Throughout December 2020, the Trump administration continued its focus on China and Russia and imposed additional export and investment controls. On December 23, 2020, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule to amend the Export Administration Regulations (EAR) and create a new Military End User List (MEU List). A license from BIS is required for exports, reexports, or in-country transfers to persons on the MEU List for certain designated items. On December 18, 2020, BIS added 77 entries to the Entity List, most of which are Chinese entities. These actions follow the … Read more
In November, the UK Government announced a significant and wide-ranging package of reforms that, if adopted, will both recalibrate and expand its existing powers to assess and intervene in mergers and acquisitions on the grounds of national security.
The proposed reforms are set out in the National Security and Investment Bill (the “Bill”) and addition to the Competition and Markets Authority’s mergers framework under the Enterprise Act 2002.
A new Investment Security Unit (the “Unit”), which will sit within the Department for Business, Energy and Industrial Strategy, will be the point of contact for businesses with questions or wishing to … Read more
In the United States, President Trump has struggled to decide whether Jay Powell or China’s Chairman Xi is the greater enemy to the U.S. In Turkey, President Erdogan concluded that “interest rates are the mother of all evil,” switched out his central bank governor for refusing to lower interest rates, and reined in the independence of the central bank with the stroke of a pen. In India, Indonesia, Ukraine, and elsewhere, lawmakers are tightening the political grip on monetary authorities. These examples reflect a new reality in monetary policy circles: the political retreat from central bank independence, … Read more
What do the emergence of independent directors in South Korea, the legal reforms on related-party transactions in India, the continued rise of environmental, social, and governance (ESG) factors in the United States, and the global spread of corporate governance codes have in common? They all trace back to efforts by international organizations – the International Monetary Fund (IMF), the World Bank, the United Nations, and the Organisation for Economic Cooperation and Development (OECD), respectively – to shape corporate governance around the world. The different corporate guidelines and norms produced by international organizations have had a noticeable impact on legal changes … Read more
Sustainability issues are increasingly high on the list of competition policy priorities both at the European Union and member state levels. The European Commission (EC) and national competition authorities are actively rethinking how competition policy can better support the transition to sustainable economic growth. Whilst recent initiatives are setting the path to much-needed guidance and legal certainty, there are already lessons businesses can take away from the discussions to date.
- Industry initiatives to tackle sustainability objectives can breach competition rules and should therefore be approached with the same eye to competition law compliance as any other collaboration with competitors. The
On September 28, 2020, the UK government made the Intellectual Property (Amendment etc.) (EU Exit) Regulations 2020 (IP Regulations 2020), which amend the intellectual property (IP) regime in the UK to reflect Brexit-related changes once the transition period ends. The IP Regulations 2020 overlap somewhat complexly with existing UK and EU IP rights. In particular, exhaustion of rights principles seem to have fallen into a lacuna and as a result parallel importation from the UK into the EU may be significantly impacted. Owners of existing registered IP rights and pending IP applications under EU law should carefully consider the … Read more
In our recent paper, Can Governance Help in Making an IPO “Successful”? New Evidence from Europe, we find that corporate governance affects company performance after an IPO in different ways. We consider an IPO to be successful if it combines positive performance in the short-term, with a value creation effect, and also in the medium-long-term, with a value protection effect (Bertoni et al., 2014).
As to the short-term, we consider the performance of a company at the date of the IPO, as measured by Q-Tobin, which is calculated as the ratio of the market capitalization of the firm … Read more
On November 11, 2020, the Parliament of the United Kingdom (“U.K.”) introduced the National Security and Investment Bill of 2020 (the “NSI Bill”) to modernize the U.K.’s foreign direct investment (“FDI”) screening process and strengthen its ability to investigate and intervene in transactions targeting U.K. businesses. The NSI Bill imposes mandatory notification requirements to the U.K. Department of Business, Energy and Industrial Strategy (“BEIS”) for transactions involving investments in U.K. businesses operating in certain strategic sectors, a regime that will apply to investors from any foreign country.
In the broader context, the NSI Bill is reflective of a global trend … Read more
The market for cryptoassets is burgeoning, as distributed ledger technology transforms capital and financial markets. With the extraordinary growth in the crypto-markets comes the need for regulation to promote efficiency, capital formation, and innovation while protecting investors. With the need for regulation comes enforcement.
In a new article, Crypto-Enforcement Around the World, we elaborate on these issues and report on the results of an international enforcement survey conducted by our Blockchain and Fintech Research Program. Our analysis also builds on the results of the research by one of the co-authors, Prof. Guseva, in her article, The SEC, Cryptoassets, and … Read more
In an important decision for arbitration users, the U.K. Supreme Court has clarified how English law will determine the governing law of an arbitration agreement which provides for an English seat in the absence of an express choice of law. In its 9 October 2020 decision in Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors  UKSC 38, the Supreme Court reaches the same outcome as the Court of Appeal, while employing slightly different reasoning.
The Enka case arises from a typical trap for the unwary. When drafting arbitration agreements, practitioners are well advised to provide … Read more
Corporate social responsibility (CSR) is typically assumed to be a voluntary rather than mandatory initiative. Yet, over the past few decades, a growing number of countries have adopted laws that explicitly require corporations to undertake CSR.
