Dow/DuPont: MOFCOM Grants First Conditional Clearance of 2017

Posted in EU and Competition

By John. D Colahan and David Zhou 


On 2 May 2017, China’s Ministry of Commerce (MOFCOM) announced its conditional clearance of the proposed US$130 billion all-stock merger of equals between the Dow Chemical Company (Dow) and E.I. du Pont de Nemours and Company (DuPont), marking the first conditional clearance that MOFCOM has granted this year. MOFCOM imposed structural and behavioural remedies on both parties — which are active in plastics, chemicals and agro-chemicals, among other sectors — to address various competition-related concerns. The transaction has been subject to merger control clearance from more than 25 competition authorities globally, including the European Commission, which granted conditional clearance on 27 March 2017.

MOFCOM’s concerns

MOFCOM found that the parties horizontally overlapped in nine different national agrochemical markets and seven different global material sciences and specialty products markets. MOFCOM also found that vertical relationships existed between the parties in an additional nine relevant global material sciences and specialty products markets. MOFCOM identified four markets where it believed that there was a risk of competition being eliminated or limited: (i) Chinese rice selective herbicides ,(ii) Chinese rice pesticides,(iii) global acid co-polymer market, and (iv) global ionomer market. Continue Reading

Banking on IT

Posted in Data Protection

By Christian McDermott, Calum Docherty, Stuart Davis and Anne Mainwaring

The European Banking Authority (EBA) has published its consultation document on security measures for operational and security risks under the revised Payment Services Directive (PSD2).

Technology - dreamstime_xxl_19374657The WannaCry ransomware attack that swept across the globe last week revealed the destructive and indiscriminate nature of cyber threats. It attacked hospitals, telecoms networks and universities, seizing hold of important data and leaving users and systems administrators temporarily powerless. These are precisely the risks that the payments industry wants to avoid as it braces for the revised PSD2, which will come into force across the EU from 13 January 2018. As such, the EBA has published a consultation paper on security measures for operational and security risks under PSD2, setting out proposed requirements for payment services providers (PSPs) to mitigate the concomitant payment processing risks.

The consultation paper is one of the EBA’s three security mandates in PSD2, complementing the Regulatory Technical Standards on Strong Customer Authentication and Common and Secure Communication (submitted to the European Commission for adoption 23 February 2017), and the Guidelines on Major Incidents Reporting (which recently finished its consultation). Continue Reading

Latest Ransomware Attack: Is Your Arbitration Cyber-ready?

Posted in Data Protection

By Sophie Lamb and Samuel Pape

The latest global ‘WannaCry’ attack has again brought to the fore the need for sovereign and private parties to have in place adequate cyber-security measures and response plans to deal with cyber-attacks, including in the context of internationalData Protection - Fingerprint arbitration.  As attackers are becoming increasingly resourceful in their ability to exploit vulnerabilities, it is critical that participants in arbitration play their part in mitigating against this type of risk, particularly where sensitive information is involved and large sums are at stake. Even the arbitral institutions themselves are not immune, as was evidenced by the hack on the Permanent Court of Arbitration’s (PCA) website during a hearing of a high profile maritime border dispute.

The increase in transparency in investor-State arbitration through the publication of case documents during the proceedings might provide new opportunities for hacktivists to interfere with the arbitral process.  For example, hacktivists could use a form of social engineering that would involve impersonating a tribunal chairperson based on information from published procedural orders for the purposes of eliciting confidential information from the parties or co-arbitrators.  This type of ‘social engineering’ has become a common method of attack and has supplanted the more basic forms of phishing attempts.  Cyber-attacks can only be thwarted if all participants in arbitration remain alive to this type of threat.    Continue Reading

Changes to Corporate Criminality Offences in the UK Cause Corporate Dealmakers to Review Acquisitions

Posted in M&A and Private Equity

By Stuart Alford QC, Daniel Smith


Proposed changes to corporate criminal offending should cause corporate dealmakers to review the scope of acquisition diligence, particularly in light of the UK Serious Fraud Office’s (SFO’s) increasing use of deferred prosecution agreements (DPAs), as highlighted by the recent Rolls Royce and Tesco cases.

