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THE JOURNAL FOR FTSE 350 IN-HOUSE COUNSEL

SPRING 2014

www.mayerbrown.comCOUNSEL 350Autumn 2014

THE JOURNAL FOR FTSE 350 IN-HOUSE COUNSEL

SPRING 2014

www.mayerbrown.com350350Autumn 2014

THE JOURNAL FOR FTSE 350 IN-HOUSE COUNSEL FTSE 350 IN-HOUSE COUNSEL

SPRING 2014

Autumn 2015

- UK LEGISLATION: The Magna Carta 800th Anniversary

- INSIGHTS: LinkedIn for General Counsel

- REGULATORY: Banking Services under the Microscope

WORLD MARKETSDoing Business in China

Perspectives on Cybersecurity and its Legal Implications

Mayer Brown’s Risk Index 2015

FOCUS

THE JOURNAL FOR FTSE IN-HOUSE COUNSEL

www.mayerbrown.comCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSELCOUNSEL 350

HOW FAR DOES US LAW REACH?

2

Mayer Brown’s Restructuring,

Bankruptcy & Insolvency practice has

more than 50 lawyers operating in

jurisdictions across the Americas, Asia

and Europe which means we are

well-positioned to represent clients

in all types of distressed situations,

regardless of their jurisdiction or size.

Our broad industry experience allows

us to quickly identify the proper context

for the business and legal issues that

can arise during the course of an

out-of-court restructuring or

in-court insolvency proceeding.

We also have extensive experience in

cross-border, formal insolvencies and

multi-jurisdictional matters.

Americas | Asia | Europe | www.mayerbrown.com

Strategic thinkers

33

Welcome.

SEAN CONNOLLY SENIOR PARTNER, MAYER BROWN LONDON

Welcome to the third edition of Counsel350.

Commissioned by leading international business law firm Mayer Brown, Counsel350 aims to showcase and share the breadth of content created by the firm’s London office, making Mayer Brown’s knowledge and knowhow available not only to our existing clients but to the broader FTSE in-house legal community. We don’t try to provide counsel directly from the page; instead, we present a range of full-length features, expert briefings and technical updates which we know our clients will find useful.

Many businesses operating outside the United States assume that they are not subject to US law. That is a reasonable assumption, but it is often wrong. The US government routinely investigates and prosecutes foreign companies and their executives for conduct occurring outside the United States. Adding insult to injury, civil plaintiffs regularly sue foreign businesses for alleged violations of US law. Applying US law to foreign conduct is not always fair, and many have criticised the United States for trying to impose its own views on the rest of the world. But, fair or not, the US government and civil plaintiffs alike have won many significant cases against non-US businesses. As a result, businesses everywhere must be mindful of US law. Our lead feature this edition takes a look at some of the areas of concern and asks if you are prepared.

MAYER BROWN INTERNATIONAL LLP201 Bishopsgate LondonEC2M 3AFTel: +44 (0)20 3130 3000

[email protected]

EDITOR-IN-CHIEFSean Connolly [email protected]

HEAD OF BUSINESS DEVELOPMENTMark Valentine+44 (0)20 3130 [email protected]

PUBLISHERBenjamin JP Rushton

SUB-EDITORAlex Dodd

COVER IMAGERaymond Barlow

HEAD OF DESIGNJamie Sparkes

PUBLISHED BY Communicate (Europe) Ltd3-5 Alma Road, Leeds LS6 2AH UKTel: +44 (0)113 224 2213www.communicateCo.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP, both limited liability Partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability Partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown Mexico, S.C., a sociedad civil formed under the laws of the State of Durango, Mexico; Mayer Brown JSM, a Hong Kong Partnership and its associated legal practices in Asia; and Tauil & Chequer Advogados, a Brazilian law Partnership with which Mayer Brown is associated. Mayer Brown Consulting (Singapore) Pte. Ltd and its subsidiary, which are affiliated with Mayer Brown, provide customs and trade advisory and consultancy services, not legal services. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practicºes in their respective jurisdictions. This publication provides information and comments on legal issues and developments of interest to our clients and friends. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek legal advice before taking any action with respect to the matters discussed herein.

© 2015 The Mayer Brown Practices. All rights reserved.

333www.mayerbrown.com

Mayer Brown’s Restructuring,

Bankruptcy & Insolvency practice has

more than 50 lawyers operating in

jurisdictions across the Americas, Asia

and Europe which means we are

well-positioned to represent clients

in all types of distressed situations,

regardless of their jurisdiction or size.

Our broad industry experience allows

us to quickly identify the proper context

for the business and legal issues that

can arise during the course of an

out-of-court restructuring or

in-court insolvency proceeding.

We also have extensive experience in

cross-border, formal insolvencies and

multi-jurisdictional matters.

Americas | Asia | Europe | www.mayerbrown.com

Strategic thinkers

COUNSEL - from Mayer Brown | Autumn 2014

4

WORLD MARKETS

06MARKET STRATEGIESData, telecommunications and tax fraud are just a few of the issues which the European Commission must harmonise with it’s Digital Single Market strategy.

10THE EUROPEAN OUTLOOK FOR FINANCIAL SERVICESThe European Commission under Jean-Claude Juncker has taken a more positive focus, but is talk of progressive movement matching reality?

14BUSINESS IN CHINAThe financial rewards of operating in China are well known, but the legal landscape less so. Investors need to engage with the complexities of Chinese law before conducting business.

FOCUS

20PERSPECTIVES ON CYBERSECURITY AND ITS LEGAL IMPLICATIONSThe belief that legislation cannot keep pace with cybercrime is a view held by many executives, but is this view the reality?

30THE LONG ARM OF THE LAWHow far does America’s governance stretch in policing world business?

47RISKY BUSINESSThe new Risk Index from Mayer Brown brings the subject into sharp focus.

UK LEGISLATION

24THE MAGNA CARTA 800TH ANNIVERSARYFew documents resonate so loudly and so far as the ‘Great Charter’, which is rightly lauded as the birth of liberty.

28THE QUEEN’S SPEECH 2015Points of note from the recently elected government’s mandate.

34THE RESULTS ARE IN…What next for employment law under the new Conservative government?

CONTENTS.

GLOBAL ECONOMIC RISK

CYBER RISK

INTERNET / MOBILE TRADING / SOCIAL MEDIA

INCREASING COST OFRAW MATERIALS

LOCAL / NATIONAL ECONOMIC UNCERTAINTY

LOSS OF MARKET SHARE / INCREASED COMPETITION

SKILLS SHORTAGES

SUPPLY CHAIN ISSUES

REPUTATIONAL RISK

COMPLIANCE WITH UK REGULATION / LEGISLATION

10099.8

97.6

95.184.5

84

81.580

79.978.6

IMPACT

PREPAREDNESS

COUNSEL - from Mayer Brown | Autumn 2015 350

55

36BANK RINGFENCINGAs the fall-out from the financial crisis continues to play out, the government has enforced several new regulations on banks.

REGULATORY

38BANKING SERVICES UNDER THE MICROSCOPEThe Financial Conduct Authority’s study into investment and corporate banking could have ramifications for banks, financial advisors, brokers and many others.

EVENTS

13EVENTSAdd value to your portfolio with Mayer Brown’s events, including the Trustee Foundation Course and the Pensions Trustee Building Blocks Class.

26GLOBAL LAW SUMMIT – EVENT REPORTA snapshot of the summit, held in Britain for the first time, attended by delegates from over 100 countries.

INSIGHTS

40LINKEDIN FOR GENERAL COUNSELIf you’re not embracing the opportunities that social media provide, you could be missing a trick.

44THROUGH THE LOOKING GLASSA detailed summary of the Looking Glass Report, and what it means for private practice and in-house legal departments.

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MARKET STRATEGIESThe European Commission launches its Digital Single Market strategy

The European Commission has issued a strategy paper on the Digital Single Market (DSM) that includes 16 initiatives to be completed by the end of 2016. It is the most radical industrial policy adopted by the EU since the original Single Market project nearly 25 years ago for the free movement within the EU of goods, services, labour and capital.

An underlying theme of the DSM strategy paper is a desire to ensure that competitors compete in a free and fair market. The application of competition law in the “new digital age” will be examined through a sector inquiry that was announced at the same time. The objective of creating a competitive digital single market in the EU will have a material effect on businesses in many sectors. This objective will be met by amending existing law and adopting new legislation and rules, some only recently adopted and others soon to be adopted.

The announced sector inquiry by the EU Commission’s competition department will pick up many aspects of the creation of a level playing field, which is an underlying element of the Commission’s strategy (see Competition Inquiry for details). The key proposals of the strategy are listed below.

Contract Law

Differences in Member States’ contract law are creating barriers to trade in the EU, with potentially 28 different national consumer protection and contract laws needing to be addressed by businesses. The Commission will propose initiatives on simple and effective cross-border rules for consumers and business, including a limited but harmonised set of key mandatory EU contractual rights applicable to domestic and cross-border online sales. This will include purchases of products with digital content.

E-commerce

The Commission argues that e-commerce is hampered by a lack of affordable, high-quality, cross-border delivery (parcel) services, with stakeholders facing a lack of transparency, excessive costs for small shipments and lack of inter-operability between different operators. The Commission will prepare an initiative with a focus on improving price transparency for parcel delivery and enhanced regulatory oversight. This initiative is in addition to a self-regulation exercise by industry reported to the Commission in June 2015. The Commission intends to ensure that effective competition exists.

Geo-blocking

Geo-blocking refers to the practice of an online service provider denying access by

THE JOURNAL FOR FTSE IN-HOUSE COUNSEL | WWW.MAYERBROWN.COM/COUNSEL350

WORLD MARKETS

350 COUNSEL - from Mayer Brown | Autumn 2015

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users in one country to websites based in other countries. Whilst there are some justified reasons for this to occur, the Commission regards unjustified geo-blocking as an unfair practice and will initiate action to put an end to it. The proposed competition sector inquiry will in particular look at this practice. There will be changes to the e-commerce framework and Article 20 of the Services Directive.

Copyright

The Commission has identified barriers to the Single Market caused by the current copyright regime, notably access issues to online media or the purchase of copyright-protected material. The Commission will propose measures aimed at allowing full portability of subscription services and access to on-line content in another country and facilitating more cross-border use of content for research, education, and text and data mining.

Tax fraud and evasion

Concerning the Commission’s existing actions in relation to tax fraud and evasion, the Commission will shortly present an action plan on an approach for corporate taxation in the Single Market, under which profits are taxed where the value is generated, including in the digital economy. In relation to Value Added Tax, dealing with many different national systems is identified as a serious obstacle to cross-border commerce. The Commission will propose measures that could include extending a single system of VAT for the on-line sale of tangible goods (it already exists for the sale of digital products); a common EU-wide VAT threshold applicable to e-commerce suppliers; and allowing for a single audit of cross-border businesses for VAT purposes.

Telecommunications

Recognising the telecommunications sector as the backbone of digital products and services, the Commission is already well advanced in producing new rules in its Telecom Single Market package. However, the focus of these to-be-adopted rules is on net neutrality and roaming. The package does not address the issues of spectrum, regulatory fragmentation or consumer protection rules. The Commission seeks a more ambitious reform of the telecom rules. This will address the lack of full

infrastructure competition; the “over-the-top” services provided by other services and platforms, such as VoIP; and tackling the fragmented approaches to regulation, ensuring a consistent single market approach. Universal broadband availability, including the investment incentives needed to ensure the network is constructed, will be addressed as part of the review of the Universal Services Directive. Radio, in particular, radio spectrum, will also be considered, given the current national and so fragmentary nature of the allocation of spectrum.

Audiovisual media services

The Commission will review the Audiovisual Media Services Directive given the expression of views that it needs to be broadened to encompass services available but currently not falling within its scope, in particular measures for the promotion of European works and advertising rules.

Online platforms

Online platforms such as search engines, social media, e-commerce platforms, app stores and price comparison websites raise challenges to established businesses in terms of them being disruptive competitors. They also raise challenges, according to the Commission, for integration into common economic and social rules, including taxation, labour laws and standards. The Commission notes the possibility of unfair terms and conditions of access and that some online platforms hold market power. The Commission will analyse issues such as lack of transparency, fair remuneration of

rights-holders and limits on portability. As an aside, in this context, the Commission announced on 15 April that it had sent a Statement of Objections to Google on comparison shopping services and also formally opened a separate antitrust investigation into Google’s conduct as regards the mobile operating system Android. By the former the Commission alleges the company has abused its dominant position in the markets for general internet search services in the European Economic Area by systematically favouring its own comparison shopping product in its general search results pages. The Commission’s preliminary view is that such conduct infringes EU antitrust rules because it stifles competition and harms consumers. By the latter, the investigation will focus on whether Google has entered into anti-competitive agreements or abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices.