To date, most scholarly and policy attention has focused on laws that require companies to disclose extensive information about their social and environmental plans, actions, or performance. In recent years, though, a growing number of countries have gone beyond disclosure to require CSR due diligence, corporate philanthropy, certain governance structures, and making CSR a duty under corporate law.
Mandatory CSR Due Diligence
CSR is … Read more
In the weeks leading up to Ant Financial’s ill-fated IPO, Jack Ma criticized the system of international banking regulation in remarks at the Bund Summit in Shanghai. The Alibaba co-founder contended that the current framework was a poor match for countries like China that needed to innovate in the creation and delivery of financial services. Describing today’s regulatory system as designed for the “elderly” economies that have long relied on a traditional and compliance-heavy system of banking, Ma explained that emerging or “youth” nations depended on their ability to foster innovation in ways that were less constrained by capital-intensive rulemaking.… Read more
On July 31, 2020, Judge Caproni in the Southern District of New York denied an emergency motion filed by certain bondholders for a temporary restraining order that would have halted efforts by the Republic of Ecuador (“Ecuador”) to restructure $17.4 billion of its sovereign debt based on allegations of securities fraud arising from statements made by Ecuador in its restructuring-related press releases. The Court upheld Ecuador’s use of the collective action clauses (“CACs”) in its indentures as the primary tool to accomplish the proposed restructuring.
In addition to its effects on Ecuador, which is restructuring its debt amidst a severe … Read more
The forced postponement of Ant Group’s initial public offering (IPO), the largest ever, by the Chinese government is the latest example of the heavy-handed regulatory approach that has made it extremely costly for companies to go public in China. The high opportunity cost of going public on the Shenzhen or Shanghai stock exchanges, where the initial return from the offer price to the first unconstrained market price has averaged 170 percent during 1992-2018, has encouraged many Chinese companies to go public in Hong Kong, the U.S., or elsewhere. The high initial returns have resulted in massive oversubscriptions of almost all … Read more
On July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU–U.S. Privacy Shield with immediate effect in Case C-311/18 Data Protection Commissioner v Facebook Ireland Limited and Maximillian Schrems (called “Schrems II,” see our previous Commentary on this case). The court upheld the EU Standard Contractual Clauses (“SCCs”) for the transfer of personal data to processors outside the European Union/European Economic Area (“EU/EEA”) under certain conditions, underscoring the need for companies to conduct an assessment of whether “supplementary measures” needed to be adopted to provide for an essentially equivalent level of data protection.… Read more
The European Commission retained Ernst & Young (“EY”) to undertake a detailed study of “short-termism” and, implicitly, to report whether it was a major roadblock to more sustainable corporate governance. Their study was then presented at a three day international conference at Oxford on November 11-13. Professor Mark Roe of Harvard Law School and I were asked to make presentations. Professor Roe’s statement ran last week on this blog, here, and a summary of my statement appears below.
In a nutshell, the EY “Study on directors’ duties and sustainable corporate governance” for the European Commission describes a … Read more
On October 23, 2020, the International Swaps and Derivatives Association, Inc. (ISDA) published its IBOR Fallbacks Protocol (Protocol) and Supplement to the 2006 ISDA Definitions (Supplement) in anticipation of the expected discontinuation of the London Interbank Offered Rate (LIBOR) at the end of 2021. ISDA has also published a related set of Frequently Asked Questions, as well as a User Guide to IBOR Fallbacks and RFRs, to assist market participants in navigating the Protocol and the Supplement.
ISDA collaborated with the Financial Stability Board’s Official Sector Steering Group to devise more robust fallbacks for LIBOR and other key … Read more
The European Union has recently taken a significant step in regulating foreign direct investment (“FDI”). As of October 11, 2020 a new EU regulation related to inbound foreign investment (the “FDI Regulation”) became binding on all 27 Member States. The new FDI Regulation does not create a stand-alone mechanism to vet foreign investment akin to the Committee on Foreign Investment in the United States (“CFIUS”) or national security review systems established by individual Member States. Rather, the new EU FDI regime establishes minimum standards for Member States’ review systems, creates an information sharing channel between the EU … Read more
In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The report purports to find evidence of debilitating short-termism in EU corporate governance and recommends many changes to support sustainable corporate governance. In a recent paper, we point out deep flaws in the report’s evidence and analysis.
Here’s a brief summary of those flaws. First, the report defines the corporate governance problem as pernicious short-termism that damages the environment, the climate, and stakeholders. But the report mistakenly conflates time-horizon problems with externalities and distributional concerns. Cures for one are not … Read more
Bank bailouts during periodic financial crises aim to stop financial panic and restore the stability of the financial system. Even if they are undesirable, future bank bailouts are unavoidable due to political and political economy reasons, whether or not they are regulated or economically efficient. In a new book, I build on existing literature to examine the different bank bailout and resolution techniques and tools through carefully selected case studies from the U.S., the E.U., the U.K., Spain, and Hungary. The pros and cons of the different legal and regulatory options are identified in order to reconstruct a regulatory framework … Read more