German climate action creates direct consequences for corporates
JOANNE HARRIS
Ratings agency Standard & Poor’s (S&P) increased the credit rating of Germany’s national railway company Deutsche Bahn in mid-October, following the German parliament’s approval of the country’s first climate legislation aimed at reducing carbon emissions and hitting climate targets ahead of 2030.
S&P Global Rating’s Senior Credit Analyst Beata Sperling-Tyler highlights the decision as ‘the first time that we have increased the credit rating of a large company because of climate action’ in Europe.
S&P’s move was a reaction to measures introduced in the German legislative package that will see investment in the rail network and a reduction in VAT on rail tickets. Germany is one of the first European Union Member States to pass legislation designed to meet a series of climate-related targets set by EU law, which follow the 2015 Paris Agreement. The rating agency’s decision means Deutsche Bahn will be able to access cheaper finance – but it also forms part of a global shift towards recognising that there could be multiple benefits in the fight to prevent further climate chaos.
Jonathan Cocker, Sustainability Initiatives Officer for the IBA Environment, Health and Safety Law Committee and a partner at Baker McKenzie, explains that the German climate law expressly recognises that to realise tangible environmental benefits, the law must pick winners among competing technologies and activities. ‘The same is starting to happen under circular economy laws,’ he says. Further, ‘those regulatory choices will have direct consequences in the marketplace, including the example of Deutsche Bahn’s credit rating,’ adds Cocker. ‘Government decisions, hard fought by industry, will increasingly curtail corporate competition and consumer choices in an effort to achieve environmental outcomes, including those associated with climate change.’
Deutsche Bahn’s credit rating has been raised as a result of climate action in Europe
Vanessa Havard-Williams, Global Head of Environment at Linklaters, says regulators and governments will want to keep under review the impact climate-led policy changes have on financial markets. ‘The energy transition will create winners and some organisations who are disadvantaged by these changes.’
Marc Ruttloff, Counsel at Gleiss Lutz, points out that the automotive industry in Germany faces both challenges and opportunities due to the new climate law. It’s a huge contributor to the German economy. ‘Of course, they’re really working to address all the changes, to shift their business model and to develop the whole mindset of their companies accordingly.’
Ruttloff suggests that the transitions the economy, especially the automotive sector, has to go through might have an additional impact on Germany’s ability to make the necessary changes. This is particularly as the agreed package is to be followed by the implementation of many more measures that will allow the government to monitor whether targets are being met.
Yet, as the S&P decision shows, there can be tangible advantages for corporates in industries likely to benefit from legislative change, or for those that make strategic decisions to boost their environmental credentials.
Cocker predicts companies will increasingly look for scientific verification of their products’ environmental credentials to gain advantage over competitors. He says third-party verification programmes could help companies distinguish themselves. ‘This remains very important as there is a common divide within industries between those typically prominent companies which are within the public eye and feel compelled to take steps to enhance environmental outcomes and those “free riders” who compete on price and avoid such investment,’ he says.
‘A regulated market, under threat of commercial disadvantage for those non-compliant, remains the best method for achieving meaningful industry environmental outcomes,’ says Cocker. ‘The challenge is to impose those regulated outcomes while still promoting free market activities.’
Investors are also increasingly powerful, particularly in places where legislative action is yet to take place. ‘Investors recognise the importance of transition strategy for companies operating in carbon-intensive sectors,’ explains Havard-Williams. She says both activist and mainstream investors are seeking investments with defined environmental, social and green credentials.
Ruttloff believes there is still some investor interest in high-carbon sectors. ‘High-carbon industries are a bold investment now but prices might go down, which makes them more attractive,’ he points out, adding that even amid a shift to renewable energy, baseload capacity from oil and gas power is still required.
This shows that the regulatory and strategic shift towards greener financial markets is still in its infancy. While there is agreement that change is required, the pace of change is concerning environmental experts. There are also worries that projects with a potentially positive social impact could be sidelined because they are not green enough.
‘Do we push climate at the expense of development and social impact?’ asks Havard-Williams. ‘The science directs this, but it poses real developmental and social challenges in some markets. And there’s a general risk that the market moves too quickly towards more straightforward green activities; there’s a pressing need to finance transition.’
