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Briefing

Germany: The Act on the mitigation of the consequences of the Covid-19 pandemic in the areas of insolvency, civil and criminal procedure law

– Main points of interest and preliminary analysis –

Just a few days after a first draft bill was prepared by the German federal government, on 25 March 2020, the German federal parliament (Bundestag) passed the Act on the Mitigation of Consequences of the Covid-19 Pandemic in the areas of Civil, Insolvency and Criminal Procedure Law (the Mitigation Act). On 27 March 2020, the Mitigation Act was adopted by the federal council (Bundesrat) and published on the same day in the federal law gazette. This allowed the Mitigation Act to already come into force on 28 March 2020.

The enactment of this new legislation is one of several measures the German government has been working on in order to mitigate the effects of the SARS-CoV-2-Virus outbreak (the Covid-19 pandemic). One of the most significant of these measures, apart from the Mitigation Act, being the emergency relief packages for businesses such as direct grants, subsidised lending, tax breaks and capital/equity injections which have been included in the Economic Stabilisation Fund Act (Wirtschaftsstabilierungsfondsgesetz / WStFG), which came into force on the same day. Presumably, there will be further legislation over the next days and weeks, adapting to the developing needs of both the citizens and the economy in the exceptional situation created by the Covid-19 pandemic.

Overview

The Mitigation Act covers four distinct areas:

  • suspension of the obligation to file for insolvency, corresponding limitation of management’s liability for allowing affected companies to continue to do business, the removal of legal impediments regarding doing business with and providing financing to, affected companies;
  • simplification of the decision-making process for companies (most notably AGMs), associations, trusts and cooperatives;
  • moratorium on contractual obligations of consumers and microenterprises regarding continuing obligations under certain long-term agreements, prolongation of debt service under certain consumer loan agreements as well as a prohibition on the termination of real estate lease agreements to avoid undue hardship; and
  • trial suspension flexibility in criminal law procedural rules.


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