Illegal content

Noting that responsibility for illegal content on the internet is addressed in principle in the e-Commerce Directive, the Commission identifies that removing illegal content can be slow and complicated, and there is a lack of transparency in the process. The Commission will propose to tackle illegal

An underlying theme of the Digital Single Market strategy paper is a desire to ensure that competitors compete in a free and fair market

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Kiran DesaiPartner, Brussels

Manu MohanAssociate, Brussels

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content through a common approach such as the establishment of a duty of care. Cyber security, privacy and data protection are high on the list of consumer concerns in Europe. In relation to privacy, the e-Privacy Directive is considered to be generally limited to traditional telecoms companies and not applicable to newer internet-based service providers. As a result, the Commission will review that directive once the new EU rules on Data Protection have been agreed, which is expected to be this year.

Data

On the basis that data is the “oil of the modern economy”, the Commission considers that action is required in relation to the ownership and access to data, so affecting big data, analytics and cloud services. A barrier to the exploitation of big data is the fragmented nature of the rules in Europe, as well as obligations in some EU Member States for storage of certain data within the country. At the same time, cloud computing presents its own issues of lack of portability, limits to contractual liability that may not be fair, and a balance that needs to be struck between the foreseen benefits from the use of big data and the privacy of personal data. The use of big data is also likely to be the key to research in many areas but the creation of “open science” cannot occur without access to the data. The Commission will launch a “free flow of data” initiative by imposing a free movement of data obligation on Member States. The Commission will also explore with stakeholders the emerging issues of ownership, interoperability, usability and access concerning non-personal data, including B2B data flows, machine-generated data and machine-to-machine data flows.

Information and Communications Technology standards

The Commission recognises that ICT standards have an essential role to play in increasing interoperability in the sector. The Commission considers that it can help steer the development of ICT standards that are essential for supporting industry development in Europe, e.g. Internet of Things, cyber security, big data, big data and cloud computing. The Commission will also aim to create essential sector standards in the areas of health, transport, mobile payments and facilitating cross-border provision of services.


WORLD MARKETS


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under exclusive terms and delay generic medicines entry on the market (most notably by patent litigation and agreements) affecting competition between originator companies, and competition between originator and generic companies. Subsequent actions by DG COMP were three competition cases for delay of generic entry against respectively Servier, Lundbeck and Cehphalon in each case in relation to a particular medicine. Additionally a competition case was brought against Servier for providing misleading or incorrect information in the course of the sector inquiry. Further, DG COMP imposed a monitoring exercise on market participants engaged in patent settlements. Finally, the EU proposed in 2011 legislation to implement enhanced cooperation in the area of the creation of unitary patent protection.

The e-commerce inquiry need not be limited in scope, despite the announced focus of the inquiry. Thus DG COMP may consider areas where it is already active, such as digital platforms (e.g. music and book digital platforms, hotel booking) and licensing of standard essential patents, and even areas where it is merely speculated that there are broader issues to address, such as the fact that many significant acquisitions in the digital space fall below the EU Merger Control regime because the target typically has a level of sales well below the current relevant financial thresholds.

Practical considerations: Whilst the questionnaires will typically be business oriented and intended to fill-in or expand DG COMP’s knowledge of the sector (how it works, why it works that way...), companies should consider carefully the potential implications and impact on their businesses before freely responding.In-house counsel has a role, but it is important to note that DG COMP does not recognise in-house counsel as having legal privilege. Consequently, where questions raised touch upon potentially sensitive or core business matters it would be appropriate to engage external EU counsel. As the inquiry proceeds and focuses on particular business practices or aspects of the sector, very detailed and exhaustive questionnaires will be issued, requiring significant resources to be devoted to responding. Whilst companies are used to enquiries of various sorts from government agencies and regulators, the potential importance of how a company engages in the inquiry should not be regarded as a “business as usual” activity. By the same token, whilst relevant trade associations will also be engaged in the process, a company should consider carefully the extent that it can rely on trade associations to protect and promote its individual interests vis-à-vis other sector players.

Timeline: DG COMP expects to publish a preliminary report for consultation in mid-2016. The final report is expected in the first quarter of 2017.

The current situation: The head of the European Commission’s competition department (DG COMP), Margrethe Vestager, announced in May the opening of an inquiry into the e-commerce sector. The announcement identifies a political desire to examine and likely break down what the Commission regards as business practices that limit or restrict the operation of the DSM, such as geo-blocking. The inquiry will examine industry practices and likely involve all the major players in the sector, although there is to be a focus on the consumer electronics industry, clothing sector and creative industries, through information requests and consultation on provisional findings. The inquiry will likely last for one year.

Companies involved: Companies that would likely receive the antitrust questionnaires are holders of content rights, broadcasters, manufacturers with own-selling operations, merchants of goods sold online and the companies that run online platforms such as price comparison and marketplace websites.

More details: DG COMP may undertake a sector inquiry if it concludes that “rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market” per Article 17(1) of Regulation 1/2003. This can be more broadly expressed as a concern that there exists market failure in the sector. In a sector inquiry DG COMP can request and demand information from market participants. It can even undertake “dawn raids” and did so in the pharmaceutical sector inquiry. Since the creation of implementing powers for DG COMP in 1965 there have been eight sector inquiries, namely in relation to: beer distribution; business insurance; energy; margarine; new media; pharmaceuticals; retail banking; and telecommunications. Most of these sector inquiries resulted in either or both legislation being adopted by the EU and competition cases being brought by DG COMP against particular companies. For example, in relation to the most recent sector inquiry, which concerned the pharmaceutical sector, DG COMP found commercial strategies by originator companies to prolong the commercial life of their medicines

Competition Inquiry

The potential importance of how a company engages in the (e-commerce) inquiry should not be regarded as a “business as usual” activity

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the implementation time: yet the last Commission kept proposing new pieces of legislation, increasing the backlog and the burden on those who must remain up to date with regulatory developments. On 29 January 2014 the outgoing Commission proposed its final large piece of financial services legislation, a controversial proposal for bank structural reform. The findings in the Liikanen report of October 2012 beg the question: is such legislation necessary and proportionate in addition to the legislation that the EU and Member States have already adopted in order to improve the resilience of banks and reduce the probability and impact of bank failure? What does the EU proposal add to the measures already in place which include banking union, new prudential

Financial Instruments legislation slid further down the agenda.

The history of Solvency II (which provides for the prudential regulation of insurance undertakings) demonstrates the fate of dossiers that were given second priority. Solvency II was proposed on 10 July 2007 but not adopted until 25 November 2009. It was due to come into force on 1 January 2013 but it was amended by Omnibus II which was itself proposed on 19 July 2011 and not agreed until 14 November 2013. Solvency II will not now come into force until 1 January 2016. Such delays created additional uncertainty, increased the likelihood of the regulation being out of date and out of touch with current industry practices and shortened

Recent stormy conditions

The EU’s response to the financial crisis to date has been increasing regulation but the scale and speed of the financial services agenda post-financial crisis has put an added and unsustainable burden on institutions already facing trying times.

Major developments, such as banking union, changed regulatory priorities. The last Commission’s focus on financial stability meant that dossiers such as the European System of Financial Supervision, banking union, bank resolution, deposit guarantee schemes, the capital requirement legislation and fiscal discipline were given priority. Significant dossiers such as the new Markets in

On 1 November 2014, despite British and Hungarian opposition, Jean-Claude Juncker succeeded Jose Manuel Barroso as the 12th President of the European Commission. For the next five years, he will set the European Union’s objectives, priorities for action and legislative programme. Financial institutions are still reeling from the legislative onslaught of the last Commission, which responded to the global financial crisis with ever-increasing amounts of regulation and a greater degree of EU-level control but, contrary to British fears, it appears that the Juncker Commission may have a more positive agenda.

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THE EUROPEAN OUTLOOK FOR FINANCIAL SERVICES: CALM WITH THE POSSIBILITY OF SUNNY SPELLS?Juncker’s EU agenda promises to loosen regulatory shackles


WORLD MARKETS


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The EU’s response to the financial crisis to date has been increasing regulation.“ ”

An area of justice and fundamental rights based on mutual trust

Towards a new policy on migration

A stronger global actor

A union of democratic change

Juncker stated that:

“My emphasis will be on concrete results in these ten areas. Beyond that, I will leave other policy areas to the Member States where they are more legitimate and better equipped to give effective policy responses at national, regional or local level, in line with the principles of subsidiarity and proportionality. I want a European Union that is bigger and more ambitious on big things, and smaller and more modest on small things.”

Juncker also appointed a First Vice-President (Frans Timmermans) dedicated to Better Regulation, Interinstitutional Relations, the Rule of Law and the Charter of Fundamental Rights. Part of Timmerman’s job is to ensure that the principles of subsidiarity and proportionality, which mean respectively that the EU should only take action where its aims cannot be better achieved by Member States themselves and that the action should be no more than is necessary to achieve the objectives of the EU Treaties, are respected. He is also entrusted with ensuring that all new initiatives are consistent with the Political Guidelines described above. Juncker emphasised Timmermans’ role in his mission letters to his Commissioners as follows:

“Respect for the principles of subsidiarity, proportionality and better regulation will be at the core of the work of the new Commission. We will concentrate our efforts on those areas where only joint action at European level can deliver the desired results. When we act, we will

requirements, the EU legislation on bank recovery and resolution, measures to better guarantee deposits, measures to improve the transparency and address the risks of derivative and domestic bank structural reforms? Will the proposal do anything more than increase bank costs and thus reduce the supply and increase the cost of finance? Yet, despite these concerns, the Commission adopted a proposal which went further than the Liikanen report by including a prohibition on proprietary trading. The proposal is seen by many as epitomising the last Commission’s response to the financial crisis and approach to the financial service sector.

A brighter future?

Juncker’s political guidelines presented to the European Parliament on 15 July 2014 promised something different. He recognised that Europe has suffered the worst financial and economic crisis since

the Second World War but compared the measures taken during the crisis to “repairing a burning plane while flying”. He pointed out that mistakes had been made and that a focus on crisis management had made the EU ill-equipped to deal with the social and economic challenges it was facing. He therefore proposed a new Agenda for Jobs, Growth, Fairness and Democratic Change. Juncker’s 10 priorities are as follows:

A new boost for jobs, growth and investment

A connected digital single market

A resilient energy union with a forward-looking climate change policy

A deeper and fairer internal market with a strengthened industrial base

Deeper and fairer economic and monetary union

A reasonable and balanced free trade agreement with the US

always look for the most efficient and least burdensome approach. Beyond these areas, we should leave action to the Member States...”

Jonathan Hill was appointed Juncker’s Commissioner for Financial Stability, Financial Services and Capital Markets Union. His mission letter from Juncker stated that:

“In just a few years the EU has put forward an ambitious and unprecedented series of regulatory and supervisory reforms to secure financial stability and improve the supervision of financial markets. The economic and financial crisis has shown that a much stricter control of financial markets and institutions is necessary. You should in particular ensure that the Commission remains active and vigilant in implementing the new supervisory and resolution rules fully, making European banks more robust so that they can get back to lending to the real economy. I also want you to look at the social fairness of regulation in this field: we should avoid wrong incentives for managers in these industries and aim to strengthen the rights of consumers, in particular the most vulnerable.Laying down the building blocks of a Banking Union was a huge step forward. However, there is still significant financial fragmentation in lending markets, which mainly hurts small and medium-sized enterprises and impairs the transmission of monetary policy. Completing the policy agenda and further repairing banks’ balance sheets will be essential to help credit flow to the real economy again. The next frontier will be to develop and integrate capital markets as a source of financing for innovative projects and long-term investment.”

Hill was given specific tasks on which to focus. They are:

Developing a capital markets union

Continuing to put in place a regulatory framework which ensures the resilience and stability of the financial services sector

Ensuring that the financial services regulatory framework takes into account the needs and interests of consumers and retail investors

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Alexandria CarrOf Counsel, London

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It is, of course, early days in the life of the Juncker Commission and it does have legacy issues with which to grapple but there are encouraging signs that the regulatory burden that has been placed on financial services institutions is unlikely to continue its dramatically upward trajectory under the new President. Deregulation appears unlikely but the prevailing wind promises a change in the weather.

Ensuring timely and effective implementation of the financial services regulatory reform agenda, particularly banking union

Reviewing the European system of financial supervision

Contributing to the development of the Digital Single Market, in particular the regulatory framework on digital/electronic payments in order to facilitate online purchases.

The statements of the Juncker Commission do point towards a Commission with a renewed and more positive focus. The last Commission focused on crisis management and dealing with a financial crisis after its event. The current Commission appears to be looking forward: its declared focus is on creating jobs, triggering more investment and encouraging banks to lend to the real economy again. It is notable that Hill’s mandate includes only one new financial services legislative proposal, capital markets union, which has a growth objective. He is instructed to assist in the development of the Digital Single Market but the rest of his mandate focuses on legacy issues and maintaining or improving the status quo. The Commission’s workplan reflects this position. It includes just two new financial services initiatives: capital markets union and a framework for the resolution of financial institutions other than banks.

