The Principle - Issue 7

Issue Seven NOVEMBER 2016 ISSUE SEVEN ALLABOUTLAW.CO.UK

Principle the

COMMERCIAL INSIGHTS & FUNDAMENTAL ADVICE

FOR ASPIRING LAWYERS

Transatlantic turbulence

The anatomy of a deal

The internet as a human right

Exploring the increasingly controversial Transatlantic Trade and Investment Partnership, or TTIP. Protests in Europe prove that public mood is mounting against the deal, while officials on both sides of the Atlantic insist it is the way forward.

We take a look at what actually happens during merger and acquisitions deals and identify the points where commercial lawyers come in, by breaking the whole process down into an easily digestible diagram.

Recently, news broke stating that the United Nations’ Human Rights Council has passed a resolution condemning countries that intentionally take away or knowingly disrupt their citizens’ internet access. In effect, the internet has become a basic human right.

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Continued on page 14

The future of secrecy & the Swiss banks AllAboutLaw.co.uk

Continued on page 24

A journalist was acquitted of violating banking secrecy laws this summer, setting a precedent that could change banking confidentiality rules in countries like Switzerland.

Here we explore what this might mean for foreign trusts and companies with Swiss accounts, and the implications for banking around the globe.

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the Principle

A note from the editors

Commercial digest COMMERCIAL INSIGHT

WORDS Jack J Collins, Emma Finamore PHOTOS Adrian Pinkstone, Diliff, MTaylor848, World Economic Forum, Secretary Of Defense

Welcome to the seventh issue of the Principle, the commercial insight and advice newspaper written by the team behind AllAboutLaw.co.uk.

For this edition we’ve put together a great collection of features grappling with topical issues in the world of law – providing you with a broad context for your studies and hopefully inspiring some debate.

THIRD RUNWAY AT HEATHROW ELICITS MIXED REACTION

We look at everything from the impact in Switzerland and Luxembourg of acquitting a journalist who called out issues with banks, and the ever-controversial Transatlantic Trade and Investment Partnership deal; to the UN’s recent Human Rights Council ruling condemning countries that intentionally take away or knowingly disrupt their citizens’ internet access. The internet, in effect, has become a basic human right. What does this mean?

As well as features based on current affairs, we’ve included advice pieces to equip you with the essentials for your career journey. We’re taking a look at what it’s really like working in a US law firm, breaking down the anatomy of a merger and acquisition deal, and exploring the advantages that life in a national – rather than in the City of London – law firm can offer.

We’ve also added a new element which will feature in all editions of the Principle moving forward: a commercial digest. This will bring you the latest essential news in the worlds of law and business, to further heighten your commercial awareness.

Until next time, enjoy!

Emma Finamore and Jack J Collins Editors, AllAboutLaw.co.uk

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BANKS LOOKING TO RELOCATE Uncertainty over the Brexit process and British negotiations has some of the UK’s largest banks seriously considering relocation in the opening few months of 2017, it has emerged.

Anthony Browne, the head of the British Banker’s Association, has claimed that the smaller banks will leave first – over the coming months – followed by their larger counterparts, as the industry fears that the EU is going to erect trade barriers to protect themselves against the power of the City of London, and entice financial services to relocate to within the EU. Talking at the BBA annual conference, he said: “Their hands are quivering over the relocate button.” Browne highlighted how the banking industry was affected more than most by Brexit, not only because of the impact of tariffs, but because its legal rights and obligations are controlled by the EU.

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Whilst environmental agencies and many homeowners in West London were distraught about the news that the government had finally decided to green light a third runway at Heathrow Airport, businesses across the capital rejoiced. The third runway is predicted to deliver £211 billion of extra growth to London, as well as 180,000 new jobs.

Zac Goldsmith, the Conservative London mayoral candidate in 2016 and MP for Richmond Park, resigned his seat in protest at the decision and will now run as an independent candidate in the resulting by-election, saying his actions will “send a clear message to government”.

Controversially, Michael O’Neill, the chief executive of Ryanair, reiterated his calls for further runways at all three of London’s major airports: Heathrow, Gatwick and Stansted. “We can’t allow the future of London to be held up by people who knew there was an airport there when they bought their house,” he said.

£571m

BHS’s pension deficit total, as the Pensions Regulator begins enforcement action against Sir Philip Green.

£1b

PPI BILL CONTINUES TO CLIMB

A new £1 billion fine for Lloyds Banking Group, and a further £600 million set aside by Barclays, has taken the total cost of the PPI (payment protection insurance) misselling scandal to over £40 billion for UK banks, making it the most settlement of its kind in UK financial history.

The high payouts have been connected with a boom in the holiday and automotive industries. A government watchdog has said that the payouts have been treated like a bonus, rather than a refund, in many households across the UK: recipients have treated the extra money as more disposable than they might have if it hadn’t been removed from them in the first place.

The Financial Conduct Authority is expected to announce a cut-off point for claims, which will coincide with an advertising campaign encouraging customers to come forward before it ends.

LADBROKES & GALA CORAL SELLING STORES AHEAD OF PROPOSED MERGER

Ladbrokes and Gala Coral have agreed to sell 359 betting shops to rival bookmakers in order to meet requirements for approving their £2.3bn merger.

The companies will sell 322 shops to Betfred for £55 million in cash and a further 37 to Stan James for £500,000 after the merger.

Ladbrokes will sell 185 shops and Gala Coral will sell 174. The Competition and Markets Authority (CMA) ordered them to sell 350-400 stores to ensure customers have a choice of bookmakers in specific local areas. Ladbrokes has about 2,100 UK shops and Gala Coral has 1,800, so the resulting company will overtake William Hill (almost 2,400 shops) as Britain’s biggest bookmaker.

Ladbrokes said the companies would ask the CMA to approve the merger based on the planned sales, and said the companies believed the sales would meet the regulator’s concerns about competition in specific locations.

Issue Seven

“To use a footballing analogy, this Act doesn’t need a substitution – it needs the full-time whistle blown on it.”

BRITISH INFLATION RISES TO TWO-YEAR PEAK

Douglas Ross, Conservative MSP The Scottish Government is defeated by a cross-party alliance at Holyrood over the controversial Offensive Behaviour at Football Act.

PUBLIC FINANCES TO TAKE £25BN HIT The Institute for Fiscal Studies has stated that the prospects for the UK’s public finances have deteriorated rapidly since the March Budget. The think tank has stated that weak growth in the financial markets since that budget was released would mean that tax receipts were well down on their predicted figure, increasing borrowing by a large amount. Their assumed figures for the economy meant that there would be, according to the IFS, a “significant increase in the deficit.”

The news comes ahead of the Autumn Statement, which will be released this month – an event that will mark Philip Hammond’s first significant milestone since taking over the post of Chancellor from George Osborne in the Summer Cabinet reshuffle. Osborne’s stated aim was to make sure that the books were balanced by 2020, but Hammond has already said that he will put that target aside in order to prioritise spending on new homes and transport. The think tank stated that he had “two big decisions,” to make in the statement – one regarding whether he should be increasing spending or cutting taxes in order to give a financial boost, and the other as to which targets he would be setting.

£104m The amount Justice Secretary Liz Truss has pledged to the Prison Service to recruit 2,500 more officers.

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Inflation in Britain rose to 1% in September, the highest since November 2014.

Despite the dramatic rise, the Office for National Statistics urged caution in making too strong a link between this increase and the downturn in sterling since the Brexit vote in June.

Mark Carney, governor of the Bank of England, warned before the EU referendum that struggling families would be hit hardest by price rises he predicted would come about as a result of a leave vote. A household-finance index published by global financial information and services company, IHS Markit, reported a 22-month high in future inflation expectations, and a threemonth low in the financial outlook for the year ahead.

IHS Markit also reported that according to recent survey data, the pace of economic growth in the eurozone in October rose to the highest seen so far this year , led by an upturn in Germany.

NETFLIX SHARE PRICES RISE BY 20% Multinational entertainment company Netflix announced a share price increase of 20%, after gaining 3.2 million new international subscribers in the last financial quarter.

These international users have offset a slowdown in its US market, where it only added 370,000 new customers in the last quarter. The company has expanded video streaming to a further 130 countries, but has dropped plans to expand into China.

It was a different story in the previous quarter: Netflix reported significantly worse subscriber numbers than it had predicted – only adding 1.7 million new paying users, instead of the 2.5 million it had told the market to expect.

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the Principle

Are the days of banking secrecy numbered?

