UK CMA Announces Closure of Investigation into PCWs for Energy Tariffs

Posted in EU and Competition

By John Colahan and Calum Warren

On 6 October 2016, the UK Competition and Markets Authority (CMA) announced the closure of its investigation into a suspected competition law breach by some price comparison websites (PCWs) for energy tariffs on the grounds of administrative priorities. The suspected competition law breach related to certain paid online search advertising practices allegedly engaged in by the PCWs. No precise description of the practices under consideration is given in the case closure notice.  However, it appears from the notice that the practices at issue concerned arrangements involving PCWs and service providers that related to access to key words likely to be used in search terms. While the CMA has chosen not to pursue the investigation in this instance, the CMA’s case closure notice confirms that marketing initiatives – along with pricing, output and R&D, amongst others – can be an important parameter of competition.  The CMA’s statement serves as a timely reminder that companies need to be aware that communications that can be construed as agreements or concerted practices in relation to online search advertising with other market players may breach UK and EU competition law rules. The potential competition law concerns include limiting access to search terms that, among other things, could change the basis of searches by consumers, as well as impacting bidding in auctions for search terms.

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China’s search for Israeli assets is to be welcomed but it won’t change the preference for early exits

Posted in Emerging Companies and Technology

By Charles Ruck

The exit outlook for Israeli M&A is especially positive, particularly in light of the ever-growing interest from the Far East. While the vast majority of inbound capital still comes from the US, China has emerged as a prolific investor in Israeli start-up and tech businesses.

Shanghai Giant Network Technology’s $4.4bn acquisition of Playtika, the social and mobile games business sold by Caesars Interactive Entertainment (CIE), is a marquee example of the increasing flow of capital coming from the East – Latham & Watkins advised CIE. Other investments have been equally eye-catching. At the end of 2014, Chinese search engine Baidu invested $3m into Pixellot, the Israeli sports video start-up. Baidu also provided financing to Carmel Ventures, the Israeli venture capital firm.

With a greater variety of foreign investors and acquirers hunting for high-quality Israeli assets, we can expect Israeli targets to achieve higher valuations.

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Tighter connections between the Bay Area and Israel will encourage investment flows

Posted in Emerging Companies and Technology

By Tad Freese

Silicon Valley trends are often soon felt in its Israel equivalent Silicon Wadi. The two start-up ecosystems are intrinsically linked. In April this year, the connection between the two regions was further tightened when United Airlines launched a new direct flight between Tel Aviv and San Francisco.

New flight routes are demand driven and Silicon Valley and Bay Area businesses and investors have a history of buying up and buying into flourishing Israeli start-ups in Israel. Equally, Israelis have become part of the start-up and tech fabric in the Bay Area.

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Commercial or Consular? State Immunity Frustrates Enforcement of Arbitral Award

Posted in Dispute Resolution

By Catriona E. Paterson

In its recent decision in L R Avionics Technologies Limited v. The Federal Republic of Nigeria & Attorney General of the Federation of Nigeria[1], the Commercial Court found that that premises owned by Nigeria were not “in use […] for commercial purposes” within the meaning of section 13(4) of the State Immunity Act (SIA) and therefore were not capable of being attached in proceedings for the enforcement of an arbitral award and judgment against the State.

In consequence, although successful in an underlying arbitration, L R Avionics Technologies Ltd (the Claimant) had its attempts to enforce its arbitral award frustrated by the rules of State immunity from enforcement as articulated in the SIA.

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Environmental Transparency Becomes Obligatory in 2017 as EU Directive 2014/95 Comes into Effect

Posted in Environment

By Paul Davies

Unprecedented globalisation, coupled with significant concerns around climate change, has taken environmental and social responsibility from a voluntary concept to something more obligatory and enforceable. Consequently, corporate governance has increasingly become a binding legal obligation in a number of jurisdictions. Demonstrable of such progression, the EU Directive 2014/95 will be enforced from 2017 – a Directive which increases reporting obligations of non-financial information. Member States will need to assess domestic legislation to ensure compliance with the new obligations under the Directive. For example, France notably revised its Commerce Code in August this year to accommodate the latest EU environmental and social governance (ESG) requirements.

Regional and international policy has have led the way. Since the Organisation for Economic Co-operation and Development (OECD) adopted its Guidelines for Multinational Enterprises in 1976, ESG has progressively featured in the legislation guiding businesses. Global Compact, undertaken by the UN in 2000, introduced voluntary participation to comply with its Ten Principles – principles which enhanced ESG. This move prompted the EU Commission to debate how Europe could better promote corporate social responsibility (CSR) to achieve greater transparency and accountability among its member states.

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China Policy for Lender Liability in Green Finance Guidelines

Posted in Environment

By Paul Davies, Gary Gengel and Andrew Westgate

In April 2015, the Final Report of the People’s Bank of China’s Green Finance Task Force made 14 recommendations to facilitate the establishment of China’s green finance system. Recommendation 13 proposed the imposition of lender liability on banks to force financial institutions “to take environmental impact into consideration in making investment and financing decisions”.

The practical consequence would be that banks and other financial institutions become liable for environmental pollution or damage caused by their borrowers. Although lender liability has been a feature of environmental regulation in Western countries in the past, it has been significantly scaled back, and most statutes provide a due diligence “safe harbor” for lenders. Otherwise, it is argued, lender liability becomes nothing more than a search for the “deepest pockets”.