Juncker has promised a different approach to the old Commission which introduced more EU level control of the financial services sector including banking union, which has created a new prudential regulator of Eurozone banks in the shape of the European Central Bank and is arguably the greatest transfer of sovereignty from Member States to the EU since the creation of the European Monetary Union. Juncker has promised greater respect for the sovereignty of Member States. Those EU watchers who have been concerned that financial services developments post-crisis have stretched, if not surpassed, the limits of what is permissible under the EU’s legal architecture have welcomed the appointment of Timmermans and the Commission’s commitment to the principles of subsidiarity and proportionality.


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EVENTS Pensions Trustee

Foundation CourseDATE: 1 December 2015

Becoming a trustee can be an exciting yet daunting experience, especially because the Pensions Regulator expects newly-appointed trustees to get up to speed with the law relating to pensions and the regulatory framework in just six months! Our foundation course aims to take trustees through the pensions landscape, the key legal principles relating to defined benefit funding and investment matters, and some of the specific issues relating to defined contribution schemes, in a practical and interactive way.

This event is aimed at newly-appointed trustees, in-house pension team members and more experienced trustees looking to refresh their knowledge.

For additional information, please [email protected]

SUBSCRIBE A COLLEAGUETo ensure a colleague receives the next

edition of Counsel350 please email [email protected]

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EVENTSUPCOMING

Pensions Trustee Building Blocks ClassDATE: 17th November 2015

Our Building Blocks Classes aim to give trustees a better understanding of some of the key areas of pensions and trust law. Each class considers a specific issue or area which trustees are likely to encounter in their role. Details of the topic(s) to be covered in this Building Blocks Class will be published closer to the time. This event is aimed at trustees who have already taken our Foundation Course or who have some experience of trusteeship, and in-house pension team members.

Employment SeminarDATE: 18 November 2015

Social media – the employment relationship


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350

WORLD MARKETS

BUSINESS IN CHINA: A FOREIGN INVESTOR’S PERSPECTIVE

The land of opportunity for the well-advised companySince China fully opened its doors to foreign investors more than three decades ago it has been a top recipient for international investments. Despite a slowdown of economic growth, foreign interest continues to be strong, with investment at US$119.56bn in 2014.

The relatively steady increase has been accompanied by a structural shift in the projects financed and locations selected. The regulatory regime for foreign investment has also been evolving rapidly in recent years. This article provides an extract from our Guide to Doing Business in China which provides existing and potential investors with a snapshot of the key legislation that may have an impact on foreign investment in China, as well as major issues that foreign investors should be aware of when making an investment in China.

Legal System

The Chinese legal regime for foreign investment is not straightforward, given its requirement for government approvals, filing and other China-specific requirements, such as foreign exchange control. Furthermore, the legal system consists of various levels of law, including The Constitution, national laws, administrative regulations, departmental rules and local regulations.

The government hierarchy is headed by China’s President down to the State Council, to China’s ministries and administrative agencies, and to their respective counterparts at the provincial, municipal, county and township or village level. Foreign investors need to understand which authorities are relevant to their particular activities.

The People’s Courts represent the judicial arm of the state and consist of the Supreme People’s Court, the Special People’s Courts and the Local People’s Courts. The higher-level People’s Court supervises the work of the lower-level People’s Courts. In the Chinese trial system, judgment at second instance is final, meaning that a case is only heard twice, by courts at two levels, and the last court decision will be final and binding – under limited circumstances, a retrial procedure may be triggered.

Foreign Investment Policy

Any foreign parties looking to invest in China should consult the Catalogue of Industries for Guiding Foreign Investment, published by MOFCOM and the National Development and Reform Commission (NDRC), which classifies industry sectors as prohibited, restricted, and encouraged. In order to encourage foreign investment in specific industries in central and western parts of China, MOFCOM and NDRC have jointly published a separate catalogue, enabling foreign investors to find preferential tax and land policies.

Since the Chinese central government established four Special Economic Zones in Shenzhen, Zhuhai, Shantou and Xiamen in 1979, a variety of “economic and technological development zones” or “new zones” have been established to

compete for attracting foreign investment. Local governments in these zones may give preferential treatment to foreign investors.

In September 2013, China launched its first pilot free trade zone (FTZ) in Shanghai. Following the lead set by Shanghai, three new FTZs were established in Guangdong, Fujian and Tianjin in 2015. These FTZs impose fewer restrictions on foreign investment in various service sectors. They also provide a more flexible foreign exchange regime and streamlined customs clearance procedures for foreign investors.

Approval and Registration

Various government bodies are involved in overseeing different aspects of foreign investment. These include the State Council, NDRC, MOFCOM and the State of Administration for Industry and Commerce (SAIC). Among these authorities, NDRC and MOFCOM are the main approval authorities for establishment of foreign-invested enterprises (FIE).

NDRC formulates and implements macro-economic development strategies and plans, co-ordinates and supervises national economic development, and is responsible for examining and approving foreign-invested projects from a macro-economic perspective. MOFCOM is responsible for reviewing and approving the incorporation of FIEs. Once the project is approved, MOFCOM or its local branch will issue an approval reply and an approval certificate.

Forms Of Business Vehicle

Depending on the business model, foreign investment in China typically takes the form of either a joint venture (JV) or a wholly foreign-owned enterprise (WFOE).


The Chinese legal regime for foreign investment is not straightforward

“”


15

A JV may be either an equity joint venture (EJV) or a co-operative joint venture (CJV).

A foreign company with multiple investments in China may establish a foreign-invested holding company (FIHC) to serve as an onshore holding company, which may take the form of either a WFOE, an EJV or a CJV with legal person status. Foreign-invested company limited by shares (FICLS), mainly set up for the purpose of listing, may be established with Chinese investors where there are at least two promoters and at most 200 promoters.

Two forms of investment vehicles exist which are aimed at setting up an RMB fund and making equity investments in China: a foreign-invested venture capital enterprise (FIVCE), which should primarily invest in private portfolio companies in high technology industries; or a foreign-invested equity investment enterprise (FIEIE), which is only permitted in a limited number of pilot cities, cannot invest in real estate, nor trade list stocks, corporate bonds (with some exceptions), futures or other financial derivative products.

Finance and Security

When a foreign company establishes an FIE, it must apply to the approval authority for approval of the total investment and registered capital. Registered capital is the amount of equity that investors hold in the FIE, and such equity plus debt amounts to the FIE’s total investment. The ratio that registered capital bears to the total investment must satisfy relevant mandatory requirements set by SAIC.

An FIE is permitted to borrow foreign debt up to the approved debt portion of the total investment (the total investment less registered capital – often referred to

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as the “borrowing gap”). If an FIE wishes to borrow more foreign loans than the approval amount, it must apply to the approval authority, and the registered capital must be increased in proportion to the increased debt portion.

The principal legislation governing permitted types of security and their operation includes the PRC Security Law and the PRC Property Law. The Judicial Interpretation of the Supreme People’s Court on Certain Issues Relating to the PRC Security Law also sheds useful light on points that often arise when implementing the Security Law.

Foreign Exchange

China has a strict foreign exchange control policy. Pursuant to the Forex Regulations, and other relevant foreign exchange rules issued by the State Administration of Foreign Exchange (SAFE), after an FIE is approved and established in China, it needs to complete foreign exchange registration before it may conduct transactions.

Subject to approval from MOFCOM, and registration with SAFE and PBOC, foreign investors are permitted to use “legitimately obtained” offshore RMB to make new or additional capital contributions to their FIEs, pay the transaction price for acquiring equity or assets of onshore companies, or provide shareholder loans to their onshore subsidiaries.

Acquisitions, Mergers and Division

A foreign investor may acquire an existing company in China if the target company is engaging in an industry open to foreign investment, and the percentage of foreign shareholding in the target company, after the transaction, complies with any applicable statutory restriction.

The acquisition of a company in China by a foreign investor is subject to, and will only become effective upon, approval by MOFCOM, or its local counterparts. An approval or record filing with NDRC, or its local counterpart, may also be required.Where appropriate, foreign investors may also consider acquiring the offshore holding company of the target company (Offshore Transaction), or acquiring assets

No land may be owned by individuals, enterprises and other organisations, however land use rights can be granted to or acquired by these individuals, enterprises or organisations, and they are permitted to hold, lease and develop such land

“

”


WORLD MARKETS


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owned by the target company (Assets Deal). The major advantage of an Offshore Transaction is that generally no Chinese government approval is required – except for merger control, national security review, and tax review. Other restrictions, such as the three-month payment deadline under the M&A Regulations, and the requirement to obtain consents from all the other non-selling shareholders of the target company, can be avoided.

Acquisition and Ownership of Land and Real Property

Land in China is either state-owned or rural collective entity-owned, depending on locations. Land in urban areas of a city is state-owned. Land in rural areas of a city and all rural land is, unless otherwise specified by the law, owned by the rural collective entity. No land may be owned by individuals, enterprises and other organisations, however land use rights can be granted to or acquired by theseindividuals, enterprises or organisations, and they are permitted to hold, lease and develop such land.

Land to be used for industrial purpose, commerce, tourism, entertainment and commercial residential housing, must be granted by way of tender, auction or listing for sale. If a land parcel is designated for purposes other than those set out before, and there exists only one prospective purchaser, the land use rights may be granted by way of private agreement with the local land bureau.

A foreign investor intending to acquire a property in China may opt to acquire property or, where the target is a company, an equity interest in an existing property owner. When acquiring property, the foreign investor must incorporate a real estate FIE as the buyer, which is subject to the examination, approval and filing formalities with the relevant authorities, and compliance with the statutory total investment/registered capital ratio.

Employment

Employment matters within the territory of China, including those of FIEs, are all subject to the Labour Law, the Labour Contract Law, and other laws

and regulations issued by the NPC or the central government. There are also local regulations and rules issued by provincial, municipal, and other lower-level government authorities that are only applicable to the relevant local regions.

In most cases, employers must recruit Chinese nationals if at all possible. In order to bring in a foreign employee, including a Hong Kong, Macau, or Taiwanese resident, an employer must first apply to the local labour bureau for an employment permit to bring in that employee.

Antitrust & Competition

A broad range of Chinese laws contain one or more provisions prohibiting anti-competitive practices, such as price-fixing, market-sharing and below-cost sales. These include the Anti-Unfair Competition Law and the Price Law. Many of these provisions have not been widely enforced, and the fragmented structure of the competition legislation reflects the historical absence of a cohesive competition policy in China.

Certain agreements between competing businesses, or between trading partners, are prohibited as “monopoly agreements” if they eliminate or restrict competition. The Anti-Monopoly Law (AML) also prohibits a business from abusing a dominant market position.

Prior to the commencement of the AML, most China competition-related provisions were rarely enforced. The main exception was the merger control regime under the old version of the Merger & Acquisition Regulations. However, the commencement of the AML, and the introduction of significant new legal liabilities relating to anti-competitive practices, reflects an increasing focus on competition issues in China.

Anti-Bribery and Anti-Corruption

Foreign investors should be aware of the risks they face from corruption in China, ranked 100 out of 175 in Transparency International’s Corruption Perceptions Index, compiled in December 2014.

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To encourage the importation of advanced technology and attract foreign investments, an FIE is allowed to import capital equipment with duty exemption. To be eligible for duty exemption, the company has to invest in a business that is “encouraged” according to the Catalogue or the Catalogue of Preferential Industries in Central and Western China for Guiding Foreign Investment.

Intellectual Property

China has a comprehensive regime of intellectual property laws that provide a wide range of remedies and channels for enforcement – including civil and criminal courts, several different administrative enforcement authorities, prosecutors and police. Although the laws exist, the level of infringement, and the perceived inadequacy of enforcement, has been the subject of disputes between China and its trade partners, particularly the US.

Environmental Protection

The Environmental Protection Law of the PRC is the national law governing all environmental protection matters in China. In addition, other laws and regulations such as the Prevention of Atmospheric Pollution Law and the Prevention of Water Pollution Law have been enacted to regulate different parts of the environment. Different provinces and municipalities have also implemented their own environmental protection regulations – these are applied regionally. FIEs in China are subject to the same regulatory regime of environmental protection as domestic enterprises.

Product Liability

A company that manufactures, sells or distributes its products in China must meet various general requirements imposed by law on the products. In addition to the general statutory duties and regulatory requirements, a company engaged in a specific industry such as food, medicine and pesticide is required to observe other statutory duties and regulatory requirements specific to that industry.

The China Food and Drug Administration (CFDA), AQSIQ and SAIC are the key

Corruption is a product of a number of factors, including the involvement of the government in commerce and finance, government bureaucracy, and a reliance on third-party intermediaries when entering and operating within the Chinese market. The government acknowledges that corruption is a threat to its economic development and social stability, and has started to address the problem head-on.

Distribution and Franchising

Foreign investors can set up foreign-invested commercial enterprises (FICE) to directly engage in wholesaling, retailing, commission agent’s services, and franchising in China. In other words, foreign investors may, through a FICE incorporated by themselves, import goods into China and then distribute them in the domestic Chinese market, or purchase goods from the domestic Chinese market, and then export them to other countries.

Foreign investors may enter into franchising arrangements with Chinese operators. A franchisor must have at least two direct sales stores and these must have commenced business activities for more than one year before it may qualify as a commercial franchisor.

