European Court of Justice Delivers Victory for EU Transparency and Accountability

Posted in Dispute Resolution, Environment, EU and Competition

Landmark ruling requires the European Commission to disclose impact assessments used as a basis for its legislative decision-making process.

By Antonio Morales and Rosa Espín

The Grand Chamber of the Court of Justice of the European Union recently issued a landmark judgment finding that impact assessments should be considered public documents. This decision sets a legal precedent in connection with the transparency, accountability, and decision-making processes of European institutions.

Case Background

A non-profit organization active in the field of environment protection had sought to access two impact assessment reports, which had played an influential role in the proposals of certain environmental laws. Continue Reading

European Banking Authority’s Draft Guidelines on Outsourcing: Discussion of Key Themes

Posted in Brexit, Emerging Companies and Technology, EU and Competition, Finance and Capital Markets

The EBA’s draft guidelines on outsourcing will impact cloud outsourcing and institutions’ deployment of FinTech.

By Fiona MacleanCharlotte Collins, and Terese Saplys

On 4 September 2018, a wide audience of interested individuals gathered at Canary Wharf for a public hearing (Public Consultation) to listen to what the European Banking Authority (EBA) had to say in relation to its long-awaited Draft Guidelines on Outsourcing (Draft Guidelines). The Draft Guidelines, which review the existing CEBS Guidelines on Outsourcing published in 2006 (CEBS Guidelines), are the EBA’s opportunity to refresh its recommendations on outsourcing to align more closely with the technical, political, and operational landscape banks face today. The attendees at the Public Consultation raised a number of questions which have, no doubt, given the EBA considerable food for thought. This blog post identifies and explores the key themes of the day. Beyond the key themes identified below, the Public Consultation included discussions of the issues of internal audit, reporting and registration, and supervisory oversight.


The extension of scope of the Draft Guidelines, as compared to the scope of the CEBS Guidelines, was a particular area of focus during the Public Consultation.

The Draft Guidelines describe their subject matter as “specify[ing] the internal governance arrangements that institutions … should implement when they outsource functions and in particular with regard to the outsourcing of critical and important functions” (paragraph 5 of the Draft Guidelines). The term “critical and important functions” is consistent with the wording used in MiFID II and includes functions which, if a defect or failure were to occur, would materially impair the continuing compliance of the firm’s activities and obligations. In this regard, the Draft Guidelines align with the CEBS Guidelines which described the requirements for “material outsourcing,” a term defined in a similar manner. However, while the CEBS Guidelines noted that “there should be no restrictions on the outsourcing of non-material activities of an outsourcing institution” (Guideline 5), the Draft Guidelines extend to all outsourcing, unless expressly stated otherwise. Many attendees at the Public Consultation noted that this scope was unduly onerous and would become administratively burdensome for firms to manage.

Notably, the broadening of the addressees of the Draft Guidelines (In-scope Entities), to include payment institutions (subject to the revised Payment Services Directive (PSD2)) and electronic money institutions (subject to the e-money Directive), was not discussed in detail at the Public Consultation. However, an attendee raised a question as to the applicability of the Draft Guidelines to industry utilities. The EBA confirmed they had not yet considered this point and advised that they would reflect and clarify the position in the final guidelines. Continue Reading

PE Firms Must Evaluate Competition Strategy Ahead of Brexit

Posted in Brexit, EU and Competition, M&A and Private Equity

By Jonathan Parker and Greg Bonné

As the UK Competition and Markets Authority (CMA) prepares to assume sole jurisdiction for UK competition reviews post-Brexit, private equity deal teams must evaluate the competitive consequences of deals bridging the Brexit period and update their competition strategy accordingly.

What is Changing?

The European Commission (EC) currently acts as a one-stop-shop supranational authority for large transactions that meet Europe-wide competition turnover thresholds, obviating the need for competition filings in individual Member States. However, post-Brexit, transactions impacting competition in the UK and the EU will become concurrently reviewable, i.e., the CMA will review UK aspects and the EC will review European aspects. A significant increase in the number of UK merger reviews carried out by the CMA is likely — the CMA believes that Brexit could result in a further 50 notifications per year, nearly doubling its current workload.

Why Does it Matter?

Timing for the establishment of the CMA’s separate jurisdiction is uncertain. At the earliest, jurisdiction could be effective immediately after the UK leaves the EU  on 29 March 2019. A two-year stay is also possible, depending on the terms of separation. The period building up to the CMA’s separate jurisdiction is likely to be the trickiest for deal teams to navigate. PE firms may not be able to implement the same merger control strategies as in the past.

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UK Serious Fraud Office Director Outlines Priorities in Keynote Speech

Posted in Dispute Resolution

New director Lisa Osofsky confirms her focus on cross-border and corporate cooperation.

By Stuart Alford QC, Nate Seltzer, and Clare Nida

On 3 September 2018, in her first speech, after only one week as head of the UK’s Serious Fraud Office (SFO), Lisa Osofsky laid out her plans for the agency.

