PUBLISHED BY

W W W . I F L R . C O M

DAILYNEWSWASHINGTON DC FRIDAY, SEPTEMBER 23RD 2016 WEATHER 29°C

LORETTA LYNCHOn why the IBA has a keyrole in preserving justice

PAGE 8

NEWSLessons in restructuring fromyesterday’s session

PAGE 2

BREXITJack Straw on why Britainreally left the EU

PAGE 6

The US often extends its jurisdictionalreach far beyond its borders. Yester-day, experts, officials and counsel

gathered to discuss the issues surroundingthat trend at the ‘SPPI showcase: The USA’slong arm of justice and what it means to theworld’.

For US counsel, the country’s prosecutorspursuing non-US citizens worldwide mightseem like business as usual. The real issue ishow other countries behave.

“The fight is the extradition. The US canoftentimes establish jurisdiction to the satis-faction of courts,” said Charles Duross, part-ner at Morrison & Foerster. He suggests thatother countries’ courts and jurisdictions alsomake decisions about the validity of US re-quests with reference to their own laws.

So why does the US have such wide andlong reach? “We have international commit-ments to try and enforce US law,” said MaryButler of the Department of Justice’s (DoJ)International Unit of the Asset Forfeitureand Money Laundering Section.

“The concern is obviously neither that theUS be a safe haven for the proceeds of crime,nor that our financial system be used to fa-cilitate or promote crimes around theworld,” she said, noting the large size of theUS economy and globalisation as the forcesat play.

Define extraterritorialAll this leads to the importance of definingextraterritorial. “I don’t think the US, whenit comes to the Foreign Corrupt Practices Act(FCPA), necessarily views it as extraterrito-rial,” Duross said.

“If you’re an FCPA nerd like I am, you’drealise it applies to US citizens, US compa-nies, foreign companies that trade on US ex-changes and foreign nationals or privatelyheld foreign companies that act in the US,”Duross said. And Duross doesn’t limit thatview to the FCPA. More widely, he believesmost people might be surprised as to the ex-tent of what the US thinks is not, in fact, ex-traterritorial.

“Narcotics, terrorism, taxation – youname it,” Duross said, citing the reach ofconspiracy law and noting people have beenarrested and convicted without ever havingever stepped foot inside the US. “The US isthe 800lb gorilla,” he said.

But global distance presents challengestoo. “The harder part isn’t establishing basisfor involving the US jurisdiction, it’s findingthe proof of specific foreign offences,” Butlersaid.

Pass the ballA recent and high-profile example ofUncle Sam’s increasingly long reach is therecent Fifa scandal. In May 2015, after aninvestigation by the (FBI), the DoJ in-dicted 14 current and former Fifa officialson charges of corruption. Many arrestswere made outside the US. “I think thiscase is very interesting,” said ThomasWerlen, managing partner at EmanuelUrquhart & Sullivan in Zurich. His firmrepresents Fifa in the ongoing case and hewas not speaking on behalf of the organi-sation. “Various people were indicted bythe US who are not US nationals,” Werlensaid.

US counsel also have perspectives on thecase. “I’ve never been to a soccer [football]game and I didn’t know what Fifa was whenI was tapped on the shoulder to join its in-dependent governance committee,” saidJames Klotz, partner at Miller Thomson.Fifa created the organisation – the IGC –after the controversial decision to awardQatar the 2022 World Cup. Qatar, some felt,would be far too hot to play sports.

“It was either grand corruption or Fifawas being visionary,” Klotz said of the deci-sion. “But it wasn’t really a great surprise toany of us that the US did something,” headded, speaking of the later scandal in which41 people have been charged, including UScitizens. At least 12 people have pleadedguilty.

So, if you do wrong in a dollar-basedglobal economy, Uncle Sam can likely comeknocking. Often, however, becoming entan-gled in the US jurisdiction is a matter ofchoice. “Last August I was in a very wet,Southern Manhattan about to go into the De-partment of Financial Services (DFS),” saidJonathan Grimes, partner at Kingsley Napley.

According to Grimes, he was with aclient, one who was a European citizen andand hadn’t actually done anything wrong. Sowhy were they standing in the rain, in NewYork, about to enter the DFS? The answer issimple: the client’s bank is very keen to co-operate with Americans. “It just wasn’t agood idea to get on the wrong side of the USregulator,” Grimes said.

Uncle Sam iswatching you

#ibawashingtonJ O I N U S O N T W I T T E R

S P O N S O R E D B Y

Key takeawaysThe US is continuing to extend its juris-•diction far beyond its borders;Major recent corruption scandals have•seen either US officials’ involvement orleadership;But US counsel and the US Department•of Justice don’t always define theirglobal reach as extraterritorial.

WA S H I N G T O N D C2 IBA Daily News

Since 2006, the final day of the IBA An-nual Conference has been dedicated torule of law issues. This traditional con-

ference highlight has been running since2005 when, in Prague, the IBA Councilpassed a Rule of Law Resolution.

That was swiftly followed by a rule oflaw initiative in 2006, with the Rule ofLaw Forum currently responsible for pro-voking, urging and assisting the member-ship of the IBA in supporting andpromoting the rule of law.

The session always focuses on contem-porary and extremely relevant currentevents or issues affecting the profession,and is led by the Rule of Law Forum. Fol-lowing successful rule of law symposia inChicago, Singapore, Buenos Aires,Madrid, Vancouver, Dubai, Dublin,Boston, Tokyo and Vienna, the final dayof the conference in Washington DC 2016will also be devoted to the rule of law. Thisyear, the Symposium will analyse and dis-cuss ‘Special regional challenges to the ruleof law’ and ‘Iran: testing the rule of law’.

This year would certainly seem a fittingyear to continue this work. As the world

increasingly appears to be leaving its pe-riod of post-Cold War stability behind,one of the key features of the instabilitythat’s followed is a weakened rule of law.