Trade and Customs

Importing and exporting goods in China requires, first of all, the registration of the company with several government agencies. The government agencies are: MOFCOM, China Customs, General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), SAFE and the tax authority. Alternatively, the company can engage a registered “foreign trade operator” to act as its agent and import or export on its behalf.

Processing Trade is a major scheme under which companies can enjoy bonded treatment in China. Under processing trade, a company can import raw materials, spare parts, packaging materials under bonded condition, provided that it processes and manufactures finished products for export overseas. Around 45 percent of China’s imports and exports are conducted as processing trade.


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government authorities in charge of product quality.

Insolvency

The Enterprise Bankruptcy Law (EBL) was enacted in 2006 and came into effect on 1 June 2007. The EBL applies to all legal entities, regardless of whether or not they are state-owned enterprises, and includes Chinese companies operating overseas and foreign companies operating in China, that are FIEs.

Overall, the insolvency regime in China largely follows standard international insolvency approach and recognises the rights of secured creditors and provides for cram down, moratorium, and avoidance provisions. The court has the most significant role in the outcome of restructuring and insolvency procedures. The debtor’s liabilities owed to employees and the state – such as wages, social insurance premiums and taxes – rank ahead of unsecured creditors on the debtor’s insolvency.

Dispute Resolution

Civil and commercial disputes are traditionally resolved by litigation in Chinese courts. The Chinese court system comprises the Supreme People’s Court, the Higher People’s Courts, the Intermediate People’s Courts and the District People’s Courts. Jurisdiction depends primarily on the size of the claims.

The procedure for conducting legal proceedings is laid down in the Civil Procedure Law and its judicial interpretations issued by the Supreme People’s Court. Mediation is not mandatory under Chinese laws but in practice, Chinese courts encourage the parties to consider mediation before pursuing their claims.

For enquiries, please contact Meggie Tao at [email protected].

The government acknowledges that corruption is a threat to its economic development and social stability, and has started to address the problem head-on

“”

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PERSPECTIVES ON

CYBERSECURITY AND ITS LEGAL IMPLICATIONS

The National Institute of Standards and Technology (NIST), an agency of the US Department of Commerce, released its “cybersecurity framework” in February 2014 to help regulators and businesses identify and mitigate cyber risks that could affect national and economic security. According to the Ponemon Institute’s 2014 Cost of Data Breach Study: Global Analysis, the total average cost per data breach for US businesses was in excess of $5.85m. Unsure of Congress’ ability to respond quickly with effective legislation to address the myriad issues surrounding cybersecurity, companies are developing their own cyber risk management protocols.

Survey background

In an effort to gauge industry concerns and measure corporate responses to these significant privacy and security threats, Mayer Brown conducted an informal survey of key executives and corporate counsel in 15 industry sectors between mid-November 2014 and mid-February 2015. The majority of the companies were from finance and financial institutions, professional services, utilities and energy, healthcare and pharmaceuticals. While

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two-thirds (70%) of the respondents’ companies have a chief information officer (CIO) or both a CIO and a chief privacy officer, one-fifth (21%) of the companies had neither.

Summary analysis

Survey respondents overwhelmingly considered the disclosure of personally identifiable information as the biggest cyber-related threat to their companies (63%). Concerns about interruption of business operations such as system sabotage ranked second (24%). Less than 10% of the respondents considered theft of trade secrets as the most serious threat. Most respondents (63%) considered cyber issues to be just one more cost of doing business or that these problems can be overcome. Well over half (57%) of the respondents estimated that litigation risk posed by cybersecurity issues has a relatively modest impact on their cybersecurity planning.

For some, pessimism reigns. Around 29% of respondents have a negative outlook on cyber-related issues, believing that cybercrime will always be one step ahead of legislative protections and enforcement.

The survey revealed that respondents’ concern about the adverse impact of regulatory enforcement appreciably affects their willingness to share incident information with the government. Liability protection is a critical component of a voluntary cyber information-sharing program. Without meaningful liability protection, companies will be hesitant to participate because any act or omission made by a participant based upon cyberthreat information received by that entity could subject it to liability. This concern may also explain why only 23% of respondents said that their company had built a close working relationship with either a government enforcement agency (FBI, US Secret Service) or a prosecutorial agency (DOJ or state attorneys general) on cyber issues. An equivalent percentage (23%) reported working closely with industry regulatory (FTC, FCC, FDIC, CFPB). Over 40% said “no, they have no such relationship,” while approximately 24% did not know.

The survey showed that 84% of respondents expect clear national standards on data breach notification to emerge within the next five years. Smaller numbers expected national standards for securing personally identifiable information, investor disclosures and liability protection for information sharing.

We survey corporate executives on industry concerns over cybercrime and security



21

This may reflect a growing recognition in Congress that having 47 different reporting standards does not make sense. Given the number of breaches that have occurred in recent years, it makes sense to instead have a clear set of standards, not just for notification but for information security as well.

Nearly 50% of respondents weren’t sure if the NIST Cybersecurity Framework has been helpful to their company in managing cybersecurity risk. This may indicate that it is premature to judge the NIST Framework, or that companies are not sufficiently aware of how it is meant to be helpful. Mayer Brown has published an informative overview which can be found at:

www.mayerbrown.com/The-NIST-Cybersecurity-Framework-Overview-and-Potential-Impacts

NB. These figures have been rounded to the nearest whole number.

Question 1Does your organisation have a Chief Privacy Officer (CPO or equivalent) or a Chief Information Officer (CIO or equivalent) who is accountable for developing, implementing and maintaining an organisation-wide governance and privacy/cybersecurity program?

SURVEY RESULTS

Both a CPOand a CIO

Neither a CPO or a CIO

Chief Information Officer (“CIO” or equivalent)

Chief Privacy Officer (“CPO” or equivalent)

Don’t know the answer

Question 2How would you describe your outlook on cybersecurity issues? For this survey, “cybersecurity issues” could include breaches, attacks, denial of service, loss of data, and/or damage to cyber infrastructure.

4%

37%

33%

21%

5%

27%

Optimistic, we’re catching up with or

getting ahead of the problem(s)

29%

Pessimistic, the problem(s) will always

be one step ahead

36%

Neutral, cyber-related issues are a cost of

doing business

9%


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Question 3Which do you consider the biggest threat to your company?

Question 4Has the NIST Cybersecurity Framework been helpful to your company in managing cybersecurity risk?

63%

4%

9%

24%

KEY:

Breach of confidential personally

identifiable information

Loss of availability or sabotage of

systems

Theft of trade secrets


Question 5

Has your company built a close working relationship with a government entity on cybersecurity issues? (more than one answer could have been selected).

20%Yes, a law enforcement agency (eg. FBI, US Secret Service)

23%Yes, an industry regulator (eg. FTC, FCC, FDIC, CFPB)

41%No

3%Yes, a prosecutorial agency (eg. State AG, DOJ)

7%Yes, an incident response agency (eg. US-CERT)

24%Don’t know the answer

Question 6

Which of the following percentage ranges best represents the estimated amount that litigation risk associated with cybersecurity issues influences your company’s cybersecurity planning?

34% 0%-20%

23% 20%-40%

10% 40%-60%

6% 60%-80%

0% 80%-100%

27% Don’t know the answer

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Question 8Do you expect clear national standardsto emerge in the next five years in the following areas? (more than one answercould have been selected)

84% Data breach notification

54% Security of personally identifiable information

41% Investor disclosures

34% Cybersecurity of third-party service providers

30% Liability protection for information sharing

Question 11Does your organisation have a written data protection plan? If so, how was the plan prepared? (more than one answer could have been selected).

30% We retained an outside IT expert or outside counsel to assist in preparing the plan

30% We consulted the PCI, NIST and or ISO standards in preparing the plan


Question 12If your company suspected that a cyber-related incident had occurred, which two external entities on the following list do you believe your company would contact first?

19% IT security company

21% Consulting firm with cybersecurity advisory

28% Law firm

7% Insurance company

13% Law enforcement (any level)

4% Some other external entity not listed here

Question 9Has your company developed a global strategy to meet the differing cybersecurity and data privacy legal requirements of the countries in which you operate?

46% Yes

27% No, we handle compliance on an individual country basis

17% Not applicable


Question 7

Does concern about regulatory enforcement actions or other adverse regulatory action impact your company’s willingness to share incident information with the government?

14% 1 (No Impact)

11% 2

27% 3

13% 4

4% 5 (Significant Impact)


Yes, for liability

27%

Question 10Does your company have a separate cyber insurance policy?

Yes, for remediation costs

7%Yes, for penalties or fines

0%No, but considering in the next 12 months

14%No, but might down the road

14%No interest

4%

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Don’t know

33%

COUNSEL - from Mayer Brown | Summer 2015350

UK LEGISLATION

24 THE JOURNAL FOR FTSE IN-HOUSE COUNSEL | WWW.MAYERBROWN.COM/COUNSEL350


THE MAGNA CARTA 800TH ANNIVERSARY - OUR LEGAL DNAOn June 15 it was 800 years since King John put quill to parchment to appease unruly barons at Runnymede.

Under duress, the unpopular monarch, who still believed in a divine right to rule his subjects, sealed the Magna Carta. The powerful landowning barons, unhappy with John’s warmongering and the resultant extortionate fiscal policies, contrived to commit the King to the protection of church rights, protection from illegal imprisonment, access to swift justice, and, most importantly, limitations on taxation and other feudal payments to the Crown. The document granted unprecedented liberties to freemen.

An embarrassed King John managed to get the charter annulled by Pope Innocent III just two months later, but the idea of a fair and just society, with nobody above or below the law, had been sown.

Certainly in the US, the centuries-old covenant is still revered as a seminal document and the inspiration behind the American Constitution of 1787. The Bill of Rights, part of the Constitution, places personal liberty and justice, and the restriction of government power above all else, just as the Magna Carta did. Indeed, President Obama referred to it twice while visiting the UK in 2013. As an international firm its not hard to see how the Magna Carta affects the way we deliver legal services today - it could be said that it gifted the UK the right to be the centre of legal excellence that it has become.

The charter has been resurrected and rewritten, added to and edited, but the underlying message remains. The current UK tax system, human rights laws, financial market regulations, all owe something to the charter. No taxation without representation and a right to trial by jury are just two of the modern-day givens which the charter set out.

Of course, the removal of fish weirs from the Thames and the standardisation of measures of wine, ale and corn have no relevance today, and the medieval document couldn’t possibly have legislated for the Second World War and the horror of the holocaust. However, the Universal Declaration of Human Rights, created by the United Nations as a result, was described as the ‘international Magna Carta’ for human kind, demonstrating the origins of its ideas lay in the historic document of 1215.

The charter is a beacon for fighting against oppression and lack of rights. It will always be relevant when discussing terrorism, dictatorships or the lack of basic rights in countries today. The charter’s democratic principles, distributed by social networking and the internet, will no doubt continue to have huge influence wherever freedom is under attack.

The celebration of the 800th Year anniversary provides yet another reminder that as lawyers we are empowered to serve based on the rule of law, and that few assemblies have resulted in such agreements that persist and resonate regardless of the intellectual, political or technological age. It’s right we feel proud as lawyers to be representatives of this living document and take time to reflect on the importance of the principles it extolls.

One thing is for sure, if the Magna Carta was given an overhaul for the digital age, the key themes of justice, liberty and freedom would still form the bedrock upon which modern law would be built.

You could argue that this important symbol of liberty is Britain’s greatest ever export

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Sean ConnollySenior Partner, London

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GLOBAL LAW SUMMIT– EVENT REPORTWe asked Thomson Reuters, sponsors of the Global Law Summit to provide their review of the event


EVENTS

The world’s legal community came together in the Queen Elizabeth II Conference Centre in London earlier this year for the Global Law Summit, Britain’s first ever event organised to highlight London’s pre-eminence as a global legal centre. Over the course of three days, delegates heard discussion and debate on some of the most pressing issues that are shaping the legal agenda globally. It also served as an opportunity to celebrate the upcoming 800th anniversary of the sealing of Magna Carta.

As the strategic sponsor, Thomson Reuters was delighted to support the Global Law Summit. It provided us with a unique opportunity to connect with our customers in the legal industry as there were 2,000 delegates, including 90 Ministers plus numerous Chief Justices, Heads of Bar Associations, Chief Counsel and other legal professionals, representing more than 100 countries.

Delegates were welcomed to the Summit by Sir David Wootton Co-Chair, Global Law Summit followed by keynote addresses from: The Rt Hon The Lord Thomas of Cwmgiedd, Lord Chief Justice of England and Wales; The Rt Hon Chris Grayling MP, Secretary of State for Justice and Lord Chancellor; Eric Holder, US Attorney General; Angel Gurria, Secretary-General, OECD; and Karim Massimov, Prime Minister of The Republic of Kazakhstan. Key executives at Thomson Reuters were also fortunate to speak alongside some of the 150 world-class speakers with unrivalled expertise across different areas of law and business.

There were a range of sessions on offer for delegates attending the Summit, spread across four main themes: Driving economic growth through the rule of law; law at the heart of 21st Century business; Magna Carta principles and modern world solutions; and law as a foundation for a modern prosperous society.