Upon announcement of her appointment, Latham identified possible priorities for the new director here. As predicted, Osofsky’s unique cross-border and corporate experience is shaping the SFO’s strategic priorities:

  1. Strengthened cross-border relationships: Osofsky made a number of references to her US experience as a federal prosecutor, and pledged to deepen cross-border relationships as a necessary step to achieve multijurisdictional cooperation and settlements. Her speech also highlighted the need for cooperation with other national law enforcement agencies.
  2. Improved corporate engagement: The agency will engage with corporates and leverage their expertise to enhance the SFO’s intel. Osofsky acknowledged the professionalism of compliance in the regulated sector, and that lawyers, solicitors, and barristers have a lot to offer in fighting crime — an approach indicative of her private sector experience.
  3. Deferred Prosecution Agreements (DPAs): Osofsky reiterated experience with DPAs, the increased international introduction of DPAs, and indicated they would be a core tool for the SFO. However, she warned companies must “ensure the crimes of the past won’t be repeated long after the watchful eye of the prosecutor moves on to another target”. For a summary of global anti-bribery laws and uses of DPAs, download Latham’s AB&C Laws app.
  4. Use of technology: In the same conference that the SFO announced the department is examining 65 million documents in one investigation — more than twice the amount it has ever reviewed for a single probe — Osofsky drew on her previous experience to highlight the SFO’s increased use of technology assisted reviews and development of Artificial Intelligence (AI).
  5. An independent agency: Contrary to predictions that Osofsky was a supporter of margining the SFO and National Crime Agency, she affirmed that she would maintain the SFO’s independence and utilise its increased core funding.

Full text of Osofsky’s speech and her plans for the agency can be found here.

Reform of the German Mietpreisbremse: A Breakthrough in Tenancy Law?

Posted in EU and Competition

Proposed reforms to the Mietpreisbremse aim at strengthening and solidifying restrictions on steep rent increases in German urban areas.

By Christian Thiele and Eun-Kyung Lee

After intense discussions within the ruling coalition, the German government this week adopted a draft bill regarding the reform of German tenancy law.

What is the Mietpreisbremse?

The Mietpreisbremse (literally “rental price brake”) introduces a considerable element of rent control into the German legal system and is one of the largest political projects in the German rental market in recent years. Adopted in 2015, the measure allows the governments of the 16 German federal states to cap landlords’ rental price raises for new rentals by way of regulation. The main purpose is to prevent landlords of apartments in urban areas from significantly increasing rents following a change of tenant. According to Section 556d of the German Civil Code, the rental price in a new residential lease contract must not exceed the local comparable rent by more than 10% if the regulations have declared the relevant region as part of an area with a strained residential market. Of the 16 federal states, 11 states, including Berlin, Hamburg, and metropolitan areas in North Rhine-Westphalia and Bavaria, have so far passed such a regulation. Continue Reading

Internal Investigations Protected By Privilege Once More?

Posted in Dispute Resolution

English Court of Appeal reaffirms privilege over internal investigation documents prepared in contemplation of litigation.

By Jon Holland, Andrea Monks, Stuart Alford QC, Nate Seltzer, Dan Smith, and James Fagan

In a much anticipated decision, the Court of Appeal has reaffirmed legal privilege protection for documents prepared during internal investigations (e.g., interview notes, forensic accounting analysis) whose dominant purpose is preparing for litigation reasonably in contemplation, and on the facts confirmed that this can occur even in the early stages of a government investigation.

This decision affirms that English law remains in line with other jurisdictions, including the work-product privilege in the United States, and should permit corporates to conduct internal investigations in anticipation of litigation without fear that external counsel will be required to turn over interview notes or other documents to authorities or to adversaries in collateral litigation.

Corporates should bear in mind the following practical tips:

  • Consider possible litigation. Corporates should place critical importance on considering at a very early stage in any investigation whether the investigation can be characterised as being for the dominant purpose of defending actual or anticipated litigation. Previous cases demonstrate that obtaining external advice is strong evidence in this regard. Companies should also consider documenting the dominant purpose in external engagement letters, Board or Audit Committee resolutions, or other materials.
  • Be wary of multiple purposes. The dominant purpose test remains vital to attracting Litigation Privilege, and will depend on a close analysis of the facts. Corporates should consider carefully where documents are also prepared for other purposes (such as compliance, business, or financial purposes), as this could prevent privilege from applying.
  • Consider legal advice privilege. The Court of Appeal expressed the view that Legal Advice Privilege might also apply, but declined to rule on this given contrary binding authority. However, even here the Court of Appeal took a more reserved position on whether information obtained from ex-employees could qualify. Therefore, corporates should take extra care when obtaining information from ex-employees as this may complicate parallel claims of Legal Advice Privilege.

