IFLR EU In-House Counsel Summit 2018: highlights
Debt and equity capital markets
- The idea behind the EU’s Capital Markets Union (CMU) – which has been a long time in the making - is to make the sector more competitive and more attractive than bank finance;
- Having one single regulator to oversee EU capital markets (with complementary national regulators) is a great idea: for instance, raising equity in the EU is a challenge at present as there are several regimes that don’t necessarily coordinate (huge differences in Spain, the UK and France);
- If you consider the Market Abuse Regulation, some centralised clarity is needed: when a company goes public, if there is early engagement with investors, does this constitute market sounding? No definitive answer to this yet.
- On the other hand, national regulators have built up a lot of expertise and knowledge in the debt space (UK, Luxembourg and Ireland): lifting that infrastructure for the CMU will not be welcome;
- Key questions: can the European Securities and Markets Authority move quickly enough? Does it have enough legitimacy to carry out certain duties: consumer protection for example?
- It will be interesting to see if Mifid II and Priips will increase move to wholesale markets? The promotion of the key information document and the prospectus regime is not done uniformly in the EU, so could encourage asset managers to avoid retail investors.
Navigating M&A transactions & competition outlook
- One key problem that companies in the UK are facing is the issue of passporting to trade in the EU: there has been a significant increase in investment into companies based in the EU;
- What kind of Brexit agreement would suit the UK in 2019 onwards: it shouldn’t be a one-size-fits-all agreement but a range of bilateral agreements;
- One factor that makes transactions successful is planning: in 2015, 50% of deals went through successfully, but this figure has dropped to between 20 and 30%. Other issues include pricing, valuation and integration – these can derail transactions easily. Nearly 40% of deals’ success hangs on integration;
- Companies have to be wary of integrating too early however: the Altice/SFR case in France is an example of a regulator fining the companies for starting integration talks prior to merger clearance;
- A number of EU regulators are eyeing US Cfius style competition rules, especially considering the interest of Chinese companies in EU assets.
Anti-corruption and bribery regimes
- What cooperation level does a company need to aim for to get regulators 'on its side’?
- The level of cooperation between Rolls Royce and the Serious Fraud Office (SFO) was extraordinary as the company deferred all interviews, gave incredible access to personnel, consulted with the SFO before winding up companies etc;
- This level of cooperation has a knock-on effect on other regulators if a company has international business;
- When a scandal hits, it spreads quickly so the need to have a quick and effective social media/communication strategy, coordinated action at all levels and awareness from the board is crucial;
- In-house lawyers need to be part of the solution: they need to help make all the corrections, and be part of the cleanup and of the leadership;
- Are companies better served by having an external law firm advising on these issues or an advisor that knowns them? An external advisor would be better, they are more objective and come with a neutral perspective.
- The legal privilege (LP) issue has recently been raised in the UK: LP is now limited to people who can instruct a lawyer (UK). US rules consider that client attorney privilege spreads to all employees – makes a huge difference in practice.
Employment law reform
- Gender pay gap reporting rules apply to applies to employers who have more than 250 employees, but there have been calls for the threshold to be reduced to 50;
- There are 6 parameters that help measure the gap including mean/ medium bonus reporting;
- There is currently no equivalent of this in the US, although in New York and California there is a provision in place whereby the employer cannot ask about a prospective employee's historical pay;
- The methodology behind the regulation is imperfect from a corporate perspective, as gender pay is not the same thing as equal pay. The former tells a people if there is over-representation not that a company is paying men and women differently;
- This could be an the era which marks the end of 'brilliant jerks'.
- There is a growing importance and awareness of corporate responsibility post-Weinstein, particularly to avoid uncontrolled external disclosures, criminal liability and brand damage. The key is to control and internalise risk and reduce external disclosure;
- The removal of tribunal fees has increased the number of whistleblowing claims brought to employment tribunals. An effective framework is vital because there is no cap on compensation for whistleblowing claims;
- The laws governing whistleblowing are dynamic. Currently the Public Interest Disclosure Act 1998 (PIDA) offers two levels of protection for whistleblowers and uses a wide definition of a worker (including numbers of individuals who would not otherwise be covered). This does not include the self-employed, volunteers, workers in armed forces or intelligence services;
- An effective whistleblowing regime must include a defined procedure for reporting and enable workers to bypass the level of management at which the problem may exist. More importantly, it should include a commitment to take appropriate action.
- When drafting a contract: there is a need to ensure the clauses are not adversarial - the spirit must preserve the relationship between parties. There must be a certainty of outcome, and clarity in the process and service of process;
- Top tips for choice of jurisdiction: exclusive and consistent across agreements.