Should Cybersecurity Be a Human Right?

The May 2017 WannaCry ransomware attack affected more than 200,000 computers spread across 150 nations. The results of the attack made clear that computers whose software is not up to date can hurt not only the computers’ owners, but ultimately the larger internet ecosystem. This fact was brought into harsh relief a month later, when perpetrators of the NotPetya attack used  the same vulnerability as WannaCry.

Spurred on by such attacks, more firms are viewing cybersecurity as essential to corporate social responsibility (CSR). Some contend that cybersecurity promotes human rights, on and offline, by protecting privacy, free expression, and the … Read more

Brexit: The Lessons from Trade Wars

Brexit has set the stage for a retaliatory trade war that neither the U.K. nor the E.U. wants and that will injure consumers (and others) on both sides. Moreover, it could threaten the U.S. as well, if it leads the U.K. to relax its financial regulatory requirements and return to its former “regulatory-lite” policies in order to compete more effectively (and thereby lead a regulatory race to the bottom).

In a paper just posted on SSRN (available here) that I deliver at the University of Paris/Sorbonne in two weeks, I analyze how trade wars begin and play out, applying … Read more

Clifford Chance Discusses US Considerations For Transition Away From Libor

Although a bedrock of the financial markets for over 30 years, LIBOR has been under pressure ever since the Wheatley Review, and a speech given by Andrew Bailey, Chief Executive of the UK’s Financial Conduct Authority (FCA) on July 27th heralds its potential demise.[1] Market participants need to prepare for the possible transition away from LIBOR by the end of 2021. This briefing explains why and assesses the practical and documentary implications for the US market.

Key Points

  • UK regulatory support for LIBOR is likely to be withdrawn by the end of 2021.
  • The development of suitable alternatives for

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Implementing Basel Capital Requirements: The Dark Side

Following the recommendations of the Basel Committee on Banking Supervision, most financial systems around the world have imposed new capital requirements for banks in recent years. These moves seem to be justified on two powerful economic grounds. First, better capitalized banks promote financial stability by reducing banks’ incentives to take risks and increasing banks’ buffers against losses. Second, lack of compliance with a set of rules established by an internationally recognized institution such as the Basel Committee may harm confidence in a country´s financial system.

In a recent paper (available here), however, we argue that the implementation of Basel … Read more

The Value of Corporate Disclosure in Emerging Markets

It has been well documented that in the U.S. and other countries with developed stock markets, sound public disclosure practices strengthen the reputation and credibility of firms. However, it’s unclear whether good disclosure practices are also beneficial in emerging markets that have weak systems of financial controls. Does disclosure build investor confidence? If so, are public disclosures the most effective way to disseminate information?

In my paper, “Catering through Disclosure: Evidence from Shanghai-Hong Kong Connect,” I use China to explore these questions and find that, although firms operating in developing markets use disclosure to boost investor confidence, it … Read more

What Responsibilities Do Sovereign Funds Have to Other Investors?

With trillions of dollars in assets, sovereign wealth funds (SWFs) play a major role in financial markets around the world. With billions (and perhaps trillions) of dollars’ worth of equity investments around the world, the investment behavior of SWFs is of primary concern to regulators, portfolio firms, and other investors. Most work on SWF equity investments has focused on the challenges that SWFs present to regulators, portfolio companies, or their own domestic constituencies. In a forthcoming essay, I seek to provide a realistic appraisal of the benefits and potential costs of SWF investment for other investors.

As numerous scholars have … Read more

How Directors’ Foreign Board Experience Improves Governance

The corporate governance literature has shown a strong link between good governance practices and firm value. The mechanisms, however, that determine the choice of effective corporate governance and board arrangements in a changing global market are not well studied. In our new working paper “Governance Transfer Through Directors’ Foreign Board Experiences,” we examine one such potential mechanism—whether firms learn about corporate governance and board practices from their directors’ foreign board experiences.

