EU Regulation

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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.

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

Authors: Andrew Moyle, Nicola Higgs, Christian McDermott, and Kirsty Watkins.

The financial services industry is leading the way in outsourcing, with contract values in excess of US$10.7 billion in 2018, causing regulators to focus more than ever on the associated risks. Guidelines on outsourcing arrangements from the European Banking Authority (EBA), which came into effect on 30 September 2019, expand the requirements on institutions in this area, while both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are also increasing their outsourcing supervision and enforcement activity.

We discussed the new requirements for financial institutions to maintain a register of outsourcing arrangements, and adhere to more stringent risk assessment and due diligence requirements at our recent event entitled Balancing the Scales: Managing the Risk and Promise of Digitisation in Financial Services.

New length restrictions will require issuers to focus on key information for investors.

By James Inness and Connor Cahalane

Under the Prospectus Regulation, which comes into force on 21 July 2019 (See EU Prospectus Regulation: New Format and Content Requirements), issuers preparing equity prospectuses will need to comply with new rules on the summary section. While the changes allow some flexibility on the information issuers must include in the summary, there are new requirements and restrictions that issuers need to be aware of. 

The full regulation will come into force in July, imposing new requirements for prospectuses

By James Inness and Connor Cahalane

The new EU Prospectus Regulation will take full effect on 21 July 2019. Issuers and other parties to capital markets transactions can expect changes in the following areas:

  • Prospectus summary: New content requirements and length restrictions will make the summary section more concise while allowing issuers the flexibility to include key information for investors.
  • Risk factors: With some material changes to the rules relating to risk factors and new ESMA guidelines, risk factors are likely to be a particular focus area for regulators.
  • Simplified prospectus: A new reduced disclosure regime will apply to secondary issues, such as rights issues.
  • Growth prospectus: Certain issuers, mainly SMEs, will be able to make public offers using an EU Growth Prospectus with lighter disclosure requirements and a standardised format.

Although the new rules will not take effect until July, competent authorities are already applying the new requirements to any prospectuses under review that are expected to be approved after 21 July 2019. In the coming weeks, Latham & Watkins will publish additional posts that take a more detailed look at the changes to the summary section, risk factors, and other areas that will impact transactions.

By James Inness

A new prospectus regulation (Regulation (EU) 2017/1129) (the Regulation) will come into direct effect on 20 July 2017, with a small number of provisions applying immediately and the remainder applying from 21 July 2019. The changes under the Regulation will likely be relevant to issuers both before and after Brexit.

Which Provisions Will Apply Immediately?

The previous exemption allowing issuers to issue up to 10% of the number of shares of the same class already admitted without the need to publish a prospectus will be increased to 20%. The exemption also now applies to all types of securities, not just to shares. Clearly, issuers will welcome this increased flexibility and the market will undoubtedly see larger undocumented deals. Given investor resistance to larger cash-box offerings (absent shareholder approval) we do not expect the changes to the prospectus regime to affect market practice in relation to cash-boxes.

The Regulation will tighten the current exemption allowing issuers to admit shares resulting from convertible securities without a prospectus. The current exemption will now only be available where the issue of shares represents less than 20% of the total shares of a corresponding class of shares that are already admitted. This change is subject to exceptions including shares admitted in connection with convertible securities issued before 20 July 2017.

By Jumana Rahman and Hayley Pizzey

Commerzbank Aktiengesellschaft v Liquimar Tankers Management Inc [2017] EWHC 161 (Comm)

Summary

The English High Court has held that asymmetric jurisdiction clauses are exclusive jurisdiction clauses for the purposes of the Recast Brussels Regulation[1] (the Recast Regulation).

Where claims are issued by disputing parties in the courts of two or more EU Member States, the usual court first seized rule applies. This means that all courts (other than the court in which the first claim was issued) must stay their proceedings until the court where the proceedings first in time were brought has determined whether it has jurisdiction. However, the Recast Regulation provides an exception to this rule. If the parties have agreed in writing that a particular Member State’s courts are to have exclusive jurisdiction over the dispute then the court first seized rule does not apply. Instead the court upon which the parties conferred exclusive jurisdiction shall first determine whether it has jurisdiction, and all other courts shall stay any proceedings before them pending that determination.

Following the ruling in Liquimar Tankers,[2] it is now clear that the English courts also consider that asymmetric jurisdiction clauses displace the usual court first seized rule.