Expected Expansion of Corporate Liability Offences

As is widely appreciated, corporates can be prosecuted under the Bribery Act for “failing to prevent” bribery. New legislation is set to create offences for a wider range of criminality, starting with the facilitation of tax evasion, but possibly followed by fraud, false accounting and money laundering.

The new style of corporate offences bypasses the long-standing English law requirement that prosecutors prove that a “directing mind or will” (i.e., directors or other senior management) was culpable in order to establish corporate criminal liability. This has made prosecution of large multinationals challenging, as very senior employees may not be privy to decisions made on the ground. The future landscape for corporate prosecutions is expected to more closely map the US, where an employer can be automatically answerable for the crime of its employee. Continue Reading

Check Your Privilege: English Court Rules Internal Investigation Materials Cannot be Withheld from Prosecutor

Posted in Dispute Resolution

By Stuart Alford QC, Daniel Smith and James Fagan

 Privilege is a fundamental human right guaranteed by the common law, and a principle which is central to the administration of justice. Once a document is subject to privilege, the privilege is absolute: it cannot be overridden by some countervailing rule of public policy”.

These dicta from Andrews J in her decision in Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 are reassuring, but her ruling on the scope of privilege may prove somewhat less so to corporates.

The decision concerned a claim by the Director of the UK Serious Fraud Office (SFO) for a declaration that certain documents generated between 2011 and 2013 during investigations undertaken by solicitors and forensic accountants into the activities of the defendant, Eurasian Natural Resources Corporation Ltd (ENRC) and its subsidiaries were not, as ENRC maintained, subject to legal professional privilege, either legal advice privilege or litigation privilege. The decision is the first to consider the position of legal advice privilege in the context of internal investigation and an SFO investigation.

Continue Reading

European Parliament’s Committee on Economic and Monetary Affairs Publishes Fintech Report

Posted in Emerging Companies and Technology

By Andrew Moyle, Fiona Maclean, Christian McDermott, Andrea Stout and Stuart Davis

On April 28th, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a report about Fintech and the Virtual Currency B - Singleinfluence of technology on the future of the financial sector. The report, prepared by Cora van Nieuwenhuizen, was adopted by ECON with 45 votes in its favour (6 against) a few days prior to its publication. Designed to encourage the EU to further support Fintech development, the report is addressed to the European Commission and is expected to be read alongside the Commission’s Consultation Document on Fintech which was published earlier this year.

The report sets out a number of priorities: Continue Reading

The OECD’s View on Integration of ESG Issues into Investments – What Next?

Posted in Environment

By Paul Davies and Michael Green

The Organisation for Economic Co-operation and Development (OECD) published a report (OECD Report) on investment governance and integration of environmental, social and governance (ESG) factors on 2 May 2017. The OECD Report develops work already carried out by the organisation on the regulation of investment companies and pension fund investments. It is also linked to certain OECD instruments, including (i) the OECD principles of private pension regulation (adopted in 2016) and (ii) the G20/OECD high level principles of long term financing by institutional investors (last published in September 2013).

The OECD Report looks into how pension funds, insurance companies and asset managers approach ESG risks and opportunities in portfolio investments. Specifically, it presents the findings of an international “stock taking exercise” of the legal and regulatory frameworks that applies to institutional investment in different jurisdictions. It focuses on how these are interpreted by institutional investors in terms of their ability and/or responsibility to integrate ESG factors into their governance processes. The interesting point here is whether these existing frameworks encourage or discourage the integration of ESG factors into decision making processes. Continue Reading

Conservation Finance: An Increasingly Attractive Concept for Investors?

