State govts risk multi-billion ringgit suits from businesses for defying CMCO

Most businesses were allowed to resume operations today under the conditional movement control order announced by Putrajaya last week.

KUALA LUMPUR: State governments which refuse to comply with Putrajaya’s announcement to ease the movement control order (MCO) risk being slapped with billions of dollars in legal suits from companies seeking damages for being prevented from reopening their businesses, FMT has learnt from sources familiar with the Covid-19 crisis management.

This comes after several states under the opposition Pakatan Harapan announced their own version of the conditional movement control order (CMCO), including Selangor which introduced a “modified CMCO” prohibiting most businesses from re-opening despite the green light from the National Security Council (NSC).

NSC is the body which consults with the health ministry and other relevant ministries in the management of the MCO which has been in force since March 18, effectively bringing economic activities to a standstill except for some sectors.

Prime Minister Muhyiddin Yassin announced the CMCO on May 1, allowing most businesses and offices to resume with guidelines on Covid-19 social distancing for different sectors.

Muhyiddin said Malaysia risked losing close to RM100 billion if business operations continued to be barred.

A source in the Attorney-General’s Chambers (AGC) who spoke on condition of anonymity said state laws cannot supersede federal laws.

“States can issue guidelines and may even have their own laws but they cannot conflict with federal laws.

“Sarawak, for example, has the Protection of Public Health Ordinance but it can only complement federal laws, not conflict with them,” the source told FMT.

It said state governments have no power to unilaterally stop businesses which have been allowed to open under the CMCO.

“The main issue is if the state governments do not allow businesses to open when federal law says they can. The state governments could be sued by these businesses.”

Under the conditional movement control order, fashion and clothes stores are also allowed to reopen.

Legal experts have told FMT that state governments have no choice but to accept the CMCO which came into effect today, as it is federal law.

Kedah, Penang, Selangor, Pahang, Kelantan, Negeri Sembilan, Sabah and Sarawak have to varying degrees expressed their reservations about the CMCO, with Selangor and Penang outright refusing to abide by the decision.

Many said they would stick to the partial lockdown until May 12, when the current phase of the MCO ends.

Yesterday, business groups urged states to toe the federal line and allow business activities to resume.

“It is important that business operations in all states resume concurrently as there are interlinkages between states.

“Stopping work in certain states will lead to major disruptions in the supply chain of goods and services and, at the same time, impact the livelihood of the rakyat,” said the Federation of Malaysian Manufacturers.

A similar stand was taken by the Malay Chambers of Commerce, which urged state governments to allow businesses to resume operation to help strike a balance between health and the people’s economic survival.

Earlier today, Umno vice-president Khaled Nordin accused International Trade and Industry Minister Mohamed Azmin Ali of failing to get consensus from state governments before allowing businesses to re-open.

“This failure indicates significant weaknesses in leadership, strategy and coordination related to the restoration of the economy,” said the former Johor menteri besar.

“This has complicated business and trade activity as Malaysia’s economy is by nature cross-border.”

But a source close to MCO procedures said state governments had been given “at least 48 hours’ notice” of the plan to ease restrictions on businesses.

Khaled also spoke of a “new narrative” where state governments would have more say.

“The era of the federal government having the final say is over,” he said.

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