Dual challenge of Covid-19 and the climate crisis for Small Island Developing States
The COVID-19 pandemic further threatens the climate resilience of Small Island Developing States (SIDS): these small islands are already vulnerable to natural disasters and climate change, and must simultaneously respond to the wide-ranging socio-economic challenges posed by the global public health crisis, with one crisis exacerbating the other. SIDS face the dual challenge of responding to the high and growing risk of climate change impacts, including on seaports and other coastal transport infrastructure, while simultaneously responding to the implications of the coronavirus pandemic.
Vital role of coastal transport during the pandemic
The potential of devastating socio-economic impacts resulting from disruptions in the transport sector (both passenger and cargo) have been particularly demonstrated, as governments imposed mobility-related restrictions during the global health crisis due to COVID-19, in particular international travel and border restrictions, including the closure of air and maritime borders for passengers. SIDS are particularly hardly hit as health requirements, travel restrictions and low demand has forced the cruise ship and aviation industries to cancel journeys. While not arising from climate factors, the quasi halt of air and maritime transport unleashed an unprecedented shock to tourism in the Caribbean, causing wide-ranging adverse economic effects, including a rise in unemployment (affecting among others women in the tourism industry) and sharp declines in foreign exchange and tax revenues, which curb resources available for public spending. Widespread supply-chain disruptions resulting from the ongoing pandemic and a dramatic increase in freight costs at global level have added to the pressure on SIDS, while foreign exchange earnings have decreased significantly.
For more information, see a brief overview of transport and trade-related implications of COVID-19 for Small Island Developing States. Additional information related to COVID-19 response and recovery is also available on the UNCTAD website.
Transport and trade connectivity in the age of pandemics
The COVID-19 pandemic represents a supply and a demand shock – both aspects influencing international trade in goods and services. Furthermore, cargo and document handling during global maritime trade can facilitate virus transmission across borders, lockdowns in both major producing and trading countries have crippled international supply chains and regional coordination on the transport response to COVID-19 has been limited.
As part of its response to the COVID-19 crisis, UNCTAD has been providing technical advice and guidance to small and medium-sized traders and policymakers, in particular in developing countries on transport and trade connectivity in the age of pandemics.
Commercial law implications of the COVID-19 crisis
The unprecedented disruptions associated with the pandemic and its massive socioeconomic consequences are also giving rise to a plethora of legal issues affecting traders across the globe (delays and performance failure, liability for breach of contract, frustration and force majeure). The effects of such issues may lead to large-scale economic losses and bankruptcies, in particular for small and medium-sized enterprises, including in developing countries. Collaborative approaches by Governments and industry, policy coherence and synergy will be required to minimize adverse effects. Industry and traders need to be encouraged to waive some of their legal rights and agree on moratoria for payments, performance and the like where appropriate, and Governments should consider where intervention or financial assistance may be necessary.
In all cases where performance is disrupted, delayed or becomes impossible, legal consequences arise, leading to the need for dispute resolution and potential litigation involving complex jurisdictional issues in a globalized context. Unless common approaches are found to reducing the incidence of disputes and facilitate their resolution, for example by agreement on contractual extensions, restraint in terms of pursuing rights and legal claims, and efforts at mediation and informal dispute resolution, this could be on a scale overwhelming legal and administration of justice systems, with implications for global governance and the rule of law. Coordinated government and collective industry action is required, as well as commercial risk-allocation through standard contractual clauses drafted to address contractual rights and obligations in the light of the circumstances associated with the pandemic.
To respond to the considerable demand for advice and guidance, UNCTAD has carried out research and analysis as well as related training focusing on the legal implications of COVID-19 and related response measures for some of the key types of commercial contracts used in international trade, in particular international sale of goods on shipment terms and carriage of goods by sea.
For further information, see two related UNCTAD briefing notes on the commercial implications of the COVID-19 crisis published in 2021, as well as two analytical reports, published in 2022 and 2023, which can be accessed through the links below, and through the UNCTAD Policy and Legislation Section website. The documents consider key legal implications of the pandemic and related response measures, as well as contractual approaches to commercial risk-allocation, and provide some recommendations for commercial parties as well as considerations for policymakers.
Additional training materials for a series of related online training courses on implications of the COVID-19 pandemic for commercial contracts, delivered in May and June 2022, are also available on the UNCTAD website.
- UNCTAD Training course on implications of the COVID-19 pandemic for commercial contracts – International Sale of Goods on Shipment Terms and Carriage of Goods by Sea, 2022
A webinar with a focus on policy issues arising was held as part of the project closing event, in June 2022. Further work on related issues is in preparation and will be made available here in due course.