Four experts weigh in
Managing transatlantic business in uncertain times
What are the legal implications of the current economic crisis around the coronavirus in the United States and Norway? How have the countries handled the situation? What are the outlooks? How has the defense industry been affected?
These were some of the areas covered in a Norwegian American Chamber of Commerce webinar, “Managing Transatlantic Business in Uncertain Times,” on April 29.
Idar Voldnes, CEO of IntraPoint, a Norwegian-American software company helping customers with their digital transformation of crisis management planning and response, and president of NACC Mid-Atlantic, was the moderator.
The panel featured Ryan W. Marth, president NACC Minneapolis, and partner, Robins Kaplan, LLP, advising U.S. and international clients on all aspects of their businesses; Eirik Tord Jensen, president, Kongsberg Defense & Aerospace USA, responsible for marketing personnel, overseeing and facilitating business development operations in the United States; Kaare M. Risung, partner, Schjødt, where he heads digital innovation technology, media and telecoms in the trade industry for Scandinavia’s largest law firm.
Norwegian Ambassador to the United States Kåre R. Aas offered opening remarks:
“Fighting the pandemic is an international responsibility,” he said. “There are various challenges. One is to reopen our societies and businesses and recover the economy, both on the national and international level. We have to avoid protectionism and the trade barriers. Working together here and across the Atlantic is key. That means that we have to share knowledge, insights, and our experiences. We will get through this. It will take time. It’s also important for nations not to be inward-looking, but to open up, seek partnerships, and work together through multilateral and international institutions like the World Trade Organization.”
“As the risk picture has evolved, so have our plans,” said Voldnes.
Kongsberg has been able to maintain its defense dealings with the United States, while the other aspects of the business have adapted to the new world of Zoom meeting, though both have come with some hurdles.
“The military part of Kongsberg is less affected than others,” said Jensen. “The U. S. defense industry has been defined as an essential business, and that’s been exempted from some of the measures imposed in the different states so far. What has been issued by the federal government up to now is of an advisory nature. We do not see it as a federal directive. That means that the individual states can shut down defense companies if perceived as not necessary to save lives. When Pennsylvania imposed their restrictions on various businesses defense wasn’t mentioned at all. We contacted the governor’s office [Tom Wolf] and made him aware of the recommendations from the federal government to shield the defense business. We managed to get ourselves and our suppliers on that exception list.
“We have been very active in helping our suppliers, especially the small ones, to keep the business going. Some of our suppliers are struggling more than others. If you have a supply chain spread all over the world, you have a problem these days. If you’re concentrated in the country where you operate, you are more likely to succeed.
“We have control of our U.S.-based supply chain. It’s more challenging for others. Some countries have been less focused than others on keeping their defense industry up and running. Norway has not been a problem. The material director was well ahead of the situation and showed the U.S. government that Norway could keep the defense business running or prioritize deliveries to the United States. We showed we can deliver in a crisis like this.
“That’s very important for promoting Norway as a reliable source of supply and reliable ally. This was very important for us in order to avoid stops in sales and deliveries. In some programs, we need assistance from Norway, such as the travel restrictions to United States. We realized early that would be a challenge to deliver if we can’t get our employees in the United States. The embassy was very helpful to resolve that problem.”
As for other departments, he continued, “Those of us who have a job that allows for working from home [do]. For the rest, we have implemented various mitigation measures. If we can avoid it, we don’t travel by plane. We drive cars. In production, we have implemented measures like wearing masks, using hand sanitizers, social distancing. Most of the interactions now take place electronically. The collaborations work surprisingly well internally and externally. Our IT system, coming from a military sector, is very secure but does not handle all new technologies equally well. Right now, I’m using an iPad, because our laptop doesn’t allow software like Zoom to be installed. Going to Norway, to the IT department, and having them install that is pretty difficult, because all software has to be approved in advance.
“We have seen that having an adept IT department has been extremely important throughout this crisis. Without the ability and responsiveness from the IT department, we would never have been able to conduct business the way we do right now. One really positive result is that we now have significantly higher competence on how to work electronically. The U.S. government and our customers have shown an impressive ability to adapt to the new situation. Things work because everyone is focused on finding solutions rather than focusing on the crisis as such.”
While there were some similarities the two lawyers are seeing in their countries, the challenges and the way the respective governments are handling the issue is stark. Marth’s firm has seen an increase in questions about contracts, insurance, force majeure (unforeseeable circumstances that prevent someone from fulfilling a contract), restructuring and government assistance programs. “Some of my Norwegian clients were not aware that they could get funds through the U. S. government, even though they were based in Norway,” said Marth.
America also has 50 states with different laws. Some states are starting to reopen, others not. Marth noted that regulations not only vary state to state but even municipality to municipality. “How are we handling it?” he asked.
“It’s just keeping in touch with the various jurisdictions where our clients operate. We’ve had a lot of those inquiries lately as people are trying to follow up with various stay-at-home orders, what is allowed, what isn’t allowed, and support packages in various states. Some states have basically opened up. Others are more gradually opening up. Do you need to document that you were essential? There are other questions. Can you open up? Will the government let you open? Should you open? That’s a business-by-business consideration. What’s your cost structure? What are your competitors doing? Are there risks that could come with opening up prematurely or without proper precautions in place?”
Norwegian lawyers are restudying contract law, especially in regard to leases. “One thing about Norwegian contract law is that force majeure is available, even without it being written into the contracts,” said Risung. “Even if you do, the courts will easily disregard it and apply general principles of opportunity for contract revision. When something abrupt and unavoidable like this happens, it is very easy to sympathize with the party who is unable to perform its obligations. There’s also a party on the other side of that contract that has relied on the benefits according to that contract. The whole exercise is to strike the balance of the risks because what is relief for one party will be a burden on the other party.”
While Norwegian businesses closed and employees were laid off, the government responded swiftly.
“It’s very good to live in a country where there is a very big fat oil fund,” said Risung. “That has given the government room to initiate programs. The government has relaxed payment of VAT and taxes, so that will be in the fall rather than the payment milestones in the spring. There are loans to banks, startups, small and medium size enterprises. The program that has had the most immediate effect, is the direct compensation of unavoidable fixed costs for companies that have lost more than 20% of their turnover year-to-year, from February to March, 30%, from April to May. If you have been forced to close down, you get 80%, 90%, of your unavoidable fixed costs covered by the government. If you have those effects without formally closing, 80%. That has been implemented through an electronic platform that has been put in place very quickly. Payment is made within days.
“We’re seeing a surge in bankruptcies, particularly in the retail sector. What the government has done, which will be of importance to somewhat larger companies, is a Chapter 11 instrument that it has been working on for years, but this has really sped up the work. It has gone through parliament. Hopefully, it will save some of these companies from bankruptcies.”
“It’s great to see that the aid packages from parliament have been administered so efficiently,” said Marth. “The [U.S.] federal government sends out paper checks and has not been able to accomplish that simple task efficiently. From the American lawyer, anytime the economy takes a downturn—magnified now—we see an uptick in litigation, from employment, contracts, lease issues and insurance. One of the practice pointers for the Norwegian side, is to expect more litigation and use that to guide your business dealings with your suppliers, customers, employees. Read your contracts. Make sure that you’re following the contract. Similarly, with employment policies. Document everything.”
This article originally appeared in the May 22, 2020, issue of The Norwegian American.