Posted in Environment

By Paul Davies and Michael Green

Broadly defined, conservation finance is the raising of capital to support the conservation of land, water and resources. This concept started with “debt for nature” swaps during the 1980s and 1990s whereby developing countries agreed to protect ecosystems using revenues freed up by sovereign debt relief (such deals usually being arranged by international environmental groups). Recently, there has been an increasing focus on cash generating investments in this area, thereby excluding certain philanthropic and grant based activities. Market commentators note that, ideally, conservation finance should capture both elements. For example, in two reports (2014 and 2016), Credit Suisse and McKinsey suggest that “cash flow” should “in part remain with the ecosystem to enable its conservation” and also, in part, be “returned to investors”. In Ecosystem Marketplace’s assessment of the current market, it was emphasised that the key focus should be on “conservation impact” and that this should not be a “by-product of an investment made solely for financial return”. The difficulty appears to lie in striking the right balance between the conservation of the environment and financial gain.

Against this shifting landscape, a wider range of investors are being drawn to conservation finance projects. For example, “impact investors” such as high net worth individuals, family offices or foundations are increasingly attracted to this area as they place a greater emphasis on the environmental or social impact of their investments. They are often prepared to take on high risk projects or accept lower returns in exchange for these positive impacts. In addition, private sector investors (clients of banks, asset management firms and beneficiaries of public pension funds) are looking into investment products in this area, drawing into sharper focus the shift away from traditional philanthropic element of conservation finance. As Ricardo Bayon, a partner at Encourage Capital (an investment management firm offering conservation finance funds) recently told Environmental Finance Magazine, high impact investments no longer means investors are giving up their returns – it is possible to “have your cake and eat it.” Continue Reading

Warranty and Indemnity Insurance: Practical Pointers

Posted in M&A and Private Equity

By Nick Cline, Dan Treloar, Katie CampbellPencils_sngleColClr

Warranty and Indemnity (W&I) insurance, which seeks to bridge the gap between a buyer’s wish for deal protection and a seller’s desire for a clean exit, has become a common product in European M&A transactions. In our view, there is real value in having a thorough understanding of the process and key practical considerations for acquiring a policy. According to the Latham & Watkins 2016 European Private M&A Market Study, which examined over 170 deals signed between July 2014 and June 2016, the proportion of transactions where W&I insurance was used has increased, with around 13% of transactions now using the product. Claims data compiled by AIG (R&W Insurance Global Claims Study) indicates that claims are filed against around one in seven W&I policies globally, suggesting real protection for both buyers and benefit to sellers that would otherwise be exposed to such claims.

Planning, Timing and Readiness

In both bilateral and auction sale processes, strategic bidders can enhance the deliverability of their offers by addressing W&I insurance early in the process. Bidders can present themselves as “dealready” counterparties that pose a lower execution risk than rival bidders. Early engagement with brokers and lawyers will also reduce the risk of coverage gaps and ensure a smoother process. Brokers can also seek beneficial terms and leverage any competitive tension between underwriters earlier in the process. Continue Reading

Chinese Outbound M&A: 4 Key Questions

Posted in M&A and Private Equity

By Richard Butterwick, Cathy Yeung, Yilong Du, Karima Salway

Overseas direct investment by Chinese companies increased significantly in 2016 to US$212 billion, a 143% increase from 2015. While outbound M&A interest remains strong in China, recent measures taken by the Chinese government to scrutinise transaction fundamentals more closely and slow capital outflows may impact deals in 2017. Consequently,

Chairs in a meeting room

what should European corporates know and do in order to minimise the risk of an aborted deal?

1. Why Do the Deal?

Chinese regulators are focusing on the authenticity and commercial purpose of deals by Chinese companies. Acquisitions with a solid rationale that benefit the Chinese economy are unlikely to be rejected outright. So-called “irrational” deals (outside of a Chinese buyer’s core sector, particularly in the real estate, media, sports or hospitality sectors) will face greater regulatory hurdles and carry a higher abort risk. European corporates and their advisers need to factor this into any approach from a Chinese company. Continue Reading