Updated: Aug 13, 2020
It is said that Malaysia is entering the phase of a new normal. A new norm requires new laws. Currently, Malaysia does not have any specific law enacted to deal with the COVID-19 pandemic and its rippling effects on individuals, businesses and the economy in comparison to our neighbour across the causeway, Singapore and other countries like the United Kingdom and Scotland.
The Malaysian government implemented several measures on a piecemeal basis to dampen the adverse effects of the COVID-19 pandemic such as:
1. The Companies (Exemption) (No. 2) Order 2020 provided protection for companies from being wound-up for a period of 6 months after receiving a statutory demand compared to the previous period of 21 days.
2. The Employees Provident Fund (EPF) released an announcement stating the reduction of the employee’s share of the statutory contribution rate from 11 per cent to seven (7) per cent with reference to the Government’s announcement on the 2020 Economic Stimulus Package.
3. The National Economic Recovery Plan (PENJANA)
4. The Ministry of Human Resources announced that the Minimum Standards of Housing and Amenities (Amendment) Act 2019 will take effect on 1st June 2020 with a three (3) months’ grace period until 31st August 2020 in Peninsular Malaysia and the Federal Territory of Labuan. This is because the major contributing factors for COVID-19 infection transmission amongst the foreign workers are cramped housing facilities, unsatisfactory practices of personal hygiene and unsanitary environment as the Ministry of Health said in its press statement on 26th May 2020.
Local news reports have stated that the Malaysian government is drafting a Temporary Measures Bill (“Malaysian COVID-19 Bill”) to mitigate the social and economic impacts of COVID-19. Minister in the Prime Minister’s Department (Parliament and Law) Datuk Takiyuddin Hassan said that the COVID-19 Bill will involve amendments in several existing legislation as part of the efforts to rebuild the economy from the effect of this COVID-19 pandemic and the resultant variants of MCO (hereinafter referred to collectively as “pandemic”).
The Prime Minister’s Office released a press statement on 28th May 2020 on its proposal to enact a Malaysian COVID-19 Bill to overcome the effects of the pandemic. The proposed contents will include the necessary amendments or modifications for a prescribed period to the provisions under certain existing legislation that are seen to impede the collective effort in reviving the Malaysian economy.
The above measures implemented are certainly welcome but a specific and extensive Malaysian COVID-19 Bill is still required to address the issues caused by the pandemic. It is paramount that the Malaysian COVID-19 Bill’s reach is wide enough to assist the rebuilding of all or a majority business sectors and lubricating the gears of our national economy which may have grown stagnant.
Some of our Commonwealth brethren have already enacted a specific law regarding the pandemic such as:
a) Singapore COVID-19 (Temporary Measures) Act 2020
b) UK Coronavirus Act 2020
c) Australia Coronavirus Economic Response Package Omnibus Act 2020
d) Emergency Measures in the Public Interest (COVID-19) Act 2020 of Ireland
It is suggested that Malaysia should refer to and analyse them as existing Malaysian law is not foreign to adapting laws of other jurisdictions. For example, the recently introduced Section 17A of the Malaysian Anti-Corruption Commission Act 2009 is modelled from Section 7 of the UK Bribery Act 2010 and our Contracts Act 1950 is fundamentally similar to the Indian Contract Act 1872.
Below is a brief discussion on the recently enacted laws specific to the pandemic by Singapore, the United Kingdom and Scotland.
B. Republic of Singapore
Singapore’s swift actions are to be commended as its Ministry of Law announced on 1st April 2020 that it intended to introduce the COVID-19 (Temporary Measures) Bill and the Singapore Parliament passed the COVID-19 (Temporary Measures) Act 2020 (“SG Coronavirus Act”) 6 days later. The SG Coronavirus Act took effect on the same day it was passed.
The SG Coronavirus Act operates retrospectively and is applicable to certain scheduled contracts that are to be performed on or after 1st February 2020 (which is the approximate date when the Singapore’s economy started to be significantly affected by the pandemic) and on the contracts entered into or renewed before 25th March 2020.
Examples of the measures implemented by the SG Coronavirus Act are as below:
1. Relieves for residential real estate are such as the developer will be prohibited from withholding or forfeiting any part of the booking fee paid during the prescribed period and terminating the agreement on the basis of the buyer’s non-payment
2. Rental relief for non-residential real estate as non-residential leases and licenses of real estate falls under the definitions of "scheduled contracts" in the SG Coronavirus Act. Landlords are barred from exercising their even if tenants have breached lease obligations, provided that tenants have first given notice rights of re-entry or forfeiting the lease
3. Protection against the forfeit of deposits made for events or functions that had to be postponed due to the pandemic, for example, a venue provider cannot forfeit a person's deposit for an event that is postponed because of COVID-19 restrictions without obtaining a determination from an assessment that it was just and equitable to forfeit the whole or part of the deposit
4. Relief against non-performance and liability to pay liquidated damages of certain types of contracts such as events, tourism-related, construction contracts and supply contract
5. Prohibition of insolvency proceedings and the increase of the monetary threshold for insolvency for businesses (SGD 10,000 to SGD 100,000) and individuals (SGD 15,000 to SGD 60,000)
6. Conduct of court proceedings and Syariah Court proceedings using remote communication technology
C. United Kingdom (“UK”)
The Coronavirus Act 2020 (“UK Coronavirus Act”) came into effect on 25th March 2020. It is a piece of legislation which enables all four governments (i.e. England, Wales, Scotland and Northern Ireland) across the UK the ability to take action, meaning many of the powers contained within its clauses do not come into effect immediately.