Perspectives in Practice of the UNIDROIT Principles 2016
A pioneering new book from the IBA, Perspectives in Practice of the UNIDROIT Principles 2016, offers extensive analysis on the application of the International Institute for Unification of Private Law’s (UNIDROIT) Principles of International Commercial Contracts, updated in 2016.
Prepared by a group of independent experts representing all the major legal systems of the world, the Principles are an attempt to ‘codify’, in the form of a non-binding or ‘soft law’ instrument, the general aspects of international contract law. They were first published in 1994 and updated in 2004, 2010 and most recently in 2016. The Principles are extremely valuable for international trade and business. Knowledge and application of the Principles by lawyers, advocates, the judiciary, arbitrators, transactional lawyers and lawmakers will lead to the international harmonisation of contract law.
The first half of this ambitious book comprises 28 country perspective reports describing the application of the UNIDROIT Principles in each jurisdiction. The reader can use these reports in international cases to gain a sense of the background thinking of those involved.
The second half of the book consists of a collection of over 250 summaries of selected court and arbitration cases where the UNIDROIT Principles were referred to or relied on, either by the parties themselves or by the arbitrators or judges. These summaries illustrate the manner in which domestic courts and international tribunals apply the UNIDROIT Principles to the resolution of real disputes.
The book represents the culmination of an IBA working group collaboration between four committees (International Commerce and Distribution, Arbitration, Litigation, and Corporate and M&A Law) and the IBA European Regional Forum. The working group consisted of 51 specialised practitioners, advocates, arbitrators, professors, former judges, corporate counsel and transactional lawyers from 28 countries.
Download the book in its entirety or in sections at tinyurl.com/IBA-UNCITRAL
IBA Arbitration Committee podcast tackles due process paranoia in arbitral tribunals
The IBA Arbitration Committee has produced its first podcast, highlighting the report Annulment of arbitral awards by state court. The report presents the findings of a survey of 13 jurisdictions, addressing for each the common complaints arising from arbitrations on procedural grounds, and looking at whether these have led to a setting aside or annulment of an award or not in specific cases.
The report originates from a perception by many stakeholders that ‘due process paranoia’ among arbitrators is inhibiting some arbitral tribunals from taking a bold approach to conducting proceedings. Due process paranoia is driven by a concern that robust procedural decisions will result in awards being set aside or not enforced. It can result in frustration from the parties and counsel, and causes decisions that can lead to inefficiency and increased costs. The Committee hopes to expand the report to cover more jurisdictions and to update existing jurisdictions in due course.
The podcast features Committee Co-Chair Philippe Pinsolle, head of international arbitration for continental Europe at Quinn Emanuel in Paris, and Emmanuel Jacomy, a partner in Shearman & Sterling’s international arbitration practice in Beijing. It is presented by Angeline Welsh, a barrister at Essex Court Chambers in London.
Listen at tinyurl.com/arbitration-dpp
Looking to the future of legal education worldwide: new survey
The IBA and the Law Schools Global League, which brings together 25 leading law schools with a shared vision of the need to promote a global approach to legal education, have prepared a survey as part of their ‘Blueprint for Global Legal Education’ project.
The project’s purpose is to identify the new challenges, trends and opportunities for law schools and legal education worldwide, as well as to understand the responses to these by law schools.
The survey is aimed at law schools, bar associations and legal organisations in every region and gathers information on such areas as the international elements of law schools (the international mix of students, staff and course content), training provided in communication, management and practice-related skills, multidisciplinary programmes, legal technology and regulation.
The survey is easy to complete and contributions will be extremely helpful to the project. Access through the link below, or on the IBA website.
Access the survey at tinyurl.com/lsgl-survey
New book outlines use of insolvency and bankruptcy proceedings to return stolen assets
A new book, co-written by the IBA and the United Nations Office on Drugs and Crime-World Bank Stolen Asset Recovery Initiative (StAR), focuses on the use of underutilised insolvency and bankruptcy proceedings to pursue the restitution of corrupt funds.