Green Finance at G20

Green finance was a prominent topic at the eleventh G20 summit, which concluded last week in the city of Hangzhou, pushed to the forefront by the host country, China, which has cemented its position as a market leader in “greening” its economic system.

China’s commitment to green finance is well established– China’s government has been encouraging banks to take environmental issues into account with respect to their lending since it first issued green credit guidelines in 2007. In the months preceding the G20 summit, China had actively participated in international discussions regarding the development of green finance, highlighting China’s efforts to transition towards sustainable growth. China has become the world’s largest green bond market, issuing 33% of the world’s total in the first half of 2016. Increasingly, China is also adopting a leading role in establishing and developing the regulatory framework as green bonds become a fixture of environmental policy.

Commercial Banks Should Prepare for Implementation of New Guidelines

New guidelines for establishing the green financial system, released during the G20 Summit (4 September 2016), confirmed China’s earlier proposals to seek to introduce the concept of lender liability for environmental damage into China’s legal framework. The guidelines were published by the People’s Bank of China, but were jointly issued with six other government agencies, including the Ministry of Finance, the National Development and Reform Commission, the Ministry of Environmental Protection, and China’s regulatory commissions for banking, insurance and securities, indicating the breadth of government backing for these measures.

The introduction of lender liability would be a sea change in the environmental regulatory framework of what is now one of the world’s key manufacturing and financial markets. The new guidelines are anticipated to attract significant attention from around the globe. Banks and other financial institutions need to engage with the proposals as quickly as possible, with a view to not only seeking to clarify the scope and timing of any amending legislation, but also in considering what procedures and processes need to be in place to mitigate environmental risks associated with lending.

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US and China Ratify the Paris Climate Agreement

Posted in Environment

By Paul Davies and Michael Green

Prior to the G20 Leaders’ Summit on 4 September, China and the US ratified the Paris Climate Agreement during a ceremony in Hangzhou, China. This commitment from the world’s largest carbon dioxide emitters is expected to prompt developed nations in Europe to follow suit.

The adoption of the Paris Agreement by 195 countries is widely considered to be one of the most ambitious international environmental agreements, whereby parties committed to limiting the increase in the global average temperature to 2˚C above pre-industrial levels while striving to limit the temperature increase to 1.5˚C.

China and the US join 25 other signatories who have ratified the Paris Agreement – the majority of whom are islands particularly vulnerable to climate change, for example, the Bahamas and Nauru. With China and the US now among the signatories, it is likely to accelerate the entry into force of the Paris Agreement.

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UK Supreme Court Adopts New “Range of Factors” Approach to Defence of Illegality

Posted in Dispute Resolution

By Dan Smith and Anna Hyde

The UK Supreme Court has rejected a formal “reliance” test to determine whether a defendant to a civil claim can rely on the claimant’s wrongdoing to defeat the claim, replacing it with a more fact-sensitive “range of factors” approach, which may expand cases in which the defence operates.

No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act”, Lord Mansfield’s dicta in Holman v Johnson (1775)[i], encapsulate the English common law defence of illegality to civil claims.  The defence is based on the public policy that a person should not be able to benefit from their own wrongdoing and that the courts should not enforce claims that harm the integrity of the legal system.  It is a potentially far-reaching defence which can apply in any civil claim, and the recent case of Patel v Mirza[ii] indicates that all litigants should now consider it whenever allegations or evidence indicate wrongdoing.

However, whilst the rationale is clear, authorities have been less so. As Gloster LJ put it in the Court of Appeal, “it is almost impossible to ascertain or articulate principled rules from the authorities[iii], either for the recovery of money or other assets paid or transferred under illegal contracts, or for the range of cases to which the defence might apply (e.g. to claims for contractual damages or performance, to claims in tort, or to restitutionary claims for unjust enrichment).

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China to Promote Green Finance at G20

Posted in Environment

By Paul Davies and Andrew Westgate

Now in its eleventh year, The G20 Summit heads to the city of Hangzhou, China – the first time a G20 summit has been held for heads of state in China. As this years’ destination, China is maximising its role as the host nation to not only highlight its position as an economic superpower, but also to push for continued commitment to climate change and showcase its market-leading role in green finance.

In preparation for the summit, China has not only spruced-up its host city, but has cleaned up its skies. Chinese authorities implemented strict controls on factories operating in the provinces of Zhejiang (where Hangzhou is located), Jiangsu and the city of Shanghai, as part of its short-term air quality plan to ensure blue skies during the G20. As significant industrial centres, the restrictions introduced impact global supply chains across various industries, yet such impact has not deterred the priority of air quality. Continue Reading

China Continues to Lead Global Investment in Solar and Wind Projects But Curtailment Remains an Issue

Posted in Environment

By Paul Davies and Andrew Westgate.

According to a recent report released by Clean Energy Pipeline, global clean energy backing in the first half of 2016 totalled US$116.4 billion. China was the largest investor, financing US$15.3 billion worth of solar and wind projects and accounting for nearly 30% of the world’s total solar and wind investment.

Yet despite its significant investment, the output of China’s push into renewable technologies continues to be limited by its grid system, and subsequent curtailment. Curtailment occurs when energy is available, but the operator does not allow that energy to be delivered to the grid because there is no demand and/or the energy cannot be stored. According to the central government, nearly 15% of wind-generated electricity went unused in 2015. Also contributing to this challenge is the disconnect between where energy is generated and where it is needed. As an example, in 2014, 46% of wind power curtailment was caused by a failure to use electricity generated in the province of Gansu. Continue Reading