As well as providing networking opportunities between governments, legal bodies and businesses, the Summit included around 40 separate sessions covering different issues related to how law enables business to flourish across different jurisdictions.

In this article, we will focus on a couple of the sessions that I trust will appeal to readers of ‘Counsel 350’.

A long history of supporting the rule of law

It has already been mentioned that the Summit recognised the 800th anniversary of the sealing of Magna Carta, a document which has formed the basis for democracy and the legal system in Britain and which underpins the US constitution.

Less well known than Magna Carta is the history of Thomson Reuters’ support for the legal profession. It has a history of supporting lawyers and the rule of law that goes back some 200 years. Starting with the formation of the Sweet & Maxwell publishing business, this support now extends to online solutions such as the Practical Law know-how service and software tools such as Serengeti and Thomson Reuters Elite. Supporting the rule of law is central to our values and it is why we have committed to support Magna Carta-related events both here in the UK and in the US.

But the Summit was also very much about looking forward. And we were as keen as anyone to examine how the role of the legal professional is evolving in the 21st century, what are the factors driving that change and how we, as a business, can support the profession and our customers through these changes.

Delivering justice in a digital age

On the first day of the Summit, a panel of speakers discussed current initiatives designed to employ innovative technology in our justice systems, including the expanding application of online negotiation and dispute resolution techniques.

The panel featured: Claire Wardle, Group General Counsel at Kingfisher Plc; Lorna Jack, Chief Executive, The Law Society of Scotland (Chair); John MacKenzie, Partner, Shepherd and Wedderburn LLP; and Mahesh Rengaswamy, Senior Director, Global Justice Programs at Thomson Reuters.

Innovation in the use of technology has had a huge impact on how the legal profession delivers legal services and engages with clients, colleagues and the courts, while court systems are increasingly looking towards digital solutions for e-filing and case management to improve efficiency. It is also an area Thomson Reuters is actively working on with governments around the world. The discussion was very timely, coming a week after the UK Civil Justice Council called for a state-backed online dispute resolution service to increase access to justice by delivering a more affordable and user-friendly court process.


GLOBAL LAW SUMMIT– EVENT REPORT

27

The panel discussed how far justice could extend into the virtual space, and how tomorrow’s lawyers and judges will operate in an increasingly digitised court environment.

It was argued that fully digitised courts could enable judges and lawyers to become true stewards of the framework of the rule of law, less weighed down by administrative tasks and paper chasing. Digitising a court system also offers an opportunity to improve processes and guidance for citizens, improving access to justice.

At the same time businesses are benefitting from the application of online systems, particularly in high-volume dispute resolution. Semi-automated platforms for resolving B2B and B2C disputes offer a quick and cost-effective tool for managing relations with customers and others.

The future of the legal profession

A highlight of the Summit was the plenary session that looked at the future of the legal profession. With standing room only, delegates came to listen to: Professor Richard Susskind OBE; David Morley, Worldwide Senior Partner, Allen & Overy LLP; Chris Osborne, Co-Chairman, EMEA, FTI Consulting; and Susan Taylor Martin, President, Legal, at Thomson Reuters.

Professor Susskind argued that the practice of law and the administration of justice will change more radically over the next decade than in the last century. Rapid advances in technology, including artificial intelligence, social networking, and robotics, will drive the widespread use of internet-based legal diagnostic tools, tele-lawyering, online dispute resolution, and virtual hearings.

The emergence of new ways of sharing legal expertise in society and the replacement of many legal tasks by machine, he argued, will require us to radically rethink the scope and nature of the legal profession.

Among the factors driving change is the pressure on in-house legal departments to do more with less. This had led to the decomposition of many legal processes and has been the impetus for many law firms looking at different ways of delivering legal services. The panel agreed these pressures show little sign of diminishing. The legal profession is going through significant long-term structural change and the liberalisation of the market has brought alternative providers that enable new ways of sourcing legal work. Examples

of this included low cost service centres, legal process outsourcers (including the Thomson Reuters-owned Pangea 3 business), contract lawyers and paralegals. Legal workflows and services provided by law firms are being de-constructed and re-imagined in new and more efficient ways through process improvement, technology and alternative staffing strategies. It was clear from the session that technology will continue to be a strong force in the industry for the foreseeable future, but whether it is disruptive or not is a matter of interpretation. Yes, technology will disrupt many current ways of doing things, but that does not mean diminished opportunities for lawyers. In many cases, technology will mean more, rather than less, opportunity for lawyers, because it will enable lawyers to serve previously underserved populations such as consumers and small businesses. Technology might mean that those services won’t look like traditional legal services delivery, but they will be guided and ‘engineered’ by lawyers.

Continuing the conversation…

While the summit may have come to an end, there can be little doubt that it achieved everything it set out to do. Not only was it a great opportunity to see and hear from so many distinguished speakers in one place, it also enabled many delegates to make new connections and to come away with a different perspective.At Thomson Reuters, we look forward to continuing the many conversations that started at the Global Law Summit.

The emergence of new ways of sharing legal expertise in society and the replacement of many tasks by machine will require us to radically rethink the scope and nature of the legal profession

“

”

Lucinda Case VP Customer Segments & Strategy

Thomson ReutersLegal UK & Ireland

28

THE QUEEN’S SPEECHKey announcements for the environment, planning and energy sectors

2015

The Queen’s Speech delivered to both Houses of Parliament on 27 May 2015 marked the Conservative government’s first opportunity to outline its key reforms aimed at delivering the mandate it received at the General Election.

The government’s priorities will be delivered through a number of new bills as follows.

Housing

The new Housing Bill will introduce a statutory register for brownfield land, which is intended to help bring forward new housing schemes. The government will seek to achieve the target of having Local Development Orders in place on 90% of suitable brownfield sites by 2020.

The introduction of a statutory register for brownfield land was last proposed by Margaret Thatcher’s government in the early 1990s. It was dropped after protests from the property industry on the basis that land on such a register could be blighted. Paradoxically, therefore, this could have the unintended effect of holding back new housing schemes. We expect that this proposal will be the subject of similar objections.


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29

Energy

The proposed Energy Bill will seek to ‘increase energy security’ by establishing a new Oil and Gas Authority (OGA) as an independent regulator which will be charged with the asset stewardship and regulation of oil and gas recovery in the UK. Environmental regulation stays with the Department of Energy and Climate Change.

In addition, the power to determine planning applications for large scale onshore wind farms (those over 50MW) in England and Wales will be devolved to local planning authorities, in an effort to allow local constituencies to have greater control over these forms of development, by removing the requirement for consent from the Secretary of State. This proposed reform will not apply to Scotland and Northern Ireland.

Also, the government will separately deliver on its commitment to end subsidies for new onshore wind farms.

The Northern Powerhouse

The Cities and Local Government Devolution Bill will be introduced to devolve certain powers to cities with elected metropolitan mayors, in an effort

to develop a Northern Powerhouse. The devolution of certain powers regarding transport, housing and policing will seek to boost growth and productivity in these regions.

These aims are supported by the construction of phase 1 of the High Speed 2 (HS2) railway via the High Speed Rail (London-West Midlands) Bill, which will grant planning permission for the HS2 project.

Paris 2015 Climate Change Conference

As part of its commitment to an 80% reduction in emissions by 2050 from 1990 levels, the government is seeking to agree a new global climate change agreement in Paris during the 2015 United Nations Climate Change Conference to take effect from 2020. Any agreement may have material impacts upon the operation of the EU Emissions Trading System and the carbon market generally. For the first time in a number of years, there is a high expectation that the annual conference will deliver a legally binding replacement to the Kyoto Protocol, which expired in 2012.

The Cities and Local Government Devolution Bill will be introduced to devolve certain powers to cities with elected metropolitan mayors, in an effort to develop a Northern Powerhouse

“”

Michael HutchinsonPartner, London


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THE LONG ARM OF THE LAWMany businesses operating outside the United States assume that they are not subject to US law – a reasonable assumption that is often wrong. Fair or not, the US government routinely investigates and prosecutes foreign companies and their executives for conduct occurring outside the US. Furthermore, civil plaintiffs regularly sue foreign businesses for alleged violations of US law. As a result, businesses everywhere must be mindful of US law.

Most of the US laws with extraterritorial application relate to international commerce and trade. The laws that are most commonly enforced against non-US businesses include competition laws, anti-bribery laws, anti-money laundering laws, securities laws, and customs and trade sanction laws.The US relies on two different theories to justify the extraterritorial application of its laws. Most often, it is to regulate foreign business activity on the theory that the conduct threatens to harm US companies or US consumers. There is also the threat to its national interests. This is perhaps best seen in the area of international trade policy – trade restrictions or embargoes have been placed against certain nations.Generally speaking, the US cannot compel a foreign business to appear in a US court, though they can seek to extradite a corporation’s executives. Also, US authorities can seek to freeze or forfeit a foreign company’s US-based assets, which can effectively block a foreign corporation from the financial markets.

Civil plaintiffs have fewer tools available, but they can obtain discovery of foreign records –¬ discovery in the US is incredibly broad – and can enforce judgments from US courts in a variety of ways.

Non-US businesses should implement compliance programmes that take into account US laws. When investigations or civil suits arise, non-US businesses would be wise to consult with US counsel immediately.

The Foreign Corrupt Practices Act (FCPA)

In the 1970s, the US Congress discovered that many US-based businesses routinely paid bribes to foreign government officials to win contracts or business. Congress responded by enacting the FCPA, which sat mostly dormant for the next 20 years.

In 1998, Congress expanded the jurisdictional reach of the FCPA and over the following decade Federal authorities began extracting huge settlements from companies that bribed foreign officials or that concealed bribe payments in their books and records.

In recent years, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have stepped up enforcement of the FCPA against individuals. Company executives, including non-US executives, can face huge fines and lengthy prison terms for FCPA violations.

The FCPA’s anti-bribery provisions prohibit directly or indirectly: offering, paying, promising to pay, or authorising to pay “anything of value” to foreign officials, political parties/officials, candidates for foreign public office, or any person in order to obtain or retain business, secure any improper advantage, or influence or induce any act of a foreign official.

The DOJ and the SEC have concurrent FCPA enforcement jurisdiction. In addition, civil plaintiffs (including the countries where the bribery occurred) now routinely file securities actions.

The FCPA provides for substantial criminal and civil penalties. Criminal violations of the anti-bribery provisions expose entities to fines of up to $2m per violation. Criminal violations by individuals often result in imprisonment, property forfeitures and significant fines.

All companies should stress compliance throughout their operations. Companies should prepare and enforce written compliance policies, ensure that these compliance materials are distributed to all employees, require regular training, establish internal reporting programmes, and regularly audit and update their policies and systems.

Anti-Money Laundering (AML)

US law criminalises money laundering. The key federal AML statutes are 18 USC § 1956 and 18 USC § 1957. Section 1957 prohibits certain financial transactions in amounts greater than $10,000 when the funds are derived from certain crimes. Section 1956 generally requires that the defendant conduct a financial transaction with the intent either to promote the carrying on of specified unlawful activity or to conceal or disguise the nature, source, location or ownership of proceeds of specified unlawful activity.

A US court may exercise jurisdiction over a transaction that violates Section 1956 if it was by a US citizen or if the transaction occurred, in part, in the United States. Similarly, a US court may exercise jurisdiction over a transaction that violates Section 1957 if the defendant is a US person (in the case of corporations, this means a corporation organised under US law and its subsidiaries) or if the offence takes place in the United States.

The DOJ is primarily responsible for enforcing the AML laws. In addition, under


COUNSEL - from Mayer Brown | Autumn 2014 350 350

How far does America’s governance stretch in policing world business?


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various other AML statutes, financial services regulatory agencies (such as the Federal Reserve Board), the US Department of the Treasury (through the Financial Crimes Enforcement Network) and the SEC may impose civil money penalties.

The Bank Secrecy Act (BSA), among other things, requires certain financial institutions in the United States (eg. banks, broker dealers, money services businesses and casinos) to have an appropriate AML programme.

The Antitrust and Competition Laws

Over the past 20 years, the DOJ has embarked on a campaign to convince other nations to criminalise anti-competitive business conduct. That campaign has been remarkably successful, nevertheless, the US imposes more criminal fines, and jails more individuals, for antitrust offences than any other nation.

US antitrust law is generally aimed at stopping two types of anti-competitive acts: collusive acts taken by two or more persons and unilateral acts that occur when an individual abuses its dominant position in a relevant market.

Activities that affect US interstate commerce are actionable under federal antitrust law. Foreign activities may be subject to US antitrust law when they affect US import commerce or if the conduct has a direct, substantial and reasonably foreseeable effect on US commerce and this domestic effect gives rise to a claim under federal antitrust law.

Federal antitrust law is enforced by the DOJ, which has exclusive enforcement authority for federal criminal actions, the Federal Trade Commission, state attorneys general and private plaintiffs.

