The economy in the post-COVID-19 era: the legal vision of accelerated digital transformation
We analyse, from all areas of business law, the main digital and technological challenges that companies will face after the pandemic, offering possible responses and legal solutions.
The health crisis caused by the expansion of COVID-19 has forced most companies and organizations, of all sizes and sectors, to accelerate -or to start up in a very short time, when they were not already under way- transformation processes of their ways of operating in order to be able to continue their activities as far as possible in the emergency situation, and to adapt to a change in habits of citizens in general, and consumers in particular.
Overnight, the world has become digital and companies are forced to adapt quickly to a new reality, based on reducing face-to-face interactions and physical contacts between companies to a minimum. people, and the large-scale replacement by interactions and forms of relationship by telematic means.
This sudden acceleration of the change to digital does not seem to stop once the most critical phase of the current pandemic is over: due to the foreseeable continuity of physical distancing measures, and also due to the leap forward that this crisis in adoption will have meant of digital technologies in most organizations and the general population.
In this environment, beyond the analysis of the rapid regulatory changes generated in the phase of health emergency and confinement, it is necessary to pay attention, from a legal perspective, to the new challenges and risks associated with this new phase of generalized and accelerated digital transformation. in the different areas of business and social activity.
The essential role of logistics
The health crisis has given greater visibility to a sector of key activity to guarantee the supply of the population, and has made it possible, at the same time, for many companies and micro-companies, whose “digital” reality was minimal, to continue their activity. The unstoppable rise of electronic commerce, the coexistence between the physical channel and the digital or omnichannel, are presented as the reality that we will inhabit, an ecosystem in which logistics is positioned as essential and enables the product to reach the consumer wherever he wants or choose: your home, your workplace, a point of convenience, slogans, the establishment itself, etc.
The technology that has been a great ally of e-commerce logistics, can become a real engine that also drives out of the crisis. We are seeing or will see the growing importance of traceability and real-time information about the product and its delivery to the customer (RFID, monitoring, geolocation, IoT, big data). Also the use of autonomous technologies in deliveries (delivery vehicles, drones and even ground drones) or the digitization of information and documentation associated with logistics and transport (the EU has taken a further step in the digitization of transport and logistics creating a legal framework that obliges the authorities to process the legally required documentation in electronic format). Added to this is the use of blockchain and DLT technologies applied to the supply chain (major projects in international air and maritime transport, international trade financing, etc.). Understanding the changes and accompanying companies with the necessary support in the face of legal issues that may arise in this innovation process will be key.
3D printing as a solution
Additive manufacturing or 3D printing has made it possible to obtain essential medical materials and equipment in the fight against the pandemic, such as respirators, fasteners for masks for health workers, and even tests. The so-called maker communityhas spared no effort, announcing the potential of this technology to reorient production quickly and efficiently. There are still stumbling blocks to overcome in terms of production costs, print speed or the availability of printable materials, but the potential is there. A different question, from a legal point of view, is who assumes responsibility for the final product: how can we know that the CAD file circulating on the web is not protected by third party intellectual or industrial property rights? can be held responsible for the use of a product that turns out to be defective? to the well-intentioned ‘homemade’ manufacturer? To the hospital that has decided to use an unapproved device? There are many issues that will have to be resolved in the short term,
Geolocation, in the spotlight
Technologies related to geolocation and its business and social applications are also on the rise from now on and the debate on whether they are sufficiently protective of privacy has been revived. Actually the dilemma is old, but the approach has changed. Given the complexity of the solutions proposed, it is very important to correctly identify the technology being discussed in each case in order to make the right business decisions. An app that geolocates individually is not the same as an appthat identifies pseudonymized contact data, and the purpose of avoiding contagion is not the same as the purpose of restricting access to establishments. Existing geolocation applications for certain services such as logistics, already mentioned, will be expanded in order to provide better services and identify the status of a shipment at all times. In short, it will be essential to carry out a rigorous case-by-case analysis of the solutions that are proposed, in order to take advantage of the benefits that technology allows without undermining the rights of people.
The great challenge for trade
Shops and companies in the retail sector in areas such as fashion are going to have to adapt to an unknown environment, incorporating innovative measures that pose a real organizational and management challenge.
Technologies such as blockchain can be particularly useful due to their traceability potential. For example, it would be possible to trace the entire supply chain of the vaccine, from manufacturing to delivery to the patient. What do we get? Greater confidence in your safety thanks to the traceability of aspects such as the maintenance of the cold chain or the location and withdrawal of defective batches. It is also possible to imagine the creation of digital vaccination cards with reinforced reliability thanks to the use of blockchain , equally complete and reliable.
In general retail , as a result of confinement, online purchases of all kinds of products have increased considerably, and this has expanded the most common scope of these purchases, on the one hand in terms of the type of products purchased and, on the other, in terms of the traditional profile of the buyer. Thus, the online purchase of food and perishable products has become normal and people who had never used this channel have joined online purchases.
