Queen Announces New UK Data Protection Bill

Posted in Data Protection

Data Protection - FingerprintBy  Gail Crawford and Danielle van der Merwe

Following the commencement of the Brexit negotiations earlier this week, the Queen announced in her speech on Wednesday a new law that will “ensure the United Kingdom retains its world-class regime protecting personal data”.

This bill will replace the current Data Protection Act 1998 in the UK. One of the bill’s main reported benefits is the implementation of the General Data Protection Regulation (GDPR) (and the new directive applying to law enforcement data processing), meeting the UK’s obligations while it remains an EU Member State. Crucially, the intention is for the Bill to help put the UK in the best position to maintain its ability to share data with other EU Member States,  and internationally after the UK leaves Europe.
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Up into the Clouds?

Posted in Emerging Companies and Technology

By Fiona Maclean, Stuart Davis and Charlotte Collins

Cloud services come with the promise of many benefits for the financial services sector. Cloud computing offers large-scale and cost-effective solutions for data storage and efficient processing and is also the underlying technology for many FinTech platforms. As with a lot of new technology, however, financial institutions are struggling to see how they can embrace cloud services fully in the context of the current regulatory landscape. This is particularly so given that use of cloud services is often considered a material outsourcing, meaning that banks and investment firms must follow strict rules in order to ensure that the risks posed by migrating data to the cloud are mitigated appropriately.

Cloud Regulatory Guidance: Clear Skies?

Current guidance on outsourcing for banks and investment firms is from the Committee of European Banking Supervisors (CEBS) and dates from 2006 (the CEBS Outsourcing Guidelines), so is overdue for review. The European Banking Authority (EBA) has recognised this and, amidst concerns that firms simply may not use cloud service providers because they cannot reconcile how to do this in line with the regulatory requirements, published some new draft guidelines on outsourcing to cloud services (Draft Cloud Guidelines) for consultation on 17 May 2017.

The final guidance resulting from the public consultation (the Final Cloud Guidelines) will supplement, rather than replace, the existing CEBS Outsourcing Guidelines, so both will need to be read in parallel. Essentially, as the CEBS Outsourcing Guidelines are short and principles-based, the new guidelines seek to add more detail as to how a firm’s regulatory obligations may be met in the specific context of outsourcing to a cloud service provider, based upon discussions the EBA has had with firms and their regulators. Continue Reading

U.S. Withdrawal from the Paris Agreement Creates an Opening for China to Lead

Posted in Environment

By Paul Davies and Andrew Westgate

On June 1, 2017, President Trump announced during a speech at the White House that the United States will withdraw from the Paris Agreement, fulfilling a campaign pledge to end the agreement that the President argued would harm the U.S. economy. Supporters of the Paris Agreement had lobbied for the U.S. to remain in the agreement, including members of the Trump Administration and 360 companies that signed an open letter to the President. In the end, President Trump was swayed by the agreement’s opponents who argued it threatened America’s energy sector. Though under its terms the U.S. cannot withdraw from the Paris Agreement until 2020, the effect of the announcement was immediate as leaders around the world condemned the decision and pledged support for the agreement.

In relation to China, the decision to withdraw is significant in two respects. First, cooperation between the U.S. and China was a key driver of the negotiations leading to the Paris Agreement and crossing the agreement’s threshold of 55% of the world’s carbon emissions to become effective. Second, President Trump has framed the decision as part of a larger pivot away from international trade and cooperation, which has left China in the unfamiliar position of a leading champion of international trade. China’s President Xi Jinping called on the world to “remain committed to developing free trade and investment” in Davos earlier this year, a position expressed by the U.S. in the past. Alex Wang, a professor of environmental law at the UCLA School of Law noted that “[w]hile the US is breaking these ties, China — which has traditionally been more reserved in international affairs — is building them at breakneck pace.” Continue Reading

China Increases Focus on Electronic Waste

Posted in Environment

By Paul Davies and Andrew Westgate

As a world leader in the manufacturing of electronic devices, China is beginning to reform its rules and regulations to ensure that the resulting framework is able to keep pace with the rapid developments now taking place in this sector both in China and globally. Two recent developments in this regard are discussed below.

