President Trump’s Coronavirus National Emergencies Act Declaration: The Ultimate Guide on Economic and Legal Impacts for Businesses
The National Emergencies Act endows the President with broad authority to direct (and shut down) domestic and international commerce during the novel coronavirus (COVID-19) outbreak. Here is what companies in the United States need to know.
On March 13, 2020, President Trump declared a national emergency concerning the novel coronavirus (COVID-19) outbreak in the United States. In his proclamation, President Trump cites the authority vested in him, “by the Constitution and the laws of the United States of America, including sections 201 and 301 of the National Emergencies Act (50 U.S.C. 1601 et seq.).”
The National Emergencies Act is a federal statute enacted in 1976 that authorizes the President of the United States to declare a “national emergency.” Despite its extraordinary implications, the National Emergencies Act is decidedly brief, and it does not define what constitutes a national emergency. However, once the President Declares a national emergency under Section 201 (which simply states, “during the period of a national emergency . . . the President is authorized to declare such national emergency”), the President is endowed with a plethora of “emergency powers” established under a variety of other federal statutes, and these emergency powers give the President broad authority to act without Congressional oversight or approval.
Understanding the Business Implications of a National Emergency Declaration
Yes, it really is as broad as it sounds. It is for this reason that many scholars and academics on both sides of the aisle are critical of the National Emergencies Act. While most agree that the law serves a legitimate purpose in theory, questions concerning the potential implications of national emergency declarations have surrounded the National Emergencies Act since it was first invoked by President Carter.
Just what are these implications, exactly? As summarized in a recent article in The Atlantic:
“The moment the president declares a ‘national emergency’—a decision that is entirely within his discretion—more than 100 special provisions become available to him. While many of these tee up reasonable responses to genuine emergencies, some appear dangerously suited to a leader bent on amassing or retaining power. For instance, the president can, with the flick of his pen, activate laws allowing him to shut down many kinds of electronic communications inside the United States or freeze Americans’ bank accounts.”
As quoted by Forbes, economist Dan Mitchell, co-founder of the Center for Freedom and Prosperity, expands on the impact for businesses as follows:
“You’ll see that the president has the power, for all intents and purposes, to severely disrupt or even block financial transactions between people and/or companies in the United States and people and/or companies in a designated foreign country . . . . The economic consequences would be profound. In a negative way.”
What Should Businesses in the United States Do to Prepare for the Exercise of the President’s Emergency Powers During a Declared National Emergency?
To be clear, national emergency declarations are not particularly novel. There have more than 50 national emergency declarations since the National Emergencies Act’s passage in 1976, and more than 30 of these national emergencies are still ongoing. However, as just about everyone recognizes that the novel coronavirus (COVID-19) pandemic is different, it is our opinion that businesses in the United States need to be taking different steps to prepare.
These steps include the following:
1. Anticipating Potential Exercises of the President’s Emergency Powers
To the extent possible, companies need to try to stay one step ahead. This means anticipating potential exercises of the President’s emergency powers during the novel coronavirus (COVID-19) national emergency. While the President’s emergency powers are broad, they are not unlimited, and any exercises of these powers must have some relation (even if tenuous) to the national emergency that has been declared.
With these considerations in mind, companies can narrow down the list of emergency powers that both (i) have a realistic possibility of being invoked, and (ii) that are likely to have direct or indirect implications for their businesses. With these insights, companies can then begin to prioritize and plan accordingly.
2. Getting in Front of Possible Restrictions on Domestic and Foreign Trade
President Trump has shown willingness to get involved in matters of both domestic and foreign trade during his presidency, and there are various indications that he may use his emergency powers to influence the U.S. and global economies in various ways during the novel coronavirus (COVID-19) pandemic. For companies that may be negatively impacted, it is critical to take action before it is too late.
Of course, what this means, exactly, will differ under differing circumstances; and, at this point, there is still a significant amount of forecasting involved. That said, if companies can get ahead of any potential trade implications, they should, and they need to start planning now.