COMMERCIAL INSIGHT

WORDS Emma Finamore PHOTO David Plas, Freepik

SWITZERLAND

A

journalist has been found not guilty of criminal charges while reporting on tax avoidance schemes. This may seem like an obvious verdict – reporters are supposed to break stories like this – but he was reporting on the murky world of Luxembourg banking, and the verdict could have implications both there and in Switzerland, where secrecy laws protecting its financial sector go back to the Middle Ages. The journalist’s acquittal in one of the smallest countries in Europe could have a major impact on the entire banking world.

Two former bank employees received 12 and nine-month sentences respectively for leaking documents exposing favourable tax arrangements offered by Luxembourg to some of the world’s biggest companies. The prosecution accused them of theft and said they violated a confidentiality agreement in their employment contracts. However, Edouard Perrin, the journalist who reported the leaks, was acquitted of all charges.

These so-called Luxembourg Leaks (sometimes shortened to Lux Leaks or LuxLeaks) disclosures attracted international attention and comment about tax avoidance schemes, and contributed to the implementation of measures aiming at reducing tax dumping and regulating tax avoidance schemes beneficial to multinational companies.

The 30,000 pages of documents leaked by the whistleblowers exposed favourable tax arrangements offered

by Luxembourg to some of the world’s biggest companies – including Apple, Ikea, and Pepsi – while Jean-Claude Juncker, now head of the European Commission, was prime minister.

Now that a court has decided it is not a crime to report on arrangements like this, places that have historically offered total secrecy – such as Switzerland – might be forced to change.

To grasp the importance of the LuxLeaks case internationally, it is important to understand the specific circumstances of banking in places like Switzerland. Here, the industry is regulated by the Swiss Financial Market Supervisory Authority (FINMA), which derives its authority from a series of federal statutes. The country’s tradition of bank secrecy, which dates to the Middle Ages, was first codified in the Federal Act on Banks and Savings Banks, known as the Banking Law of 1934. It became a criminal act for a Swiss bank to reveal the name of an account holder.

Swiss bank secrecy protects the privacy of bank clients, similar to confidentiality protections between doctors and patients, or

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lawyers and their clients.

Despite some concessions in recent years, Switzerland’s infamous secrecy means banking is a huge part of its economy.

In 2011, banks represented 59.4% of the total value added of the Swiss financial sector, totalling 6.2% of the country’s GDP. UBS and Credit Suisse, the two largest banks in Switzerland, were ranked globally at 19th and 25th among banks, with assets of approximately US$1.375 trillion and US$1.090 trillion, respectively. In other words, it is very big business.

This means the stakes of protecting this secrecy, and banking’s reputation in places like Switzerland and Luxembourg, are high.

Prosecutors at the LuxLeaks trial accused Perrin of going beyond the remit of a journalist, alleging that he manipulated bank workers into releasing the information.

For others, the stakes of allowing such secrecy to continue are equally high. Tove Ryding, Tax Justice Coordinator at the European Network on Debt and Development (Eurodad) defended Perrin’s position in a statement on Eurodad’s website, and those of the bankers who were found guilty: “The sentences imposed on these men are a complete disgrace and an indictment of the system that has condemned them. They acted in the public interest and deserve thanks and protection from prosecution.

“They revealed the secret tax deals that allowed huge corporations to pay next to nothing to the public purse. These kind of deals mean both developed countries, and the poorest nations in the world, lose billions every year. This information should not have been secret in the first place. There is no reason why citizens should not be allowed to know where multinational corporations do their business and where they pay their taxes.”

Despite the bankers involved being found guilty, does this acquittal of journalist Edouard Perrin mark a shift in attitudes within the banking world? There are some indications that things are changing. Switzerland signed a new standard in 2014 promising (in theory) automatic exchange of information designed to combat tax evasion. It also committed to activating the automatic information exchange of financial information from 2018 onwards.

Along with members of the Organisation for Economic Cooperation and Development (OECD) and G20, Switzerland endorsed the new automatic information sharing standard at the annual meeting of the Global Forum on Transparency and

AllAboutLaw.co.uk

UK

VENEZUELA

US

FRANCE

ISRAEL

GERMANY UAE EGYPT LUXEMBOURG PANAMA SOUTH AFRICA HONG KONG

Above HSBC “Swiss Leaks” data (similar to LuxLeaks) showing the extent of tax evasion in various countries. Source: Grandjean, Martin (2015).

Issue Seven

LuxLeaks: key findings

340

Around 340 companies secured secret (but legal) deals from Luxembourg that allowed many of them to slash their global tax bills.

Above Jean-Claude Juncker was prime minister of Luxembourg when it offered favourable tax arrangements to some of the world’s biggest companies.

Exchange of Information for Tax Purposes. This standard will give tax officials around the world a powerful new tool with which to tackle cross-border tax evasion. The countries that have signed up to the standard must commit to an annual exchange of all financial information automatically, on a reciprocal basis with all other participating countries. However, the parliament – and maybe a public vote from the Swiss people – will need to give approval before the 2018 timeline can be seen as final.

Despite potential backlash from voters, the Swiss banking sector – and others, like Luxembourg’s – can’t hide from a changing world forever. Frank Gerhardl, M&A Partner at Zurich-based law firm Homburger, said in an interview with Leaders League (a business and market intelligence magazine) in October, that it is only a matter of time before Swiss banks fall in line with global trends, despite the risk of short-term losses. “Certain business leaders contend that Switzerland will lose one third of its banks in the near future,” he said.

“This will certainly bring to law firms some domestic or cross-border deals. By 2018, banks will also face new regulations with Basel III. This in turn will bring law firms more work on regulatory, compliance or even financing matters for their clients. However, transparency and tax compliance of assets is a worldwide trend, so we believe that in the long run Swiss banks will get stronger after this catharsis.”

Some are already embracing this change. US bank Citigroup’s Swiss unit is one of Switzerland’s largest foreign banks and, with at least $25 million needed to become a customer, it’s also one of the most exclusive. In September it was reported that Citigroup’s private bank in Switzerland had begun asking its wealthy clients to voluntarily waive banking secrecy – and getting surprising responses.

Kristine Braden, who heads up the bank’s Swiss arm, told FinNews.com that clients have been “overwhelmingly positive” in an interview in September, and that consenting to cross border data disclosure can actually bring some advantages for a bank’s customers. It can make their lives easier by allowing bank staff to travel to meet them in London, for example, instead of Switzerland, and still work off the same account information. “We’re offering our clients the opportunity to consent to cross-border data disclosure because we think we can serve their needs globally from Switzerland,” Braden said. “While we care deeply about data

“This information should not have been secret in the first place. There is no reason why citizens should not be allowed to know where multinational corporations do their business and where they pay their taxes.” protection, at the end of the day we want to be able to serve our global client’s needs, wherever our client is operating.

“Clients come to Switzerland because of the security of Switzerland, the privacy of Switzerland, the products and services, historical ties – they’re here for a lot of reasons, but for us it was never about secrecy anyway so the client’s willingness to consent to cross-border data disclosure wasn’t a big deal.”

Braden said Citi hasn’t lost any clients by asking them to waive their right to secrecy, which marks a first in the Swiss market: “Many asked me, ‘how many clients did you lose?’ I said, ‘we haven’t lost any.’ They’re here because they’re using Citibank as a global bank. I think if you’re just a Swiss bank it might be different. When a client has consented to crossborder data disclosure, the banker can work with them on a product that has their live, real-time data.”

Banking in Switzerland is set to change, and as a result, the way companies and wealthy individuals bank all over the world will change too. What’s for certain is that with acquittals for whistle blowers, those seeking to use secrecy laws to cover up foul play will not be able to do so forever.

AllAboutLaw.co.uk

Many of the tax deals exploited international tax mismatches that allowed companies to avoid taxes both in Luxembourg and elsewhere through the use of so-called ‘hybrid’ loans.

In many cases, Luxembourg subsidiaries handling hundreds of millions of dollars in business have very little presence and conduct little economic activity in Luxembourg. One popular address is named as ‘home’ to more than 1,600 companies.

<1%

Companies have channelled hundreds of billions of dollars through Luxembourg and saved billions in taxes; some have enjoyed effective tax rates of less than 1% on the profits they’ve put into Luxembourg.

The list of companies seeking tax rulings from Luxembourg includes American entertainment icon The Walt Disney Co., politically controversial Koch Industries and 33 other firms.

05

the Principle

A history of firsts

COMMERCIAL INSIGHT WORDS Emma Finamore GRAPHICS Freepik

The International Criminal Court’s first war crimes trial for destruction of cultural monuments – known as ‘cultural vandalism’ – ended in September. Here we take a look at that case, as well as other notable criminal justice firsts.