Battery Waste. In December of 2016, the Ministry of Environmental Protection (MEP) issued the “Battery Waste Pollution Prevention Technology Policy.”[1] The policy, which applies to all kinds of battery waste, does not impose specific requirements, but instead defines key policy priorities for regulators to develop standards for battery waste. Priorities reflected in the policy include the following: Continue Reading

Hong Kong Permits Third Party Funding of Arbitration

Posted in Dispute Resolution

By Hanna Roos and Kavan Bakhda

Hong Kong approved last week the awaited Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 to permit third party funding of arbitration, as well as supporting court, emergency arbitration and mediation proceedings. The Hong Kong Legislative Council adopted the draft bill in the form of amendments made to the Arbitration Ordinance (Cap. 609) presented to the Legislative Council in January 2017 (see our earlier blog for a discussion of the draft bill). It is expected that the amendments will take effect later this year while an appropriate Code of Practice for funders is drawn up.

The bill introduces a new Part 10A (ss 98E-98W) to the Arbitration Ordinance, as well as a new section 7A to the Mediation Ordinance. The bill applies equally to domestic and international arbitrations which were unified into a single regime in 2011. The amendments clarify that third party funding of arbitration and mediation seated in Hong Kong (or using services provided in Hong Kong for arbitrations taking place elsewhere) is not prohibited by the common law doctrines of maintenance and champerty.

According to the report of the Legislative Council, the bill does not apply to court litigation, and its funding by third parties therefore remains prohibited in Hong Kong, save for court proceedings related to the arbitration such as challenges and enforcement. This may encourage parties with a Hong Kong nexus to opt for arbitration over litigation. Continue Reading

The European Commission Places Environmental, Social and Governance (ESG) Issues Centre Stage

Posted in Environment

By Paul Davies and Michael Green

The European Commission has recently published plans to integrate sustainability considerations into decisions made by investors within the EU. More specifically, the EU is looking to spell out in legislation, that the consideration of ESG issues should be incorporated into the fiduciary duties of EU asset managers.

The main proposal is to clarify that fiduciary duties of asset managers includes consideration of ESG issues, ensuring that sustainability is more central to corporate governance and promoting the effective incorporation of ESG performance in issuer credit ratings and key market benchmarks. The European Commission also renewed its commitment to the integration of sustainability and ESG factors in (i) rating methodologies and verification systems (e.g. green bonds), (ii) investment mandates of institutional investors and asset managers and (iii) upcoming reviews of financial legislation.

However, the European Commission will not formalise proposals to enact the suggested changes until 2018, when it is expected to implement a broader EU strategy on sustainable finance. Campaigners from WWF have praised this renewed focus on ESG issues, encouraging the European Commission to follow this up with an ambitious strategy the following year so that a clearer definition of ESG criteria can be set out. They argued that sustainability could be integrated “right away” to EU laws such as the law on alternative investment fund managers. Continue Reading

German Utilities Score Billions on Constitutional Challenge to German Nuclear Fuel Tax

Posted in EU and Competition

By Jörn Kassow and Alexander Wilhelm

On 7 June 2017, the Federal Constitutional Court of Germany (FCC) published a recent decision that declared the German Nuclear Fuel Tax Act (Kernbrennstoffsteuergesetz – KernbrStG) void due to the lack of legislative competence of the federal legislator (Bundestag) to enact the law constitutionally. The FCC argued that neither the Federation (Bund) nor the federal states (Länder) have the right to seek tax outside the competencies of the Basic Law (Grundgesetz). The court found that the tax on nuclear fuel cannot be allocated to the type of excise duty (Verbrauchsteuer) within the meaning of Art. 106 of the Basic Law.

The tax on nuclear fuel was imposed in 2010 as a measure for fiscal consolidation. From 2011 through 2016, each gram of fissile nuclear fuel loaded into a German reactor carried a levy of €145. The legislator deemed the tax to be an excise duty within the meaning of tax regulations. According to the Federal Ministry of Finance, the tax revenue amounted to nearly €6.3 billion.

