Engineering companies with customers all over the world are facing the same problems as a result of the Covid-19 crisis: Corona has brought important projects to a standstill shortly before completion. Either it is not possible to finish assembling plants at customers abroad, to make them available for commissioning, or to carry out the final inspection and approval – so-called “acceptance” (“Abnahme”) - of plants that have already been fully installed because staff are unable to travel abroad. Subsequent maintenance measures were frequently often also conducted by the company's own employees. In many cases, remote support offers an alternative way for companies to remain involved themselves and to provide instructions or explanations. This can be combined with local assistance, for example if the customer itself or local service providers carry out the commissioning. However, contractors should consider the legal requirements of their remote involvement, from supplementary agreements on commissioning in the contract to the consequences of involving third parties under labor, competition and data protection law.
What needs to be considered in order to implement this?
In project contracts, the parties regularly agree on the project’s acceptance with the participation of both parties on site. If the contractor wishes to deviate from this, it needs a special agreement with its customers. Particular attention should be paid to the following: From a legal point of view, “acceptance” is the customer's declaration acknowledging that the contractor's performance is in conformity with the contract (§ 640 (1) sentence 1 German Civil Code [Bürgerliches Gesetzbuch - BGB]). This has to be distinguished from the inspections and tests preceding this declaration of acceptance as well as the commissioning, which generally have to be carried out by the contractor as part of its work performance. The contractor can offer the customer two options:
- The postponement of these services until the hindrance to performance ceases to exist. In many cases, the contractor can refer to §§ 275 (1), 283 p. 1 BGB (temporary impossibility) or § 313 (1) BGB (disturbance of the transaction basis); albeit that the details are legally disputed. For the customer this has the disadvantage that the commissioning and acceptance is postponed, and for the contractor this means that it has to wait for the payments agreed for these services.
- It may therefore be attractive for both parties to agree to drop the contractor's inspection, testing and commissioning services and to replace them with remote support at inspections, tests and commissioning which is to be provided as a service ("time and material"). The customer can also opt to flank the remote support with local service providers retained by it in parallel. This can minimize delays in commissioning and acceptance whilst simultaneously reducing the contractor's liability and warranty risks
The use of an external company or solo freelancer (contractor) to construct the plant is also subject to similar labor law and social security problems abroad - especially within the EU - as in Germany. If an external company is used, its activities must be carried out on the basis of a contract for work or services. This means that the external company must use its own personnel whilst exercising its own right to give instructions. If this is not the case, this raises questions of temporary employment here. If a solo freelancer is used, then a distinction also has to be made here between self-employment and pseudo self-employment. If a foreign authority establishes that the solo freelancer should actually be classed as an employee, this creates far-reaching problems. In particular, in this case the company establishes a permanent establishment abroad that is of relevance under tax law.
Outside the EU, this scenario is viewed in a multitude of different ways. There are countries where an assignment for third parties - irrespective of how this would be assessed under German law - simply functions as a contractor. In other countries, the deployment of temporary employees is expressly prohibited and punishable by law, which means that the company needs to implement a clear contract type from the outset.
IP rights and know-how protection
Customers or third parties may have to be provided with documents or software that would not leave company A if A's own employees were to be deployed on site. To the extent necessary, a corresponding agreement on rights of use or a license should be considered. Furthermore, it may become necessary to disclose protected internal know-how. In such cases, the parties will have to conclude appropriate confidentiality agreements and take actual precautions to avoid the loss of protection of the company's own know-how pursuant to the German Trade Secrets Act [Gesetz zum Schutz von Geschäftsgeheimnissen - GeschGehG].
From the competition and antitrust law perspective, the parties will have to pay attention to what kind of information is being made available to whom. Especially if a party wishes to or must cooperate with competitors abroad in this exceptional situation, it should remember that even the exchange of competition-relevant information can be questionable and prohibited under cartel law. In addition to prices, all non-publicly accessible company data, in particular customer data, product-specific application data or production volumes, are generally also sensitive under competition law. Many cartel authorities are more sympathetic than usual to the need for competitors to cooperate during the corona crisis. However, this does not mean a carte blanche in cartel law matters and also does not dispense with an examination of the individual case.
Data protection law
Unlike meetings that are held on site, digital communication leaves a trail. Personal data is affected to a greater extent, especially if the measures and processes carried out are to be stored for evidence purposes, for example as a video recording. To this end, the basic requirements of the GDPR must be observed (in particular the definition of the legal basis (such as the legitimate interests of the company), information or transparency, the determination of storage and deletion periods, sufficient technical and organizational measures such as encryption, and, if necessary, agreements on the transfer of personal data to third countries).
Export control law
In the area of export control, a different assessment may be necessary if, for completion or acceptance by third parties, technical documents such as drawings etc. or certain software components must be handed over to the customer or third parties abroad and are therefore no longer used only by the company's own employees in Germany. Also the aspect of approval of technical support in the case of remote services or the provision of information to third parties abroad must be kept in mind. If US technology is involved, it must be clarified whether the TAA underlying the use of US technology also covers the case of transmission to the recipients concerned.