Prioritising Environmental Obligations in Future Trade Agreements

Posted in Brexit

By Paul Davies, Charles Claypoole and Michael Green

We have commented previously about the Transatlantic Trade and Investment Partnership (TTIP) and its relationship with environmental obligations. Here, following Brexit, we turn our attention to future trade arrangements for the UK and the implications for environmental law.

As a member of the EU, the UK was not able to negotiate its own trade agreements with non-member countries, and could only do so as part of the EU Common Commercial Policy (CCP). Following Brexit, and assuming that a post-Brexit relationship between the EU and the UK does not involve UK participation in the CCP as a means for participating in the Internal Market, the UK can negotiate in its own trade agreements with non-member states and put in place trade arrangements with the EU following its withdrawal (assuming Brexit proceeds).  As such, the UK Government has already suggested that discussions will take place on a new free trade deal with China – which has never had a free trade agreement with any EU country.  Further, Commonwealth countries, such as Canada, Australia, India and Singapore, have also expressed interest in negotiating trade agreements with the UK.

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We Come as Friends! – Amicus Briefs in Investor-State Arbitration

Posted in Dispute Resolution

By Jonathan Hew

Investor-state arbitrations frequently raise issues of public importance that parties other than those to proceedings, such as NGOs, may want to address. “Amicus briefs” afford them a limited opportunity to do so, as demonstrated in Infinito Gold v Costa Rica.[1]

Amicus briefs

Provisions on amicus briefs can be found in certain arbitral rules.[2]  One prominent example is Article 37(2) of the ICSID Arbitration Rules, which gives ICSID tribunals the discretion to admit an amicus brief.  In deciding whether to do so, a tribunal must consider, among other things, the extent to which:

  • the brief would assist the tribunal in determining a factual or legal issue related to the proceeding by bringing a perspective, knowledge or insight that is different from that of the disputing parties;
  • the brief would address a matter within the scope of the dispute;
  • the third party has a significant interest in the case.

The tribunal must also ensure that the amicus brief does not disrupt proceedings or unduly burden or unfairly prejudice a disputing party, and that disputing parties can make observations on the brief.

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Green Bonds: Green Striping to Fuel China’s Green Economy?

Posted in Environment

By Paul Davies and Aaron Franklin

China has become the world’s largest green bond market, with green bonds issued in the first half of 2016 reaching 75 billion yuan (US$11 billion), 33% of the world total. This figure is approximately two percent of the total assets of China’s commercial banks, and demand for green bonds is expected to rise to 20 times that much.

Green bonds provide access to an ever-growing and important market to corporate issuers and international investors. Bloomberg Business estimates that China’s green bond market may be worth US$230 billion in the next five years – an opportunity too big for the international business community to ignore.

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Managing Environment Risk in Trade Agreements Post-Brexit: What Can We Expect?

Posted in Brexit, Environment

By Paul Davies, Charles Claypoole and Michael Green

The UK’s decision to leave the European Union (EU), assuming the UK does not negotiate continued participation in the EU’s Internal Market and the Common Commercial Policy (on similar terms as now), will impact its existing participation in EU trade agreements and free trade access. Once the UK has withdrawn from the EU, the UK will need to commence national trade negotiations – early indicators suggest that there are already a number of countries (e.g. Australia, Canada, India and others) that would be interested in fast-tracking the process. Trade agreements strive to increase economic activity by reducing or removing barriers to trade across international borders. For example, trade agreements may negotiate reduced taxes applied to imports, reduce compliance costs associated with foreign jurisdiction regulations, and/or require signatory countries to outlaw child labour.

Typically, trade agreement objectives indirectly impact on environmental obligations for businesses and touch on a wide spectrum of environmental issues that affect consumers, including: food safety (the use of GM crops, for example); pesticides; chemical regulations; energy resourcing; and contamination liability. One of the most contentious agreements currently being negotiated is the Transatlantic Trade and Investment Partnership (TTIP), which is between the EU and the US. There are concerns that the current TTIP may stall or fail altogether due to the UK’s departure from the EU. However, if it does happen, we can expect the draft proposal to influence the content and format of many future trade agreements (including those that the UK will be looking to negotiate and enter into). Continue Reading

Return of the MAC – Material Adverse Change Clauses Making a Comeback in Oil and Gas Deals

Posted in M&A and Private Equity

By Simon Tysoe

For many years, US and UK M&A practices have differed in their use of material adverse change clauses (MACs) in sale and purchase documents. Common, even ubiquitous in the US, these clauses, which permit a buyer to refuse to close upon the occurrence of events detrimental to the target, remain a rarity in SPAs on this side of the Atlantic. However, oil and gas transactions, especially those involving upstream assets, prove an exception to this rule.

MnAViewsMAC imageAug2016The differences between US and UK practices are most apparent in private deals. MACs remain rare in UK practice but are more common in oil and gas deals, with around a third of private upstream deals having a MAC. Even within oil and gas practice, however, US sale and purchase arrangements are much more likely to contain MACs than UK documents. The drafting tends to be different too. US MACs are often general in nature, covering events with an adverse financial or operational impact. This broad introduction is typically subject to a number of carve-outs, such as general economic conditions and market conditions, and general economic, regulatory, or political conditions or changes. Continue Reading

New EU Data Protection Rules Move the M&A Goalposts

Posted in M&A and Private Equity

By Gail Crawford

After over four years of debate, the General Data Protection Regulation (GDPR) recently came into force, taking effect after a two year transition period, i.e. from 25 May 2018. The GDPR introduces a rigorous and far-reaching privacy framework, which will impact many M&A transactions.