Prominent examples range from thecomplete abandonment of local, regionaland international legal norms, with the riseof the terror group so-called Islamic State(IS) in Iraq and Syria, to what seems like thesubtle but steady erosion of regional legalframeworks. One example of the lattertrend is, of course, to be found in Turkeywhere in July the Turkish army apparentlyattempted to overthrow the elected govern-ment. And in recent years the Iranianregime has, and some would argue contin-ues, to skirt on the edge of acceptable inter-national legal conduct. In short, many ruleof law issues – and many challenges to it –abound in the modern Middle East.

Regional challenges Fitting, then, that the morning programmeof the Rule of Law Symposium will exam-ine the troubled Middle East region’s con-flict situation. This will be done throughthe lens of the region’s diverse history, as

well as through the subjective views ofprotagonists, and the previous efforts –often failed – to resolve protracted issues.

Crucially, the session will also examinethe applicability of the principles of inter-national law, and the elements and poten-tial compromises within or resolution ofconflicts, or the resolution of particular is-

sues conflicts have created. Participantswill include lawyers from the region itself,diplomats or negotiators who have soughtto deal with the issues, international lawauthorities and Rule of Law Forum leadersinvolved in the project. Each participantwill bring their individual expertise to bearon what is a complex topic of nothing lessthan critical global importance.

Iran: testing the rule of law The afternoon programme looks at a rangeof rule of law issues related to a countryand a regime at the heart of the MiddleEast’s current configuration: Iran. Thoseissues ranging from compliance with theNuclear Arms Agreement, to issues of eco-nomic sanctions, to international law prin-ciples related to regional stability and theactions of IS. Moderator Essam Al Tamimiwill discuss with experts on Iran and ex-perts on related issues of international law,rule of law questions in which Iran may beinvolved. Each is a fascinating topic, andin recent years the global media have kepttheir focus firmly on Iran – and the Obamaadministration – as both interacted in theirhigh-stakes geopolitical negotiations. Atthe heart of these issues to date? The ruleof law, which of course will be key to anyfuture developments too.

The keynote speaker is AnthonyKennedy of the US Supreme Court. Otherspeaks are Aaron David Miller, vice-presi-dent for New Initiatives at the WoodrowWilson International Center for Scholarsin Cleveland, and Kito de Boer, head ofmission of the Office of the Quartet,Dubai.

Pushing forwardThe Rule of Law Symposium is now a regular fixture atIBA’s annual conference. Today’s all-day event will tackleIran and troubles in the Middle East

“The Iranian regimehas…skirted on theedge of acceptableinternational legalconduct”

PREVIEW

SESSION

Rule of Law Symposium – Voices of thenext generation: bringing change to theMiddle East

COMMITTEE

Presented by the Rule of Law Forum

TIME/VENUE

Today 10:00 – 16:00Salon 3, Lobby level

News

Restructuring troubled divisions must be done in a struc-tured and responsible manner to avoid future prob-lems, according to panellists on yesterday’s session

‘Restructuring distressed businesses: strategies for savinghealthy assets, carve-outs and divestments of losing assets andrecognising the difference’.

“Both the sell and buy-sides need to do their homeworkproperly,” said session chair Ralf Morshäuser, of Gleiss Lutz inGermany. “You need to take care of all risks and challengesposed by the restructuring of that business.”

According to the American Bankruptcy Institute, total bank-ruptcy filings in 2015 were 10% lower than in 2014, continu-ing the downward trend seen in recent years. That’s in spite oftroubled global macroeconomic and financial conditions put-ting more and more pressure on businesses.

This means companies are exploring other options to takecare of distressed assets, subsidiaries or divisions. However, notall are carrying out proper due diligence in assessing and ac-counting for all the specificities of the troubled business to en-sure it survives after being sold off. In some jurisdictions,employees have a right to block a transfer if they object to thedeal.

In Germany, the first case that made the M&A and restruc-turing communities think about these issues was Siemens’ saleof its unprofitable mobile phone business to Taiwan’s BenQ in2005. The deal saw some of the unit’s 1,400 employees goingback to Siemens when the company filed for insolvency a yearafter the sale closed, claiming the transfer was not handledproperly.

According to Ian Johnson from Slaughter and May in Lon-don, UK retailer British Home Stores’ recent collapse is also anexample of how not to handle a restructuring. Owner Sir PhillipGreen took dividends out of the business and decided he did

not want the associated liabilities. He sold the loss-making busi-ness, which went into administration earlier this year, 13months after the sale, for just £1 ($1.30).

“This goes to show that to some extent, a seller does have acorporate duty to look ahead,” said Johnson. “What you needis a responsible sale process, and an assessment of the risks andthreats in the business.”

Meanwhile Nagashima Ohno & Tsunematsu partner Yu-taka Kuroda provided an example of a well-handled sale. Heoutlined Panasonic’s 2008/9 restructuring and the sale of vari-ous assets it had previously acquired from Sanyo.

“Panasonic did a good job choosing the buyer for these as-sets,” he explained. “They were a credible purchaser with a vi-able business plan, which meant the business survived varioussales.”

Joanna Gumpelson, of Paris-based De Pardieu Brocas Maf-fei, outlined a growing trend in French case law where formercreditors and employees are attempting to trigger shareholderliability in the event the sale of a distressed business goes wrong.

“France’s highest court has recognised the admissibility ofsuch claims,” she said. “If the acquiring third party has a badbusiness plan, which means the business goes bankrupt, em-ployees can sue for wrongful negligence.”

The situation is similar in the Canadian energy industry,when it comes to assets that have environmental issues attachedto them. According to Neil Narfason of Ernst & Young, com-panies like Esso can sell such assets, but don’t want to be heldliable in the event they cause environmental damage.

He said that those companies will tend to sell to the ‘mostcredible bidder’, not necessarily the highest bidder, becausethey do not want to be held responsible several years after thedeal.

Failing to prepare, preparing to failKey takeaways

Both the sell and buy-sides need to do their homework•properly in the case of the sale of a distressed busi-ness;Not all are carrying out proper due diligence in as-•sessing and accounting for all the specificities of thetroubled business to ensure it survives after being soldoff;In some jurisdictions, employees have a right to block•a transfer if they object to the deal.

