The Protection of Investors and the Compensation for their Losses: Australia

Investor protection has been an ideal in corporate and securities law ever since the early 20th century, when Berle and Means famously highlighted shareholder vulnerability in modern public corporations. In more recent times, investor protection has been treated as a litmus test for the quality of a jurisdiction’s corporate governance and as having a direct link to capital market structure.

Our recent working paper examines the adequacy of Australian law in protecting public company investors in a particular situation – namely, when they rely to their detriment on inadequate, false, or misleading information released by the company. As our … Read more

How Arbitrators Interpret Contracts

I suspect that most issues of contract interpretation call for the application of what Stefan Vogenauer has termed “universal hermeneutic truths”—that is, the search for meaning by going no further than “common sense” and how language is “commonly and naturally deployed.”  An arbitrator does this not only by worrying the text of an agreement, but more broadly by attempting to identify the underlying narrative—the sense of the transaction. These are universal lawyerly skills.  And should an agreement run out of guidance for settling a dispute, a further step would move from interpretation, as commonly understood, to the process of filling … Read more

Gibson Dunn Discusses Draft Divorce Deal on Brexit

Negotiators for the European Union and the United Kingdom have agreed a 585-page draft withdrawal agreement (the “Withdrawal Agreement”).  A copy of the Withdrawal Agreement can be found here.

The draft Withdrawal Agreement sets out how and when the UK will leave the EU and will be legally binding.  A separate, non-binding draft declaration (available here) sets out the aspirations for the future trading relationship between the UK and EU (this draft declaration is still being negotiated, with the UK and EU expected to agree a final draft this week).

This long-awaited “divorce deal” has been … Read more

The Transatlantic Debate over Shareholder Rights

Effective and sustainable shareholder engagement is a cornerstone of the corporate governance model of listed companies, which is based on a system of checks and balances among boards, management, and stakeholders. Enhancing the involvement of shareholders in corporate governance is therefore an important factor in improving the financial and non-financial performance of companies, particularly with respect to environmental, social, and governance issues, as set forth in the United Nations’ principles of responsible investment (Recital 14 of the Directive, available here). And this is even more the case in view of the fact that the increased involvement of all stakeholders, … Read more

Skadden Discusses Merger Reviews and Antitrust Inquiries in Case of “No-Deal” Brexit

As the U.K.’s March 29, 2019, exit date from the European Union approaches, companies involved in merger reviews or antitrust investigations should pre-emptively address the risk of a “no-deal” Brexit.

Both the U.K. and EU have antitrust laws that can apply simultaneously to the same merger or allegedly anti-competitive conduct. Currently, procedural rules determine how jurisdiction is divided between the European Commission (Commission), at the EU level, and the Competition and Markets Authority (CMA), at the U.K. level. But there are no transitional provisions dictating how jurisdiction for pending matters is to be handled in the event of a “no-deal” … Read more

Can Companies and M&A Law in Europe Adapt to the Market for Corporate Control?

Takeover regimes in Europe have been under persistent scrutiny by the public, politicians, and market participants. Sometimes, that is just the nature of the game: Takeovers create winners and losers, and the latter (with the help of their champions and constituencies) often complain. But other times the discontent derives from the inadequacy of regimes in handling certain deals. The task of the law is not easy: Deals are complex and unique, while the law is general. In particular, target companies have a particular ownership structure that must fit the paradigm contemplated by the law, which in the EU consists almost … Read more

Debevoise Discusses UK’s Proposed National Security Review for M&A

Many countries have been looking again at their ability to block acquisitions when they threaten national security. For example, we reported on a change to German law in July last year, and a European Commission proposal (which would cover all EU member states) in October. Most recently, a new law in the United States has increased the power of the Committee on Foreign Investment (CFIUS) to block deals. Such rule changes – often triggered by a controversial foreign acquisition – are understandable, but investors need to know the process and timeline. Vague tests, long clearance procedures or excessive look-back periods … Read more

Debevoise Discusses the UK’s Proposed National Security Review for M&A Deals

Many countries have been looking again at their ability to block acquisitions when they threaten national security. For example, we reported on a change to German law in July last year, and a European Commission proposal (which would cover all EU member states) in October. Most recently, a new law in the United States has increased the power of the Committee on Foreign Investment (CFIUS) to block deals. Such rule changes – often triggered by a controversial foreign acquisition – are understandable, but investors need to know the process and timeline. Vague tests, long clearance procedures or excessive look-back periods … Read more

Gibson Dunn Discusses How Brexit Will Affect Financing and Documentation

Since the result of the Brexit referendum was announced in June 2016, there has been significant commentary regarding the potential effects of the UK’s withdrawal from the EU on the financial services industry.

As long as the UK is negotiating its exit terms, a number of conceptual questions facing the sector still remain, such as market regulation and bank passporting. Many commentators have speculated from a ‘big picture’ perspective what the consequences will be if / when exit terms are agreed.  From a contractual perspective, the situation is nuanced.  This article will consider certain areas within English law financing documentation … Read more

Gibson Dunn on Why the UK Is Heading for a “Soft Brexit”

Our discussions with politicians, civil servants, journalists and other commentators lead us to believe that the most likely outcome of the Brexit negotiations is that a deal will be agreed at the “softer” end of the spectrum, that the Conservative Government will survive and that Theresa May will remain as Prime Minister at least until a Brexit deal is agreed (although perhaps not thereafter).  There is certainly a risk of a chaotic or “hard” Brexit.  On the EU side, September’s summit in Salzburg demonstrated the possibility of unexpected outcomes.  And in the UK, the splits in the ruling Conservative Party … Read more

Covington & Burling on the UK’s “No-Deal” Competition and Merger Guidance

The UK Government published its highly-anticipated technical guidance on merger review and anti-competitive activity on 13 September 2018 which will apply in the case of a ‘no-deal’ Brexit (the ‘Guidance’). Although brief, it provides market players with some form of practical advice and insights on what to expect, how cases are likely to be divided between the EU and UK regimes, how UK competition law will develop, and suggests in what ways post-Brexit competition damages actions in the UK Courts may change. This Guidance follows on from the previously released ‘no-deal’ state aid guidance – as was covered in our … Read more

Addleshaw Goddard Discusses a “Hard” Brexit’s Implications and Practical Solutions

At 11 pm on March 29, 2019, the United Kingdom will leave the European Union.  In the absence of a material change of trajectory in the Brexit negotiations, it is likely that the investment management industry will find itself grappling with the consequences of a “hard” Brexit.  But what does this mean in practice, what are the implications for investment managers and how can they mitigate them?