The GDPR sets out defined obligations and substantial fines for non-compliance. The new regime will extend the territorial reach of EU data protection law, catching any business that operates in the EU, or offers goods and services to – or monitors the behaviour of – EU data subjects. In the M&A context, a non- EU entity that targets or monitors EU individuals will be subject to the GDPR.

MnAViewsDataProtection imageAug2016The GDPR imposes mandatory data breach notifications and much stronger sanctions for non- compliance. Fines of up to 4% of annual worldwide turnover or €20 million, whichever is higher, can be imposed. This has rightly concerned business – a survey by Ovum in 2015 showed that 94% of IT decision makers are concerned about the GDPR and 52% of respondents thought that the GDPR would result in fines for their company. Continue Reading

Jury out on Gender Pay Reporting Regime

Posted in M&A and Private Equity

By Kendall Burnett and Sarah Gadd

There is mixed opinion on the UK’s forthcoming gender pay reporting regime. Whether the new reporting obligations will help eradicate the UK gender pay gap (reported by the Office of National Statistics to be 19.2% in 2015) or fuel an increase in equal pay discrimination claims in the private sector remains to be seen. The changes are part of the government’s drive to tackle gender inequality, including its pledge to increase the representation of women on all FTSE 350 boards to 33% by 2020.

The UK is not the first EU country to introduce mandatory gender pay reporting. In France, large employers are required to factor gender pay equality into their annual collective bargaining negotiations, and can be required to implement a gender pay gap action plan. Non- compliant companies can be fined up to 1% of their total wage bill, and may also be subject to civil, and in rare circumstances, criminal sanctions if a gender pay gap exists that the company cannot objectively justify. However, the Nordic countries are the leaders in this area with Iceland, Norway, Finland and Sweden grabbing the top spots in The Global Gender Gap Report produced by the World Economic Forum in 2015. Whether these countries’ successful narrowing of the pay gap comes down to mandatory reporting or other cultural factors is difficult to tell. Continue Reading

Do Not Delay! The Early Bird Catches the Anti-Suit Injunction

Posted in Dispute Resolution

By Daniel Harrison

The recent case of ADM Asia-Pacific Trading PTE Ltd v PT Budi Semesta Satria [1] illustrates the need for parties to act promptly and carefully when faced with proceedings contrary to an arbitration agreement.

The court refused to grant an anti-suit injunction to restrain proceedings in favour of arbitration because the claimant had actively engaged in the proceedings for over a year and delayed in making its application for relief.

The Facts

ADM Asia-Pacific Trading PTE Ltd (ADM) and PT Budi Semesta Satria (BSS) entered into a stock finance agreement (the Agreement) which contained a jurisdiction clause referring to the Indonesian courts. As contemplated by the Agreement, the parties entered into a separate contract for the sale (by ADM) and the purchase (by BSS) of soybeans containing an arbitration clause with the seat in London (the Sale Contract).

BSS refused to pay the full purchase price complaining that the quality of goods was not in accordance with the Sale Contract, which ADM refuted. On 22 May 2013, BSS commenced proceedings in the Indonesia courts relying on the jurisdiction clause in the Agreement.

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New Oil and Gas Decommissioning Strategy Published by UK Oil and Gas Authority

Posted in Environment

By Paul Davies and Simon Tysoe

Sustained investment in offshore platforms and production installations has been critical in securing the UK’s energy supply. Despite ongoing oil price volatility, in 2016 and 2017 £3-4 billion of capital per year is envisioned for new developments in the UK continental shelf (“UKCS”). Such developments are expected to sustain production for decades, not only to meet rising energy demand, but to maximise significant project investment. Falling industry costs and improvements in efficiency have led to a decline in the operating costs of oil and gas installations – the Oil & Gas UK’s Economic Report 2015 anticipates expenditure on existing assets to drop to £2.1 billion by the end of 2016, representing a 22% decrease from the previous year.

Yet, notwithstanding cost optimisation, as oil and gas fields near depletion and therefore become unproductive, installations need to be retired or recycled. Removal requires substantial investment – expenditures of £2 billion are forecast by 2018, up from £1 billion in 2014 – to undertake the decommissioning of approximately 50 fields by 2018. More significantly, current mid-point estimates for UKCS decommissioning to 2050 is £47 billion, with a substantial portion of this being funded through tax-relief. Consequently, on 30 June 2016, the Oil and Gas Authority (OGA) published the UK’s Oil and Gas Decommissioning Strategy. The OGA, tasked with maximising economic recovery of the oil and gas lifecycle, will also issue accompanying delivery programmes to detail how decommissioning will be achieved.

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Court Refuses to Expand Challenges of Arbitral Procedural Orders

Posted in Dispute Resolution

By Daniel Harrison

The recent case of Enterprise Insurance Company Plc v U-Drive Solutions (Gibraltar) Limited [1] illustrates the reluctance of courts to intervene in arbitrations despite the parties agreeing otherwise. The court dismissed an attack on two procedural orders pursuant to sections 68 and 69 of the Arbitration Act 1996 (Act) because there was no award for the purposes of the Act and the consent of both parties was not sufficient to establish the court’s jurisdiction.

The Facts

U-Drive Solutions (Gibraltar) Limited (U-Drive) commenced an arbitration against Enterprise Insurance Company Plc (Enterprise) for breach of a distribution agreement. Enterprise claimed that no agreement between the parties existed and challenged the jurisdiction of the tribunal on that basis before the tribunal and the court, which both dismissed the challenge.

The tribunal issued Procedural Order 10 ordering U-Drive to provide security for costs. When U-Drive failed to provide security, the tribunal issued a peremptory order compelling U-Drive to pay the security for costs and then directed that U-Drive must comply with the order and provide security within two weeks, failing which its claim would be dismissed. Within two weeks, counsel for U-Drive gave an undertaking to provide security, which was eventually provided seven days after the two weeks limit had expired.

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