Ralf Morshäuser and Joanna Gumpelson

WA S H I N G T O N D C4 IBA Daily News

EDITORIALEditor: Tom YoungReporters: Amélie LabbéLizzie MeagerEdward PriceBrian Yap

PRODUCTIONProduction editor: Joshua PasanisiWeb production editor: Joao Fernandes

ADVERTISINGHead of sales: Richard Valmarana

Associate publisher: AmericasRoberto MirandaTel: +1 212 224 3494rmiranda@euromoneyplc.comAssociate publisher: APAC & AfricaWilliam Lo Tel: +852 2842 6970william.lo@iflrasia.comBusiness development: Europe and Middle EastLiam Sharkey Tel: +44 207 779 8384lsharkey@iflr.comManaging director: Timothy WakefieldCEO, Legal Media Group: Matthias Paul

IBA Daily News is produced by InternationalFinancial Law Review, and published byEuromoney Trading Limited, London. Thecopyright of all editorial matter appearing inthis newspaper is reserved by the publisher.No matter contained herein may bereproduced, duplicated or copied by anymeans without the prior consent of theholder of the copyright, requests for whichshould be addressed to the publisher. Nolegal responsibility can be accepted byEuromoney Trading Limited, IFLR orindividual authors for the articles whichappear in this publication. Articles that

appear in IBA Daily News are not intendedas legal advice and should not not be reliedupon as a substitute for legal or otherprofessional advice.

Directors: John Botts (Chairman), AndrewRashbass (CEO), Colin Jones, The ViscountRothermere, Sir Patrick Sergeant, PaulZwillenberg, David Pritchard, AndrewBallingal, Tristan Hillgarth

Opinions expressed in IBA Daily News do notnecessarily represent those of the IBA or any ofits members.

Printed in Washington DC by Day & Night Printing, Inc.

IFLR SUBSCRIPTIONSUK/Asia hotlineTel: +44 20 7779 8999 Fax: +44 20 7246 5200

US hotline Tel: +1 212 224 3570 Fax: +1 212 224 3671

hotline@euromoney.comCustomer service: +44 20 7779 8610

The European Central Bank has ad-mitted there’s still work to be donein the pursuit of the eurozone’s

Banking Union. In particular, the centralbank cites challenges facing the Single Su-pervisory Mechanism (SSM) in harmonis-ing national and European law andsupervisory cultures.

“In the last two years we have notchedup a lot of achievements. But there is stillmuch to do. We need to further the workof the harmonisation of liquidity risk,”said Bernhard Hörtnagl, head of section atthe European Central Bank, speaking onyesterday’s panel ‘Has the European Bank-ing Union kept its promises?’.

The 2007-2008 global financial crisisoriginated in the US mortgage and whole-sale banking market, but quickly spreadworldwide. In Europe, this financial con-tagion morphed into the euro area crisis.Most press coverage of the crisis focusedon the fate of Greece, and the issue ofwhether the country could remain in thesingle currency.

But another key feature of the crisis wasthe so-called sovereign doom loop inwhich potentially insolvent banks were re-liant on the fiscal resources of likewise po-tentially insolvent states. TroubledEuropean banks and governments faced apotential, mutually-reinforcing negativespiral.

Eurozone policymakers responded, inpart, with the Banking Union, a compre-hensive plan to break the link betweenbanks and sovereigns. The key pillars ofthe Banking Union are the euro area’sSSM, a comprehensive European-level su-pervisory regime, and the Single Resolu-tion Mechanism (SRM), a plan forwinding-up insolvent European banks.The Banking Union was initiated in 2012.

Italian concerns The scope of Banking Union is huge. “TheSSM is the largest supervisor in the world,with the significant institutions it coversholding €21.7 billion in assets,” according

to Dirk Bliesener, partner at HengelerMueller and European liaison officer at theBanking Law Committee.

With so much at stake, and with the Eu-ropean economy so reliant on its banks, akey aim of the Banking Union is that it isready to help deal with any future bankcrises in Europe. In this regard, one coun-try’s banking sector in particular is cur-rently playing on many minds. “Italy stillhas some problematic banks, which re-vived the old debate on bail-in versus bail-out,” said Sascha Hoedl, partner atSchönherr Rechtsanwälte.

That, it seems, is an understatement.And lawyers in Italy are more frank. “I’mafraid to say we’ve had a lot of Italianbanks that have suffered – and suffered isthe right word,” said Alessandro Por-tolano, co-managing partner at ChiomentiStudio Legale.

“The arguments in favour of the Bank-ing Union are compelling, but there arealso practical difficulties,” said Portolano.

From his vantage point in Italy, Por-tolano also recognises the ECB’s self-con-fessed issue with the crossover of thenational and European approach. “We’venoticed that the ECB has taken an aggres-sive approach to aspects of law which, atleast in Italy, are more the domain of otherregulators such as the exchange commis-sion,” said Portolano.

Looking to the USEuropeans are now looking to the US forguidance, which has long had an estab-lished bank deposit insurance frameworkand also made provisions, albeit overlap-ping ones, for bank resolution in Title Iand Title II of the 2010 Dodd-Frank Act.

According to Randall Guynn, partner atDavis Polk & Wardwell, there’s a distinct

contrast between US and European bankresolution models. In Europe, the bridgemodel can be used, sometimes referred toas the two company model, in which a newbridge bank is created. The alternative inEurope is the bail-in model, sometimes re-ferred to as the one company model.

“Under US resolution laws, the only op-tion is the two company model and underUS bankruptcy code you can use both,”said Guynn. But before the Europeansimagine that the US is entirely ahead of thegame, it should be remembered that issuesare also outstanding in the US. “There’sprogress that needs to be made, but there’simpatience in Congress as to when it willbe done. And some say, if it’s not finishedsoon, we should break [the banks] up,”said Guynn.