3. Assessing the Contractual Implications of Government Action Impacting Business Transactions
While it might not be entirely clear at this time how or why the novel coronavirus (COVID-19) pandemic may necessitate the blocking of financial transactions or the freezing of U.S.-based companies’ bank accounts, these are not possibilities that companies can afford to overlook or dismiss out of hand. This is true not only with respect to business transactions that are currently on the horizon, but with respect to future potential business dealings as well.
At this point, it is not clear how long the novel coronavirus (COVID-19) pandemic will last. The extent of its commercial and economic impacts also remains to be determined. With this in mind, companies must view President Trump’s national emergency declaration as an event with potential long-term implications, and they must begin to view all future transactions through this lens.
4. Carefully Considering Potential National Emergency Implications for New Commercial Contracts
In this same vein, companies should consider the potential implications of the novel coronavirus (COVID-19) national emergency declaration for new commercial contracts as well. Among other things, this means incorporating contractual protections that specifically address the possibility of the exercise of the President’s emergency powers negatively impacting one or both parties’ ability to perform. Once again, while companies still can plan ahead, they should do so.
5. Thoroughly Considering and Documenting Any Business Activities that May Face Scrutiny
As President Trump begins to exercise his emergency powers pursuant to the novel coronavirus (COVID-19) national emergency declaration, companies will need to carefully evaluate any business activities that are – or may be – impacted. If there are questions as to whether a particular transaction or course of conduct is permissible, companies will need to make informed decisions at the executive or managerial level, and they will need to thorough document the legal justification(s) for their business decisions.
6. Establishing Means of Monitoring and Compliance
In order to make informed decisions, companies will also need to establish means of monitoring for updates at the federal level. Companies will need to be prepared to respond quickly as new mandates are handed down, and they will need to have appropriate internal reporting and compliance mechanisms in place in order to prevent delayed responses from creating exposure to federal legal liability.
7. Adopting Policies and Procedures Focused Specifically on the Novel Coronavirus National Emergency Declaration
With all of the above considerations in mind, companies – public and private across all business sectors – must adopt policies and procedures that are focused specifically on the novel coronavirus national emergency declaration. Even in times such as these, when there are significant new developments on a daily basis, companies must still make sound and reasoned decisions that are supported by appropriate internal documentation.
These policies and procedures can, and generally should, allow for a certain amount of discretion. However, they must still provide clear guidance, and they must be appropriately tailored to the company’s governance structure, operations, and legal risks. Here, too, unique times call for a unique response; and, when the dust settles, company leaders need to be confident that the decisions they made during the novel coronavirus pandemic did not create unnecessary lingering exposure in civil litigation or federal law enforcement matters.
Additional Resources for Businesses During the Novel Coronavirus (COVID-19) Pandemic
While President Trump’s National Emergencies Act declaration presents novel legal issues for businesses in the United States, these issues do not exist in isolation. To the contrary, the novel coronavirus pandemic presents numerous legal and compliance risks for companies nationwide. For more information about what companies need to be doing in response to the novel coronavirus pandemic, you can read:
- Coronavirus Consulting & Risk Mitigation – Learn about more coronavirus-related risk factors for businesses in this Q&A session with the former FBI agent on our corporate compliance and risk mitigation team.
- Risk Management in the Midst of the Coronavirus Outbreak: What Do Companies Need to Know?– In this article, we discuss 10 key strategies for managing corporate risk during the novel coronavirus (COVID-19) outbreak.
- Do Publicly-Traded Companies Have a Duty to Disclose Coronavirus Cases Under SEC Rules? – Read about the SEC’s guidance for publicly-traded companies during the novel coronavirus outbreak, and learn about the additional filings that may be required.
Contact Oberheiden P.C. | National Security Law Firm for Companies Nationwide
Do you have questions about what your company can – and should – be doing to mitigate corporate risk during the novel coronavirus pandemic? Our national security law firm is advising companies nationwide with regard to risk mitigation and compliance. To speak with a senior member of our federal compliance and defense team in confidence – including our former FBI agents with experience in counterterrorism – call 214-692-2171 or inquire online today.