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English High Court Confirms Costs Award Part and Parcel of Substantive Award

Posted in Dispute Resolution

The Court’s ruling supports the general principle that costs follow the event.

By Oliver E. Browne and Robert Price

In Andrew Martin, Nicholas Greene, Coban 2017 LLP (formerly named Strutt & Parker LLP) v. Michael Harris [2019] EWHC 2735 (Ch), the English High Court held that any arbitration award as to costs stood or fell with the substantive award. Therefore, if the substantive award was overturned by the court, the costs award would cease to have effect, regardless of whether the costs have been dealt with in separate award. Continue Reading

Financial Institutions and the Cloud: How to Navigate an Evolving Regulatory Landscape

Posted in Data Protection

Insights from Latham’s flagship event: Managing the risk and promise of digitisation in financial services.

By Fiona Maclean, Stuart Davis, and Alistair Wye

In a bid to keep pace with rapid advances in cloud adoption across financial services, regulators have published a raft of new guidance in the past year. Most recently, the European Insurance and Occupational Pensions Authority launched guidelines for insurers and reinsurers on outsourcing to cloud providers in July 2019, while the European Banking Authority (EBA) published updated guidance on outsourcing that came into effect on 30 September 2019, covering both cloud and other outsourcings.

We discussed some of the challenges facing financial institutions in the evolving area of cloud compliance at our recent event entitled Balancing the Scales: Managing the Risk and Promise of Digitisation in Financial Services. One key issue highlighted in the discussion is that the new EBA guidelines do not contain an overarching split between cloud and non-cloud arrangements, and there are no general exclusions or exceptions for new entrants or FinTech providers. Entities subject to the EBA guidelines will therefore face additional administrative burdens that they must balance with the need to stay ahead of the competition. Continue Reading

Is Arbitration Sustainable?

Posted in Dispute Resolution

Sustainability, opportunity, and meeting the challenges of the future. 

By Sophie J. Lamb QC

Each year, Hong Kong Arbitration Week celebrates the triumphs and challenges of international arbitration while actively promoting the development of the practice in Asia. This year’s prestigious Harbour Litigation Funding Lecture, now a highlight of Arbitration Week, was delivered by Sophie Lamb QC, Co-Chair of Latham’s International Arbitration practice. She examined the question of whether international arbitration can keep pace with global change, concluding that the community must do more to address calls for greater diversity, transparency, environmental responsibility, and enhanced efficiency. Below are excerpted highlights from the speech. Continue Reading

UK Supreme Court Upholds First Successful Claim for Breach of Quincecare Duty

Posted in Commercial, Finance and Capital Markets

In a leading case, the Court examined the extent of the duty of care that a bank owes to its customers when executing their orders.

By Andrea Monks and Nell Perks

On 30 October 2019, the UK Supreme Court dismissed Daiwa’s appeal in the case of Singularis Holdings Ltd (In Official Liquidation) v Daiwa Capital Markets Europe Limited [2019] UKSC 50. The decision marks the first successful claim for breach of the Quincecare duty that banks owe to their customers. Latham & Watkins expects to see further examination of the duty as instances of fraud continue to rise and the courts consider the degree of responsibility that banks should bear for stopping financial crime.

The Quincecare duty, which Justice Steyn set out in 1992, refers to an implied term of the contract between a bank and its customer that the bank will use reasonable skill and care in and about executing the customer’s orders. A bank will be in breach of this duty if it executes an order that it knows to be dishonestly given, shuts its eyes to the obvious fact of the dishonesty, or acts recklessly in failing to make reasonable enquiries. Continue Reading

Payment of Interest on Arbitration Award to Sanctioned Iranian Entity Prohibited

Posted in Dispute Resolution

In a geopolitically significant case, the English High Court opined on important provisions of the EU sanctions regime.

By Charles Claypoole, Robert Price, and Olivia Featherstone

The judgment of the English High Court in Ministry of Defence & Support for Armed Forces of the Islamic Republic of Iran v. International Military Services Limited [2019] EWHC 1994 (Comm) constitutes the latest decision in a long-running dispute between the Iranian Ministry of Defence, (MODSAF), and the UK Ministry of Defence (via its subsidiary, International Military Services (IMS) that has been litigated in various courts and tribunals since 1990.

This latest judgment concerns whether IMS is liable to pay interest on the amounts an arbitral tribunal awarded to MODSAF in 2001, or whether IMS is prohibited from paying such interest by EU sanctions laws (specifically, EU Regulation 267/2012 – as amended).

The judgment carries great legal importance, as judicial pronouncements on the interpretation, application, and operation of EU sanctions laws are relatively rare. Continue Reading

Baking the Books — Recent Instances of Fraud Highlight the Need for Vigilance in M&A Deals

Posted in M&A and Private Equity

Buyers’ best defence against M&A fraud requires rigorous, pre-closing due diligence — when fraud is suspected, deal teams should seek legal advice and proceed with caution.