ECB: Banking Union needs work

Key takeawaysThe European Central Bank has admit-•ted there’s still work to be done in thepursuit of the eurozone’s Banking Union;

In particular, the central bank cites•challenges facing the Single Supervi-sory Mechanism (SSM) in harmonisingnational and European law and super-visory cultures;

The SSM is the largest supervisor in•the world, with the significant institu-tions it covers holding €21.7 billion inassets.

Bernhard Hörtnagl, ECB

“A lot of Italian bankshave suffered - andsuffered is the rightword”

HIGHLIGHTS MONDAY

www.iflr.comFriday, 23rd September 2016 5

Increased flows of migrants as seen in Eu-rope in recent years could have a dramaticimpact on legislation, according to lawyers

at yesterday’s morning session ‘Where will mynanny or plumber come from?’

Immigration laws often focus on skilledworkers, to ensure major corporates and fi-nancial institutions can hire the best staff. Infact many countries either do not have quotasor limits for skilled workers, or have them aspolitical formalities but do not use them.

But for middle and lower skilled workersthe situation can be very different. “Countriesare happy to receive high levels of skilledworkers, and little of the rest,” said Luca Mas-simo Failla of Lablaw Studio Legale in Milan,who moderated the panel.

This is an especially pressing issue in Ger-many, which last year opened its doors to 1million refugees fleeing conflict in Syria. “Ger-many has a demographic problem, we needrefugees, so Angela Merkel has shown realleadership in her choice,” said Thomas Griebeof Vangard in Hamburg. “Now language, lo-cation and training is key to getting these peo-ple into work, so we intend to change the lawto make it easier.”

Language courses are only made availableto refugees whose asylum has been accepted,for example, which leaves thousands of peoplein Germany simply waiting for this to be ap-proved and doing very little in the process.

Immigrants are also only permitted to seek

work through temporary employment agen-cies if they have been in the country for morethan 15 months. But these agencies haveproven very successful in getting low-skilledGerman workers into jobs, so are well suitedto working with asylum seekers.

So the plan, as told by Griebe, is to changeasylum law to reflect the country’s changingcircumstances.

Likewise the war on terror has forced Aus-tralia to transform its immigration landscape.“As immigration lawyers, we’re now used to

working with the police force. It’s extraordi-nary – we’re certainly earning our keep,” saidMaria Jockel of Holding Redlich in Mel-bourne. “The problem is now that we have somany immigration agents that there’s a com-mon perception of incompetence, criminalityand fraud.” Working with clients has becomemore difficult as the country’s circumstanceshave changed, she explained.

Back to Europe, the reaction in Austria hasbeen almost entirely different to Germany’s ap-proach. Right wing politicians and press haveperpetuated a culture of fear and insecurity, ac-cording to Sabine Straka of her namesake LawOffice Straka in Vienna. “The authorities havereacted by drawing borders and buildingfences,” she said. “We are jeopardising thegreat social achievements we have made,largely through the use of misinformation.”

The misinformation problem is felt perhapsnowhere more than in the UK, where the lead-ers of the Brexit campaign allegedly used re-peated falsities to promote their cause. For

example the claim made that the country is ‘atbreaking point’ on immigration, explainedMelanie Lane, partner at Olswang in London.

“It’s clear that British people want to see areduction of immigration, even at the cost offull access to the single market,” she said. “Sothere’s no doubt the vote to leave will lead toa shortage of low skilled workers in the UK, atleast in the short to medium term.”

Generally EU countries will source theirlower skilled workers from other EU countries,reducing the need for extensive legislation andpoints-based systems. But that’s likely tochange when the UK can no longer take ad-vantage of the stream of workers from easternEuropean countries like Poland, Slovakia andHungary.

So the UK will likely be forced to overhaulits third country immigration programme.Lane speculated this could mean a parallel sys-tem put in place where EU migrants require alower level of skills than those from outside ofthe bloc, or more occupations added to skillshortage lists.

But of course, it can also go the other way.Naturally, legislation can have an equally dras-tic effect on inflows of foreign workers to anycountry. When the new Canadian conservativegovernment overhauled the system in 2008 mi-gration fell sharply year-on-year from around116,000 in 2011 to 73,000 in 2015. That’s setto be reversed with the new liberal govern-ment.

Immigration’s impact on law“We are jeopardisingthe great socialachievements we havemade”

Thomas Griebe, Vangard

HIGHLIGHTS MONDAY

WA S H I N G T O N D C6 IBA Daily News

Former British foreign secretary JackStraw has explained why he believesBritain voted to leave the EU, and laid

some of the blame at the door of the Euro-pean Commission.

In an opening speech in yesterday’s session‘Brexit or bust? Better together or the end ofEurope as we know it?’ Straw, who cam-paigned for the UK to remain in the EU, ar-gued that many Brits never felt emotionallyattached to the idea of a union. “It has alwaysbeen seen as a transactional relationship,” headded.

Straw criticised the viability of the eurocurrency. “A single currency beyond a singlecountry was inherently unstable,” he said.“Breaking up the euro would be an unimag-inable nightmare but there needs to be somehonesty – particularly from those in the EU –about the monumental error of its creation,”added Straw.

Straw explained that as the UK movedfrom being the so-called sick man of Europein the 1970s to one of its most successfuleconomies – with unemployment levels in thecountry now at 4.9% compared with the eu-rozone’s 10.1% – membership became an in-creasing burden on the country.

He reserved particular scorn for Jean-Claude Juncker, President of the EuropeanCommission, citing his statements during theBrexit campaign as damaging. “Juncker prob-ably lost the Remain campaign more votesthan any other figure. Every time he spoke,you could see votes for the Remain campaigndrain away,” said Straw.

Moving onto the fallout from Brexit, andthe long process of negotiating a new relation-ship between Britain and the EU, Straw saidthat the UK’s vote to leave the EU will not re-sult in materially improved immigration con-trols.

The most potent argument in favour ofleaving the EU was about taking back controlof immigration. “But we will go on needing

migration for lower skilled jobs. And there isan understanding that we will continue towelcome highly skilled workers too,” saidStraw.

