suspension or of delays may follow in the weeks to come. For M&A and merger control activities this means:

  • Where possible, any agreement that is currently being negotiated should adapt to that uncertainty. Where agreements have already been concluded, and where a transaction has been filed, consider the consequences of a delayed clearance and prepare for such a scenario.
  • Expect a challenging review process. If asked to provide information or data on short notice to the authority, be prepared and ensure that the competent person and/or information readily available and accessible from home. Any market test a competition authority will undertake during this time of crisis may produce insufficient results as many companies may not respond working from home, which potentially leads to an inaccurate picture of the market.
  • Enforcement Priorities: Focus on abuse of dominance, concerted practices, and exclusivity arrangements

Supply shortages, in particular for essential goods, are currently a key concern. Raising prices for goods or input goods as a reaction to the increased demand and/or securing supply exclusively in times of scarcity may be a perfectly rationale reaction for companies. However, certain enforcement priorities have already been shifted:

  • First, an ever closer scrutiny by regulators, but also others, customers and competitors, who witness a crisis-related potentially abusive change of conditions (e.g., a price increase; the UK regulator, for example, has set up a special task force to monitor and collect evidence about unjustifiable price rises).
  • Second, competition authorities may assume stricter interpretations as to what constitutes abusive behavior, in particular, what constitutes an excessive price so as to ensure that the margin within which companies may take advantage of the crisis is kept to a minimum.
  • Third, authorities will be quick to investigate crisis cartels, i.e., the alignment or information exchange between competitors in view of a decreasing demand, (e.g., capacity reductions to drive up the price, adjustment of discount programs, or the re-negotiations of insurance conditions).
  • Fourth, authorities might scrutinize exclusivity arrangements within the supply chain more closely, for example, in cases where competitors are excluded from vital supplies.
  • More forthcoming approach to crisis-related forms of cooperation, including exemption from antitrust rules
  • The competition authorities are aware of the need for cooperation by competitors to address crisis-related issues, such as a shortage of supplies, or the need to accelerate relevant innovation. Thus, forms of cooperation that can be justified by such a need, e.g., a cooperation aimed at facilitating logistics to ensure supply of goods currently in high demand will be met with a lenient approach.
  • The European Competition Network, a network of all European competition authorities, has openly encouraged companies to reach out to them for informal guidance.
  • To date, there a few instances of conditional and limited exemptions from antitrust rules. These are limited to industries hard hit by or essential in this crisis; for the IMT sector, this includes exemptions for airlines (e.g., Norway).

Indri Pramitaswari “Mita” Guritno is a partner in Hadiputranto, Hadinoto & Partners in Jakarta who has been advising on banking and finance transactions for more than twenty years. She has extensive experience in debt restructuring (acting both for borrowers and creditors) and structured finance.


Yaeko Hodaka has over 25 years of legal experience in the areas of corporate law, including mergers and acquisitions, corporate restructuring and reorganization, internal investigation, litigation and dispute resolution. She is a partner in the Corporate/M&A Practice Group, with a focus on the automotive sector and serves as the Regional Chair of Industrial, Manufacturing and Transportation Group in Asia Pacific.


Dr. Nikolaus Reinhuber has more than 25 years' experience in cross-border transactions and is the Global Chair of the Industrials, Manufacturing and Transportation (IMT) industry group in Baker McKenzie’s office in Frankfurt. Clients have described him as "statesmanlike, with real interpersonal skills, who strikes the right note at 3 a.m. and gets the deal to the finish line" as well as "excellent work and extremely strong dedication" (JUVE 2014/2015). Before joining Baker McKenzie in 2008, he served as an M&A and corporate partner with Freshfields Bruckhaus Deringer, where he also held a global management position. Dr. Reinhuber has also acted as a supervisory board member of listed companies and advised them on their IPOs.


Dr. Nicolas Kredel, LL.M is a partner in Baker Mckenzie's Dusseldorf office in Germany. His practice focus on clients in EU and German competition law matters, including domestic and international cartel investigations, merger control proceedings and abuse of dominance cases. He routinely leads global projects for antitrust risk prevention (compliance systems), international investigations and transactions. He also provides competition law advice on cooperation agreements with competitors, as well as supply agreements and distribution systems.


Jannan Crozier is a partner in Baker & McKenzie's Corporate Group based in London and the Firms Global M&A Chair. Jannan practices in Corporate Law and advises clients in relation to cross-border mergers and acquisitions and negotiated carve out transactions.
Jannan joined Baker & McKenzie's London office as a trainee solicitor in 2003, qualifying as a solicitor in the Corporate Group in 2005 and being promoted to partner in 2015.
The Legal 500 lists Jannan as a "Next Generation Partner" within M&A: upper mid-market and premium deals, GPB 500 million and ".. is especially experienced in cross-border M&A, and complex carve-outs."



Jennifer Trock is chair of Baker McKenzie's Global Aviation Group and North America International Commercial Practice Group. She leads the Firm's unmanned aircraft systems (UAS) focus team and is a member of the Firm's Future Mobility Taskforce. She is the immediate past chair of the ABA's Forum on Air & Space Law. Jennifer has been recognized by Chambers USA, Aviation Regulatory – National (2007-2022) and has received honors from Euromoney's Guide to the World's Leading Aviation Lawyers, Infrastructure Journal and The Washingtonian. Jennifer has also been recognized by Women in Business Law (Americas) (2021) as the Aviation Lawyer of the Year.