This legislation will expire in two years and is subject to a six-month parliamentary review. This review will be in the form of a vote on a motion stating the UK Coronavirus Act should not end. There is also a provision to suspend and revive any provisions of the UK Coronavirus Act.
Examples of the measures implemented by the UK Coronavirus Act are as below:
1. Delays when landlords are able to evict tenants either by extending the notice period that a landlord is required to serve on a tenant to at least three months or, in some cases, creating a three months’ notice requirement where a requirement to give notice does not currently exist.
2. Ensures that leases cannot be forfeited for non-payment of rent for a three-month period for all types of commercial tenants, with a power to extend if it is needed. This moratorium will only apply to non-payment of rent. Landlords should continue to be able to exercise other rights of forfeiture. For example, a tenant would not be allowed to cause damage to the rented property.
3. Introduction of the Coronavirus Job Retention Scheme which is designed to help employers retain staff during the coronavirus pandemic, even if they are forced to temporarily shut their business. Employers will be able to claim a grant up to 80 per cent of the wages of employees whom they continue to pay but who would otherwise have been laid off as a result of the coronavirus (COVID-19) crisis.
4. Allowed the use of technology either in video/audio-enabled hearings in which one or more participants appear before the court where there is no physical courtroom. Hearings should be conducted fully by video link, unless the court directs otherwise, given the person appealing the decision would be subject to restrictions, and there is the risk of passing on the infection if they were to travel to court.
Like Singapore, Scotland acted quickly. The Coronavirus (Scotland) Bill was introduced on 31st March 2020, passed the next day in the Scottish Parliament and came into force on 5th April 2020. The Act is due to expire on 30th September 2020. However, Scottish Ministers can extend the expiry date by regulation to 31st March 2021 and again to 30th September 2021.
Examples of the measures implemented by the Coronavirus (Scotland) Act 2020 are as below:
1. Temporarily extends the notice periods to be given to tenants prior to raising eviction proceedings. The length of notice which landlords shall be required to give depends on various factors such as
(i) the type of tenancy in place
(ii) the way in which the tenancy has been created and
(iii) the reason the landlord is seeking the eviction
In the majority of cases, landlords will need to wait between 2 and 6 months before raising court proceedings.
2. If a tenant in a commercial lease fails to pay rent due, the lease can be terminated on a period of notice of 14 weeks if the rent remains unpaid.
3. Debtors who successfully apply for a moratorium under the Bankruptcy (Scotland) Act 2016 will now be protected for a period 6 months rather than 6 weeks. A person's creditors are prevented from taking some (but not all) action to recover sums due to them during the moratorium.
However, this does not automatically grant a moratorium to all debtors as debtors must give notice that they intend to :
(i) apply for their own sequestration
(ii) enter into a protected trust deed, or
(iii) apply for the approval of a debt payment programme.
4. Requirement for a person to physically attend a court or tribunal no longer applies except in certain cases. Persons excused from having to physically attend a court or tribunal must instead appear by electronic means in accordance with the direction issued by the court or tribunal.
E. Food for Thought
The above legislative cross-border comparison impresses the similarities of various legal frameworks of different jurisdictions.
The hope is that temporary rental relief and suspension of lease covenants would be sufficient to overcome present liquidity issues and prevent en-masse terminations by landlords or developers. Such terminations may not only affect home buyers or tenants but may also cause an economic collapse in the housing and REIT market.
The Coronavirus Job Retention Scheme is a brilliant move by the UK Government that allows employees to keep their jobs during this economic downturn.
The conduct of court proceedings using remote communication technology improves the efficiency of the courts. Physical attendance at a court or a tribunal should be required where allowing the person to attend by electronic means would prejudice the fairness of proceedings or be contrary to the interests of justice.
The prohibition on creditors initiating insolvency proceedings and relief for inability to perform contracts prevents a spike in legal proceedings that would inevitably arise due to the pandemic. This allows judicial time to be focused elsewhere where it is more needed.
There is an understandable concern that the above systems are open to abuse, which makes it important certain conditions and specific facts arising from the pandemic must be proved (which we did not go into detail in this article) to justify the above measures working in favour of the person seeking to rely upon them.
It is suggested that our proposed Malaysian COVID-19 Bill to be simple and straight to the point without the overuse of legalese or Latin. Ambiguity may result in businesses having to engage legal services for an opinion and that is the last thing a business needs in this economic drought.
In an interview with CNBC on 7 April 2020, Singapore’s Minister for Law and Minister for Home Affairs, K. Shanmugam said it well on why the State makes such unprecedented interventions into private contracts:
“You’re looking at economic devastation. Businesses destroyed, people’s lives ruined, and in such a situation, you don’t talk contract. You talk equity, you talk justice, you talk about what is the right thing to do.”
This article represents the views of the writer alone. Information in this article may not constitute the most up-to-date information.