Formal negotiations between the UK andthe EU cannot begin until Prime MinisterTheresa May invokes Article 50 and starts thecorresponding two-year process, which UKBrexit Secretary David Davis has insisted will

be triggered without a parliamentary vote.Caroline Vicini, deputy head of delegation

of the EU to the US explained that the so-called divorce proceedings between the twoparties will be arduous, largely because of un-certainty surrounding the UK’s wishes.

“No one knows what will happen,” shesaid. “Not even the Brits know what they areaiming for. No one has heard any sort of vi-sion as to where the UK will end up,” addedVicini. “It is impossible to say how we will re-spond to a negotiating position that we can-not even fathom. Because we don’t knowwhat the UK wants,” said Vicini.

Offering a perspective from the corporateworld, Alexander Ritvay, partner at Noerr inGermany was more positive. “It’s not the endof history. We have to get over it. Brexit mighteven have a positive impact.”

Ritvay noted the rise in interest in UKcompanies from foreign buyers, specificallyAsian companies looking to position them-selves in the UK. He also said that choice oflaw clauses are unlikely to be drafted in Eng-lish law for the time being. “I don’t think itwill last but it is the case for now.”

The panel featured perspectives from re-maining EU jurisdictions. Oana Bizgan, chiefof staff in Romania at the Department ofTrade and Investment explained that Centraland Eastern European countries had long de-bated their relative position within the EU.“We worked so hard to get in and now theUK is leaving we don’t understand why. Wehave more to lose in this divorce than we haveto gain,” she said.

Jack Straw: Brexit’s hard truths

Lateral hires are at an all-time high, up by over onethird since the post- finan-

cial crisis recession. They are alsocosting more money than ever – astudy conducted by ALM LegalIntelligence estimates new partnerhires in the US cost firms in excessof $1.3 billion in compensationalone every year.

The lawyer movement businessmay be an industry in itself but italso raises some wide-ranging eth-ical, contractual and regulatoryquestions. Who does the client be-long to? What are a lawyer’s du-ties and rights when leaving afirm? These were some of thequestions asked by speakers at

yesterday morning’s “Departuresfrom and lateral hires into lawfirms” panel session.

“It depends if you’re talkingwell-developed, highly-regulatedlegal markets or less regulated ju-risdictions where law societiesdon’t have a tremendous amountof power,” said Martin Kovnats,partner at Aird & Berlis and co-vice chair of the ProfessionalEthics Committee. “The rules aremuch more like the wild west inthe latter.”

Who does the client belongto?When leaving for a new firm, alawyer may be tempted to takewith him the clients he or she hasspent time and money developinga relationship with. This is all welland good but it’s not a straightfor-ward matter.

According to CarlosDominguez, partner at HoetPelaez Castillo & Duque, and co-chair of the Latin American Re-gional Forum, the lawyer has noproperty rights over the client, notonly in his native Venezuela, butmore generally in the LatAm re-

gion and globally. As such, thefees accrued during the renderingof legal services belong to thefirm, and the departing lawyer hasno basis on which to withholdthem.

“The client has final decisionover what to do but I do considerthat the firm has a better rightcompared to the individuallawyer,” he told delegates.“There may however be somefactors influencing the client’s de-cision – the lawyer’s unique ex-pertise and who brought theclient in.”

The sentiment was echoed byRachel McGuckian, principal atMiles & Stockbridge, and co-vicechair of the Professional EthicsCommittee. “The individual part-ner holds the relationship on behalfof the firm – that’s the rule,” sheconfirmed, although conceded thatwhen asked the question of whotheir lawyer was, clients tended torespond with the name of an indi-vidual or a group of people.

Duties and rightsIn most regulated jurisdictions,such as the UK, US or Canada, the

departing partner has strict dutiestowards their old firm – these canbe contractual or regulatory.While ethical considerations arethe same de facto in less super-vised areas, in practice, thingsmay be different.

In the US, whatever the con-duct of lawyers and firms, theyhave to act in the best interests oftheir client who has an absoluteright to choose their counsel.

This means that legal practi-tioners and their firms need to beclear and transparent about theirmovements and their duties, coop-erate with the client and with eachother, and not defer or wait totransfer any work, which couldcost time or money. This meansinforming their law firm of theirintention to leave before inform-ing their client.

Harvey Cohen, partner atDinsmore & Shohl, and seniorvice chair of the Closely Held andGrowing Business EnterprisesCommittee, said his firm carriesout background and credit checkson prospective hires to ascertainif they have previously been in-volved in any regulatory duties or

ethics violations. However, Alberto Navarro,

partner at Navarro Castex Aboga-dos in Argentina and co-chair ofthe Professional Ethics Committee,said that weak bar associationsand a lack of sanctions in the caseof legal duty violations in SouthAmerica mean that matters tend tobe solved on a case-by-case basis.

“There have been cases wherea partner goes and takes 20 asso-ciates with him, and it was nearimpossible for the old firm to doanything,” he said. “You couldargue that these were cases of un-fair competition, but commerciallaw principles don’t apply to thelegal profession.”

Key takeawaysThe individual partner holds•the relationship on behalf ofthe firm;

The client has an absolute•right to choose their counsel,and nothing can impair that;

In most regulated jurisdic-•tions, the departing partnerhas strict duties towards theirold firm but the situation isless defined in countries withless oversight.

A guide to lateral hires

“The client hasfinal decision overwhat to do”

“Juncker probably lost the Remain campaignmore votes than any other figure”

HIGHLIGHTS TUESDAY

Jack Straw

www.iflr.comFriday, 23rd September 2016 7

The training, hiring and recruitment ofpolice officers in the US is essentialto improving race relations in the

country, according to the former director ofthe FBI Robert S Mueller III, speaking dur-ing yesterday’s lunchtime discussion.