This Regulatory Spotlight discusses the consequences of a hard Brexit for alternative investment fund managers (although it will also be of relevance to investment managers more broadly).  It then explores some practical solutions … Read more

The Sky’s the Limit as Comcast and Fox Prepare for Battle at the Auction Block

For the last year, a heated ownership battle has been unfolding between Comcast and 20th Century Fox in their contest to acquire Sky PLC. Sky is Europe’s leading media company and the largest pay-TV broadcaster in the UK, with over 21 million subscribers and 30,000 employees (not to mention a mercilessly dominant professional cycling club). While many such battles are settled outside of the public eye, this one is destined for a different fate: Over the next two days, the Comcast/Fox contest will culminate in an old-school auction—one ordered by the UK Takeover Panel, which oversees and regulates all … Read more

How to Achieve Equivalence of Financial Regulation in the EU and UK Post-Brexit

As the March 29, 2019 deadline approaches, the United Kingdom prepares its withdrawal from the European Union amidst political turbulence that would suit a television drama.[1] Center stage is what to do about the financial services industry. For the UK as well as the European continent, it makes the most sense to keep Europe’s financial sector integrated with the UK and to be pragmatic in interpreting the EU Treaty on the Single Market freedoms.

UK Financial Services

The UK openly seeks an arrangement acceptable to the EU. The latest UK White Paper proposes to stay in the EU’s Single … Read more

Comparative Corporate Governance

By adopting a systematic cross-national comparative approach, my recent study provides an overview of corporate governance (CG) around the world. It takes stock of what we know about the two main CG models, the variations within and across these models, as well as the worldwide diffusion and possible convergence of CG practices.

Although there is a range of different regimes of CG in advanced economies, the literature on comparative CG focuses on two: the shareholder-oriented model (prevailing in Anglo-Saxon countries) and the stakeholder-oriented model (prevailing in Germany, Japan, and continental Europe, Aguilera & Jackson, 2003). While the former prioritizes a … Read more

Hidden Holdouts and the Puzzling Pricing of Collective Rights: An Analysis of the Venezuelan Debt Crisis

The emergence of “activist” investors across a range of markets has been one of the most interesting phenomena of the past few decades (see here, here and here). These investment funds seek to capture rents from their investments by “actively” enforcing their rights.  Activist investors pursue this strategy in markets in which the majority of investors are passive. Much of the discussion of this development in both the financial press and the academic literature has focused on activists acquiring equity positions in order to influence a firm’s management policies (see here and here). Our focus, however, is … Read more

Wachtell Lipton Discusses UK Corporate Governance Code

The Financial Reporting Council on July 16 issued a revised corporate governance code and announced that a revised investor stewardship code will be issued before year-end. The code and related materials are available at www.frc.org.uk.

The revised code contains two provisions that will be of great interest. They will undoubtedly be relied upon in efforts to update the various U.S. corporate governance codes. They will also be used to further the efforts to expand the sustainability and stakeholder concerns of U.S. boards.

First, the introduction to the code makes note that shareholder primacy needs to be moderated and that … Read more

Skadden Discusses Latest Legislation to Expand Foreign Investment Review

In large part as a response to China’s national industrial goals and subsequent Chinese acquisitions of U.S. and European companies that are technology leaders in key industries, the U.S. government and a number of European governments are seeking to expand the scope of their national security reviews of foreign investments. Below, we outline ongoing developments affecting U.S. national security reviews of inbound foreign investment.1

FIRRMA Moves Ahead

The Senate and House have recently passed their respective versions of the Foreign Investment Risk Review Modernization Act (FIRRMA) legislation that was origi­nally introduced in November 2017 with significant bipartisan support. FIRRMA … Read more

Kirkland & Ellis Discusses CFIUS Reform

On May 22, 2018, the Senate Committee on Banking, Housing, and Urban Affairs  held a hearing to mark up its draft proposed amendment to the Foreign Investment Risk Review Modernization Act (“FIRRMA”). Initially introduced on November 6, 2017, with strong bipartisan support, FIRRMA would — for the first time since 2007 — reform the process by which the Committee on Foreign Investment in the United States (“CFIUS”) assesses “covered transactions.” Proposed in response to a new and evolving macro security environment, FIRRMA would radically impact planning for long-term enterprise investment strategy as well as discrete transactions for U.S. and non-U.S. … Read more

Debevoise Discusses the U.S. CLOUD Act and Europe’s Response

Electronically stored data play a vital role in criminal investigations. The framework for the transfer of such data across national borders continues to be difficult to navigate. Recent legislative developments in the United States and the European Union signal a change in the approach to cross-border data transfer for law enforcement purposes on both sides of the Atlantic.

This Client Update sets out the main provisions of the recently adopted U.S. Clarifying Lawful Overseas Use of Data Act (“CLOUD Act”) and of the draft EU regulation on sharing electronic evidence (“e-Evidence Regulation”). It then considers their implications not only for … Read more