International Developments

Skadden Reviews ESG for First Half of 2020

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Interest in the environmental, social and governance (ESG) policies of companies and their impact on the wider community has continued to increase amongst institutional investors, retail shareholders and the media during the first half of 2020. The COVID-19 pandemic and the Black Lives Matter movement have both resulted in the “S” in ESG becoming rapidly more important as companies seek to reaffirm their public image in response to such events, defying any concerns that ESG issues would fall to the wayside at the onset of an economic crisis. In this article, we review some of the key ESG developments and … Read more

Lessons from Luckin Coffee: The Underappreciated Risks of Variable Interest Entities

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On April 2, China’s Luckin Coffee announced that some of its employees, including the chief operating officer, had fabricated over $300 million in reported revenues. On April 21, the Securities and Exchange Commission and the U.S. Public Company Accounting Oversight Board alerted investors that firms based in “emerging markets, including China,” often do not satisfy the auditing standards normally met by firms traded on U.S. exchanges.  In May 2020, the Nasdaq Stock Market ordered Luckin to delist and proposed stricter listing requirements for firms based in markets that restrict U.S. regulators’ access to information.  Concurrently, the U.S. Senate enacted, and … Read more

A New Case for Human Rights Due Diligence in Supply Chains

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In a new paper, “Protecting Contract’s Hidden Parties,” I argue that harm to third parties from supply chains offers a compelling reason for requiring human rights due diligence in supply chains. Many scholars have turned to fiduciary duties or negligence theories to create incentives for companies to consider non-shareholder interests.  My article shares this objective but takes a different path by examining a corporation’s duties to others in its role as a contracting party.  This analysis can help to address human rights violations in supply chains and may also have implications for third-party harms arising in other types of contracts.… Read more

Skadden Discusses Schrems II: Court Strikes Down EU-U.S. Privacy Shield

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On July 16, 2020, the Court of Justice of the European Union (CJEU) struck down the EU-U.S. Privacy Shield as a valid mechanism for transferring personal data from the European Economic Area (EEA) to the United States (Schrems II). The European Commission Standard Contractual Clauses (SCCs) for data transfers remain valid but are subject to increased due diligence on the part of data exporters to ensure that the privacy laws of the importing country are adequate. Below, we discuss the background to Schrems II, the judgment itself and key takeaways.

Background

In 2013, Austrian privacy activist Max Schrems filed a … Read more

Paul Weiss Discusses Transition from LIBOR to Alternative Reference Rates by End of 2021

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Notwithstanding the impact of COVID-19 on the global economy and market participants, from the perspective of regulators, working groups and industry leaders, the anticipated cessation of the London Interbank Offered Rate (“LIBOR”) remains the end of calendar year 2021.[1] Indeed, the UK Financial Conduct Authority (“FCA”) has confirmed this 2021 deadline.[2] The Bank of England (“BoE”) has explained that that the global market volatility caused by COVID-19 highlights the need to shift away from LIBOR, pointing out that LIBOR rates rose as central bank policy rates fell, reflecting low activity for the LIBOR market.[3]

While the worldwide … Read more

Cooperation in Securities Market Regulation: Perspectives from Australia

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The global financial crisis highlighted the interconnectedness of international financial markets and the risk of contagion it posed. The crisis also emphasized the importance of supranational regulation and regulatory cooperation to help address and ameliorate that risk.

Yet, although capital flows are global, securities regulation is not. As a 2019 report by the International Organization of Securities Commissions (IOSCO) notes, the regulatory challenges, which were revealed so starkly during the global financial crisis, have by no means dissipated over the last decade. According to IOSCO, lack of international standards, or differences in the way jurisdictions implement such standards, can lead … Read more

The Fall of Wirecard

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In the public imagination, Wirecard was Germany’s biggest tech company success story – a €24 billion high-growth payment processor doing deals across the globe and pioneering new technologies.  While naysayers complained about its opaque corporate and financial practices and raised doubts about its business model, most observers admired its nimble approach to surmounting regulatory barriers to international expansion. In a world intoxicated by companies with unlimited growth prospects, it was a winner.

The reality was much different.  Most of Wirecard’s reported business didn’t exist.  And the company hadn’t made any money in years.  How could something like this happen in … Read more

Cleary Gottlieb Discusses New UK Powers to Intervene in Mergers on Public Interest Grounds

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On 22 June 2020, the UK Government introduced new measures allowing it to intervene in merger transactions “to maintain in the United Kingdom the capability to combat, and to mitigate the effects of, public health emergencies.”[1]  The Government will be able to intervene on these grounds in any transaction that meets UK merger thresholds, including those that also meet EU thresholds.  These measures, which are effective as of 23 June 2020, have been introduced in direct response to the COVID-19 pandemic, and will apply, among others, to businesses involved in the development and distribution of vaccines and other pharmaceuticals … Read more

Accounting and Convergence in Corporate Governance

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Convergence in corporate governance – the adoption by various countries of similar governance laws and practices – and whether it is even occurring have been a hot topic of debate over the past 20 years, particularly in the legal and the law-and-economics literature. The legal literature, however, has sometimes neglected the important role of accounting and financial disclosure in corporate governance.

Proponents of convergence theories have suggested that certain laws and practices would be an advantage in a competitive and globalizing economy. Firms subject to efficient norms would be better run and more successful in the product market, and they … Read more

The Global Diffusion of Stewardship Codes Post-COVID-19

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The rapid global spread of COVID-19 in the first half of 2020 has had serious repercussions for governments, corporations, and institutional investors. Government responses have largely been fragmented, with each nation prioritizing its own interests and following the science of its own advisers. The result has been a wide range of strategies to contain the virus and protect domestic economies and citizens and subsequently to unwind lockdowns and stimulate post-COVID economies.