Directors with international board experiences have access to a much larger and more diverse set of governance practices than directors who only sit on domestic firms’ boards. For example, … Read more

How Substitutable Are Workers? Evidence from Worker Deaths

The fluidity of labor markets depends on the ease with which one side of the market can fulfill the needs of the other: whether workers can find employment that suits their skills and firms can find adequate substitutes for workers who leave. Today much is known about the worker’s perspective. A large body of empirical literature documents that workers suffer persistent earnings losses after they have been displaced from their job – in line with Becker’s (1962) idea that human capital has firm-specific components (see, e.g., Topel 1991; Jacobson et al. 1993; and Dustmann and Meghir 2005).

The other side … Read more

Shearman & Sterling Discusses European Central Bank’s Leveraged Transactions Guidance

After a period of public consultation, the European Central Bank (the “ECB”) published its final Guidance on Leveraged Transactions (the “Guidance”) on May 16, 2017[1]. Twenty-four organisations (comprising credit institutions and market associations) commented directly on the ECB’s draft guidance. Most comments focused on ensuring consistency between the ECB’s Guidance and the 2013 Interagency Guidance on Leveraged Lending in the US (the “US Guidance”) and ensuring market viability in Europe. We wrote about potential issues raised by the ECB’s draft guidance in our last briefing[2]; here, we discuss the most relevant changes that made the final … Read more

A Tax on Aggressive Tax Planning

Tax planning by multinational enterprises (MNEs) is estimated to generate a worldwide loss of corporate tax revenues of between $100 billion and $240 billion. U.S.-based MNEs alone are believed to retain a total of $2 trillion in earnings outside the U.S., largely for tax reasons. Over the last few years, the Organization for Economic Cooperation and Development (OECD) has been trying to come to grips with the tax reduction strategies of MNEs. Its results, presented in the 2015 final reports of BEPS (Base Erosion and Profit Shifting) have disappointed many. That is understandable: Most of the proposals depend on further … Read more

Arnold & Porter Discusses Trump’s Buy American and Hire American Executive Order

The United States has long offered its domestic industrial base preferential treatment in the Federal government marketplace through laws and regulations requiring agencies to prefer purchase of American-made products and contracts with American companies, and only resort to other sources in circumstances of genuine need. On April 18, 2017, President Trump issued an Executive Order (Order) intended to emphasize and potentially strengthen these policies. The Order, entitled “Buy American and Hire American,” defines “Buy American Laws” as “all statutes, regulations, rules, and Executive Orders relating to Federal procurement or Federal grants”—including those that refer to “Buy America” or “Buy American”—“that … Read more

Kirkland & Ellis Discusses Trump’s Trade Agenda

In late March, the Trump administration took several steps to begin implementation of its “America First” international trade agenda. We note three actions in particular:

First, President Trump signed an executive order directing the Secretary of Commerce and the U.S. Trade Representative (“USTR”), in conjunction with other agencies, to issue a report within 90 days identifying foreign trade partners with which the United States has a significant trade deficit;

Second, President Trump signed an executive order instructing the Department of Homeland Security and other agencies to increase enforcement of collection of unpaid antidumping and countervailing duties; and

Finally, the USTR … Read more

Cleary Gottlieb on the Trade Implications of Brexit

The UK Government triggered on March 29, 2017, Article 50 TEU.  As a result, the UK is likely to have exited the EU by March 2019.

In a speech delivered on January 17,  Prime Minister (“PM”) May explained that the UK would not seek to be part of the EU’s customs union, but would instead look to establish a “comprehensive” trade agreement with the EU.  In tandem, she noted that the UK would no longer accept the jurisdiction of the European Court of Justice.

How Will a Post-Brexit Future Relationship be Achieved?

1.      The Current Situation

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Latham & Watkins on Defining Foreign Private Issuers: Wizard or Muggle?

