FCA Speaks Out on the Ethics of Big Data

Posted in Data Protection, Emerging Companies and Technology, Finance and Capital Markets

FCA Chair hints that new regulation addressing data ethics in the FinTech space may be on the horizon.

By Nicola Higgs, Fiona Maclean and Terese Saplys

Will societies of the future be ruled by algocracy, in which algorithms decide how humans are governed? Charles Randell, Chair of the Financial Conduct Authority (FCA) and Payment Systems Regulator, addressed how to avoid this hypothetical scenario in a broad-ranging speech on that he delivered on 11 July 2018 in London.

Randell’s Remarks

Contributing Factors to an Algocracy

According to Randell, the following three conditions could collectively give rise to a future algocracy:

  • If a small number of major corporations were to hold the largest datasets for a significant number of individuals (as is currently the case)
  • Continuing vast and rapid improvements in artificial intelligence and machine learning that allows firms to mine Big Data sets with greater ease and speed
  • Further developments in behavioural science allowing firms to target their sales efforts by exploiting consumers’ decision-making biases

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Corporates Reorganise Amid M&A Boom

Posted in M&A and Private Equity

By Daniel Treloar

Last year marked a continuation of strong M&A volumes, with US$3.15 trillion in global transactions according to data provider, Mergermarket. Strong activity, driven by cheap debt and a low growth environment, has continued into Q1 2018, and large deals are expected to be a fixture of the M&A landscape in the year to come. The buoyant M&A market has led to extensive reorganisation work for both sellers and buyers, particularly for mega-deals that frequently require substantial post-deal integration and non-core divestment work — a trend Latham believes will continue while M&A levels remain high. However, while well-executed reorganisations can help facilitate a smooth M&A process or integration project, they require meticulous and timely planning to ensure a successful outcome.

What constitutes a corporate reorganisation and why reorganise?

A corporate reorganisation typically involves the transfer of assets, whole businesses, or shares between entities forming part of the same corporate group, on a solvent basis. Businesses undertake corporate reorganisations for several reasons, and M&A is currently a large driver. Continue Reading

German Federal Court: Property Sellers Who Withhold Usage History Risk Liability

Posted in Dispute Resolution, EU and Competition, Finance and Capital Markets

FCJ decision finds that mere suspicion of contamination resulting from a sold property’s past use constitutes a defect.

By Patrick Braasch and Christian Thiele

The German Federal Court of Justice (FCJ) has ruled that an abstract suspicion of contamination resulting from a sold property’s past use already constitutes a material defect — irrespective of the actual existence of any contamination. A seller’s failure to disclose the known usage history — which objectively gives rise to the suspicion of contamination — constitutes fraudulent conduct. As a consequence, the seller cannot invoke any contractual limitation of liability.

Case background

The FCJ’s judgment, dated 21 July 2017 (V ZR 250/15), involved a case in which the plaintiff had acquired from the defendant several plots of land that had been developed as a business park. In the notarized sale and purchase agreement, any liability of the defendant was excluded, with the exception of intent and fraudulent conduct. The defendant was aware that an asphalt mixing plant for regional road construction, as well as a sewage sludge retention basin, had been operated on the property from the 1960s until the 1980s. When the defendant acquired the property in 1989, the seller at that time represented that he was not aware of any soil contamination. Continue Reading

Nuclear Sector Deal — Financing New UK Nuclear Power Projects

Posted in Environment, Finance and Capital Markets

By Beatrice Lo and Heeran Caselton

The UK government recently published its Nuclear Sector Deal (Sector Deal) as part of the UK’s modern industrial strategy. Recognising the sector’s strategic importance in delivering future energy security, the Sector Deal reconfirmed the government’s commitment to upgrading the UK’s nuclear infrastructure and support for new build nuclear projects.

Amongst a number of other policy initiatives, the Sector Deal includes:

  • Industry action to reduce the cost of new build nuclear projects by 30% by 2030.
  • Targeted cost savings of 20% by 2030 for the decommissioning of old nuclear sites.
  • Up to £56 million in funding for R&D in advanced modular reactors and support for the development of small modular reactors. Furthermore, the industry awaits the Expert Finance Working Group’s findings on financing models for small reactors, which is scheduled for this summer.
  • The government will keep under consideration a range of financing options for new nuclear projects, including a direct equity stake in Wylfa and assessing use of a regulated asset base financing model.

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English Court Issues Anti-Arbitration Injunction Restraining Lebanese Arbitration Proceedings

Posted in Dispute Resolution

Judgment clarifies the exceptional circumstances in which anti-arbitration injunctions against foreign-seated arbitrations might be granted.

By Oliver E. Browne and Robert Price

In Sabbagh v Khoury, Justice Knowles in the High Court issued an anti-arbitration injunction to restrain arbitration proceedings commenced in Lebanon on the basis that, contrary to the Lebanese arbitral tribunal’s findings, the tribunal did not have jurisdiction to hear the case.


The claimant, Sana Sabbagh, is the daughter of the late Hassib Sabbagh who founded the Consolidated Contractors Company (CCC) group of companies, the largest group of engineering and construction companies in the Middle East. She claimed that after her father’s stroke, the defendants, which include her two brothers, conspired to misappropriate assets and shares belonging to her father that lawfully belonged to his estate following his death (and in which Ms. Sabbagh was entitled to inherit a one-third interest). Continue Reading

FCA Supports Guidelines on the Open Banking Fall-Back Provisions Exemption

Posted in Emerging Companies and Technology, Finance and Capital Markets

The FCA has outlined its approach to implementing key standards under the revised Payment Services Directive.

