One of the sad, but almost inevitable consequences of the current COVID outbreak is that companies will have either gone ahead with, or will be considering, mothballing their plant. Some closures may inevitably follow and there are a lot of legal issues which need to be considered in that scenario, but mothballing or temporary closure itself with the intention of reopening to full or reduced capacity at a later point, throws up some key points and here is my non exhaustive key list.
I should say of course that first and foremost, at this moment in time is the health of workers and the wider social responsibility in this COVID outbreak and nothing below should take away from that number one priority, but when prudently mothballing the plant you ought to consider some of these issues.
· Many manufacturing and industrial facilities will have operating and environmental permits. Those permits will contain conditions which need to be fulfilled and other obligations such as monitoring requirements. It is worth reviewing the permits and potentially liaising with the regulator. Of course, the regulators are constrained and looking at things in a slightly different way whilst this pandemic continues, but you do not want to be in a non-compliant position on key operating permits when you come to reopen or restart things. It is also possible that you will need to apply for permit variations. Some environmental permits are valuable and you will not want them to lapse or give a regulator the opportunity to revoke them.
· Clearly, if you are mothballing a plant, the machinery and site needs to be safely mothballed and closed down.
· If your plant is held under a lease you should also check the leasehold obligations to ascertain whether there are any lease conditions which need to be followed or any provisions prevent mothballing.
· While we are all being told to work from home as far as possible, you should not underestimate the potential for a site to suffer from trespassers, therefore site security and safety during reduced occupancy need to be considered in the context of a variety of laws including occupier’s liability.
· You will need to consider your commercial contracts. Many will be grappling currently with distressed contracts and areas like force majeure claims, but a thorough and systematic approach needs to be adopted on this to make sure that a mothballing does not cause breach of contract claims.
· There will clearly be employment issues, but many of these will have been addressed already and there is a plethora of articles and information out there about employment issues during this pandemic. What is key on any mothballing or closure is maintaining the services of the key workers who know about the plant and its history.
- Insurance needs to be considered and insurers potentially notified.
One hopes that the decision to mothball sites and taking early actions will hopefully result in less plant closures than might otherwise have occurred. If ultimately a plant closure is being considered, there are a wider variety of things to take into account and Burges Salmon have guidance on plant closure and decommissioning which may be of use.
Vast numbers of companies across the UK have stopped operations during the pandemic,