Facial masks, empty streets, daily headlines… the Chinese government has placed over 60 million people in quarantine, nationally extended the Chinese new year holidays and is building new hospitals at a breakneck speed due to coronavirus.

This herculean effort has all been aimed at stopping the spread of the coronavirus. However, beyond the public health concerns there will also be economic fallout from the outbreak.

A heavily affected sector will be British schools operating in China, which will face both operational and legal issues.

Pupils and parents

Similar to most organisations and businesses in China, schools have been given extended holidays. However, it seems likely that their holidays will extend beyond that granted to factories or offices. It appears probable that the holidays will be extended until April, or possibly even May. Schools have been asked to pick different time slots to start their spring semester to ensure there is not a concentrated mass movement of students; those in the same area should avoid starting on the same date.

As face-to-face schooling has become impossible there has been a trend for online teaching. Many international schools have tried to organise robust timetables and online courses using Microsoft Teams and other software. Some schools have explicitly ruled out the use of the likes of WeChat – a Chinese social media platform – out of concerns for student welfare. Chinese authorities normally have strict regulations on online education but are now promoting online classes and even education via TV – “special measures in special times”.

There have already been murmurs amongst parents at some of the international schools that payment should be stopped if schooling is halted. Although one can sympathise, it is clear that the overheads of the school will remain largely in place despite students having an extended break.

It is unlikely that the fundamentals will have changed much once the outbreak peters out

Teachers and staff

Teachers are encouraged to work remotely. However, there will inevitably be disruption. Many international teachers have left China. Others are unable to return to the country due to travel bans and flight cancellations. Teachers, if in the UK, are required to work in the same time zone as China so that online teaching can be conducted simultaneously. Staff health and wellbeing is now high on the agenda; hand-held temperature readers, hand sanitisers, foaming soaps and wet wipes are essential supplies to ensure a safe and healthy work environment.

Some cities, such as Shanghai, have extended the ban from attending work. Therefore, employers cannot require employees to come in. Employers need to be careful that too robust a demand to come to work may open them up to claims that their actions have led to the spread of an infectious disease. This could result in civil or even criminal liability.

It should be noted that the approach has varied across the country. Regional governments have issued different regulations to deal with employment issues. The main common thread is that employers cannot fire employees unable to work due to the lockdown, and in the main these employees will be paid in the normal course – at least for the first month.

However, many of these employers will face increasing economic pressure if the situation continues and so will likely try to reduce their personnel costs. Most regions will allow employers to deem that employees are taking unspent leave; if the time is extended, then employers can place employees on ‘waiting for work leave’, which will necessitate payment of a basic allowance; typically, at least 70% of the local minimum wage.

Partnership contracts and royalty fees

Most British schools in China have licensing models in place with local investors and operators. The outbreak of coronavirus will likely have an impact on the performance of these licensing contracts. If the coronavirus has affected the fulfilment under one of your contracts it is important to look into the force majeure clauses.

Under Chinese law, force majeure is an objective event that cannot be foreseen, is unavoidable and insurmountable. It is clear that the coronavirus would meet these requirements. It is worth noting that the China Council for the Promotion of International Trade has already set up an online system to issue qualified applicants certificates of force majeure.

A significant impact on British schools is the challenge faced by their Chinese partners to remit royalty fees to the UK; the usual foreign exchange control measures in China are compounded by logistical and practical difficulties (e.g. government offices are closed and necessary approval chops cannot be obtained).

If these are genuine problems and have caused delay of payments, instead of overreacting and escalating to a claim, British schools should review their contracts and be ready to negotiate in good faith on performance of the contracts, or agree adjustments with Chinese partners.

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Summary

The coronavirus has first and foremost been a public health issue. Inevitably, there will be an economic impact and disruption to usual schedules. Schools will be no exception – indeed, due to their nature, they are likely to be closed longer than factories or offices.

In the short-term, British schools in China will need to grapple with employment issues, AWOL teachers, disgruntled parents and lower revenues. However, it is unlikely that the fundamentals will have changed much once the outbreak peters out. There is little doubt that China will bounce back and that the opportunity for British education remains immense.

For reference, China recovered quickly from the SARS outbreak in 2003. There may be an even greater appreciation for online teaching but, in the main, it is likely things will return to normal quickly. International schools’ best option would be to not only keep calm and carry on, but also keep abreast of current issues and continue to make plans for the future.

Mark Schaub and Jack Yu work for law firm, King & Wood Mallesons