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The US government routinely investigates and prosecutes foreign companies and their executives for conduct occurring outside the US

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OFAC regulations may provide general licenses authorising certain categories of transactions, such as those involving the protection of intellectual property in a sanctioned country, or trade for humanitarian purposes. OFAC also issues specific licenses on a case-by-case basis upon written application.

All companies should maintain a robust compliance programme that includes educating directors, officers and employees on the requirements and prohibitions of US economic sanctions. OFAC encourages companies to voluntarily disclose past violations as soon as they become aware of them.

Securities Enforcement

In the wake of the stock market crash of 1929, the US Congress passed legislation to strengthen American capital markets. This legislation included the Securities Act of 1933 (the Securities Act) and the Securities Exchange Act of 1934 (the Exchange Act).

The Securities Act generally requires companies issuing securities that are publicly traded on a US securities exchange to register those securities with the SEC. The Exchange Act created the SEC and established a framework under which companies with registered securities must file periodic reports with the SEC.

The Securities Act typically requires companies issuing securities that are traded on a US securities exchange to register those securities with the SEC.

Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act are the most commonly cited statutory provisions prohibiting fraud in the US securities markets. The SEC has also promulgated Rule 10b-5 to implement the fraud prohibitions of Section 10(b).

If a foreign company engaged in transactions in securities listed on US securities exchanges or otherwise engaged in domestic US transactions in other securities, it may be subject to anti-fraud provisions of US securities law.

Foreign accounting firms that perform audit work for companies with securities listed on a US exchange are subject to

US securities laws. The SEC and the US Public Company Accounting Oversight Board (PCAOB) have authority, under the Sarbanes-Oxley Act of 2002 (SOX), to regulate foreign accounting firms that prepare or furnish an audit report with respect to an issuer of securities listed on a US exchange.

Foreign companies should implement strong internal controls and compliance programmes when engaging in transactions involving securities listed on a US exchange. Moreover, a foreign company should think carefully before listing its own securities on a US exchange.

The Anti-Terrorism Act

After the terrorist attacks of 9/11, the United States (like many other nations) began employing a multi-faceted strategy for combating terrorist financing.

Among other things, the US enacted the Suppression of the Financing of Terrorism Convention Implementation Act of 2002, which amended an existing domestic law – the Anti-Terrorism Act (ATA) – to add provisions implementing the Financing Convention by making it a crime to provide or collect funds with the intention that the money be used for terrorist activities.

The ATA makes it a crime to unlawfully and willfully provide certain support for terrorist activities or to terrorist organisations, and creates a civil action and federal jurisdiction for recovery of treble damages and attorneys fees for any US national injured in his or her person, business or property by an act of international terrorism.

Section 2339B of the ATA specifically provides for “extraterritorial federal jurisdiction.” Under Section 2339B, jurisdiction exists where:• An offender is a national of the United

States or a lawful permanent resident (green card holder)

• An offender is a stateless person whose habitual residence is in the United States

• After the conduct required for the offence occurs, an offender is brought into or found in the United States, even if the conduct required for the

US states have separate antitrust laws that are enforced by private plaintiffs and local attorneys general.

The antitrust laws provide for substantial criminal and civil penalties. For corporations, criminal violations of US antitrust law can be punishable by a fine of up to $100m. For individuals found guilty of antitrust offences, the maximum sentence for a Sherman Act violation is 10 years in prison, a fine of up to $1m and three years of supervised release.

The DOJ has adopted policies that significantly benefit companies that detect and disclose antitrust violations quickly. For example, the first company to report a criminal antitrust violation to the DOJ generally receives corporate leniency, meaning that the company will not be criminally charged with an antitrust offence.

Economic Sanctions and Trade Restrictions

Economic sanctions restrict economic and trade relations between persons subject to the jurisdiction of the United States and certain targeted individuals, entities, countries and regimes. Secondary sanctions against Iran target the activities of persons outside the jurisdiction of the United States.

The Office of Foreign Assets Control (OFAC) in the US Department of the Treasury is principally responsible for administering and enforcing US economic sanctions. All “US Persons” must comply with US economic sanctions programmes administered by OFAC.

The US maintains a number of economic sanctions and embargoes against geographic regions and governments, and “list-based” programmes which target individuals. Comprehensive countrywide sanctions programmes are currently maintained against Cuba, Iran, Sudan and Syria. More limited sanctions apply to Burma (Myanmar) and North Korea.

The penalties for violating OFAC sanctions include civil and criminal fines as well as imprisonment.


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offence occurs outside the United States

• The offence occurs in whole or in part within the United States

• The offence occurs in, or affects, interstate or foreign commerce

• An offender aids, abets or conspires with a person over whom jurisdiction exists

Section 2339C of the ATA provides for jurisdiction over an “offence [that] takes place outside of the United States” if:• A perpetrator is a national of the

United States or is a stateless person whose habitual residence is in the United States

• A perpetrator is found in the United States

• The offence targeted or injured (i) US government property, including overseas embassies, (ii) any person or property in the United States or (iii) any US national or the property of a US national or US corporation

The ATA is enforced by the DOJ and private civil plaintiffs. Violations of Sections 2339A, 2339B and 2339C provide for the imposition of significant fines and carry prison sentences of up to 15 years (or up to life, if the violations resulted in the death of any person).

A non-US company, particularly a non-US financial institution, should have in place procedures ensuring that it does not wire funds to or from, maintain accounts for or provide other goods or services to persons or entities identified as being terrorists or terrorist-affiliated.

The Customs Laws

US importers have long been subject to civil penalties for violating US trade law. In recent years however, the DOJ has taken a more aggressive approach in enforcing these violations.

CivilTraditionally, the US government has enforced the customs laws through civil litigation. Penalties varied depending on the severity of the violation, as set out below:1. Negligence: Fines ranging from 0.5 times to 2 times the total duty loss

Non-US businesses should implement compliance programmes that take into account US laws

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2. Gross Negligence: Fines ranging from 2.5 to 4 times the total duty loss3. Fraud: Fines ranging from 5 to 8 times the total duty loss

CriminalThe DOJ increasingly has pursued customs violations through criminal actions. Prosecutors can pursue these actions under a variety of statutes, including:• 18 USC § 541 – Knowingly affecting

the entry of goods at less than true value

• 18 USC § 542 – Knowingly introducing, or attempting to introduce, goods by means of a fraudulent invoice, declaration, affidavit, letter, paper or false statement

• 18 USC § 545 – Defrauding, or importing any banned merchandise into, the United States

False Claims ActCustoms violations are frequently targeted by whistleblowers, who can brings suits of behalf of the government under the False Claims Act (31 USC § 3729). Not only does the False Claims Act makes it illegal for any person or entity to knowingly submit a false claim for payment, it also makes it illegal to make a false statement (or to omit required information) to avoid having to pay money or duties to the US government. Monetary penalties include fines for each false claim, as well as treble damages, meaning the government can collect three times the amount of the actual fraud.

To read the full paper, please visit: www.mayerbrown.com/The-Long-Arm-of-US-Law/

Authors: Kelly B. Kramer, Simeon M. Kriesberg, Alex C. Lakatos, Sydney H. Mintzer, Matthew Rossi, Carol J. Bilzi, Matthew J. Alexander, Stephen M. Medlock, Christopher R. Ford, Kelsey M. Rule.

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THE RESULTS ARE IN: WHAT NEXT FOR EMPLOYMENT LAW UNDER THE CONSERVATIVE GOVERNMENT?

UK LEGISLATION


The Conservative Government has now been in place for a

few months. We discussed in outline how each of the parties’

manifesto pledges could impact employment law, in our May update which can be found on our website by searching our publications for Employment Round-up. We can now take a more focused look at what we can expect the employment law landscape to look like in the coming months.

Going forward, the Government is expected to prioritise laws on work and childcare. In their first legislative programme, a number of employment related bills were announced including the EU Referendum Bill, the Full Employment and Welfare Benefits Bill, the Enterprise Bill, the Trade Unions Bill and Childcare Bill showing that work and childcare will play a large part in this first legislative programme. Over the coming years, we can expect the following policy issues to feature on the agenda:

Equal payThe Coalition Government had already paved the way for legislation requiring employers with over 250 employees to publish information on their gender pay gap prior to the election campaign. The current voluntary system whereby companies can choose to disclose the difference between the average pay of their male and female employees has seen very limited take up despite over 250 companies having signed up to the initiative. The Government has now published a consultation paper on the implementation of gender pay gap reporting, with regulations which are expected to require employers with 250 or more employees to publish their gender


pay gap information. Regulations are expected to be made during the first half of 2016, although commencement is likely to be delayed to enable businesses to prepare for implementation. The consultation closes on 6 September 2015.

Tribunal FeesThe Conservatives propose to retain the recent introduction of fees in Employment Tribunals, though the legality of this system is still being challenged. Earlier this year, Unison were granted permission to appeal their failed judicial review challenge of the fee system and that is expected to be heard this year. If the case is successful, it is possible that fees which employees have paid out could be ordered to be repaid. Earlier this summer the Government announced its intention to review tribunal fees to assess how effective they have been. The outcome of this review is expected later in the year.

National Minimum Wage (NMW) and the Living WageAll parties declared support for the ‘Living Wage’ and an increase in the NMW. The National Living Wage will be compulsory and those aged 25 and over will receive it. It is due to be implemented in April 2016 at the rate of £7.20 per hour. The NMW currently stands at £6.50 per hour.

Income TaxIn their manifesto, the Conservatives pledged to increase personal allowances to £12,500 by 2020. They also plan to raise the personal allowance automatically in line with the NMW under what has been termed the “Tax Free Minimum Wage Law”. The first Budget raised the personal allowance to £11,000 in 2016/17. The aim is that people working 30 hours a week on NMW will not have to pay any income tax. The National Insurance Contributions and Finance Bill is designed to enact this.

Zero hours contractsZero hours contracts were another popular topic in the election campaign. Provisions in the new Small Business, Enterprise

and Employment Act which came into force on 26 May have the effect of banning ‘exclusivity clauses’ in zero hours contracts, namely clauses in such contracts which do not guarantee any minimum amount of work but prevent the employee from working for another employer. The Conservatives have also pledged to enhance information and guidance available to improve transparency over the terms of zero hours contracts and the rights a worker will have under them. The Act sets out measures which provide for the Secretary of State to tackle anti-avoidance by unscrupulous employers through regulations. No regulations are yet in force but drafts have been produced. Given the controversial nature of zero hours contracts and the press interest in them, it is likely that this will remain a focus of the Government.

In/out European referendumThe Conservatives have pledged to renegotiate EU membership and hold an in/out referendum before the end of 2017. This has been set out in the EU Referendum Bill. In the event the UK were to leave the European Union, this would have significant implications for employment law given that much of our domestic employment legislation is derived from European directives. Whilst an exit could result in significant changes to UK employment law, it would be unlikely that all existing employment law derived from Europe would be repealed.

Human Rights ActThe Conservatives have stated their intention to repeal the Human Rights Act and instead introduce a British Bill of Rights. The party made it clear that they want decisions on human rights to be made by UK courts and therefore proposed that the Supreme Court would be the “ultimate arbiter” of human rights matters in the UK, breaking up the formal link between British courts and the European Court of Human Rights. The Queen’s Speech referred to the Government bringing forward proposals for a Bill of Rights to replace the Human Rights Act.

Other policiesOther Conservative initiatives include: (i) new legislation to reform trade unions and protect essential public services against strikes. Key provisions will include (a) a new 50% turnout threshold of those entitled to vote; and (b) a new requirement that 40% of those entitled to vote must vote in favour of industrial action in certain essential public services (health, education, fire, transport); (ii) an increase in the entitlement to free childcare for working parents, as set out in the Childcare Bill; (iii) implementing measures to reduce regulation on small businesses and cut ‘red tape’ to boost job creation (including a proposal to introduce a cap on public sector redundancy payments to six figures for the highest earners); (iv) a new concept of ‘volunteering leave’ in the public sector and in companies with more than 250 employees (this would give employees up to three days paid leave per year in order to undertake voluntary work); (v) the creation of 3 million new apprentices over the next 5 years; (vi) an increase in the number of women on boards; and (vii) halving the gap between disabled people’s employment rate and the rest of the population.

ConclusionsMany of the pledges set out in the Conservative manifesto were suitably vague, so it remains to be seen how these will develop. Employment law has changed at a consistently regular pace since 1997 and many of the reforms that we have seen were not ones that had been predicted. With their unexpected majority, the Conservatives may feel emboldened to push forward with changes they have not previously thought possible. The Government’s new Business Secretary, Sajid Javid has said that he will “look afresh” at aspects of employment law and regulations to encourage enterprise. It is likely that Europe will dominate the agenda until 2017 in light of the promised in/out referendum. Certainly, that has the potential for the greatest impact over the next five years for employment laws and indeed more generally for the UK.

Katherine FoxAssociate, London

Louise Fernandes-OwenProfessional

Support Lawyer, London

Chris FisherPartner, London

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BANK RINGFENCING: PENSIONS REGULATIONS FINALISEDGovernment gives fair warning to banks

As part of the fall-out from the financial crisis, banks are going to be required to restructure in order to “ringfence” their retail activities. New regulations allow pension schemes in which ringfenced banks participate to be restructured to ensure that the banks’ pension liabilities are also ringfenced.