THE FIRST…CYBER BULLYING TRIAL UK, 2008: A housewife who created a fake MySpace account to send hostile emails to a neighbour’s 13-year-old daughter was charged with cyber bullying that prompted the girl’s suicide. Lori Drew was accused of posing as a fictitious 16-year-old boy called “Josh Evans” in a plot to befriend and later send taunting messages to a vulnerable girl with a history of depression, who was also being bullied at school.

Drew set out to “tease, embarrass, humiliate, make fun of and hurt” the “suicidal” girl, said prosecutors, using the social networking site to tell her that “the world would be a better place” without her.

The victim replied, telling “Evans” that he was “the kind of boy a girl would kill herself over”. She then hanged herself with a belt, in an upstairs room of her family home, the Missouri jury heard.

VERDICT: The jury acquitted Drew of three felony charges. They did, however, find her guilty of breaking MySpace’s terms of use.

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THE FIRST…BRITISH TRIAL HELD IN SECRET UK, 2014: The identities of two defendants charged with serious terror offences were withheld from the public, and the media banned from being present in court; the two men were known only as AB and CD. This unprecedented secrecy was imposed by the Crown Prosecution Service on the grounds of national security.

AB was charged under the Terrorism Act 2006 with engaging in preparation of terrorist acts. He was also charged, along with CD, of being in possession of documents containing information likely to be used by a person preparing an act of terrorism: a document entitled “Bombmaking”. CD was also charged with possession of an improperly obtained UK passport. After a legal challenge from some UK newspapers, the defendants’ names were revealed as Erol Incedal and Mounir Rarmoul-Bouhadjar, both 26 and from London.

They both pleaded not guilty to the charges. Most of the trial still took place in secret, with only some of the opening speeches of the trial and the final verdicts held in open court.

VERDICT: Erol Incedal (AB) was jailed for 42 months for possession of the “Bombmaking” document.. Mounir Rarmoul-Bouhadjar (CD), who had pleaded guilty at an earlier hearing, was sentenced to three years.

THE FIRST…UK MARITAL RAPE CONVICTION

THE FIRST…TRIAL USING DNA EVIDENCE UK, 1986: Dr. Alec Jeffreys used his recently-developed DNA method to help Midlands police arrest and convict a suspect who raped and murdered two schoolgirls three years apart. Richard Buckland, a local 17-year-old with learning difficulties, revealed knowledge of the second murder and admitted the crime under questioning, but denied the first murder, three years previously. Using DNA profiling, Jeffreys compared samples from both crimes against a blood sample from the suspect which conclusively proved that both girls were killed by the same man...but not Buckland.

VERDICT: Colin Pitchfork was eventually identified and convicted of the murders after samples taken from him matched samples taken from the two dead girls. This turned out to be a specifically important identification: not only did Jeffreys’s work prove who the real killer was, but it exonerated Buckland, who likely would have spent his life in prison otherwise.

THE FIRST…CULTURAL VANDALISM TRIAL

UK, 1990: The defendant, “R”, had been convicted of attempting to rape his wife. He appealed the conviction, claiming that it was not legally possible for a husband to rape his wife, as the wife had given irrevocable consent to sexual intercourse with her husband through the contract of marriage, which she could not subsequently withdraw.

THE HAGUE, NETHERLANDS, 2016: Ahmad al-Faqi al-Mahdi was a member of Ansar Dine, a Tuareg Islamic extremist militia in North Africa. The International Criminal Court charged him with committing the war crime of intentionally directing attacks against historical monuments or buildings dedicated to religion. The arrest warrant listed ten monuments in Timbuktu, at least one of which is a World Heritage Site.

VERDICT: Both the Court of Appeal and the House of Lords upheld the rape conviction, declaring that a marital rape exemption did not exist in English law. In short, they determined that under English criminal law it is possible for a husband to rape his wife. A year later, in 1991, rape within marriage became a crime in the UK.

VERDICT: Al-Mahdi pleaded guilty to the charges of destroying nine mausoleums and the mosque. The first person to plead guilty to a charge at the ICC, al-Mahdi made a statement expressing remorse and advised others not to commit similar acts. He was sentenced to nine years in prison for the destruction of cultural heritage.

AllAboutLaw.co.uk

Issue Seven

Myth busting: working at a US law firm FUNDAMENTAL ADVICE Contributed by:

PHOTO Antony Delonoiux

Shearman & Sterling is proud to have been one of the first US firms to emerge in the UK legal market. Opening in London in 1972, the office has moved away from its Wall Street roots to establish itself as a leading international firm with over 80% of the London office now England & Wales qualified.

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hearman & Sterling has run a successful training contract programme for over ten years and has winter, spring and summer vacation schemes. The two-week scheme is a great chance for participants to see the realities of working for a USorigin firm in London and to dispel some commonly held myths:

MYTH #1: LACK OF SUPPORT At Shearman we are proud of the support networks we have in place.

With around 15 trainees per year, we are able to tailor our training contract to the individual. Trainees share an office with a senior associate or partner supervisor, who helps manage their workload, explains deals and guides them with constructive feedback.

Trainees also choose a mentor to talk them through seat choices, appraisals, qualification and anything else which might come up.

We are proud of the early responsibility we offer trainees: they are fully integrated into teams and get involved in live transactions and cases, billing time and experiencing client contact, gaining drafting experience and even the chance to negotiate situations from the very beginning. None of this is done alone though – we have an industry-recognised training programme and full timetable of training sessions to ensure everyone has the technical expertise and soft skills required to provide exceptional legal advice to our clients.

MYTH #2: LONGER WORKING HOURS We are committed to delivering exceptional results for our clients, which can mean working long hours, though this is the case for all top tier law firms. At Shearman, there is a real culture of “getting on with it”, meaning that lawyers and business services staff of all levels will pull together to work to deadlines. The collegiate atmosphere means that there is no ‘facetime’ and when work is not

urgent we do standard 9.30 – 5.30 days. Downtime gives trainees the opportunity to get involved in pro-bono work, our local CSR initiatives such as legal clinics and local schools’ reading schemes and also try their hands at writing and delivering training sessions or contributing to firm know-how. The downside of high-end cross-border transactions is that work-flow can be unpredictable, but having your team around you to share the burden and the laughs is something our trainees really value.

MYTH #3: LACK OF JOB SECURITY AT SMALLER/NEWER FIRMS Formerly, trainees felt they needed a brand name UK firm on their CV, and US-origin firms were overlooked as a riskier option for starting your career. In fact, we have illustrious histories in North America (Shearman recently celebrated its 140th birthday in New York and has been in London for 44 years) and thus have existing client relationships and reputations. With our networks of global offices we are truly international so can offer a great service to our multinational clients, who find New York and England & Wales law increasingly dominate their transactions. Accordingly, there is a strong demand for English speaking, English qualified lawyers in firms with a global reach like Shearman. This can be noted by our organic growth in London – promoting five partners in 2016 and retaining 100% of our 2015 and 2016 trainees, as well as our growth year on year in terms of turnover.

MYTH #4: US FIRMS’ LONDON OFFICES ARE SATELLITE OFFICES With 39 partners in London, we are the firm’s second largest office and a vital part of the global Shearman network. What’s more, the London office serves as the hub for our European platform.

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We rarely work on domestic deals, so our London partners are travelling the world leading on important client relationships and developing new business. Though over 80% of London’s work is led by London partners, our globally structured practice groups mean that work is shared around the international network to ensure the best lawyers get involved regardless of which office they’re based in. This structure also allows partners, associates and trainees alike to move easily around the Shearman network experiencing different offices, cultures and legal systems on secondment or longer-term. Shearman’s history of seeking highly complex, cross-border work has resulted in well-established offices in 20 strategic financial centres such as Abu Dhabi, Paris, Sao Paulo, Hong Kong and Brussels.

MYTH #5: ALL US FIRMS ARE THE SAME! There’s a huge range of firms in the London market and not all US firms are the same. You should always try to meet law firm representatives and go beyond the website and brochure to find out about the culture, strategy, history and future of the firms you’re interested in. Types of work, trainee intake size, retention rates, international offices, awards won, engagement surveys and industry news are some good places to start when doing your research. However, nothing can beat an open day or vacation scheme to really test out whether you’re a good fit with the firm.

The myths around US-origin firms are just that. The reality is that we can offer lawyers the best of both worlds: the chance to work with household name clients on headline making deals, whilst benefitting from streamlined teams with hands-on partner interaction in a friendly working environment.

To meet Shearman & Sterling, apply for an Open Day or Vacation Scheme online now.