The StAR series supports the efforts of the StAR and UNODC by providing practitioners with knowledge and policy tools that consolidate international good practice in asset recovery efforts.
The book, Going for Broke: Insolvency Tools to Support Cross-Border Asset Recovery in Corruption Cases, explains how these proceedings offer a suite of alternative tools and procedures that can, in certain circumstances, cut through the red tape and return stolen assets to victims.
The book sets out, for the first time, a step-by-step guide for asset recovery practitioners on the use of insolvency proceedings in recovering corruption proceeds. It explores the procedures associated with insolvency actions and the challenges associated with this approach, while providing practical methods for various strategic and technical concerns.
Case studies demonstrate the benefits of cross-border insolvency proceedings in international corruption cases and the obstacles that practitioners may face.
The guidebook aims to facilitate the exploration of insolvency tools as an alternative mechanism to recover their nations' stolen assets in corruption cases.
Download the book for free at tinyurl.com/IBAGoingForBroke
IBA LPRU global engagement with United Nations and wider legal profession
In May 2019, the IBA Legal Policy and Research Unit (LPRU) published its landmark report Us Too? Bullying and Sexual Harassment in the Legal Profession. Since launching the report, the LPRU has undertaken a global engagement campaign to raise awareness of the report’s findings and contribute to positive change.
Events have been held in 28 cities across six continents, in partnerships with local bar associations, law societies and external partners, such as the European Commission, International Labour Organization, World Bank Group and Thomson Reuters.
LPRU representatives have met with and presented to over 80 law firms, as well as regulators and civil society organisations. Most recently, in collaboration with the Spanish Bar Association, the LPRU presented a Spanish-language version of the report in Madrid on 22 January.
The global campaign concluded with a presentation in Rome on 10 February, in collaboration with the Roman Bar Association. Planning is currently under way for the second phase of the project.
In the meantime, the LPRU continues its trend of engagement with other international bodies, as well as IBA committees and members, in other projects. In collaboration with the IBA Business and Human Rights Committee and IBA Arbitration Committee, the LPRU has submitted a reflection paper to the ongoing consultation on non-state-based grievance mechanisms conducted by the Office of the UN High Commissioner for Human Rights. The reflection paper focused on the role of the legal profession in supporting the design and implementation of effective non-judicial grievance mechanisms (UNGP 31) and, more generally, in the achievement of a cohesive ecosystem of remedies for rightsholders.
Learn more about the bullying and sexual harassment project here: www.ibanet.org/bullying-and-sexual-harassment
Read the LPRU reflection paper on effective non-judicial grievance mechanisms here: tinyurl.com/non-judicial
Over 200 Cuban lawyers receive IBA diploma
International Commercial Law Diplomas were awarded to over 200 Cuban lawyers at a graduation ceremony at the University of Havana in November. The event – hosted by the IBA in collaboration with the International Legal Assistance Consortium (ILAC) and Cuba’s National Organization of Collective Law Offices – celebrated four editions of the diploma. The programme, launched in 2016, has been instrumental in addressing the knowledge gap of Cuban lawyers regarding commercial contracts and cross-border transactions.
Opening the ceremony, Carlos Domínguez, former Chair of the IBA Latin American Regional Forum and current member of the advisory board and coordinator of the project, congratulated graduates for their efforts and their excellence as legal professionals. ‘The law is learned by studying, but is exercised with the flag of ethics, and with deeply social, humanitarian and justice values,’ he said.
The diploma is funded by the ILAC, with the IBA controlling the academic aspects of the programme. The ILAC has approved the financing of the project for at least two more years, with the possibility of carrying out similar activities in other provinces.
For further details and to view the list of graduates, please visit tinyurl.com/IBACuba
UK efforts to tackle financial crime back in firing line
RUTH GREEN, IBA MULTIMEDIA JOURNALIST
In recent years, the UK has been among the most strident voices calling for greater global efforts to fight corruption. But a dearth of convictions for financial crime and delayed investigations have prompted serious questions about the country’s appetite for tackling corruption.