“The world witnessed the election ofPresident Obama with great joy and thesense that racism was going to abate, thatwe were moving into a new world,” said theIBA’s executive director Mark Ellis, moder-ating the discussion. “But that seems to bechallenged now…just on Friday there wasanother unarmed black man shot by a whitepolice officer. What are we doing wrong forthis to keep happening time and again?”

Mueller explained that when he was ap-pointed director of the FBI in 2001 helearned that the average age of graduatingnew agents was 30 years old, and won-dered why. “They said we give them abadge, a gun, and the power to affect peo-ple’s lives. The most important thing theyhave to have is judgment and maturity.”

Part of the training of FBI agents imple-mented by Mueller’s predecessor involvesgoing to the Holocaust museum. “We reallyput a lot into training our agents, and my be-lief is that we should be doing the same in

the police force,” he added. “It’s so impor-tant that these people have a greater world-view than someone just out of college.”

The sheer number of law enforcementdepartments around the country includingcounty, state and federal police, and alllocal sheriffs’ offices makes this difficult.“It means unfortunately a town or citymanager will look at the law enforcementbudget, and the last thing they will con-sider is training,” said Mueller. Larger en-tities with bigger budgets will be able toplace a higher emphasis on improving it.

Mueller was sworn in as the FBI’s direc-tor just one week before the 9/11 attacks.Ellis asked how he feels it has affected himas a person.

Mueller said that on September 112001 he was being briefed on another casewhen an advisor came to tell him a planehad just hit a tower in New York. Then,they came back again and said a secondplane had hit a tower – at which point they

knew it was most likely a terrorist attack.Next the Federal Aviation Authoritywarned the Bureau of a hijacked planeheading towards Washington DC, 80 milesaway. “What I remember most is trying tofigure out the target – would it be the Bu-reau’s building? Would it be the Capitol,or the White House?” That plane eventu-ally crashed in a field in Pennsylvania.

“But what happened after was a reallyeducating experience for me,” he added,explaining that the first time he briefedPresident Bush after the event, he told howthe Bureau was working towards identify-ing the hijackers by their seat numbers onthe plane. “The President held up his handand said ‘stop – you’re telling me you’rebringing people to justice, and I expect theFBI to do that. But my question today is:what are you doing to prevent the next ter-rorist attack?’”

Mueller said he had not expected thatquestion. “I felt like a high school studentwho hadn’t done their homework,” addingthat the next day he of course had an an-swer. “And that question was the sameevery time I briefed Bush after 9/11, andevery time I briefed President Obama – itwas always the same.”

Mueller: police training mustimprove

“I felt like a high schoolstudent who hadn’t donetheir homework”

HIGHLIGHTS TUESDAY

Robert Mueller

WA S H I N G T O N D C8 IBA Daily News

International cooperation is key to fightingharm and oppression, and combating thechallenges arising from global threats, ac-

cording to US attorney general Loretta Lynch. “Serving justice increasingly requires a

global outlook,” she told delegates at yesterdaymorning’s keynote session. “As lawyers, wehave a responsibility to ensure this is not lim-ited to one nation and its borders.”

Lynch referenced recent events in the US –Saturday’s bombings in New York, and twopolice shootings of black men in North Car-olina and Oklahoma this past week – to high-light the Department of Justice’s (DoJ) goal offinding those who commit acts of terror, andrebuilding trust between law enforcement andthe communities they serve.

The IBA has a key role to play to preservethe ideal of justice as a leader in the global ef-fort to uphold the rule of law, she continued.

“In light of recent events, we are all con-nected,” Lynch said. “The IBA has fought tire-lessly so that all people around the world canenjoy the freedom, the dignity, the opportunityand the justice that is their birthright. This in-deed requires international cooperation andcoordination.”

She described the DoJ’s work in fighting ter-rorism, one of the most important threats theworld faces at this time. It has in recent years

partnered with global police cooperation bodyInterpol, European equivalent Europol, and anumber of other international organisations todetect, investigate and suppress terrorist activ-ities. It is also exchanging staff with some ofthese organisations, and sharing informationon approximately 4,000 suspected individuals.

“We have had some successful achieve-ments, but we need cooperation,” Lynchstressed. “It’s not only in the interest of the USto see those individuals brought to justice, butof all of us around the world.”

Another area where the DoJ is also active iscybercrime. Once again, Lynch stressed that in-creased cooperation between nations had been

a necessary response to the global challengesposed by digital criminals. US President BarackObama has also been working with interna-tional partners to ensure the fight against cy-bercrime is a global undertaking.

Recent examples include a 2014 presiden-tial directive outlining how the US collects in-telligence in such a way to safeguard privacy –also extending protections to non-US people –and a 2016 umbrella agreement between theEU and US on the protection of data trans-ferred for counter-terrorism purposes.

Lynch also referenced the DoJ’s third goalof combating corruption, stressing it is “any-thing but a victimless crime”. The US has re-

covered billions of dollars since setting up anasset recovery initiative in 2010.

Some of her most high-profile work in thisfield was the prosecution earlier this year of anumber of senior executives working for in-ternational football federation Fifa and its re-gional subsidiaries on charges includingracketeering and money laundering. US au-thorities, working in coordination with lawenforcement in Switzerland, arrested severalFifa delegates last year over their role in a cor-ruption scandal worth an estimated $150 mil-lion.

IBA President David W Rivkin, who intro-duced the keynote address, called the roleplayed by Lynch and US federal prosecutorsmore generally ‘America’s greatest contribu-tion to the world since the Marshall plan’.

One of the most appalling crimes of all timeis human trafficking, said Lynch, another fieldwhere the DoJ has benefited from global coor-dination, notably by sharing intelligence andresources with international partners. Thisglobal work led to the arrest last June of mem-bers of a human trafficking network operatingin the Ivory Coast.

According to Lynch, the common threaduniting all those threats and the work done toaddress them is that the effort is ongoing.

“We have a long way to go before [all thosethreats are eradicated], but have made tremen-dous progress by working together as an inter-national community,” she said. “As lawyers,you ensure that might does not make right –laws are not tools for repression, but the bul-warks of liberty.”