07

the Principle

Transatlantic turbulence The battle for a trade deal that will make relations across the Atlantic Ocean easier has been raging for months, but the latest developments have threatened to shut down the deal for good. Jack J Collins investigates the intricacies of what the deal comprises, why so many people are opposed to it, and the timeframes that negotiators from both sides of the agreement are trying to work within.

COMMERCIAL INSIGHT WORDS Jack J Collins PHOTO Anderson201

Above Protests in Germany against the TTIP deal.

Opposite Data from Library Europa.

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T

he Transatlantic Trade and Investment Partnership, or TTIP, is a saga which seems to be rumbling on forever, and it hit a number of further rocks this summer. It was suggested by the German Economy Minister, Sigmar Gabriel, upon the stagnation of talks, that the United States administration was not willing to compromise with its European counterparts.

It’s just the latest in a series of setbacks and stalemates that have come to characterise the discussion about a deal which is one of the most controversial in recent history. Major public protests have been seen across Europe as more and more Europeans decide that the deal is not something that they want to be part of, whilst governments insist it would be a positive transaction for both sides.

Angela Merkel, the German Chancellor, for example, indicated her desire to press on with the deal, stating that a successful negotiation programme would result in a “new chapter” in the history of globalisation. She added: “We are still continuing the discussions about TTIP and I think we should continue them as long as possible.”

It was a sentiment echoed by Anton Boerner, who is the President of the BGA trade organisation in Germany.

He claimed: “TTIP may be the last chance for Europe to participate in a trade deal that allows us to set the standards for global trade.” He added: “Such standards might not please everyone but they would definitely be better than the ones that other countries without democracy and respect for human rights would write.”

That dilemma appears to be the question that will tip the scales one way or the other, in the case of the EU agreeing to US demands – are these demands too much or would it be more dangerous to not be involved in what would become the largest trade agreement of all time, dealing with up to 25% of global trade?

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WHAT IS TTIP? TTIP is an agreement between the EU and the US, focused on lowering trade costs and regulations across the Atlantic. It is designed to boost trade by removing regulations which are ‘barriers’ to profits, making transactions easier, cheaper and more desirable.

Consumers would benefit from cheaper goods, reducing tariffs on imported products and facilitating further competition on the shelves, driving prices down. It has also been mooted that TTIP would boost the UK economy by around £10 billion, the EU economy by £100 billion, and solidify the US-EU partnership as the most important axis around which the global economy revolves.

The issues that surround these supposed benefits, however, are complex. The deal includes a serious reduction in some standards that many hold sacred, such as labour rights, regulation of genetically modified crops and foods, chemicals in cosmetics, digital privacy laws, and the possible relaxation of banking safeguards that were implemented after the financial crisis of 2008.

One of the biggest arguments against TTIP in the UK is that it includes ‘market access’ which does not allow for state monopolies on enterprises such as public services. Critics say this would lead to the privatisation of the NHS and the end of any hope to renationalise the railways.

There’s one further damning indictment of TTIP from a public perspective: the investor-state dispute settlement (ISDS) clause would allow corporations to take governments to court, away from the public eye. This is seen as a direct threat to democracy by many.

The ISDS was set up to encourage companies to invest in countries where they might not have received a fair hearing,

Issue Seven

ROYALTIES & LICENSE FEES €24 billion

ROYALTIES & LICENSE FEES €15 billion

TRANSPORTATION €23 billion

TRANSPORTATION €33 billion

TRAVEL €17 billion

TRAVEL €17 billion

FINANCIAL €10 billion

FINANCIAL €18 billion

OTHER BUSINESS SERVICES €53 billion

OTHER BUSINESS SERVICES €50 billion

USA

USA

EU

EU

EU trade in goods & services with the USA

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the Principle and thus is judged in an independent court by three independent adjudicators.

However, that’s not always how it works out. Detractors argue that because companies are allowed to take legal action against countries hindering their profit-making agendas, that ISDS is deterring countries from pushing pro-environmental policies, because it’s possible that these policies might slow down profit in some way and therefore put the government in a position from which they could be sued by a foreign company.

There’s precedent for this as well. After the nuclear Fukishima disaster in Japan in 2011, Germany shut down its nuclear power industry, deeming the risks to society and health to outweigh the benefits that the potential industry could bring to the economy.

However, a Swedish utility company named Vattenfall was already operating two nuclear power stations in the company, and as such, were left out of pocket by the German decision.

Due to ISDS, Vattenfall was able to sue the German government to the tune of €3.7 billion to compensate for lost profits. Despite the fact that the German decision was one made for the good of its environment and its population, the ISDS ruling meant that they could be financially punished for the decision. TTIP would roll this out to a variety of industries across the EU and the UK. FURTHER ISSUES There are two blatantly obvious issues that are now further obstacles to the future of the agreement. The first of these is the fact that an agreement was not reached before the US election, meaning that the negotiations that have already taken place with President Obama’s administration become almost meaningless.

The second ‘spanner in the works’ is Brexit, which effectively

means that should any deal be struck, it will not include the UK, which represents 16% of the European Single Market. The US has already halted proceedings after the Brexit vote.

In terms of an American administration, the huge issue that stands out is that President-elect Donald Trump has previously stated that they see no future for the US-EU deal, and, interestingly, has highlighted that they see the UK as their important strategic partner in the Western world. Whilst Obama did state that the UK would join the “back of the queue” after Brexit, and highlighted his ongoing commitment to TTIP, he has subsequently backtracked in some ways, pledging to uphold the “special relationship” at the G20 Summit in China in September.

However, at the beginning of October, 90 EU negotiators travelled to New York for five days of talks regarding the agreement. Whilst the hopes of concluding a deal before Obama’s administration left office have evaporated, they were hoping to “lock in as much progress as possible” before the changeover period began. Cecilia Malmström, the EU trade commissioner, stated before the negotiating team travelled, said: “If we were not to conclude TTIP before 19 January, then there would be a natural pause.”

And that natural pause could last for longer than some people might think. US trade representative Michael Froman will almost certainly leave his post during the changeover of the White House, and his successor could take up to six months to be appointed. Considering that in the spring of 2017 Germany will find itself in the midst of its own national election campaign, there is unlikely to be two representatives sitting around a table until at least autumn of that same year – almost a whole year from where we are now.

This time round the negotiations were set to be slightly more simple – finding compatible ground on standards

in the pharmaceutical, engineering and IT sectors, which, whilst difficult, are not as tricky as public-sector contracts or protections of geographical indications. Whilst agreements may have been made, and indeed, locked down, they would appear to be on hold for the time being.

John Springford, head of research at the Centre for European Reform, suggested that we would not see TTIP talks resuming in 2017: “The window of opportunity for getting TTIP done was before we got into the US election campaign, and certainly before the French and German elections got under way. I think that window of opportunity is now closed.”

Brexit is a whole different problem in itself for proprietors of the TTIP deal. War on Want, a British group opposing TTIP, released a statement last month stating that Brexit was “the killer blow to the deal across Europe”.

Not only does it mean that the British sector of the team negotiating a deal are now far less likely to be interested, but the US-UK relationship, and the fact that the UK is seen as a ‘gateway to Europe’ mean that the US teams are now reconsidering their stance.

US officials have indicated that talks will be put on the back burner until after the White House changes hands for good in January, warning Brussels that the EU is a much less attractive proposition without the UK. US trade negotiator Dan Mullaney said: “Imagine if the United States said, for instance, ‘Well, maybe TTIP will not apply to California’.” With those kind of analogies now being thrown around, the waning interest from across the Atlantic is set to be matched only by the growing unrest surrounding the deal in Europe. It appears that the popular sentiment to scrap the deal might win the day after all, but it’s not all perhaps, due to the ‘people power’ that some might say it is.

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Issue Seven

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11

the Principle

The war for the airwaves COMMERCIAL INSIGHT WORDS Jack J Collins GRAPH Data from the BBC

A

t the beginning of 2016, there appeared to be a closing of the broadband market – EE’s merger with BT would put them firmly in the driving seat when it came to the broadband spectrum, whilst Three’s proposed merger with O2 would let the company join Vodafone as one of three big players dominating the market.

Whilst the BT and EE merger went ahead with no issues, the O2 and Three merger was blocked by the EU, in a move which has been extremely controversial. CK Hutchinson, who own Three, had a planned deal which was worth £10.3 million, but the European competition commissioner, Margrethe Vestager, ruled that the deal would reduce customer choice, and would end up raising prices for consumers.

Despite backing the EE/BT merger, Ofcom have praised the EU’s decision, with the regulator stating that they thought that a reduction from four to three major players in the UK mobile telecommunications market would be harmful to the UK consumer.