From 2026, banks will be required to ringfence certain core services in separate, financially independent legal entities. Regulations have been made dealing with related issues for their pension schemes.

These include:

• prohibit ringfenced banks from participating in a multi-employer scheme (or section of a segregated multi-employer scheme) in which employers outside the ringfenced bank’s group also participate;

• prohibit ringfenced banks from being a party to an arrangement under which the bank is liable for all or part of the pension liabilities of a wholly-owned subsidiary of another ringfenced bank in the same group, unless the liabilities relate to a scheme (or section of a segregated scheme) in which both ringfenced banks participate and in which no employers outside the ringfenced banks’ group participate;

• prohibit ringfenced banks from being party to a “shared liability arrangement” (an arrangement under which the bank provides a guarantee, indemnity or bond in respect of the pension liabilities of a company which is not part of the ringfenced bank’s group or under which the bank is otherwise liable for the pension liabilities of such a company);

• provide for a procedure whereby, if another party to a shared liability arrangement refuses to release a ringfenced bank from the arrangement or will release it only on unreasonable terms, the bank can ask the courts for an order releasing it;

• give the trustees of a multi-employer scheme, in which a ringfenced bank participates, power to modify the scheme (with employer consent) to allow the ringfenced bank to meet its obligations under the regulations; and

• require a ringfenced bank to make a clearance application to the Pensions Regulator before making restructuring arrangements that are likely to be materially detrimental to a pension scheme of which the bank is an employer.

The regulations came into force on 5 March 2015. However, the ring-fencing provisions do not apply to banks until the later of 1 January 2026 or the fifth anniversary of the date on which the bank becomes a ringfenced bank.

CommentIt is helpful that the government has made these regulations so long before the ring-fencing requirements come into effect. This will give the affected banks plenty of time to plan the potentially significant pensions restructurings that will be required. In particular, where entities that are ringfenced and entities

that are not currently participate in the same scheme, one group or the other – or potentially both – will have to withdraw and arrangements will have to be made for allocating responsibility for scheme liabilities attributable to employees of the two groups.

It will also be interesting to see how the requirements for ringfenced banks to also ring-fence their pensions liabilities will tie in with the Regulator’s anti-avoidance powers.

UK LEGISLATION



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Andrew BlockPartner, London

From 2026, banks will be required to ring-fence certain core services in separate, financially independent legal entities

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BANKING SERVICES UNDER THE MICR SCOPE. Financial Conduct Authority launches investment and corporate banking market study

A market study focusing on the conditions of competition in relation to investment and corporate banking services has been launched by the UK Financial Conduct Authority (FCA). The study will cover services provided in the United Kingdom, but the FCA’s findings could reverberate more widely in view of the international significance of the UK banking and financial sectors.

What can the FCA do?The FCA has launched the market study on the basis of its powers under the Financial Services and Markets Act 2000 (FSMA). It might instead have used its new “concurrent powers” under the Enterprise Act 2002, which it acquired on 1 April 2015, namely the power shared with the CMA and other sector regulators to apply UK competition law. A consequence of using its FSMA market study powers is that the FCA is not bound by a statutory timetable.

If the FCA concludes that competition is not working well, it may intervene to promote effective competition using a number of possible measures. These include rule making, publishing general guidance and proposing enhanced industry self-regulation.

The FCA could also impose firm-specific remedial measures such as own initiative variation powers or own initiative requirement powers, cancelling permissions, public censure, imposition of financial penalties, and filing for injunction or restitution orders. Alternatively, it could make a reference to the CMA for an in-depth market investigation.

BackgroundThe UK financial markets have been under close scrutiny since the financial crisis of 2008. Since then, a broad range of actions has been initiated, resulting in the imposition of sanctions on firms and individuals.

Following preparatory steps taken in 2014 and early 2015, the FCA announced on 22 May 2015 its decision to launch a market study into investment and corporate banking services.

The FCA invited interested parties to submit comments by 22 June 2015 on the issues identified in the terms of reference of the study, and also intends to host a number of roundtable and/or bilateral meetings with interested parties.

The FCA aims to publish an interim report setting out any concerns identified by it, as well as any proposed remedies, and to publish a final report in the Spring of 2016.

If the FCA concludes that competition is not working well, it may impose market-wide remedies, firm-specific remedies, or make a market investigation reference to the Competition and Markets Authority (CMA).

The market study will focus on the following three topics, in respect of primary market and related activities:

(i) Choice of banks and advisers – namely, the competitive landscape generally, clients’ purchasing behaviour and in particular the impact of syndication, and entry and expansion including the potential effects of regulation.

(ii) Limited transparency – namely, adequacy of information, transparency of the process of allocation of debt or equity, and the impact of established practices, processes or regulations on transparency in the Intellectual Property Office process.

(iii) Bundling and cross-subsidisation – namely, whether bundling and/or cross-subsidisation occurs, and whether such bundling and/or cross-subsidisation has adverse effects on competition and clients.

REGULATORY


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What can you expect if your firm’s activities fall within the scope of the market study?The FCA will shortly begin to gather information and will therefore be seeking data, information and/or views from firms whose activities fall within the scope of the investigation.

The FCA may ask firms to submit information on a voluntary basis, or it may use its formal information gathering powers under FSMA. It may also share information and co-ordinate with other authorities, such as the Prudential Regulation Authority and CMA.

Responding to the FCA’s information requests may be burdensome, and care will be required in the preparation of responses.

Many of the activities falling within the scope of the market study have not previously been subjected to detailed scrutiny by the UK competition authorities, and conduct that may have been viewed as normal market practice for many years may be called into question.

Mark ComptonPartner, London

The FCA is unusual among the world’s financial sector regulators in enjoying full competition enforcement powers in addition to its regulatory powers. As well as the various forms of intervention referred to in the previous section, the FCA could also use information gathered by it in the exercise of its regulatory powers to enforce the competition rules against individual companies.

The launch of the market study is also a timely reminder of the need for firms to ensure that their practices, documentation and compliance procedures are in line with the requirements of UK and EU competition law.

Who is affected?

Corporate Banking (and related activities):Focus in so far as affect competition for primary market activities

Corporate Lending: Overdrafts and revolving lines of credit; loans on an unsecured or secured basis; syndicated loans

Corporate Finance/Advice: Advice relating to restructuring balance sheets; management buy-outs & buy-ins; leveraged buy-outs; advice on transactions, acquisitions and capital raisings

Corporate Broking: Investor relations services, interface with stock-market, marketing shares

Primary Markets:Area of focus

Equity Capital Markets: advising on and managing the marketing, distribution, allocation and underwritingof equity issues, including initial public offerings, follow-on equity offerings, special warrants and private placements

Debt Capital Markets: Advising on and managing the marketing, distribution, allocation and underwriting of bond issues

Acquisition Financing: Debt financing to support acquisition

Other Services:Focus in so far as affect competition for primary market activities

Ancillary Services: Risk management solutions and trading activities to support primary markets activities

Investment and Corporate Banking

David Harrison Partner, London

Kiran DesaiPartner, Brussels

The FCA wishes to hear from a wide range of firms with different business models and client profiles, including firms which provide a combination of both investment and corporate banking services, standalone investment banks which offer services such as underwriting securities and trading and brokerage services, corporate banks that are deposit takers and loan makers for corporate and large businesses, boutique investment banks that specialise in a specific service client type or industry, and advisers.

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LINKEDIN FOR GENERAL COUNSELIs your online profile an extension of yourself? Or is it AWOL? Social media expert Adam Gordon explains how an online presence will further your career.

The internet has revolutionised the way we live our lives. We order our groceries, hail a taxi, browse cars, houses, holidays and potential dates online. I can’t really think of anything we can’t achieve using the internet in 2015. Managing your reputation and your career is no exception; social networking is here for the rest of our careers and unless you’re already on the wind-down, you’d better get fluent with it as soon as you can.

Here’s a quick outline of some of the most useful and coolest social networks and what they are good for:

• Facebook: great for keeping in touch with family and friends. Steadily growing age profile and not the ‘cool’ site it once was

• Instagram: for the visually inclined, this is for sharing and commenting on your selfies and favourite photos. Unlike Facebook, you avoid mum and dad here…

• LinkedIn: by far the most powerful site for managing your reputation and career in the UK and most of the world. This is the one this article will focus on most closely

• Snapchat: slightly controversial tool for sending images which disappear between one and 10 seconds after viewing

• Twitter: the fastest source of information that exists. Very different to the standard social network format but once you know how it works it is indispensable

• Whatsapp: acquired by Facebook last year for $22bn (this is not a typo), this is the best free instant messaging platform for your smartphone

So, now that we know what some of the most important social networking sites can do, what can we actually achieve using these tools?

1. Easily keep in touch with friends, family and professional contacts

2. Broadcast our most important messages to private or much broader, public audiences

3. Demonstrate our expertise and develop our reputation as we wish

4. Use LinkedIn Groups to keep up-to-date with industry or issues-based communities, share your thoughts and participate in or lead discussion

5. Find almost everyone we know or want to know professionally

6. Build our audience and achieve influence

7. Initiate conversations and relationships with people we don’t yet know

OK so what else do we need to know before considering making more or better use of social media?

a. Everyone has different preferences for how they wish to communicate and therefore build relationships. Some people are on the phone all the time. Others less so (i.e. never). Some people like to attend events. Some people avoid them like the plague. In 2015, we know that lots of professionals enjoy to communicate and build relationships at social networks such as LinkedIn. The reason for that is because they can determine your credibility and see what you have in common with them before connecting.

b. Most people (94%)* will connect with you online whether you know them offline or not, as long as you appear to be useful and/or relevant.

c. Insight is a currency. You gain insights every single day. When you share them at social media (obviously not the confidential ones), you gain goodwill in return from your network. You develop your reputation as an expert and perhaps the go-to ‘guy’.

*2012 Adam Gordon survey using LinkedIn Polls


INSIGHTS

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GENERAL COUNSELIs your online profile an extension of yourself? Or is it AWOL? Social media expert Adam Gordon explains how an online

the fastest source of information that exists. Very different to the standard social network format but once you know how it works it is

Whatsapp: acquired by Facebook last year for $22bn (this is not a typo), this is the best free instant messaging platform for your smartphone

So, now that we know what some of the most important

achieve using these tools?

Easily keep in touch with friends, family and professional contacts

OK so what else do we need to know before considering making more or better use of social media?

for how they wish to communicate and therefore build relationships. Some people are on the phone all the time. Others less so (i.e. never). Some people like to attend events. Some people avoid them like the plague. In 2015, we know that lots of professionals enjoy to communicate and build relationships at social

useful and coolest social networks and

great for keeping in touch with family and friends. Steadily growing age profile and not the ‘cool’

for the visually inclined, this is for sharing and commenting on your selfies and favourite photos. Unlike Facebook, you avoid mum and

slightly controversial tool

achieve using these tools?

Easily keep in touch with friends, family and professional contacts

2. Broadcast our most important messages to private or much broader, public audiences

3. Demonstrate our expertise and develop our reputation as we wish

4. Use LinkedIn Groups to keep up-to-date with industry or issues-based

Find almost everyone we know or want to know professionally

Initiate conversations and relationships

Most people (94%) will connect with you online whether you know them offline or not, as long as you appear to be useful and/or relevant.

Insight is a currency. You gain insights every single day. When you share them at social media (obviously not the confidential ones), you gain goodwill in return from your network. You develop your reputation as an expert and perhaps the go-to ‘guy’.

*2012 Adam Gordon survey using LinkedIn Polls

reason for that is because they can determine your credibility and see what you have in common with them before connecting.before connecting.

you’re already on the wind-down, you’d better get fluent with it as soon

Here’s a quick outline of some of the most useful and coolest social networks and

Initiate conversations and relationships with people we don’t yet know

social networking sites can do, what can we actually social networking sites can do, what can we actually do, what can we actually achieve using these tools?do, what can we actually achieve using these tools?

participate in or lead discussionparticipate in or lead discussion

Find almost everyone we know or want 5. Find almost everyone we know or want

will connect with you online whether you know them

platform for your smartphone

So, now that we know what

Broadcast our most important messages to private or much broader, public to private or much broader, public

•information that exists. Very different to the standard social network format

OK so what else do we need

Easily keep in touch with friends, family Easily keep in touch with friends, family and professional contacts

slightly controversial tool slightly controversial tool for sending images which disappear

for the visually inclined, this is for sharing and commenting on your selfies and favourite photos. Unlike Facebook, you avoid mum and

making more or better use making more or better use of social media?

Everyone has different preferences Everyone has different preferences


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For years now, all reputable commentators from the Harvard Review to the McKinsey Quarterly have been talking about the openings available to professionals from using the business-focused networking sites but how many GCs are seizing the opportunities now afforded to them for demonstrating their expertise, making new contacts and generating benefits? Hopefully you will after reading the following step-by-step ‘how-and-why to.’