In global justice we trust

Astandalone human right to the envi-ronment is not needed because otherrights carry it in their scope, accord-

ing to panellists at yesterday’s morning session‘Human rights and the environment.’

“There’s no doubt there’s an internationalacceptance of the right to life and health,” saidHaynes and Boone’s Hector Herrera. “It’s notstrictly necessary, but from a legal standpointit would be convenient, for the purposes oflegal proceedings in developing countries.”

Today, around 90 countries have a consti-tutional right to the environment – but it maybe that the right to participation is a more ef-fective means of protection. Michael Burgerfrom the Sabin Centre for Climate ChangeLaw agreed, adding: “To the extent that par-ticipatory rights provide a platform forachieving substantive results, absolutely – andthose are often easier to come by, and recog-nised both in and outside of the environmen-tal context.”

The issue is more pressing now than everas around a third of all corporate human

rights cases involve some kind of environ-mental harm. There are both public and pri-vate actors – mining, oil and gas drilling,climate finance projects, renewable energyand land grabs – all posing a threat to therights to life, water, property, standard of liv-ing, and self-determination for people acrossthe world.

“The fact is that environmental degrada-tion has an adverse effect on human rights,”added Burger.

And to ensure the most effective protectionof those rights in the development of projects,the local community must be involved at theearliest stage possible – that way, conflictscould be severely reduced, said Ramiro Fer-nandez of Avina.

He spoke of how the indigenous Mapuchecommunity in Argentina has made strides inaffecting environmental reforms in the Patag-onia region of the country.

“These people got organised, and sent theirchildren to study law, and have gained a rightno one else in my country has – the right toprevious consultation for underground re-sources projects,” he said. “They understandthat they have a right to life, and that whathappens to their land happens to them.”

He added that citizens in Patagonia havemore commonly had to use political toolssuch as demonstrations and roadblocks, asopposed to legal tools: “The legal tools aren’t

there yet, but are developing.”Speaking from the European side, Claus-

Peter Martens of Sammler Usinger in Berlinexplained that German Chancellor AngelaMerkel’s decision to accelerate the country’sexit from nuclear power has resulted in aclash of human rights, industry and the envi-ronment.

That’s been caused by the development ofrenewable energy in the country – which hasnow increased to 30% of total energy pro-duction. “It turns out planting windmills inforests and protected areas isn’t a particularlygood idea either,” he said.

“So we went to the constitutional courtand questioned whether, in light of the greenpower initiative, it’s still permissible to de-stroy villages.” In the Rhineland region ofGermany alone, 130 villages have been re-located, affecting around 45,000 people.

Many road traffic reduction cases, in-cluding one recently in Düsseldorf, havebeen won in Germany via European law asopposed to local law. Often German courtswill capitulate to the European Court of Jus-tice on decisions, as long as European lawgrants basic constitutional rights at the samelevel. Member states have an overwhelmingbody of European law containing detailedrights.

But it’s generally different in every memberstate, according to Martens. “Between 28member states there tends to be around 20different approaches,” he said. “So that’s in-teresting in light of Brexit.”

Protecting our right to theenvironment

Hector Herrera, Haynes and Boone

Loretta Lynch

HIGHLIGHTS WEDNESDAY

www.iflr.comFriday, 23rd September 2016 9

The Rt Hon. Arlene Foster MLA, FirstMinister of Northern Ireland, yester-day shared her thoughts on politics,

global conflict and peace in Northern Ire-land. She believes the Northern Irelandpeace process holds lessons for solving otherconflicts, is excited at how more Britishwomen are taking up powerful positions,and thinks that Brexit will be good for theUK.

Foster became First Minister on January11 2016. A lawyer by profession, she recentlycampaigned in favour of Brexit, the referen-dum decision by the UK to leave the Euro-pean Union (EU). She’s also had first-handexperience of conflict – and how it’s resolved.

“It’s easy to look at Northern Ireland andask what we can take from it and put itdown to a Colombia or a Middle East expe-rience,” Foster said.

But according to her, every conflict iscompletely different. In terms of whether theinternational community should intervene,she believes that international help can bepositive. But if they are to be of use, interna-tional negotiators must be there to mediate,not tell local people what to do. Instead, thekey on the ground is how fast, and how well,those people can move outside their comfortzones.

“It’s not more difficult in terms of peopledying, but peace can be more difficult thanactual conflict, in terms of having to step

outside your comfort zone,” Foster said. Foster certainly knows about conflict. She

has a deep-rooted background in NorthernIrish political life, including the so-calledTroubles, the period of civil strife thatblighted Northern Ireland for many years. “Iwas born in 1970 and that was literally atthe start of the euphemistically-called Trou-bles,” she said. Her experience of that con-flict quickly became personal: her father wasa police office and small farmer, and on Jan-uary 4 1979, the Irish Republican Armytried to murder him. “Thankfully he sur-vived, I think because the weapon being used

jammed,” Foster said.The family then left the area, on the bor-

der, and moved elsewhere. But as well aswhat happened to her father, her school buswas also bombed – its driver was a part-timemember of the security forces. There wereabout a dozen children on the bus; nonewere too badly injured.

“All of that obviously had a profound im-pact on me growing up,” she said. A naturalquestion is how she can, today, work withrepresentatives of those that targeted herfamily. “You don’t make peace with yourfriends, but with your enemies. That’s what’s

been going on in Northern Ireland,” Fostersaid.

Women in powerFoster’s a powerful example of a powerfulwoman. “I hope people respect me as a seri-ous politician who wants to get thingsdone,” she said.

She’s keeping a close eye on the US elec-tion, which may return the first US presidentin Hillary Clinton. And she’s had a front seatas British politics have changed. “There havebeen funny moments along the way, I re-member a male politician once saying to me‘bring me a cup of tea’,” she said. “I said Iwasn’t there to make the tea. But I havetough skin,” she said.