However, Three’s chief executive, Dave Dyson, feels that the ruling was incorrect and let down consumers across the country. He states that prices would actually go up and there would be a lack of competition due to the dominance of the two major companies on the electromagnetic spectrum, which he coined as “the lifeblood” of any mobile operator.

Currently, BT/EE holsd 42% of the spectrum allocated to the UK’s mobile networks, whilst Vodafone has 29%. Three

has 15% of the spectrum, whilst O2 holds 14%, meaning that their proposed merger would have given them a level playing ground with Vodafone.

Speaking to BBC News, Dyson said: “If you’ve got one or two players in the market that dominate spectrum, then there is always a fear that innovation is slower because you don’t have people pushing each other.” In response then, he has called on Ofcom to regulate the spectrum market further in order to promote healthy competition in place of the merger.

Later this year, Ofcom is selling off a large chunk of the spectrum frequency which used to belong to the Ministry of Defence, but is now available. This bandwidth is going to be sold 02 14% EE/BT 14% Three 15% Distribution of the UK’s mobile bandwidth spectrum, (BBC, 2016)

Vodafone 29%

to mobile telecommunications companies, who will use it to provide high-speed date for their customers – something which is crucial to their success in the consumer market.

As a result, Dyson has called for a cap on the amount of spectrum that any company could hold, suggesting that this should be at 30%, in order to level the playing field. This would mean that if BT/EE wanted to partake in the auction for ex-MoD bandwidth, it would have to sell some of its existing spectrum, and Vodafone would be severely limited in what it could purchase at the action.

The implication is that both BT/EE and Vodafone have plenty of unused bandwidth, and that they were only going to participate in the auction as a strategic manoeuvre to make sure that they remained ahead of their competitors.

“If [BT/EE and Vodafone] were to bid on this spectrum, it would most likely be a mechanism to stop ourselves and O2 strengthening our position, which would effectively be anticompetitive,” Dyson concluded.

With Ofcom set to launch their own consultation process regarding the rules of the upcoming auction extremely soon, this statement from Dyson is sure to apply the pressure to the regulator. However, if they were to go ahead with these changes, some would argue that it was an admission that perhaps they were wrong to allow the first merger to go ahead and to subsequently block the second.

If it looked like the battle for the UK’s telecommunications market was becoming simpler and more streamlined, the latest developments have blown those thoughts out of the water – the war for the airwaves has simply entered its next stage.

There’s room for everyone at our table For more information about graduate recruitment visit www.pinsentmasons.com/graduate © Pinsent Masons LLP 2016.

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Issue Seven

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13

the Principle

The anatomy of a deal

COMMERCIAL INSIGHT WORDS Emma Finamore GRAPHICS Freepik

Deals are what business is all about; they facilitate everything from timing, ownership, price, cooperation, sale, value and separation. But what actually happens during a deal and where do the commercial lawyers come in? We’ve broken it down into an easily digestible diagram, looking at an example merger and acquisition deal, so you can see each stage of this important process.

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LEVERAGED ACQUISITION The acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.

1

Company A needs to create an acquisition vehicle, another company, through which to buy Company B. Lawyers needed to figure out key points:

AIM OF THE DEAL

• • • •

Should it be a limited company?

Should it be a limited partnership?

Where is it registered?

Is it tax efficient?

For this deal, Company A decides to set up a limited company in Luxembourg. Corporate lawyers get to work on setting that up.

Company A (a private equity firm) wants to buy Company B, improve it and sell it on for a profit. Company B’s current owners want £950 million for the sale.

This will be a leveraged acquisition: Company A doesn’t have £950 million so instead it aims to use £350 million that its raised through a fund with investors and borrow the remaining £600 million from banks (debt finance).

By running Company B better that it was before, Company A hopes to generate more revenue and use this to pay off the interest on the loans.

Company A aims to make Company B worth £1.3 billion, so its sale can pay off debts and still leave a large profit.

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ACQUISITION VEHICLE

LIMITED COMPANY A form of incorporation that limits the amount of liability undertaken by the company’s shareholders.

LIMITED PARTNERSHIP Partners unite to jointly conduct a business in which one or more of the partners is liable only to the extent of the amount of money that partner has invested.

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Issue Seven

DUE DILIGENCE An investigation of a business or person prior to signing a contract, or an act with a certain standard of care.

3

DUE DILIGENCE

Company A must look at exactly what it is buying with Company B: what does it own, its liabilities, contracts, debts, is anyone currently suing the company, does it own its intellectual property, its brand?

These questions are called due diligence and are answered, usually, by trainee lawyers.

What about the people who already work at Company B? What employment issues will Company A encounter in each jurisdiction when/if redundancies are made to streamline the company?

This is where employment and benefit lawyers come in, understanding and migrating salary packages.

Anti-trust issues are also important: what other companies does Company A already own? Will this deal trigger an investigation by the European competition authorities? If the authorities require Company A to get rid of some of its assets to level the playing field, which ones? How much will it cost, and is it worth it?

5

4

SALE AND PURCHASE AGREEMENT

Once due diligence issues are resolved, Company A and Company B move towards the execution phase: both parties focus on the sale and purchase agreement, otherwise known as the SPA. The SPA is the agreement under which Company B’s current owners agree to sell it to Company A. Lawyers draft, negotiate, redraft, renegotiate, and finally agree it.

Before signing the SPA – lawyers make sure all the right documents are in place: share certificates, employment contracts, licences, loan agreements, and the bank’s conditions for lending.

SIGNING THE SPA

SALE & PURCHASE AGREEMENT The agreement by which a company’s current owners agree to sell it to a buyer.

The sale and purchase agreement has been negotiated and agreed to. It is the legal contract that obligates a buyer (Company A) to buy and a seller (Company B) to sell a product or service.

Not only do SPAs dictate the terms of the sale, but they also contain detailed information about the buyer and the seller, and serve as an official record of when the final sale is to take place.

At this final stage lawyers oversee signings, verifications, last minute negotiations and amendments to contracts.

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the Principle

The gig economy: opportunity or a threat?

Those who champion the gig economy point to its flexibility, providing opportunities for people who want to work overtime or to those who need to work at hours unusual in a standard job. But are these new employers undercutting existing firms doing the same thing, and are their jobs legal and safe? Jack J Collins delves deeper.

T

echTarget defines the ‘gig economy’ thus: “An environment in which temporary positions are common and organisations contract with independent workers for shortterm engagements.” What it means in a practical sense, is that each individual member of a company works for ‘themselves’ and is paid in the way that mirrors a zero-hour contract – they simply get paid for the hours that they register.

Whilst this seems fine in theory, what it means is that employees can be denied benefits such as sick pay, holiday pay, or even job security. The recent inquisition into working practices at Sports Direct have highlighted that when people are tied to these precarious contracts which offer little security, they forgo basic employment rights such as sick pay, job security and decent working conditions.

As such, the gig economy has been highlighted as both an exciting opportunity for those who want to work to their own schedule and in their own way, and a highly detrimental way of living for those who take it as their primary means of income and cannot guarantee their own working rights.

Jonathan Bartley, who is the co-leader of the Green Party, released a statement earlier in the year saying: “This kind of brutal employment practice exposes the razor sharp edges of the socalled gig economy, and this decision has not come a moment too soon. It’s time for companies like Deliveroo and Uber to follow suit by ending their use of bogus self-employment contracts and

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guaranteeing staff decent pay, sick leave and job security.”

Guardian columnist Will Hutton was slightly more measured in his approach: “There are workers – some students, older workers and adults with childcare responsibilities – for whom the gig economy presents opportunities. There is also a truth that bears repeating: there is no gig economy without consumers who relish its convenience, cheapness and flexibility.”

But he also comes to the conclusion that there are far more severe problems lurking under the surface. He points out that increasingly, the whole concept of a gig economy forces mainstream employers to compete on the same terms, “creating a contractualised workforce required to bid again and again to continue doing a job that used to be full-time, tenured and part of a career.”

The pitfalls of these bids have been highlighted over and over again by numerous sources: because they’re private relationships between two people, they’re hard to monitor which leaves them open to abuse. There’s no way really to create any sort of trade union for leverage purposes because everyone is ‘self-employed’.

There are no payments into the mortgage scheme which leaves people susceptible to poverty as they get older.

Whilst there are a number of factors contributing to the rising number of working-age adults in poverty, a key factor is the growth of underpaid, insecure jobs. By becoming part of a gig economy constantly looking to make things cheaper for the consumer, we’re

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COMMERCIAL INSIGHT WORDS Jack J Collins PHOTO Sam Saunders

undercutting each other and driving wages down.