An accelerated revolution in payment methods
The means of payment are also undergoing an accelerated transformation, which includes an intensification during this phase of the use of face-to-face contactless payment solutions via smartphone or other devices with a tokenized card and fingerprint (replacing cash payments, but also physical card payments). and PIN insertion via keyboard) and online payments (in the context of the exponential rise in online commercial transactions, both B2C and B2B, since the beginning of the confinement measures). In these environments, difficulties continue to combine the user experience and the rapid adoption by large sectors of the new non-face-to-face instruments, with the protection measures against fraud and against undue chargebacks derived from the requirements of DSP2;
cybersecurity
The rapid large-scale adoption by companies, organizations, and individuals of telematics environments has increased the number of attacks and exposed vulnerabilities that cybercriminals can exploit. According to INCIBE reports, a greater number of attacks is not taking place, but what is taking place is an increase in the vulnerability of those entities that were not prepared for an intensive use of technology in their processes. We have also seen that phishing attacks have appearedtaking advantage of the health crisis and attempts to steal information through social engineering techniques adapted to this situation. From all this we are going to see an increase in the awareness of organizations regarding the need to adequately protect themselves against cyber attacks.
Secure electronic transactions
Although electronic transactions were already widely developed and implemented in the business world, the current situation has further intensified this type of relationship through electronic channels. Many companies have stopped accepting physical invoices to require only electronic format, and many manual processes have been transformed into digital ones.
This increase in electronic transactions in the business world has also given rise to electronic identification systems, such as the use of electronic signatures, certificates or electronic seals and verification systems by third parties. This trend will continue in the future, as the necessary confidence in this technology has been generated and its ease, reliability and comfort have become evident.
The information revolution… and privacy
Everything that has been said so far and everything that follows are reflections on the economic and legal evolution and developments with a common element that affects transversally. This element is the automated management of information using technological means and, in almost all cases, this information contains personal data referring to individuals and natural persons.
This fact, together with the essentiality of the use of personal data for some purposes directly related to the fight against the epidemic ( contact traceability apps , immunity passports, etc.), returns to the front line the need for any project that it is carried out is carried out by applying the principles of privacy by design and privacy by default, in such a way that the greatest efficiency of the systems and technology can be achieved with the best protection of privacy for citizens.
Impact of ‘online’ contracting in the B2B environment
It is evident that online B2B platforms bring a series of benefits to companies, since they offer greater transparency in the availability of products, services, suppliers, prices and purchase conditions and, by not operating in a specific time zone, these platforms They are global in nature.
It seems that it is still early to determine the magnitude of the economic impact on B2B platforms after COVID-19, but they continue to work to meet the most immediate needs of their markets.
In particular, companies that have viewed digital commerce as a secondary channel must now reorient, with a digital mindset, every aspect of their business. It is the opportunity to redouble the commitment to e-commerce , expanding its offer and creating new lines of service.
While this is an opportunity to grow revenue, attract new customers, and drive channel change, successfully managing the situation will depend on digital channels having the capabilities and scale to absorb the impact, as well as deliver. the pertinent legal aspects.
It seems that the trend is a continuous commitment to B2B electronic commerce since the benefits of participating in the digital age with these platforms are multiple.
Culture goes digital
One of the sectors most affected by this crisis has been the cultural sector. Capacity limitations will mean a before and after for this industry, which will have to rethink its business model and look for alternatives, largely digital.
In the musical field , online concerts have become popular, but they are mostly solidarity events that do not allow artists to earn a living. The pandemic will not end live concerts, but will force them to be transformed: the business of large music festivals is threatened and contracts with large promoters could be replaced by more modest ones with theaters and music halls where it is easier to control crowds . In addition, the idea that artists can charge for their concerts online is starting to take shape.
In the audiovisual field , the figures show that streaming has rebounded with confinement and that subscription to platforms continues to grow, but the pandemic has paralyzed hundreds of filming. The Ministry of Culture has published a “safe filming” protocol that is beginning to be used on some sets. Movie theaters must deploy strict disinfection protocols and gradually increase their capacity, while the virus will encourage summer cinemas and drive-ins.
The book sector could come out better off . The writers already work confined, the bookstores have opened and the wounded writers are populating them little by little. Book launches may suffer, but authors are becoming more familiar with platforms like Zoom or Teams, and perhaps bookstores could become hosts of these online events. The worst part will be the fairs, which must be equipped with security protocols that allow orderly access.
Museums will reopen in June and virtual tours will continue, but can you charge for them? For now, it seems risky to guarantee it.
The great opportunity for startups
The pandemic we are suffering is affecting companies unevenly: the most digital ones are maintaining or even increasing their market share, while many of the more traditional ones are going through serious difficulties. Startups face this situation with a weakness (access to third-party financing has become very complicated in recent weeks), but with many advantages compared to a traditional SME: they are much more flexible, they are used to taking risks, pivoting – changing the business model- is part of their DNA and they know how to take advantage of the advantages that technology offers.
Any crisis is also an opportunity and there is no doubt that, at least in the short term, there is a gold mine for those startups that are capable of solving the new problems generated by COVID-19, especially if the product or service they develop is easily scalable.