Oliver Browne, Richard ButterwickAlanna Andrew, Frederick Brodie, Connor Cahalane, and Catherine Campbell

Recent high-profile fraud cases gravely illustrate how a failure to detect fraudulent activity can cause lasting damage to corporate value. In January 2019, publicly listed bakery chain Patisserie Valerie collapsed following allegations of a £40 million accounting fraud.

In our view, instances of fraud in the context of acquisitions are more common than is often thought. There can be (or have been) allegations of artificial inflation of reported revenues, revenue growth, and gross margins or other distortions — underlining the high stakes and public nature of M&A fraud allegations.

The best protection against fraud comes from specialist due diligence and an early emphasis on fraud detection pre-closing. Where concerns arise post-closing, English law provides some innate protections, but deal teams should seek legal advice early on to help navigate this complex area without causing further damage. Continue Reading

Protect Your Antitrust Privilege — Why M&A Dealmakers Must Take a Strategic Approach to Privilege

Posted in M&A and Private Equity

Companies must mitigate risks to antitrust privilege posed by cross-border megadeals and increased regulatory demand for documentation.

Richard Butterwick, John ColahanMartin DaviesJonathan ParkerOliver MiddletonGregory Bonné, and Catherine Campbell

A strong M&A market has driven a high volume of megadeals across the globe in recent years, with acquirers turning to ambitious transactions. Antitrust issues frequently arise on such complex deals, and in an evolving antitrust environment, taking a planned and strategic approach to privilege during the deal process is crucial. Balancing the need to run a thorough due diligence exercise and transparent deal process with the need to maintain confidentiality and privilege can be challenging. In our view, practical planning for privilege issues forms a key part of successfully navigating international M&A deals. Continue Reading

Making Your Carve-out a Clean Cut

Posted in M&A and Private Equity

Buyers and sellers can make the most of divestments through a value-centered approach to planning and post-closing transitional service agreements.

By Richard Butterwick, Robbie McLaren, Emily Cridland, and Katie Campbell

In the current deal market, corporates are taking an increasingly strategic and value-centred approach to planning carve-outs and divestments in order to maximise value. According to advisory firm EY, 84% of corporates recently questioned said they plan to divest an asset within the next two years, up from 20% in 2015. Streamlining operating models and managing a unit’s position in the market are most commonly cited as triggers for divestment. While financial distress can be a factor, EY’s findings demonstrate the analytical approach corporates are taking to divestments. This is echoed in recent deals we have advised on, including Telenor’s sale of its Central and Eastern Europe Business to PPF Group and Allergan’s sale of its global generic pharmaceuticals business to Teva.

In our view, corporates should approach each step of the carve-out process with two key factors in mind — what drives value in the carved-out business and how such value drivers will translate once the business is in the buyer’s hands. Continue Reading

Navigating M&A in 2019 — How Deal Terms Are Responding to the Current M&A Market

Posted in M&A and Private Equity

Drawing on Latham’s Sixth Private M&A Market Study, we explore trends and developments in consideration mechanics and deal conditionality.

Richard Butterwick, Martin Saywell, Simon J. Tysoe, Catherine Campbell, and Richard George

Uncertainty has been a significant market factor in 2019. The UK’s decision to leave the European Union, protectionist responses to China as a global investor, market volatility, and trade tensions have all given dealmakers pause for thought. With these growing pressures on international M&A, deal teams and in-house counsel are increasingly required to work with advisors to find strategies and solutions to get deals done — a task that requires an intimate knowledge of deal terms and current market trends. In our view, geopolitical factors can impact how parties approach deal architecture and key provisions of transaction documents.

Drawing on data from Latham & Watkins’ sixth Private M&A Market Study, we will examine how consideration mechanics and conditionality deal terms are responding to the current M&A market. Continue Reading

New Challenges for Transitional Services Agreements in Financial Services M&A

Posted in M&A and Private Equity

Subcontractors, security, and audit and termination rights will require special consideration under forthcoming EBA outsourcing guidelines.

Richard Butterwick, Deborah J. Kirk, Fiona M. Maclean, Samantha Peacock, Kirsty Watkins, and Catherine Campbell

Recent growth in divestiture and carve-out deals in the M&A landscape, including the financial sector, has brought renewed focus to transitional services agreements (TSAs), which typically feature in such deals. TSAs can facilitate an M&A deal by allowing a seller to continue to provide services to the divested business for a period after closing, providing operational continuity while the parties seek to untangle joint operations and effect integration with the buyer or to establish the target as a stand-alone business.

In our view, deal teams are increasingly aware of both the challenges of structuring a successful TSA and the burdens on parties of relying on such agreements long term. Parties are seeking to address issues prior to closing, and if a TSA is unavoidable, to establish a clear action plan and timeline for executing the necessary steps to exit the TSA in a timely manner. However, as buyers and sellers look to create efficient TSAs, both sides should understand the potential impact of the European Banking Authority (EBA) Guidelines. Continue Reading

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