Many feel that something has to give, and already the stirrings of the undercurrent have been seen. Deliveroo riders went on strike in August after the company attempted to change their hourly rate with one which would pay them on how many deliveries they made, which the riders correctly claimed would have left them vulnerable to almost no payments during quieter hours. Ultimately, the company decided not to force through new contracts.

Uber drivers took the company to an employment tribunal this summer, claiming that as employees they should be entitled to sick pay and other benefits. Whilst the tribunal’s verdict has not yet been announced, the UberEats branch also has faced pressure from its drivers after an attempt to drive down their rates of pay this summer.

The delivery company Hermes, who classify all their 10,000+ workers as “self-employed”, has been subject to reports of “chronically low pay and poor working conditions at the company”

by Labour MP Frank Field. A recent government initiative has been confirmed in response to Field, who had also requested an investigation into the working practices at the company. A new compliance team is being created at HMRC, which will look into the risks associated with the changing nature of the economy.

Jane Ellison, Financial Secretary to the Treasury, wrote the letter to Field after his approach, saying: “Employment status in the UK is determined by the reality of the working relationship and not simply by the terms of any contract. Individuals cannot be opted out of employment rights and protections simply by an engager calling them ‘self-employed’.”

“Where companies are believed to have misclassified individuals as self-employed, HMRC establishes the facts of the case and will take steps to ensure that all the appropriate tax, [National Insurance contributions], interest and penalties are paid,” she added. “These include, where necessary, taking individuals and companies to court to force payment.”

It is the latest in a series of government attempts to understand the implications of a growing gig economy. In October, Matthew Taylor of the RSA think tank was asked to lead an investigation into modern employment practices and how they are changing. His review is expected to include a detailed look at the framework in place that regulates the gig economy, and whether it undermines initiatives such as the National Living Wage and the latest pension scheme.

Whether there will be sufficient change or not remains to be seen, but the changing nature of the working world cannot be denied, for better or for worse. Whilst there is demand for a the services provided by a gig economy, there will always be supply, but at what cost, and for whom?

Issue Seven

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17

the Principle

CMS merger: what’s the deal?

COMMERCIAL INSIGHT WORDS Jack J Collins

“Of the near-850 UK-based roles of the three firms (313 at Nabarro, 269 at CMS and 263 at Olswang), almost 500 jobs could be at risk as the firm looks to streamline and restructure their business services department.”

C

onfirmation came through earlier this month of the threeway merger between CMS Cameron McKenna, Nabarro and Olswang, creating a new firm that will be the sixth largest law firm in the world by headcount. The new firm, which will officially be called CMS Cameron McKenna Nabarro Olswang, will trade as CMS UK, and will be completed by 1 May 2017.

The statement that released the news of the completed deal said that the partners of all three individual firms had “voted overwhelmingly in favour” of the merger, and that they were confident that the deal would “create a new powerhouse” in the legal market, which is expected to have global revenues which will fall just shy of £1 billion.

The merged firm will add a real estate branch to CMS’ portfolio, whilst simultaneously strengthening the position of Olswang and Nabarro across Europe. Olswang in particular has been exploring options for a merger for a while, and touted plans with Simmons & Simmons and Bird & Bird earlier in the year, both of which were unsuccessful following preliminary talks.

There are numerous logistical issues that follow any given merger, but especially one of this size and scope. The first of these is the issue of location, and news has filtered out of the CMS camp that its Cannon Place office is going to be put up for sale again, but only after Olswang and Nabarro have initially moved in and set up on two vacant floors in the building.

Last September the building was put on the market but failed to sell; it will be put up for sale again in the latter stages of 2017, with a price of roughly £500 million. It has not been revealed whether the merged firm will remain in the building after this sale.

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A further issue is that of the business services support teams of the firms, which will now be merged creating a prospective overlap of roles. There were initial assumptions that the two smaller firms would have to forgo their business services teams upon completion of the merger, but these assumptions have since been quashed by what has been communicated to the firms’ current staff.

It is understood that each firm has told its non-fee earning staff that they will be assessing the individual capabilities of each member of their teams, and using that as the basis for deciding who will be part of the business services support team at the new firm.

What this means is that of the near-850 UK-based roles of the three firms (313 at Nabarro, 269 at CMS and 263 at Olswang), almost 500 jobs could be at risk as the firm looks to streamline and restructure their business services department. The largest roles within this department – such as heads of PR, HR and IT – are expected to be confirmed much earlier than the completion of the merger itself, perhaps before the end of the year.

Whilst the initial difficulties are perhaps going to be difficult for the merged company, with many people looking to get themselves secured within the new firm, the streamlined firm will look to become a more efficient business unit, utilising the skills of its staff to get the best out of them. The statement of the merger concluded that: “The leadership, boards and partners of all three firms believe that this merger is an excellent fit in culture and values, presents an outstanding opportunity, and consequently have given their overwhelming support.”

Issue Seven

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19

the Principle

Apple & the EU COMMERCIAL INSIGHT WORDS Emma Finamore

A

One of the world's largest companies – Apple – has been ordered by the European Commission to pay a record-breaking €13 billion in back taxes to Ireland. But it’s not the tech giant’s first run-in with the law: as well as a breakdown of this latest legal hiccup, here we’ve included a few of the others Apple has come up against over the years.

pple was ordered to pay a record-breaking €13 billion (£11 billion) in back taxes to Ireland this summer.

The world’s largest company was presented with the tax bill after the European Commission ruled that a sweetheart tax deal – an agreement in which one party presents the other with very attractive terms and conditions – between Apple and the Irish authorities was no less than illegal state aid.

The Commission claimed the deal allowed Apple to pay a maximum tax rate of just 1%. In 2014, for example, the tech firm paid tax at just 0.005%. By way of comparison, the usual rate of corporation tax in Ireland is 12.5%.

Around 90% of Apple’s foreign profits are earned by Irish subsidiaries, the Financial Times reported after the ruling in late August, and the company’s total $187bn in cash it holds in Ireland is the largest foreign cash pile held by any US multinational.

“Member states cannot give tax benefits to selected companies – this is illegal under EU state aid rules,” said the European competition commissioner, Margrethe Vestager, whose investigation of Apple’s complex tax dealings has taken three years.

Vestager’s ruling prompted an angry response both from Apple and from Ireland, and is likely to spark a political row between the US and the EU. The US Treasury said the ruling threatened to damage the “important spirit of economic partnership” between the US and the EU. In an open letter to customers, published online, Apple’s chief executive, Tim Cook, claimed the ruling could deal a blow to big companies investing in Europe: “The Commission’s move is unprecedented and it has serious, wide-reaching implications. It is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe. Ireland has said they plan to appeal the Commission’s ruling and Apple will do the same. We are confident that the Commission’s order will be reversed.

“At its root, the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money. Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe. Using the commission’s theory, every company in Ireland and across Europe is suddenly at risk of being subjected to taxes under laws that never existed.”

Some lawyers have also criticised the Commission’s actions.

“The EC may have good intentions towards creating a more

20

level playing field,” said Tim Wach, the managing director of Taxand, an international tax consultancy, in a statement on the company’s website. “But the turmoil and confusion that arises from this ruling and the other recent and pending state aid cases is not conducive to improved business and investment confidence at a time when corporates are facing the challenges of slow growth across global markets.”

In contrast, the Commission said Ireland’s tax arrangements with Apple between 1991 and 2015 had allowed the US company to attribute sales to a “head office” that only existed on paper and could not have generated such profits.

This “head office” meant Apple avoided tax on almost all the profit generated from its multi-billion sales across the EU’s single market. It booked the profits in Ireland rather than the country in which the products were sold.

Apple and Ireland have both said they intend to appeal against the ruling, but the European Commission seems resolute. Vestager said: “The commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years.”

Cook said in his public letter: “We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.”

The Irish government also wants the ruling reversed, so it can hold onto its reputation as a low-tax headquarter base for overseas companies.

Ireland’s finance minister, Michael Noonan, said Dublin would appeal against the Commision’s ruling. He said: “The decision leaves me with no choice but to seek cabinet approval to appeal. This is necessary to defend the integrity of our tax system, to provide tax certainty to business and to challenge the encroachment of EU state aid rules into the sovereign member state competence of taxation.”

President of the European Commission, Jean-Claude Juncker rejected the idea that European authorities were unjustly singling out US companies, and said the ruling was “clearly based on facts”.

In fact, Commission investigations on taxation had mainly focused on European companies, he said. “This is not a decision against the United States of America,” Juncker told Reuters’ reporters in a statement.

“It would be absurd to choose this territory of state taxation to attack the USA. We are applying the rules. We are basing our decisions on facts and on the legislation.”

