International Developments

Banking Bailout Law

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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

Preparing for the Transition from LIBOR to SOFR: The ARRC Recommendations

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The London Interbank Offered Rate (LIBOR) has been the standard floating rate benchmark for debt instruments of all kinds around the world for decades. It is calculated every banking day by polling major banks on their estimated borrowing costs for various currencies and tenors. If your business carries debt, the interest rate on that debt is likely to be linked to LIBOR.  A few years ago, after it came to light that certain banks were effectively manipulating LIBOR, it was announced that LIBOR will cease to be quoted as of the end of 2021.

While the official end of LIBOR … Read more

Cleary Gottlieb Discusses Business Interruption Claims in the UK After COVID-19

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Following the decision of the English High Court[1] in the high profile test case brought by the UK’s Financial Conduct Authority (the “FCA”), the UK insurance industry faces the prospect of being liable to cover losses relating to COVID-19 under business interruption policies.

In this piece, we review the implications of the decision and the position of policyholders in both the UK and the US.

Executive Summary

The English High Court has found that a number of representative business interruption insurance policies will cover financial losses caused by COVID-19. Insurers can now be expected to incur significant financial liabilities … Read more

Climate Change as Systemic Risk

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Governments have tended to treat climate change as primarily an issue of environmental policy. Recent climate change-related events, ranging from hurricanes to forest fires to floods, and their devastating effects on the global economy, however, are gradually alerting regulators and governments to the risks of climate change to financial stability. This has spurred action in several countries, as well as globally, to address climate change as a financial risk. Nevertheless, the U.S. has been notably absent from these efforts despite being the home to several large financial markets.

Covid-19 has also highlighted the perils of ignoring seemingly non-financial risks. Perhaps … Read more

Paul Hastings Discusses Internal Document Review in M&A and the Amazon/Deliveroo Case

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In recent years, there has been a proliferation of merger control rules throughout the world as well as policy changes in the field. As shown by Amazon’s experience in its recent 16% minority shareholding acquisition of the online restaurant delivery operator Deliveroo, this has led to new risks and challenges for merging companies, as well as significant timing issues (in big, worldwide transactions, it can now take as long as 18 months or more to get through all of the regulatory minefields). At least 130 jurisdictions in the world (of about 200) have rules which concern, directly or indirectly, merger … Read more

What Factors Affect Global Investment in Private Equity?

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Since the1990s, global investment in private equity has increased from under $10 billion per year to well over $100 billion. Over the same period, there has also been a shift from public markets in major economies like the U.S. and UK.  These developments are likely connected by the fact that small and mid-sized companies are staying private longer or never going public, which is largely the result of more private funding being available to late-stage start-ups and growth companies in these economies.

Over the last two decades, another notable trend has been the rise in private equity investment outside the … Read more

Wilson Sonsini Discusses the Future of Vertical Agreements in Europe

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The Vertical Block Exemption Regulation1 (VBER)—the antitrust legislation governing most vertical arrangements in Europe2—entered into force on June 1, 2010. Among other things, it creates a safe harbor for vertical agreements which meet certain conditions, shielding them practically from the application of Article 101 of the Treaty on the Functioning of the European Union (TFEU). Guided by the VBER and the Vertical Guidelines3 published by the European Commission (EC), the onus is on companies to self-assess their vertical agreements.

As the VBER will expire on May 31, 2022, the EC has recently undertaken an evaluation of … Read more

The Cost of Uncertainty About Material Adverse Changes

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Material adverse change/effect (“MAC”) clauses have evolved into important risk-allocation mechanisms that are commonly included in high-profile mergers and acquisitions (“M&A”) and financing deals. They typically allow lenders or buyers to either terminate an agreement without cost or penalty or renegotiate the agreement from a position of strength. When the prospects for business are dark, desperate lenders and buyers seek to rely on the ex-post triggering function of MAC clauses to avert disaster.

The uncertainty caused by COVID-19, exacerbated in the UK by Brexit, has forced many market participants to re-examine their deals. While some have managed to adjust, others … Read more

Debevoise & Plimpton Discusses UK and EU Anti-Money Laundering Enforcement

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In the last few months, the UK and EU have separately outlined major plans that will soon bring a renewed focus to their fight against money laundering. Businesses will need to prioritise ensuring that their anti-money laundering (“AML”) controls are up-to-date and effective, and should be prepared for an increasing number of enquiries and investigations.

UK Economic Crime Levy. HM Treasury is currently consulting on the introduction of a levy paid by entities in the ‘AML-regulated sector’ (including financial services, accounting and law firms) to raise £100 million per year for further government action to combat money laundering.[1] The … Read more

Debevoise & Plimpton Discusses Whether EU Antitrust and Data Privacy Rules Are Converging

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Competition v Privacy. Competition and consumer authorities are increasingly considering the implications of digital platforms’ ownership and use of consumer data and whether concerns about harm to privacy are indicative of a lack of competition.

For a long time the orthodoxy in the EU had been that competition authorities were sensitive to the possible issues of data concentration, but, equally, were careful to contain their analysis. The prevailing view was best summarized by the EU Court of Justice that “any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law, they … Read more

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