Welcome to the first commercial awareness post!

Being commercially aware for an application or interview is simply about being able to articulate your own opinions on a commercial issue and explaining how the firm you are applying to may be affected. It is also a habit, so make it a routine to want to know the happenings of the global economy.

As we humans waved good-bye to 2019 and welcomed in the new decade with big and hopeful smiles. Little did we know that lurking in the shadows was the terror that is COVID-19; better known as the Coronavirus (‘the Virus’), and here are some disasters it has caused so far…

 

Oil

Oil prices crashed.

There was a break down between OPEC (Organisation of Petroleum Exporting Countries) and Russia concerning a disagreement to reduce oil production. Due to the Virus, demand for oil has dropped – e.g. oil demand in Europe has sunk – and a contributing factor is Italy being on lockdown, as it has some of the most economically productive areas of the eurozone. So, OPEC wanted to reduce oil production.

Russia refused to cut down the amount of oil being produced, as a retaliation to US shale oil companies for the sanctions the US have imposed on Russia in the past. This is because a reduction in oil production only benefits these US shale oil companies.

Saudi Arabia wasn’t too happy about this and decided to slash the prices of its crude oil going to Europe, US and Asia. The steep cuts going to Europe is aimed at hitting at Russia. So, this has basically become a ‘tit for tat’ oil price war and has shaken the global economy.

Brent crude dropped to as low as $32.52.

 

Impact on Law firms

The profitability of oil producers will be negatively affected, and some may be unable to continue in business. Other types of businesses may also be unable to carry on. For example, Flybe recently went into administration with the Virus partly to blame (due to a huge reduction in air travel). Additionally, Occidental Petroleum Corporation cut shareholders’ dividend from 70 cents to 11 cents out of its fear of a reduction in profits.

Insolvency practitioners will have a lot of work to do, which means more money for them.

However, lawyers that work on commercial contracts in the oil and gas sector may find it difficult to gain business and profit, as less contracts will need to be drafted for investments into the oil industry.

 

Interest rates have been slashed

The Bank of England has slashed interest rates from 0.75% to 0.25% to encourage more spending and borrowing, which will support businesses. This is an indicator that consumer spending is on the decline, which makes sense as people wouldn’t want to participate in activities such as going to the cinema, restaurants or any activity that involves people being in one space, in order to avoid the Virus (this could be worse if places start to lock down in the UK).

Businesses that offer services are in for a lot of trouble concerning their profitability.

 

Impact on Law firms

High street law firms and firms that deal with private clients, may really feel the negative impacts of this, due to the fact that whole cities, even countries are on lock down (e.g. Italy, as mentioned above), because people will be more inclined to stay at home and spend less on services (which includes legal services).

However, this could be a huge opportunity for online legal services and a huge opportunity for law firms that are adopting forms of legal technology or alternative methods of providing legal services. This could be another way to bring in business.

 

The Scramble to find a cure  

The Bill & Melinda Gates foundation, Wellcome and Mastercard donated $125million dollars in seed funding, launching the Therapeutics Accelerator initiative to quicken the efforts to find the cure for the Virus.

 

Impact on Law firms

As doctors rush to find a cure for the Virus, intellectual property lawyers will be in high demand, as patents will need to be registered to protect these creations.

Firms specialising in medical law will also bring in profits.

 

Infrastructure Projects

The Virus will disrupt supply chains. Wuhan in China, where it all started, is a major manufacturing area, amongst others on lock down. Key infrastructure projects that are currently ongoing may have to be halted, due to the unavailability of resources and supplies.

This means that investors into such projects will lose out on potential profits, due to operational delays and late completion.

 

Impact on Law firms

Multiple contractual relationships and businesses will be obstructed. There have been debates as to whether the non-performance of a contract as a result of the Virus outbreak can trigger the force majeure clause. In simple terms, it is a clause in a contract that is triggered when through no fault of any of the parties, the contract cannot be fulfilled due to an unforeseeable happening. Some call it an “Act of God”.

Corporate, construction, and employment lawyers will have a lot of damage control work to do in terms of trying to draft alternative agreements, interpreting specific terms of contracts to provide commercial solutions, or finding alternative ways of compensation. Disputes concerning wages could arise amongst construction workers as well, which will give rise to employment contract issues. Insurance lawyers could also potentially get involved as an option, if agreed that the Virus suffices as an unforeseeable happening out of the parties’ control.

Lawyers may very well be in high demand, which could very much bring in more business for law firms.

Ikenna Henry Onyebuchi

Ikenna Henry Onyebuchi

Hello there! I am Ikenna Henry Onyebuchi, a graduate from the University of Exeter with an LLB Law degree. I am currently on a Career Commitment Scholarship, studying at BPP University Law School, enrolled on the Legal Practice Course, with the combined master’s in law degree. I am also currently in search of a training contract to embark on my journey to becoming a solicitor in England, and I will be sharing my journey through BAME Nation!

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