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“We never asked for, nor did we receive, any special deals. We now find ourselves in the unusual position of being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid.”

- Apple’s Tim Cook.

Issue Seven

2016

“iPhone” trademark in other countries, under assumed names so Cisco would not realise what it was doing. A company called Ocean Telecom Services filed for the trademark in the US, for example, using almost the exact wording as the international Apple paperwork.

Cisco filed a lawsuit in 2007, claiming Apple owned Ocean Telecom and was using it as a front to acquire the trademark. Shortly afterward, Cisco and Apple settled, though no details were given about financial agreements.

APPLE V. MICROSOFT

2015

for the ruling that the ‘trash can’ icon and folder icons from Hewlett-Packard’s NewWave windows application were infringing. The lawsuit was filed in 1988 and lasted four years; the decision was confirmed on appeal in 1994, and Apple’s appeal to the US Supreme Court was denied.

A copyright infringement lawsuit in which Apple Computer (now Apple Inc.) sought to stop Microsoft and Hewlett-Packard using visual graphical user interface elements that were similar to those in Apple’s operating systems.

Apple lost all claims in the Microsoft suit except

CISCO SYSTEMS V. APPLE

2007

agreement and Apple Computer paid Apple Corps around $26.5 million, agreeing it would not package, sell, or distribute physical music materials.

In September 2003, Apple Corps again sued Apple Computer alleging Apple Computer had breached the settlement once more, this time over new products iTunes and the iPod. Apple Corps alleged Apple Computer’s introduction of the music-playing products with the iTunes Music Store violated the terms of the previous agreement in which Apple agreed not to distribute music. The trial opened in March 2006 and ended in May that year, with the court judging in favour of Apple Computer.

Since 1996, data hardware company Linksys has been selling a product called the iPhone, trademarked by parent company Cisco. When Apple announced it was going to create a phone, it was informally dubbed the iPhone (because of the iPod and other lowercase “i” Apple products). The nickname then spread rapidly.

Apple had allegedly approached Cisco about getting the rights to the iPhone trademark, but Cisco did not accept. So Apple started applying for the

WHITE V. APPLE

1994

Apple Corps (The Beatles-founded record label and holding company) and Apple Inc. (then Apple Computer) began a decades long dispute involving the use of the name “Apple”. In 1978, Apple Corps filed suit against Apple Computer for trademark infringement and the parties settled in 1981 with Apple Computer paying an undisclosed amount to Apple Corps, later revealed to be $80,000. A primary condition of the settlement was that Apple Computer agreed to stay out of the music business.

In 1991, after Apple introduced the Apple IIgs with a synthesiser chip, Apple Corps said the product was in violation of the terms of their settlement.

The parties then reached another settlement

A UK man won his lawsuit against Apple for losing his iPhone data when he took his device into the Genius Bar for repairs. Apple had to pay the man £2,000 in compensation.

FBI V. APPLE

1978

APPLE CORPS V. APPLE

A history of Apple & the law

The FBI wanted Apple to create new software that would enable them to unlock a work-issued iPhone 5C recovered from one of the shooters in a terrorist attack in California that killed 14 people and injured 22. The phone was recovered intact but was locked and set to eliminate all its data after 10 failed password attempts.

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Apple declined to create the software, and a hearing was scheduled. However, a day before the hearing, the government obtained a delay, saying they had found a third party able to assist in unlocking the iPhone. Days later it was announced that the FBI had unlocked the iPhone and withdrew its request.

21

the Principle

Law

not

in the City It can be easy to assume that the City of London is the only place for aspiring lawyers, but it’s not. Here we take a look at the advantages that a training contract with a law firm outside of London could offer you.

COMMERCIAL INSIGHT WORDS Emma Finamore GRAPHICS Freepik

SIZE

Junior lawyers in regional firms often cite being in a smaller team as one of the advantages to training outside the capital. The big Magic Circle firms tend to take on 90-100 trainee solicitors each year; a smaller regional firm is more likely to employ just 20 or 30 trainees, and partners know trainees by name.

As such, you could be the only trainee solicitor in the department, allowing you to gain much broader experience within a practice area, working with a number of different lawyers – many of whom are experts in their field. This could also lead to more responsibility and a higher quality of client work, compared to your peers training in London. Junior lawyers in regional firms might even have more involvement in business development, building direct relationships with new clients.

VARIETY

Departments within national firms are often less singular in their focus than those at London’s City and West End firms.

For example, in a corporate department you might see both capital markets and M&A work for both financial institutions and manufacturing clients. Or an employment team might

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represent both employers and employees. At larger national firms there’s international work on offer too.

RECOGNITION

firms Travers Smith and Berwin Leighton Paisner. Mills & Reeve is noted for its education and healthcare expertise, Irwin Mitchell is big on personal injury and clinical negligence, and BLM has a focus on defendant-side insurance litigation.

COMMUNITY Compared to smaller local firms outside London, national firms have greater market recognition across the UK, in London and sometimes overseas too. After you’ve completed training you may wish to move to another firm or work in-house, in which case that recognition will be a helpful career booster.

MOBILITY

Outside London, national firms are usually closely integrated in their local business community. Trainees are often encouraged to participate in events organised by the local Junior Lawyers Division, while firms may sponsor community pro bono projects, business awards, or university events such as debating competitions.

ASPIRING CRIMINAL/FAMILY LAWYERS Many national firms have sites across the country, offering junior lawyers the chance to move between offices. Working at a national, multi-site firm makes it possible to around the UK, trying out various cities and towns, while remaining with the same employer.

SPECIALISATION

Many national firms are very well regarded in the market for the quality and complexity of the legal work they undertake, in particular areas. This could be especially useful to a trainee who wants to pursue a particular area of law. For example, Pinsent Masons is as highly regarded nationally for its AIM work as City

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If you’re interested in the more people-centred areas of law, such as family or crime, you might be better off targeting training contracts outside London, particularly in smaller, high street firms, as these tend to advise individuals on ‘everyday’ legal matters such as conveyancing, family, and wills and probate.

In a high street firm, you are given plenty of individual attention during your training, your commitment is noticed and you are rewarded by progressing up the ladder more quickly.

When considering becoming a high street solicitor, it’s important that you feel able to communicate and empathise with clients, as this will be a big part of your work – perfect if criminal or family law is what you want to specialise in.

BD Graduate ad 265x162 20mm.pdf 1 07/07/2016 14:25:15

Issue Seven

Our trainees of today are our partners of tomorrow; theyâ&#x20AC;&#x2122;re highly valued, actively involved and strongly supported.

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M

Y

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MY

CY

CMY

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Looking for a Training Contract?

Come along to our open evening and meet us: partners, lawyers and trainees.

Weâ&#x20AC;&#x2122;ll be holding talks and sharing as much information as possible about what it is like to train and become a lawyer at one of the fasted growing law firms in the UK.

Wednesday 1 March 2017, 4pm-6pm 100 Victoria Street, Bristol, BS1 6HZ To sign up, please email your name and current course to jenna.wickham@footansty.com We look forward to meeting you!

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23

the Principle

The internet: a human right?

68%

of the world’s population live without internet access

COMMERCIAL INSIGHT WORDS Jack J Collins

W

hilst the jokes fly around that people are spending their whole lives on the internet in today’s day and age, it’s no passing gaffe to say that it’s going to become a violation to take it away. That’s because the United Nations’ Human Rights Council has recently passed a resolution condemning countries that intentionally take away or knowingly disrupt their citizens’ internet access. In effect, the internet has become a basic human right.

That’s not quite the whole story, however, and this is where the issue becomes slightly controversial. Not only is the resolution a non-binding one, meaning that it has no legislative power; but also, whilst over 70 nations supported the decision, it was opposed by a number of countries – including major international players such as Russia, China, Saudi Arabia, India and South Africa.

The sticking point for many of these countries was a particular passage of the resolution which said it: “Condemns unequivocally measures to intentionally prevent or disrupt access to our dissemination of information online in violation of international human rights law and calls on all States to refrain from and cease such measures.”

Article 19 is a British group which fights for the rights of freedom and expression worldwide. Their executive director, Thomas Hughes, released a statement voicing their concerns: “We

24

are disappointed that democracies like South Africa, Indonesia, and India voted in favour of these hostile amendments to weaken protections for freedom of expression online.”

“A human rights based approach to providing and expanding Internet access, based on states’ existing international human rights obligations, is essential to achieving the Agenda 2030 for Sustainable Development, and no state should be seeking to slow this down,” he added.

