A new law in Germany aims to benefit consumers and microenterprises by protecting the loss of essential services in the form of temporary deferrals of contractual obligations and loans during the coronavirus (COVID-19) pandemic.
The German Federal Cabinet approved special legislative measures in response to the COVID-19 pandemic on March 23. Two days later, an act to mitigate the consequences of the COVID-19 pandemic in civil, insolvency, and criminal procedure law, dated March 24, 2020, passed the Federal Parliament (Bundestag), and on March 27, the Federal Council (Bundesrat), the Second Chamber of the German Parliament, adopted the act.
The new rules will be in force for a limited time period and are aimed at financial relief for consumers and microenterprises. As large businesses often deal with small enterprises as their customers, the temporary rules in the new act may supersede existing German civil law rules, and even individual contractual obligations, with a potentially significant impact on the cash flow of larger businesses.
Pursuant to the act, a moratorium (i.e., the right to refuse performance; in particular, payment) for “essential” services will apply, but it will only benefit consumers and microenterprises until June 30, 2020. Microenterprises are those with fewer than 10 employees and less than 2 million euros ($2.2 million) in annual turnover.
Only claims relating to a continuing obligation relationship concluded before March 8, 2020, are covered and the creditor must not be ”unreasonably affected” by the moratorium. The moratorium does not apply to employment contracts, rental agreements, and loan agreements.
The regulation on deferral of loans provided for in an earlier draft of the act will only benefit consumers and not borrowers in general. The duration of the deferral (April to June) was reduced against the first draft from six months to three months. However, there is a possibility in the law to extend the scope of application to include microenterprises in particular, by means of a legal regulation. The proposed regulation in the act will apply to consumer loans concluded before March 15 (instead of March 8).
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