As a leader, Foster has recently appliedthat tough skin during the UK’s Brexit debate.She campaigned to leave while the results ofthe June 23 referendum saw Northern Irelandvote by a majority to remain.

“What we have to do now is to get thebest possible deal for the UK in terms of ex-iting the European Union,” she said. ForNorthern Ireland, a key issue therein is whatwill happen to the free movement of peopleacross its border with the Republic of Ire-land. Foster thinks that freedom can, andmust, be preserved – even if in future theborder becomes international.

“It’s very important that we have themaximum of free movement,” she said.

Tough lessons on conflict

Rt Hon. Arlene Foster, MLA

HIGHLIGHTS WEDNESDAY

News WA S H I N G T O N D C10 IBA Daily News

QUESTIONWho will win theupcoming Presidential election –and why?

Kwame AgbanVolta River AuthorityGhana

In Ghana we have asimilar political system,and with that I think

Clinton has an edge. The other side willhave to do more to convince peoplethey can do better.

Stepan GuzeyLidingsRussia

Trump. It’s time forchanges in the US – foreight years the Democ-

rats have been on top, and I think hisrhetoric is quite tough compared toClinton’s.

Francisco EsparragaUniversity of NotreDameAustralia

Clinton. I think shehas the policies, she’s

clearly far more intelligent than heropponent. She has the experience –far more than her opponent – andshe’s not a demagogue.

Serah SanniJ B Daudu & CoNigeria

Clinton is a people’sperson. She’s very diplo-matic, and not too

harsh. A lot of people believe in her as-pirations and she knows how to relateto people and bring them together with-out discrimination.

Pedro de la FuentePwCArgentina

I think Trump will win.America is clamouringfor change and Clinton

is not up to it. She’s not differentenough from Obama. People want theeconomy to improve and Trump some-how expresses that hope.

Judith Jansens vanGellicumBenvalorNetherlands

Clinton. I think peopleare afraid of the things

Trump will do if he is the President. Idon’t know that it’s for Clinton’s positiveattributes, but because she is betterthan her opponent.

Nicholas O’DonnellSullivan & WorcesterUS

Clinton. She has abig advantage in thedemographics and

electoral college, and I don’t thinkTrump will get further than he has sofar. Either way it will come down tothe wire.

Paola VogrichVogrich Law FirmUK

It’s hard to call but itshows the country is di-vided. Trump is talking

to emotions and anxieties and is sup-ported by very rich people, and Clintonhas a past. Trump might win.

Sameer TegallyConyers Dill & PearmanMauritius

It’s difficult. If peoplevote rationally it will beClinton, but if it’s emo-

tionally, and security issues sway them,then Trump may have an edge. But allin all I think Clinton.

Pamela SuttorL Rundle & CoAustralia

I haven’t met anybodywho intends to vote forTrump. I don’t think Clin-

ton is a good candidate either but it’llprobably be her. There are better peo-ple who’ve never stood for President –General Powell was impressive.

Edie HofmeisterTahoe ResourcesUS

I think Clinton will winbecause she’s morequalified. I think she’ll

be able to overcome her dislikeabil-ity factor so that when it comes tobeing in the voting booth they will gofor her.

Only one-third of FTSE350 compa-nies have a cybersecurity policy,according to a speaker during yes-

terday’s panel: ‘Cybersecurity for publiccompanies: how to manage the risk of cy-berthreats’.

Driven by a growth in cases of data ma-nipulation or ransomware, in which a com-pany is denied access to its internal data bythird parties, several international studieshave estimated losses due to cybercrimes orcybersecurity failures to range from $400billion to $2 trillion globally by 2020.

According to Philip Celestini, sectionchief at Federal Bureau of Investigation’scyber division in Washington DC, lossesdue to ransomware reported to the FBIstood at roughly $29 million last year. Thisnumber surged to $209 million in the firstquarter of this year.

But Celestini argued that these problemswill not go away once one has found a solu-tion to them, and that a vast majority of theseattacks are not being reported.

“There will be counter-measures from theadversaries and will be counter-counter meas-ures from the security environment,” said Ce-lestini.

These figures have also been seen com-ing out of other developed jurisdictions.Elliot Shear, managing director at W Legalin London, stressed a constant lack of duediligence from some UK firms on cyber-re-lated matters.

Due diligenceShear referred to a recent report showingthat two-thirds of FTSE350 companies beinginvestigated have suffered from some kindof cyber breach in the last 12 months.

“In terms of due diligence, one of thekey risks that tends not to be looked at asa separate entity is cyber,” said Shear,adding that there is a dichotomy betweenthe breaches and the policies.

While corporates are urged to step uptheir internal mechanisms against cyber at-tacks, investors in the US are increasinglyplacing the onus of ensuring protectionagainst cybercrime on the target compa-nies’ relevant assets.

Disclosure considerationsLuke Dembosky, partner at Debevoise &Plimpton in Washington DC, argued that,from a liability standpoint, investors shouldconduct their own due diligence on their tar-geted assets up front.

But Stephanie Avakian, deputy directorof the division of enforcement at the Secu-rities and Exchange Commission in Wash-ington DC, argued that all publiccompanies should start thinking abouttheir disclosure amidst an upshot in cyber-related crimes. She argued the importanceof public companies reviewing their exist-ing disclosure regularly to ensure it is upto date.

“[They need to ask themselves if] thereis something in the existing disclosure...that is now misleading, and if there is aneed to make a corrected disclosure,” saidAvakian.

Cybersecurity: an uphill battle

Key takeawaysSeveral international studies have esti-•mated losses due to cybercrimes or cy-bersecurity failures to range from$400 billion to $2 trillion globally by2020;

While corporates are urged to step up•their internal mechanisms againstcyber attacks, investors in the US areincreasingly placing the onus of ensur-ing maximal protection of assets oncompanies invested;

Two-thirds of FTSE350 companies•being investigated have suffered fromsome kind of cyber breach in the last12 months.

Elliot Shear, W Legal, London

“There will be counter-measures from theadversaries and will becounter-countermeasures from thesecurity environment”