By Christian McDermott, Stuart Davis, Brett Carr, and Charlotte Collins

The FCA has published a statement on its website relating to the European Banking Authority’s (EBA’s) Opinion and draft Guidelines of 13 June 2018 on the Regulatory Technical Standards on Strong Customer Authentication and Common and Secure Communication under PSD2 (the RTS).


The drafting of the RTS, which will apply from 14 September 2019, proved to be one of the most controversial aspects of the revised Payment Services Directive (PSD2) (for background on the RTS, please see Latham’s related Client Alert). The RTS provide for how account information service providers and payment initiation service providers — commonly referred to as third party providers (TPPs) — should interact with account servicing payment service providers (ASPSPs) such as banks. This is crucial to enabling TPPs to provide their services, which rely on ASPSPs making available certain information regarding a customer’s payment account (with the customer’s consent). In turn, these new services will help to open up the banking sector to new business models. Continue Reading

UK Financial Services Regulators Warn Firms About Risks of Exposure to Crypto-assets

Posted in Emerging Companies and Technology, Finance and Capital Markets

Both the FCA and the PRA have written to firms to warn about certain risks associated with exposures to crypto-assets, and to advise firms of the measures they should consider implementing to mitigate such risks.

By Stuart Davis and Charlotte Collins

The FCA and the PRA have each written a “Dear CEO” letter to firms, to warn about the risks associated with exposure to crypto-assets. The letters reflect each regulator’s concerns, according to their regulatory remit, and provide examples of practical measures that firms should be putting in place.

These letters come at a time when both the use and regulatory scrutiny of crypto-assets is increasing, with the FCA recently revealing in a response to a Freedom of Information Act request that it is currently investigating 24 crypto firms. Continue Reading

English Court Cannot Issue Anti-Suit Injunctions Restraining Other EU Court Proceedings

Posted in Dispute Resolution

Judgement clarifies that the Brussels Recast Regulation does not reverse the West Tankers decision.

By Oliver E. Browne and Robert Price

In Nori Holdings v Bank Otkritie, Justice Males in the High Court issued an anti-suit injunction to restrain court proceedings commenced in Russia in breach of an arbitration clause, but refused to issue an anti-suit injunction to restrain similar court proceedings commenced in Cyprus on the grounds that he was bound by the Court of Justice of the European Union’s (CJEU) decision in West Tankers, affirmed in Gazprom, which prevented the grant of such anti-suit injunctions.


Prior to the CJEU’s West Tankers decision, the English courts had the authority to grant, and indeed did grant, anti-suit injunctions restraining court proceedings commenced in breach of an arbitration clause, see for example The Angelic Grace cited with approval by the Supreme Court in AES Ust-Kamenogorsk. The CJEU in West Tankers however held that such anti-suit injunctions were in breach of EU law as such injunctions undermine the effectiveness, or effet utile, of the Brussels Regulation by “obstructing the court of another Member State in the exercise of the power conferred on it by [the Brussels Regulation]”. Continue Reading

MiFID II Research Unbundling 6 Months on – what are we seeing in the market?

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

The FCA has recently announced that it will begin a review of how firms have implemented the unbundling rules “within weeks”.

By Beatrice Lo and Jonathan Ritson-Candler

At its recent asset management conference, the FCA announced that it will imminently launch a review of how asset managers have implemented the new MiFID II obligation to pay for the research they receive from sell-side firms separately from execution costs (the so-called “unbundling rules”). This is the first FCA-initiated MiFID II review, and comes only six months after the implementation of MiFID II. This is indicative of the regulator’s focus in this area.

The unbundling rules, as part of MiFID II, came into effect on 3 January 2018. The rules represent one of the most significant implementation challenges for the industry given that previously, research had not been separately priced and the new rules are silent on how sell-side firms should negotiate and price their research services (and what buy-side firms could accept). This meant that firms were still developing their pricing models and were still engaged in negotiations post the 3 January 2018 deadline. In recognition of this, towards the end of 2017, the FCA and ESMA permitted “trial periods”. During these periods, sell-side firms can provide, and buy-side firms can receive, free research for a maximum of three months (within any 12 month period). The regulator is keen not only to ensure that firms are compliant with the new rules, but also to understand the broader impact of the unbundling rules on the market. Continue Reading

Real Estate Transfer Tax: Putting an End to Share Deals?

Posted in EU and Competition, Finance and Capital Markets

The Conference of the German Ministers of Finance has announced measures against so-called share deal structures following the conclusion of the respective technical federal-state working group.

By Tobias Klass


So-called share deal structures have been the focus of German political debate about real estate transfer tax (RETT) for some time. The coalition agreement already contains the governing parties’ political letter of intent to end allegedly fraudulent tax structurings regarding RETT through share deals. The background of said structures are transactions in which land or real estate is not sold directly, but indirectly, by selling the shares of the property holding company. Provided that a purchaser acquires less than 95% of the shares, RETT is not triggered under current law. If a corporation is involved in these structures, a co-investor typically will acquire the remaining shares of more than 5%. Alternatively, if a partnership is involved, the shares remain with the seller, as the mere change of shareholders in the amount of at least 95% of the partnership interests would already trigger RETT. As market participants have merely adapted to the current legal situation, referring to fraudulent structures is generally inaccurate. However, these structures became the focus of tax authorities, rendering them politically targeted.

As a first step, the current resolution of the Conference of the Ministers of Finance dated June 21, 2018 has substantiated the political discussion. The Conference asked tax department heads of the federal and state ministries of finance to transfer the resolution into a draft bill that the federal government will submit to the legislative procedure. Continue Reading