The coronavirus pandemic has also exposed the fragility of global supply chains and forced corporations to quickly adapt to a rapidly evolving new normal.  Institutional investors, meanwhile, have seen … Read more

Sullivan & Cromwell Discusses Significant Ruling on EU Merger Control

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On 28 May 2020, the General Court of the European Union (“General Court”) handed down its judgment in Case 399/16 CK Telecoms UK Investments Ltd v European Commission (the “Judgment”), annulling the decision of the European Commission (“Commission”) of 11 May 2016, which prohibited the merger of the two mobile network operators O2 and Hutchison 3G UK (“Three”).

The Judgment represents a significant blow to the European Commission’s established merger policy in the telecommunications sector and possibly beyond. Challenging four-to-three consolidation in the telecommunications sector as a matter of routine has been … Read more

Do Corporations Worldwide Still Prefer Delaware?

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Hardly a day goes by without a headline about the brewing tension between the United States and China. But even as the Trump administration mulled de-listing Chinese firms traded in American securities markets, and Nasdaq reportedly planned to tighten its listing rules for Chinese IPOs, Chinese grocery delivery company Dada made its debut on the Nasdaq on June 5, 2020, with a valuation of $3.5 billion. Dada, along with mega-Chinese firms like Alibaba and Baidu, are now a hot topic on Wall Street. This burst of activity raises the question of whether Delaware is still the preferred state of incorporation … Read more

Encouraging Corporations to Investigate Potential Misconduct on Their Own – A Comparative View of Israel and the U.S.

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One of the most serious corruption cases ever investigated in Israel is “Case 3000,” also known as “The Submarines Scandal.” It concerned suspicions that senior Israeli officers and public servants received bribes for over a decade in order to “fix” tenders related to the purchase of submarines and corvette ships from the German conglomerate ThyssenKrupp. As is common practice, ThyssenKrupp sought to conduct an internal investigation into the suspicions, with the goal of cooperating with Israeli investigative authorities. To ThyssenKrupp’s surprise, its attempt at cooperation with the Israeli authorities received a cold shoulder. In an interview with the press, ThyssenKrupp’s … Read more

The Limits of the G20’s Debt Service Suspension Initiative

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As of May 1, G20’s Debt Service Suspension Initiative (DSSI) for 76 International Development Association (IDA) countries and least developed countries (LDCs) has become operational. However, it remains unclear whether private-sector creditors will collaborate on such efforts for those countries, and the question on what to do about the much larger debts of low- and middle-income countries is still open.

On April 15, the G20 announced the DSSI, which is an eight-month official bilateral sovereign debt payment suspension if requested by World BankIDA countries and least developed countries (LDCs) that are current on their International Monetary Fund (IMF) and World … Read more

Skadden Discusses UK Covid-19 Bill to Aid Business, Restructuring

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On 20 May 2020, the U.K. government published the Corporate Insolvency and Governance Bill (the bill), which includes measures designed to help businesses through the COVID-19 pandemic and features important substantive reforms to U.K. restructuring law, whose introduction has been accelerated by the crisis.

COVID-19-Related Measures:

The key temporary measures introduced by the bill are:

Statutory Demands and Winding up Petitions

Creditors frequently press companies to pay debts by issuing statutory demands followed by winding up petitions. Most recently, some landlords have been pursuing this route because of the temporary ban on the forfeiture of leases introduced by the Coronavirus … Read more

Covid-19 and Bankruptcy: A Case For “Light-Touch” Reorganizations

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Different countries have adopted various strategies to prevent or delay initiation of insolvency proceedings and protect businesses in the wake of the Covid-19 crisis. Global response has broadly been along the lines of providing direct financial aid (by way of loans or grants) or taking steps by way of emergency legislation to delay insolvency proceedings. Whether it is the United States or Europe, the overall aim of these strategies is to keep businesses afloat and provide them with protection, albeit temporary, from creditor action. The protection is based on the premise that, in a post-lockdown period, businesses will be able … Read more

Cleary Gottlieb Discusses European Merger Control During the Pandemic

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As the COVID-19 pandemic causes commercial and financial difficulties, many businesses will be considering M&A to address strategic issues, take advantage of market opportunities, and, in some cases, ensure their survival.  This memorandum considers the merger control implications of the pandemic for businesses contemplating transactions at this time.

First, this memorandum provides an overview of how European agencies are responding to the pandemic.  Second, it considers how the crisis may affect the substantive assessment of transactions, including the implications of changed competitive conditions, the availability of the “failing firm” defense, and agencies’ evaluation of the counterfactual.  Finally, we provide some … Read more

Executive Override of Central Banks in the United States and the United Kingdom

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What makes a central bank “independent?” As most central bank scholars and policy-makers would likely answer that question, “it depends” – it depends on the bank, the function it is performing, and the political-economy of the times.  Still, as complicated as the concept of central bank independence is, many experts could likely agree on at least one indicium of independence: a central bank’s legal freedom to make certain decisions free from executive branch interference – at least where certain of its core functions, like monetary policy, are concerned.

In a recent article, we compare the way that two different legal … Read more

The Case for Creditor Cooperation Duties in Corporate Workouts

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The COVID-19 pandemic is causing financial distress to economically viable firms on an unprecedented scale.  In this post, we introduce the novel idea of creditor cooperation duties to stabilize corporate workouts.

The prospect of widespread defaults by viable firms triggered by the COVID-19 pandemic has prompted emergency legislation around the globe. To a significant degree, these measures aim to keep distressed firms out of formal bankruptcy proceedings.  For example, duties to initiate such proceedings have been suspended in Germany, Italy, and Spain; rules that govern the liability of directors of near-insolvent or insolvent companies have been relaxed in Australia, Singapore, … Read more