Building a compelling LinkedIn Profile...

Make sure you have a photo on your LinkedIn profile. For most people, something professional is the right way to go although I don’t believe there’s anything wrong with an ‘action’ shot if it adds some personality to your profile. Sailing, cycling or something similar is acceptable. Posing with a fancy-looking cocktail isn’t. Make sure it’s recent too.

There are very few opportunities to add some visual customisation to your LinkedIn profile so to ensure it stands out, add a relevant background image near the top of your profile so it is distinguished. The image might reflect what you do, the industry you’re in, your location or even your personality.

Your professional headline is one of the first things someone will see when they find you in a list or view your profile. It needs to explain succinctly what you do and who for.

Your summary is another of the first things viewers at your profile will see. There are hundreds of different ways you can express your summary but here are my top tips:

• Include contact details in your summary so it is easy for people who want to offer you opportunities to actually make contact [NB. I understand that not everyone will want to make themselves that available]

• List your most important professional interests and priorities

• Cross-reference to other social networks. If you are on Twitter, build your followers by asking your LinkedIn profile viewers to follow you

Include some rich content to your summary section. What does that mean? You can add links to video, presentations, articles, interviews, white papers and more and the articles appear as thumbnails on your profile. This is a great way of giving people more opportunity to learn about you and if you have a variety of formats covered, more people will click on the links.

LinkedIn includes a blogging function called Publisher where you can share your pressing interests to encourage discussion and elevate a subject. Personally, I gain c400 extra LinkedIn profile views every time I include a new post at LinkedIn Publisher. These articles remain at your profile for viewers to read.

Add plenty of keywords throughout your profile so you are found quickly when someone is searching for an expert like

Adam Gordon is managing director of Social Media Search, a Norman Broadbent plc company working with senior professionals to help them get

connected and demonstrate their expertise online.

He is available at www.linkedin.com/in/adamwgordon and at Twitter @Adam_W_Gordon


you. If you don’t, you might miss out on opportunities. Do note, keywords in your professional headline and job titles are prioritised in LinkedIn’s search function.Add interests. Although LinkedIn is a professional network, everyone has a personality and it’s important that people can gain insights into the type of person you are. Interests can act as ice breakers when you meet someone new for the first time.

Who’s worth connecting with?

From our experience working with GCs, some of the following are worth considering connecting with.

• Other senior in-house lawyers. Knowledge sharing and community are vital for the (sometimes lonely) General Counsel

• Senior executives in your industry. Their insights will help you continue to develop your industry insights so you can add more and more value

• Lawyers you might hire. LinkedIn is a rich source of potential candidates and hiring managers can easily create short-lists (and even earn the internal bounty for DIY hiring if that’s on offer in your business!)

• Media figures at The Lawyer and other legal publications and trade titles. They may come to you for comment and that can only be good for your profile

• Former colleagues. It’s fascinating to see where they all ended up and the different directions their careers and lives have gone. Unless this sounds like your idea of hell

• Executive Search professionals specialising in in-house legal posts. You just never know what they’ll come to you with

• Executive Search professionals specialising in non-executive board appointments, if that’s something you’re interested in now or for the future

WWW.MAYERBROWN.COM/COUNSEL350

TIP: Use LinkedIn’s superb advanced search function to find the people you need to connect with. It’s reasonably intuitive and simple to use. Once you’ve created your search, save it so that this site sends you new, relevant people to connect with every week or month.

Weekly Activity

Now that your profile’s great and you’ve got connected with many of the people you want to know what are the things you should do?

a. Share a status update each day, ideally early in the day. This might be an insight, an interesting news item, your company news or similar

b. Write and share a Publisher post once a week (if you can) to broadcast an issue that’s important to you, gain feedback from your network and lead the discussion

c. Contribute to the LinkedIn Groups for people like you or the people you wish to gain exposure to

d. Connect with new people every time you receive your ‘saved search’ update of potential new connections

Finally, it’s worth noting that you might think you’re behind the curve but you are probably not. The first place to start is to consider your professional objectives and then make social media work for you rather than getting swept up in the system. Social media is not a thing. It is just a channel there to support you to achieve your objectives and take you wherever you are trying to go.

INSIGHTS


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Consider your professional objectives and then make social media work for you rather than getting swept up in the system

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350

We examine the results of The Winmark Looking Glass Report 2015

The Winmark Looking Glass Report 2015 is the fourth iteration of this impressive survey of nearly 300 senior lawyers in private practice and in-house, drawn from Winmark’s own Chief Legal Officer Network and CEO Managing Partner Network.

The report was produced by the leading research organisation in partnership with ourselves here at Mayer Brown and Thomson Reuters.

The report looks at trends affecting private practice and in-house legal departments, giving its participants and readers insight into how to capitalise on opportunities and mitigate threats as they battle through the maelstrom of changes in international legal services.

The report highlights four key themes:

• Misalignment between law firms and in-house teams

• Commoditisation, and the need for greater differentiation among suppliers as a consequence

• Increasing flexibility on the supply side, including new business models and new career opportunities for lawyers

• Technology and innovation

The differing perspectives of lawyers in-house and private practice proved to be a continuing sticking point highlighted in the research, according to Suzanne van Montfoort, Research Manager at Winmark.

“In certain areas there is really good alignment and private practice is aware of a number of issues that in-house lawyers consider important, such as communication, understanding clients’ businesses and the importance of internationalisation,” she said.

“But in others, law firms underestimate how important aspects of their service are to clients. These include collaboration with other firms, hospitality and diversity.”

The report gave clear pointers to firms on how to improve their service to clients

beyond the ‘hygiene factors’ of value for money, availability and commerciality, including using specialist project managers and providing training.

Mayer Brown Senior Partner Sean Connolly, speaking at the launch of the report, said law firms were resistant to embrace commoditisation, which he said was “to ignore the business of law as seen from the perspective of the client”.

“Lawyers find it very easy to believe they are each providers of unique professional advice, that the service they deliver is

exceptional and incapable of being pre-packaged or commoditised,” he said. “This is both unsustainable and misguided.”

“Legal private practice needs to accept that if what it delivers is plain vanilla and indistinguishable from others, then the work is open to the challenge of commoditisation. Fundamentally, even in the highest value case or transactions, there are elements of work that can and should be commoditised.”

However, Connolly warned clients not to embrace the concept that “everything for which you turn to your professional advisers can be commoditised.”

This, he said, would lead to what a majority (54%) of law firm respondents to the report

see as a key risk to their business, a ‘race to the bottom’ on fees, with only a small number of firms possessing strong enough brands able to avoid this fate by focusing on high-end transactional work or ‘bet the farm’ litigation.

The tide of commoditisation highlights another major concern of in-house lawyers; the inability to tell one law firm from another. While 90% of in-house lawyers felt that differentiation was either “very” or “quite” important, just 19% felt that law firms were “highly differentiated” from one another.

Lawyers find it very easy to believe they are each providers of unique professional advice, that the service they deliver is exceptional and incapable of being pre-packaged or commoditised. This is both unsustainable and misguided – Sean Connolly, Senior Partner, Mayer Brown

“”

INSIGHTS

THROUGH THELOOKING GLASS



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Innovation was identified as a key determinant of differentiation.

As one general counsel of a FTSE100 company commented: “We went out to the firms saying ‘we really want to challenge how you do things, show us what you’ve got.’ The firms delivered quite differently. The firms that were quite stagnant and didn’t come up with anything innovative or different didn’t make it onto our panel.”

The Looking Glass Report 2015 comments that legal services could learn from the journey consumer brands have made over the last decades, where branding, packaging and points of genuine differentiation are driving choices.

“Rather than focusing solely on factors such as technical expertise and on-time delivery, legal services should look more

closely at precisely what clients need, how they need it and what makes their lives easiest, to deliver a much more compelling, differentiated proposition,” the report says.

A host of potential innovations were mentioned as having an important impact on the sector, chief among them alternative fee arrangements, technology/innovation, and contract legal services.

While 84% of law firms had already implemented document management, and 69% matter management systems, other

innovations have been slower in getting off the ground. For instance, fewer than 10% have outsourced to an LPO (Legal Process Outsourcing) provider, with another 7%currently looking at this, while only 20% have a formal metrics programme, with a further 17% considering the change.

Chris Fowler, general counsel for UK Commercial Services at British Telecom and an active participant in Winmark’s Chief Legal Officer network, also speaking at the launch, said the Looking Glass Report 2015 could have been written about the fixed line communications industry five years ago.

“Commoditisation of traditional revenue streams, move from traditional usage variable-based charging models to fixed output-based price models, disruptive technology, lower regulatory barriers to entry with new entrants without the cost base of established providers…all of those hang true for the legal profession as it did for fixed line providers five years ago,” he said.

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“You can carry on before and hope this doesn’t impact on you,” he added, “but that’s the definition of madness really.”

BT was forced to re-engineer itself as a company, Fowler explained, and the legal function also had to re-engineer, with Fowler taking the view that the legal team was there not simply to respond to the business’ legal needs, but to support competitive advantage.

“This involved moving away from a ‘stovepipe’ mentality of doing business, with everybody doing pretty much their own thing and not really talking to one another, to an environment where you effectively move your function and base your delivery of resources providing the service around what they are doing, rather than who they are doing it for,” he said.

What had surprised Fowler, though, was the lack of emphasis from law firms on formal metrics programmes. “This struck me as puzzling, because you can’t deliver efficiency unless you measure it.”

This was a point echoed by Sam Steer, Head of Strategy, Large Law Firms, at sponsor Thomson Reuters.

“While the law firms are investing in document management, case management and so on, they aren’t investing in metrics to the same extent as in-house counsel,” she commented. “This might be something law firms could take away from the report – how do you actually measure how efficient you are and how do you demonstrate that to your clients?”

The typical annual in-house budget for technology falls into the £7,500-£10,000 bracket, according to the report, while over a quarter of in-house functions have no separate technology budget and just the top 10% have budgets of more than £200,000 per year.

The typical (median) law firm budget for technology, meanwhile, was £625,000, with only 3% of law firms failing to dedicate specific resources to technology, while 47% have a budget of at least £1m.

The ability to invest in technology was identified by the report as an opportunity for law firms to differentiate themselves from competitors.

“As large firms are able to invest in more technological innovation, they are likely to become more efficient at a faster pace than the smaller firms, giving them a long term competitive advantage,” the report said.

Chris Fowler added that law firms had a huge opportunity to embed their systems – such as document management – into their offering. “Systems are, effectively, key to a law firm selling,” he said.

Technology, and in particular the collection and use of Big Data, had allowed BT to set up its own ABS (Alternative Business

Structure) vehicle, BT Law, to externalise its volume claim business for corporates.

“We have 98,000 employees and you have an awful lot of people falling down manhole covers, vans crashing or being crashed into and once you get that data and collect that data, you can build repeatable models. It is still a work-in-progress but is a big change; we become, potentially, a profit centre for the business.”

legal services could learn from the journey consumer brands have made over the last decades, where branding, packaging and points of genuine differentiation are driving choices.

“”

INSIGHTS


For a copy of the full Winmark Looking Glass Report 2015, please email [email protected]


”

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RISKY BUSINESSThe new UK Risk Index from Mayer Brown brings the subject into sharp focus ukriskindex.mayerbrown.com

Business leaders have never been more attuned to risk, aware of their fiduciary responsibility and to use a naval phrase ready to ‘repel all boarders’

In an increasingly regulated and competitive global economy made borderless by cyberspace and on the back of the worst recession since the Second World War, UK corporations face the challenge of an ever-shifting risk landscape.

But what does this landscape really look like? Do perceptions match with reality? What are the specific risks different businesses face? How great is their relative magnitude and are there trends in the answers to these questions?

Once you start to dig into the subject of business risk, it raises more and more questions. That’s why Mayer Brown has invested in the UK Risk Index 2015, which takes a holistic look at UK corporations understanding of and approach to risk. We have also created a unique online interactive Risk Tool which GCs can use to compare their risk profile with the Index of respondents.

Real experience

The Mayer Brown UK Risk Index is firmly rooted in the real experience of major businesses in the UK today, and has been independently compiled by Acritas, the leading legal industry research company.

The data behind the UK Risk Index was provided by senior figures from major companies including Vodafone, Wm Morrisons Supermarkets and Toyota GB. Over a period of four months, Acritas conducted a detailed web and telephone survey then collated and analysed the responses across a range of different indicators providing an enlightening three-dimensional view of today’s risk landscape.

The Risk Index gives two top-line findings: the perceived magnitude of different risks faced by major businesses, and the relative levels of resource and preparation for each. The two lists are enlightening in themselves – and perhaps not surprisingly, it appears there’s by no means a direct correlation between them.

FOCUS

To receive a copy of the Risk Index or for more information on the Risk Tool, please email [email protected]


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Mayer Brown is a global legal services

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is derived from our ability to put together

highly skilled teams from our integrated

network of lawyers to assist clients with

their most complex and demanding legal

and business challenges worldwide. We

have local market knowledge combined

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visit our website www.mayerbrown.com

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