SFO Update: Lisa Osofsky’s First 50 Days

Posted in Dispute Resolution

New SFO Director reaffirms her intentions and priorities for the agency.

By Stuart Alford QC and Christopher Ting

Fifty days have passed since Lisa Osofsky took over at the UK’s Serious Fraud Office (SFO), pledging to be a “different kind” of director. In her first days, Osofsky set out her priorities for the agency, which included:

  • Improved cross-border coordination
  • Improved corporate engagement
  • Continued use of Deferred Prosecution Agreements
  • Use of technology in investigations

This blog post will analyse what Osofsky has accomplished since joining the SFO, including her first major strategic decision, a further explanation of her priorities, and key personnel changes.

ENRC Appeal

In her first major strategic decision for the SFO, Osofsky decided not to appeal the ruling in Director of SFO v Eurasian National Resources Corporation to the Supreme Court. On 5 September, the Court of Appeal overturned a High Court decision in favour of the SFO’s interpretation of legal professional privilege and reaffirmed the boundaries of litigation privilege if litigation is reasonably in contemplation. Amidst speculation that the SFO would further appeal that judgment, Osofsky issued a statement on 2 October that the SFO would not take the decision to the Supreme Court. Continue Reading

Findings from FCA Thematic Review on AML and CTF Systems and Controls Provide Timely Reminder for Firms

Posted in Finance and Capital Markets

Examples of good and poor practices provide helpful guidance, and a reminder of supervisory expectations.

By Frida Montenius, Jonathan Ritson-Candler, and Charlotte Collins

The FCA has published TR18/3, setting out the findings from its thematic review of the anti-money laundering (AML) and counter-terrorist financing (CTF) systems and controls in 13 Electronic Money Institutions (EMIs). Although the review only focused on EMIs, the findings have wider read-across and therefore are of interest to all firms within scope of the Money Laundering Regulations 2017 (MLRs 2017).

Indeed, given the FCA’s current focus on financial crime as a priority area in its supervisory (and enforcement) activities — and the fact that updating policies and procedures to reflect changes brought about by the MLRs 2017 perhaps may have been overlooked by some — now is a good time for firms to reflect on AML and CTF systems and controls and check that they are up to date and meeting expectations. Continue Reading

English High Court Confirms the Strict Duty of Full and Frank Disclosure

Posted in Dispute Resolution

English High Court confirms that without notice applicants are under an onerous duty to satisfy the requirement of full and frank disclosure.

By Oliver E. Browne, Robert Price, and George Schurr

In the recent cases of Fundo Soberano de Angola & ors v. Jose Filomeno dos Santos & ors [2018] EWHC 2199 (Comm) and Galagaev & ors v. Ananyev & ors (2018) QBD (Comm) (unreported), the English High Court has confirmed that the duty of full and frank disclosure is a serious and onerous obligation that applies to litigants and their legal advisers alike. In Fundo Soberano v. dos Santos, Popplewell J held that legal advisors have a responsibility to ensure their client understands and complies with the duty of full and frank disclosure on a without notice application, just as a legal advisor has an obligation to ensure a client understands and complies with the general duty to disclose documents under CPR Part 31. Further, the full and fair manner in which material is presented to the court, not simply its disclosure, is of critical importance to the court’s consideration of whether the duty has been discharged. Males J held in Galagaev that in large and complex cases, it is incumbent upon the applicant’s legal advisors to draw the judge’s attention explicitly to material issues and to explain their impact on the applicant’s case. Simply directing the judge to the relevant material without explaining the significance of the material in question may be insufficient to discharge the duty of full and frank disclosure.

Following these judgments, legal advisors would be well advised to inform their clients of the serious nature and extent of their obligations as soon as a without notice application is considered. In particular, if advising lay clients “from different legal and cultural backgrounds and with varying levels of sophistication” (Fundo Soberano v. dos Santos at §53), practitioners must positively act to ensure that their lay clients undertake “the fullest inquiry into the central elements of their case” (Fundo Soberano v. dos Santos at §83). To the extent that the circumstances require, practitioners must actively supervise their clients’ compliance with that obligation to ensure that the applicant’s case is presented as fully and fairly as the duty requires. Continue Reading

Italy to Complete Implementation of the Market Abuse Regulation

Posted in EU and Competition, Finance and Capital Markets

Legislative Decree 107/2018 clarifies new reporting obligations, disclosure obligations, and sanctions, effective September 29.

By Antonio Coletti and Isabella Porchia

Italy has published in the Italian Official Gazette Legislative Decree no. 107 of August 10, 2018, amending the Italian legislative provisions (Legislative Decree no. 58/1998) to transpose the Market Abuse Regulation no. 596/2014 (MAR). The decree will enter into force September 29, 2018 — marking Italy’s completion of the implementation process of MAR. The process began in March 2017 with the amendments to the Commissione Nazionale per le Società e la Borsa (CONSOB) Issuers Regulation. Continue Reading

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.

Click for larger image.

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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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