Some of the key points in the resolution are related to the advancement of human knowledge and education, which is becoming ever more inextricably linked with the advancement of technology. The UN also claimed that the resolution was crucial to the keeping of the 2030 Agenda, by highlighting within the text of the resolution that technology had “great potential to accelerate human progress.” In addition to this, US President Barack Obama was quoted in 2015, saying that high speed broadband is “not a luxury, it’s a necessity”.

There are a number of further points in the resolution which relate to education around the world and the importance of global development. It points to the fact that the internet needs to be enabled as it “facilitates vast opportunities for affordable and inclusive education globally”; highlights that

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“the global and open nature of the Internet” is a “driving force in accelerating progress towards development in its various forms”; and calls upon all States to “bridge the gender digital divide and enhance the use of enabling technology, in particular information and communications technology, to promote the empowerment of all women and girls”.

Perhaps most importantly, however, the resolution reaffirms the commitment of various states to: “Continue [their] consideration of the promotion, protection and enjoyment of human rights, including the right to freedom of expression, on the Internet and other information and communication technology, as well as of how the Internet can be an important tool for fostering citizen and civil society participation.”

By intrinsically linking the freedom of the internet with human rights laws, the UN have enshrined the importance of the internet in the modern day and age. Whilst this is by no means a perfect solution, especially considering the detractors from the agreement are major players in the field of international relations, it is very much a start, and the guidelines that the UN are providing show very clearly that it wants make these ideals into tangible laws in many of its member states – and that is something that should be very much applauded.

Issue Seven

3,497,228,725+ users

Oceania 0.9%

Africa 9.8%

3,000,000,000

Europe 19%

2,000,000,000

1,000,000,000

1993

1997

2001

2005

2009

Asia 48.4%

2015 Americas 21.8%

Left Data from AHumanRight.org.

Top Current number of internet users as of Nov 2016. (Data from Internetlivestats.com).

Above left Increasing use of the internet from 19932015 (Data from Internetlivestats.com).

Above Right Internet users by region (Data from Iinternetlivestats.com).

THE BEST START FOR YOUR CAREER.

People, relationships and results are at the heart of what we do, and you can be a part of that too in three simple steps.

People

Attend an insight evening, get to know our people, offices and culture.

Relationships

Apply for a one-week placement and develop long-lasting relationships with colleagues.

Results

Submit your training contract application by 30th June to secure your place on our assessment centre. Result.

You can apply for an insight evening, placement and training contract on our website.

www.shoosmiths.co.uk/graduates | www.twitter.com/shoosmithsgrads www.facebook.com/shoosmithsgraduates | www.instagram.com/shoosmithsgrads

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20/10/2016 09:36:17

25

the Principle

9 reasons

to work in law FUNDAMENTAL ADVICE WORDS Jack J Collins

There are plenty of reasons that you should think about becoming a solicitor, but to make things more transparent, we asked partners, associates and recruiters from some top law firms why they thought law was a brilliant career choice. Here’s what they told us.

“With its distinctive blend of exciting clients and diverse practice areas, Farrers is committed to providing first-class training for its future lawyers.”

“I was completing a Biomedical degree, and had always seen myself working in a scientific field, but was becoming disillusioned with the subject and was looking for alternatives. I had always enjoyed the process of understanding a complex concept, and being able to articulate it such a way as to make it more easy to understand.

After taking a step back, I realised this sounded a bit like what a lawyer might have to do on a daily basis. I gained some relevant work experience in City firms and found this was the case, and my preconceptions about aggressive and hard-nosed lawyers was unfounded. I’m now a transactional lawyer working in the private equity department of a US law firm. It’s a sociable profession, and people are pleasant and sociable. The work can be complicated, but for me this is part of what makes it rewarding.”

“The main reason I like working at BLM is the people. I find all those I work with to be professional, knowledgeable and technically very capable whilst being approachable and having a good sense of humour.”

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“You will get exposed to a huge variety of work, both contentious and transactional, and domestic and international. There are opportunities to take on as much responsibility as you want, and to get involved with commercial and CSR initiatives. RPC gives you the chance to get involved with interesting, and high value matters whilst also ensuring you have a social life, both inside and outside the firm.”

“It is said that variety is the spice of life. That is certainly the case working as a lawyer at Akin Gump. The work is varied, ever changing and constantly throwing up new challenges and stimulations in various sectors and locations. If you get satisfaction from solving complex problems and puzzles, sometimes in ways that are not at all apparent from the start of the case, then this role should appeal to you.”

“At DWF we focus on working with our clients, not just for them.

Being a lawyer is no longer just about the intellectual challenge of advising on the law. As well as being a legal expert, our solicitors get involved with the financial and commercial aspects. They are involved in, all of the multiple important transactions along the way, working in partnership to help clients achieve their goals.

Because of this the role of a solicitor has become more varied, with constant professional development and increased opportunities.”

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“Being a solicitor in this day and age is not just about providing fine legal advice; it is about being business advisors for the clients you work with and understanding their concerns/ goals from a commercial perspective. The prospect of a career that intellectually stimulates you whilst in a team-working environment is why someone should consider becoming a solicitor. Indeed, I can think of very few other professions (if any) that can provide you with such richness and variety.”

“There is no one size fits all approach as a lawyer – the firm rewards its people for their hard work and can offer individuals the levels of responsibility, depth, scope and opportunities to meet their full potential in their chosen career.”

“Fancy spending a seat in New York? Prague perhaps? Or maybe Dubai? This is going to be one of the first decisions you make once you join White & Case. We guarantee all of our trainees a 6-month seat across 13 international locations complete with free accommodation, language lessons and the same amount of personal training that you receive in our London office.

Becoming a solicitor with us is both challenging and rewarding, not to mention exciting. You will work on sophisticated crossborder transactions with our multinational clients across both developed and fast-growth markets with experienced supervisors who love what they do. Our truly global presence ensures that you will have an extremely well-rounded training contract.”

Issue Seven

2014 Bought first flat in London

2011 Began two-year training contract at PwC

2010 Graduated with Law degree from University of Leeds

2014-2015 Went on client secondment for a large international bank

2013 Qualified as an Immigration solicitor

2011 Completed LPC course at the College of Law Sacha’s story, Immigration solicitor

A career that takes you further Opportunity is at the heart of a career with PwC. It helps you grow as an individual and gives you the skills and experiences you need to succeed.

For Sacha, that means launching her career with a training contract that gave her commercial experience too. After rotating between multiple seats and working with diverse and exciting clients, Sacha is now a fully qualified Immigration solicitor. She’s also listed by CityAM as one of the 35 most influential women in the City – an incredible achievement that truly demonstrates how embracing every opportunity you have can really take you places.

Take the opportunity of a lifetime pwc.com/uk/work-in-legal /pwccareersuk

@pwc_uk_careers

/pwc_uk Create value through diversity. Be yourself, be different.

© 2016 PricewaterhouseCoopers LLP. All rights reserved.

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18/10/2016 11:25

Training Programme

Shape a career without limits

Ambitious and entrepreneurial graduates are rewarded at Reed Smith with a training programme that is supportive, challenging and exciting, offering unparalleled client and international secondments. Our unique culture, which allows trainees to turn passions into careers, is one of the reasons our lawyers remain with us for such a long time, moving seats, jobs roles and even countries, but sticking with the firm.

We are a global law firm with more than 1,700 lawyers in offices throughout Europe, the Middle East, Asia and the United States. Unusually, we operate as one global partnership, rather than separate country-specific partnerships, which is why we’re so good at collaborating across borders to support our clients.

As a leading adviser to industries including financial services, energy and natural resources, entertainment and media, real estate and shipping, our lawyers work with some of the most innovative organisations in the world – from multi-billion dollar Silicon Valley giants to national banks.

We have even represented some of the biggest pop stars on the planet.

We offer stimulating work in an informative, challenging and busy environment where your contribution counts from the year before you join, with our unique MA/LPC programme, through to the end of your training contract. With four seats over two years, you choose the practice or industry group areas you would like to experience, as well as benefiting from a client or international secondment. Our intake per year is 25, meaning that at any given time, we will have 50 trainees in total.

If you like the sound of our firm, we would love to hear from you.

Graduate.recruitment@reedsmith.com www.reedsmith.com/ukgraduates

reedsmith.com

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GLOBAL OPPORTUNITIES SUPPORTIVE CULTURE EXCEPTIONAL WORK To be best placed at the beginning of your legal career, you need to be in the best place. Trainees help shape the Shearman & Sterling success story and play a pivotal role in the firm’s growth. And now it’s your turn to shine.

For the best start in your legal career, start here.

Visit

ukgraduates.shearman.com

to discover more