The operators of nuclear power plants challenged the levy before several German Fiscal Courts. The Fiscal Court of Hamburg referred the case at hand to both the FCC and the European Court of Justice (ECJ). The Fiscal Court doubted the compatibility of the Nuclear Fuel Tax Act with national constitutional law and the law of the European Union. In 2015, the ECJ found the German law compatible with the European Directive (2003/96/EC) on taxation of energy products and electricity and rejected the claim that nuclear fuel must be exempted from taxation. The Directive exempts energy products for the production of electricity which are subject to harmonized excise duty. The ECJ noted that nuclear fuel is not included in the scope of this Directive. Continue Reading

Spain Reorganises its National Regulatory Authorities to Comply with EU Guidelines

Posted in EU and Competition

By Rosa Espín and Leticia Sitges

The Spanish government recently passed a draft bill for the “ rationalization and organization of the supervising regulatory bodies of the markets and the improvement of its governance” (the Draft Bill). The bill aims to reorganize antitrust regulation, and to improve supervision and regulation in the economic and financial domains, specifically the banking, capital markets, and insurance sectors.

On 4 June 2013, the Spanish government passed Act No. 3/2013, creating the Comisión Nacional de los Mercados y la Competencia ( CNMC). This comprises several regulatory bodies: the National Energy Commission; the National Antitrust Commission; the Telecommunications Market Commission; the Rail Regulation Committee; the Airport Economic Regulation Commission; and the National Postal Industry Commission.

According to the new Draft Bill, the CNMC, the Spanish current national regulatory authority (NRA), will be replaced by four new independent administrative authorities:

  1. An Independent Administrative Authority for Antitrust
  2. An Independent Administrative Authority for the Supervision and Regulation of the Markets
  3. An Independent Administrative Authority for Insurance and Pension Plans
  4. An Independent Administrative Authority for the Protection of Financial Services Consumers and Financial Investors

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FCA Regulatory Sandbox Update: Successes in Round One, Application Window for Round Three Open

Posted in Finance and Capital Markets

By Stuart Davis, Andrew Moyle, Fiona Maclean, Christian McDermott and Charlotte Collins

The Financial Conduct Authority (FCA) has provided an update on its regulatory sandbox initiative. The sandbox is part of Project Innovate, and Toy shovel in sandallows businesses (whether already authorised or not) to test new offerings in the market under close supervision and without many of the usual regulatory consequences.

The first cohort of firms has now finished testing and the FCA states that it expects most firms to take forward their propositions to market, indicating that round one has been a success.

Meanwhile, the FCA has taken on its second cohort of 24 firms, whittled down from 77 applicants. These firms will begin testing shortly. The FCA has published a full list of these firms and short descriptions of what they will be testing on its website. Continue Reading

German Court Delays Implementation of Unified Patent Court Legislation

Posted in EU and Competition

By Deborah Kirk, Charles Courtenay, Christian Engelhardt, Yasmina Borhani and Andrea Stout

Germany’s constitutional court, the Bundesverfassungsgericht, has requested that the German President hold off on signing the legislation ratifying the Unified Patent Court (UPC) and the Unitary Patent (UP) following a constitutional complaint from an unnamed individual. The court did not disclose the nature of the complaint and only stated that it will investigate it as soon as possible in order to avoid delays. Delays in Germany will considerably affect the implementation of the UPC across Europe as Germany is one of three counties (including the United Kingdom and France) required to ratify the Unified Patent Court Agreement (UPC Agreement), the international agreement which brings these measures into effect. Ten other member states must also ratify the agreement.

The legislation, which will implement the European legislation at the national level in Germany, has already been approved by the other legislative bodies, the Bundestag and the Bundesrat, and is now only awaiting the signature of the German President, Frank-Walter Steinmeier. A court spokesperson said that Steinmeier has agreed to delay signing the legislation until the investigative ruling has been completed, which has been described as the “typical” approach. Continue Reading