A series of failed prosecutions has raised concerns about the time taken to examine cases, particularly under the UK’s Serious Fraud Office (SFO) Director Lisa Osofsky, who was tipped to revamp the agency’s track record on enforcement. Convictions secured by the SFO fell to 53 per cent in 2018–2019, marking its lowest level since 2015–2016.
“The UK has one of the... best anti-corruption institutions in the world: the SFO. The system is functioning, but it has to function in all cases
Drago Kos
Chair, OECD Working Group on Bribery
In November, following a freedom of information request by law firm Fieldfisher, it was revealed that the agency has secured only seven convictions against five corporates since April 2013. Thirty-two of the 43 criminal investigations opened during this period have not reached a conclusion. Kyle Phillips, a Director in the Corporate Crime team at Fieldfisher, warns that without significant progress the ‘backlog of cases will continue to rise, risking further delays to SFO investigations’.
An October report by Her Majesty’s Crown Prosecution Service Inspectorate said the SFO had ‘delivered good results in many challenging cases’, but stressed the need for the agency to introduce measures ‘to significantly reduce the impact of current delays on case progression’.
An SFO spokesperson tells Global Insight: ‘The SFO is effective at what it does but there are always further actions we can take to improve case progression. This is something the Director is committed to doing and work is under way to achieve this. However, by their nature, our cases will always take a comparatively long time, so progress will not be immediately visible.’ In December 2018, Osofsky told the House of Commons Justice Select Committee that she was reviewing more than 70 ongoing cases to ascertain why it was taking so long to decide whether to bring charges against companies and individuals.
Robert Amaee is the Director and founder of Amaee Law and former Head of Anti-Corruption, Proceeds of Crime and International Assistance at the SFO. ‘Although there’s a perception that recent SFO activity has been less pronounced, the expectation must be that it will before long announce the instigation of one or more significant matters,’ he says. ‘I expect the Proceeds of Crime team at the SFO is champing at the bit to get out there in force and make some noise with the new Criminal Finances Act tools.’
Anti-corruption groups have also voiced concerns over ongoing delays to the SFO’s probe into allegations that GPT Special Project Management paid bribes to win a Saudi defence contract. In October, the OECD’s Working Group on Bribery met with UK government officials to discuss the case amid concerns there could be a repeat of the BAE scandal, during which government pressure forced the SFO to drop its investigation into bribery allegations involving the company following diplomatic pressure from Saudi Arabia.
Concerns are mounting over ongoing delays in SFO cases into financial crime
Drago Kos, Chair of the OECD Working Group, tells Global Insight the outcome of the GPT case would be crucial to the UK’s international reputation on tackling bribery: ‘You can build a beautiful system but destroy it with one case. The UK has one of the best anti-corruption laws in the world and one of the best anti-corruption institutions in the world: the SFO. The system is functioning, but it has to function in all cases.’ The SFO declined to comment directly on the investigation as it is an ongoing case.
Robert Barrington is Professor of Anti-Corruption Practice at Sussex University’s Centre for the Study of Corruption. He argues that the outcome of the GPT case could give an indication of the UK’s future appetite to clamp down on dirty money.
‘If the economy looks in trouble after Brexit there will be a huge temptation for the government not to care how companies win business overseas or where the money comes from.’
Barrington says there has been a discernible shift in the government’s anti-corruption efforts. ‘In 2017, I would have been a lot more positive,’ he says. ‘There was no doubt in my mind that David Cameron was very committed to certain aspects: he held the 2016 Anti-Corruption Summit, unexplained wealth orders were introduced and are now being used, and there was a sense that there was a change in political will. The question is now about the political will after Brexit. Fighting corruption across the world [involves taking both] steps forward and steps back. The UK is on the verge of taking steps back and the government has some tough choices to make.’
Peter Solmssen is former General Counsel at Siemens and Chair of the IBA Non-trial Resolutions of Bribery Cases Subcommittee. ‘There may be frustration that there hasn’t been enough activity, but there’s been a hell of a lot of activity,’ he says. ‘And, seeing more of it means that we’re discovering more, which otherwise would not have been discovered or prosecuted at all. What was tolerated for generations won’t be tolerated anymore.’