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Proposed Market Framework for Financing Small Nuclear Projects in the UK

Posted in Environment, Finance and Capital Markets

By Beatrice Lo and Heeran Caselton

The Expert Finance Working Group on Small Nuclear Reactors (EFWG), an independent group convened in January 2018 by the Department for Business, Energy & Industrial Strategy, recently published its report with recommendations for a market framework to enable the development of small nuclear projects in the UK with private financing and investment. The report follows the publication of the UK government’s Nuclear Sector Deal (see Latham’s related blog post).

The EFWG report considered small nuclear projects ranging from micro-generation projects through to 600 MW reactors. In contrast to “megaprojects”, such as Hinkley Point C, which is estimated to cost almost £20 billion, the costs of small nuclear projects typically range from £100 million to £2.5 billion. Small nuclear projects can benefit from lower capital costs and quicker build times through modular construction and factory build (as opposed to on-site build) and are generally less complex than a GW nuclear project. These factors render a number of the risks more manageable, and the lower costs involved make the investment required for a small nuclear project within the range of a greater number of market participants (compared to larger projects).

Although the EFWG report focuses on small-scale nuclear new build projects, a number of the considerations and proposals may also be relevant for conventional large-scale nuclear power projects. Continue Reading

Private Equity and Blockchain: New Infrastructure or New Asset Class?

Posted in Finance and Capital Markets, M&A and Private Equity

By Andrew Moyle and Stuart Davis

Growth in applications for blockchain and tokenisation, combined with an increasing number of initial coin offerings (ICOs), mean that buyout firms should note developments in this sector.

Why Should PE Be Interested in Blockchain?

A shared blockchain ledger could drive a single interface between a PE fund and its investors, increasing transparency and efficiency, providing real-time updates for LPs on investments, and enhanced investment analytics. Blockchain technology could also be used to automate fund administration — traditionally a manual and time intensive process. However, back- and middle office process at PE houses are typically low volume, low margin activities, in our view limiting any cost and efficiency savings for a PE fund. Furthermore, investors and regulators will scrutinize any blockchain solution and the operational risks inherent in new technology implementation.

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A more interesting development for PE is the trend towards tokenisation of financial assets. Tokenisation refers to the manufacture, issuance, storage, and transfer of digital assets on a blockchain infrastructure. Digital assets can take any form, e.g., shares or bonds, profit participation rights, fund interests, or a hybrid instrument that automatically converts from one instrument to another on the occurrence of a pre-defined trigger. Continue Reading

English Court Refuses to Extend Time for Serving a Claim Form

Posted in Dispute Resolution

Claimants and practitioners must be mindful of the period in which a claim form must be served after filing.

By Oliver E. Browne and Kavan M. Bakhda

In Viner v. Volkswagen Group Limited [2018] EWHC 2006 (QB) Senior Master Fontaine refused the claimants’ application to extend time to serve a claim form that had been filed but not served.

The Issue

In order to create leverage, claimants sometimes issue claims at court, but do not serve them. They then have four months to serve the claim if the leverage they have sought to gain has not yielded results. This claim shows that claimants and practitioners need to be aware of the time period, and either serve the claim or apply for more time before the period expires.


The case concerns a group action litigation brought by clients of two law firms against Volkswagen AG. The automaker is accused of manipulating the results of emissions tests in some of its diesel vehicles. Volkswagen UK (VW UK) is not a named defendant in the proceedings, however, a firm of solicitors based in Chesterfield, Your Lawyers, attempted to bring a claim against VW UK on behalf some of the claimants. Your Lawyers issued a claim against VW UK in January 2016, however, the firm chose not to serve the claim form within its period of validity. Your Lawyers subsequently applied for an extension of time to serve the claim until after the separate group litigation issues had been determined. Continue Reading

Debt Portability Can Deliver a Better Exit Valuation — Will US Practice Increase Debt Portability in Europe?

Posted in M&A and Private Equity

By Dennis Lamont, Charles ArmstrongJennifer Cadet, Howard Sobel, and Scott Ollivierre

Debt portability provisions — reasonably common in high yield lending but historically rare in bank financing — have been recently seen in an increased number of US transactions, as deal terms react to a buoyant financing market. What should deal teams consider when seeking to include such provisions on European deals?

What Are Debt Portability Provisions?

Debt financing documents typically contain a change of control feature that triggers an event of default, or requires a mandatory prepayment or offer to purchase, upon the sale of the borrower or issuer of the debt (referred to in this article as the company) to a third party. As a result, the credit markets generally expect that all material existing debt will be refinanced on the sale of the company.

In some cases, the need or obligation to prepay debt is coupled with call protection for particular tranches of debt, which adds a premium to the cost of refinancing existing facilities. The total amount of this cost — underwriting fees for the new replacement facilities and call protection payments — is effectively borne by the seller, as a prospective buyer will factor costs into the purchase price. Debt portability provisions waive the change of control provisions if certain criteria (including leverage ratios and ratings conditions) are satisfied.

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