The challenges in the workplace
In the workplace, the post-COVID-19 era may also bring technological advances.
In record time, companies have had to adapt by enabling teleworking in general in activities where it is feasible and everything indicates that, at least for the moment, it will be part of the “new normality”. This will bring new advances in technological solutions that facilitate collaboration between teams, hold virtual meetings or the delivery of training courses and events.
In the way of registering the day we will also be able to see changes derived from teleworking (possibility of signing in remotely) and the need to avoid contagion in the workforce when the system involves the contact of the person with the signing machine to take the fingerprint. Will it return to the proximity card system, will applications be promoted on the computer or mobile, or will it be signed through the iris?
Technological solutions that help control the safety distance between people or to detect possible contacts with someone infected may also proliferate. And the phenomenon of bot-sourcing could be accelerated , with the development of new technologies that could replace people to, on the one hand, comply with safety distances in activities that otherwise could not be carried out and, on the other, , allow companies to be more efficient to overcome the crisis.
It will be necessary to be very aware of all these questions to choose the technological solution that allows achieving the objective pursued with respect for the current legislation at all times.
Taxes in a new era
In the tax field, it will be convenient to pay attention to the work of the Commission for Social and Economic Reconstruction recently constituted in the Congress of Deputies, whose first works seem to point towards a reform of the tax system. There seems to be little doubt that it will impact digital business.
The projected long-term Tax on Certain Digital Services will also have an impact, which will foreseeably establish a 3% tax on the amount of income from the provision of online advertising services, online intermediation services or the sale of data. if they are carried out by companies that have a global net turnover of more than 750 million euros.
Let us remember that this tax, in principle, should be temporary, until the OECD and/or the European Union conclude their work on the taxation of digital companies.
These works, which have been delayed as a result of COVID-19, revolve around two major issues: (i) the determination of the present value in digital businesses and the distribution formulas of the profits generated by them among the various countries involved (an issue closely related to the valuation of intangibles) and (ii) the new concept of “digital permanent establishment” whose practical implementation will almost certainly lead to a new multilateral instrument that modifies the Double Taxation Agreements currently in force .
In more specific areas such as fintech , where an acceleration in the development of new payment applications, financial management, etc. is foreseeable. with electronic support, greater clarity will be necessary regarding the tax treatment of these services, given that their provision generates numerous tax queries regarding the possible existence of a permanent establishment or the treatment of VAT services to specify the place where they are understands the service provided (service location rules) and to determine if the service provided could be exempt from VAT.
Relations of companies with their shareholders and investors
Corporate life has been transformed during the period of the state of alarm, all types of companies (whether listed or not) and private law entities have been allowed to adopt resolutions of their governing bodies in writing and without a session, provided that decided by the president or requested by two of its members, even if its statutes did not provide for such a meeting. The holding of meetings of partners by videoconference or telephone conference has also been allowed with certain requirements, even without statutory provision.
Corporate and financing transactions
The digital transformation has had an impact on many aspects of the operation of commercial entities and their contractual relationships, but perhaps the scope of closing agreements and the form of documentation of operations (acquisitions, financing agreements, commercial collaboration contracts) by means of telematics is one of those that still has more room for growth and development, since many formalities require notarial intervention (with the presence of the parties in the notary office), among other requirements; and, in business practice, face-to-face and paper signatures still prevail, in the absence of which doubts arise for the parties about the legal certainty and reliability of the electronic evidence generated.
New times for conflict resolution
And if something goes wrong and you have to go to court, here too technology begins to play an important role. The current situation can lead to online trials no longer being an anecdote and, little by little, gaining more prominence.
For China, which is already relying on the use of artificial intelligence to administer justice, the use of videoconferencing to hold hearings has not caused great complications. In the United States, the problem of distancing has also been solved, to a greater or lesser extent, thanks to the rapid adoption of procedures carried out by videoconference. Judges, lawyers, witnesses… all connected to a screen. In other cases, less ‘techy’ solutions have been chosen, such as the telephone or even the suppression of the oral hearing when it was considered that the writings and the documentary provided by the parties were sufficient for the judge to pass sentence.
The case of the United Kingdom is especially striking. Specific figures of hearings held online are reported, figures that reach estimated quotas close to 90% of the total in recent weeks. The data is offered with the caution of the health emergency, but it allows us to glimpse a clear revolution in the sector.
However, we must not lose sight of the fact that in the United States and the United Kingdom judicial proceedings have been held for decades by telephone, and more recently by other technological means, because their procedural system is very different from that of Spain. Judges have been calling lawyers to hearings by phone for years.
In Spain, the first virtual trial was held through Skype Business on May 11 in the contentious-administrative court number 2 of Santander. At the risk of being frivolous, they say that the health crisis we are facing has done more for telecommuting than any other measure that has been taken so far. It is probable, and desirable, that it also serves as a catalyst to modernize the Administration of Justice in Spain.
For the curious, the website www.remotecourts.org provides very valuable information on the experiences and good practices of the countries that have chosen, to a greater or lesser extent, to digitize Justice during the health crisis.