The world of Harry Potter is divided into wizards and muggles, those who can work magic, and those who (sadly) cannot. In the world of US federal securities laws, the division between domestic US companies and foreign private issuers, or FPIs, is just as important. While FPIs don’t have magical powers — at least that we know of — FPIs do enjoy some very important advantages under special rules and accommodations established by the US Securities and Exchange Commission (SEC).

How do you know if you are a foreign private issuer?

A company must pass one of the following tests … Read more

Debevoise & Plimpton Discusses EU’s Approach to Financial Services “Equivalence” Decisions

On February 27, 2017, the European Commission published a Staff Working Document[1] containing an assessment of EU equivalence decisions in financial services policy.[2] Equivalence decisions are a core element of the Commission’s international strategy for financial services and provide benefits for both EU and third-country financial markets. If the Commission determines that a third country’s regulatory, supervisory and enforcement regime is “equivalent” to the corresponding EU framework in a particular market sector, that recognition usually makes it possible for authorities in the European Union to rely on supervised entities’ compliance with the equivalent foreign framework.

This reduces or … Read more

Kirkland & Ellis Discusses the Trump Administration’s National Trade Policy Agenda

On March 1, 2017, the Office of the U.S. Trade Representative (“USTR”) released its National Trade Policy Agenda for 2017 (“Trade Agenda”) describing the President’s trade policy objectives. The Trade Agenda is consistent with President Trump’s campaign promises to fundamentally alter U.S. trade policy by pivoting away from multilateral negotiations and organizations. As a result, companies with any international dealings should closely follow the Trump Administration’s implementation of this significant change of course in U.S. trade policy.

  1. Key Objectives of the Trade Agenda

The Trade Agenda sets out several customary international trade goals, such as increasing economic growth and job … Read more

Arnold & Porter Discusses Data Protection in the EU

2017 has started with a bang on the data protection front. The new EU General Data Protection Regulation (GDPR) which is intended to harmonise data protection legislation across the EU, was adopted in April last year and is due to come into force in May 2018. The UK’s data protection regulator (the Information Commissioner’s Office, or ICO) has been consistent in its support for preparation of the GDPR in the UK following the Brexit vote last year. In January this year, we saw the ICO provide an update on the GDPR guidance that it will be publishing for organisations in … Read more

PwC on Basel Committee’s Views of its Fundamental Review of the Trading Book

On January 26 the Basel Committee on Banking Supervision (BCBS) released its first set of Frequently Asked Questions (FAQs) on the Fundamental Review of the Trading Book (FRTB). The BCBS published the FRTB in January 2016 with the intent to harmonize (i.e., reduce variability) the treatment of market risk across national jurisdictions.[1] It will generally result in higher global capital requirements.

The BCBS calls for each jurisdiction to finalize implementation of the FRTB before January 2019 and for compliance to begin by December 2019. We do not expect US regulators to adopt the standard until 2018 at the earliest … Read more

K&L Gates Discusses the Border Adjustment Tax

The House Republicans have proposed sweeping changes to the U.S. tax system, specifically that income from the export of goods, services and intangibles will not be subject to federal income tax, and that the cost of such imports into the U.S. will not be deductible. By incentivising exports and deterring imports, the proposed “Border Adjustment Tax” (BAT) is intended to increase domestic production, strengthen the U.S. economy and create new jobs, and deter corporate inversions and erosion of the U.S. tax base. It also is estimated to pay for approximately one-third of the cost of the Republicans’ comprehensive tax reform … Read more

PwC Explores Whether Trump Will Stay the Course on Sanctions

President Trump made many statements during the campaign regarding actions he plans to take to reverse Obama administration sanctions policies.[1] These included revisiting the agreement to ease sanctions on Iran, rolling back the sanctions program against Russia, and reversing the Obama administration’s policy of easing sanctions on Cuba. However, we believe that reversing course on these policies is much easier said than done.

For example, several of the Obama administration’s sanctions policies – including those involving Iran and Russia – were part of multilateral actions rather than unilateral sanctions programs, so breaking from such agreements will be difficult. Iran … Read more