Theatre lawyer Sean Egan: Who should bear the cost of the Covid-19 theatre shutdown?

Unprecedented, exceptional – you have heard it all. Each day brings a major new development and tomorrow may feel very different to today.

On Sunday, Arts Council England announced an immediate suspension of grant conditions and a focus on supporting freelances and individual artists. Darren Henley’s announcement shows more leadership than the government.

The prime minister’s advice on Monday asked everyone to avoid theatres. Because this was only advice, it was left up to Society of London Theatre and UK Theatre to instruct its members to close venues.

Their prompt announcement brought certainty and consistency, but the government’s reaction shows a refusal to take concrete steps – it wants to stand on the sidelines.

On Monday, health secretary Matt Hancock stepped up his rhetoric by saying we were “fighting a war” and talked about the government’s measures, but the reality is sadly different. All we have is advice without any instructions or restrictions, leaving each sector to decide what steps it should take.

The government’s reaction shows a refusal to take concrete steps – it wants to stand on the sidelines

As a lawyer I feel the distinction is important. If the government directs a venue to close then it is 100% clear that any performances must be cancelled and related contracts cannot be performed. An instruction from a key industry body such as SOLT or UK Theatre has a similar effect in practice, but it is not quite as unequivocal.

This type of supervening event is commonly referred to as ‘force majeure’ and covers acts of God, riots and strikes. From a legal point of view, the notion of force majeure is often uncertain. The original use of the concept was to deal with situations the parties had not contemplated at the time of entering the agreement. This might be a theatre burning down or war being declared.

Now, contracts can specifically deal with these kind of events that are outside the parties’ control, but often they don’t. My advice, not just in the context of Covid-19 but generally, is for agreements to allocate liability for what happens in all situations.

Insurance policies can only cover a party’s risk of liability, so if a party clearly identifies a risk then insurance is a means of offsetting that liability.

The initial focus will be on whether cancellation insurance, or other kinds of insurance, can cover loss of performances due to Covid-19. Each policy wording will be different and will depend on the individual circumstances, so there is no absolute generalisation.

All we know for sure is that the potential losses are enormous, assuming all venues offer full refunds. Cancellation insurance is expensive so only some venues and producers may have full cover.

All we know for sure is that the potential losses are enormous

It may be that insurers will be reluctant to offer new policies to include cover for cancellation due to Covid-19 or premiums will increase, so, at best, theatres may be covered until renewal and producers will be covered for the current production but not future productions.

It looks as though venues may close for months. Given the number of people involved in making theatre, will new productions be unable to start until enough actors have contracted the virus, or do they run the risk of subsequent cancellations?

Might there be actors, even companies, who contract the virus and therefore develop immunity? How are we going to persuade audiences to come back to the theatre after months away?

The chancellor’s announcement on Tuesday set out broad ideas with financial help intended to soothe markets. Sadly, there is no detail and the Treasury briefing is barely a page. There will be a welcome rates ‘holiday’ for those in hospitality and leisure industries and it is assumed this extends to theatres, but it is not explicit.

This is extremely welcome for the commercial sector but won’t be much use to the subsidised sector, which generally does not pay rates anyway. The Coronavirus Business Interruption Loan Scheme is to be launched “in a matter of weeks” but is just a loan guarantee scheme. Its aim is to ease cashflow but sums are repayable.

The scheme may be helpful in some instances, such as to tide an organisation over until a theatre tax relief claim arrives or until settlement is received from performances that have managed to take place. If organisations have huge losses due to the impact of Covid-19 this scheme will not help except in the short term.

The government’s view at present seems to be that the monumental losses to the performing arts must principally be borne by a combination of insurers, theatres, producers, investors and ticket holders.

It sees no need to intervene to help actors, freelances or staff working in theatres, or to provide significant support from the public purse. Many regional touring theatres are already on their knees after years of cuts to funding, as we have seen from the deterioration of middle-scale touring. For these companies the outlook is bleak, and along with smaller venues in London, they may be the first casualties.

But without real sustained support, the whole industry is incredibly vulnerable.

Sean Egan is an independent theatre lawyer

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