Global Public Affairs Hot Issues by Burson-Marsteller EMEA

October 2012 Edition 15

Welcome This is the latest edition of “Hot Issues” from Burson-Marsteller’s Global Public Affairs Practice. “Hot Issues” focuses on new forthcoming legislative or policy issues that will impact business from around our global network of 150 offices in Latin America, Asia-Pacific, Europe, Middle East, Africa and North America. The public policy dynamics in each country, let alone a particular region can be very different, demonstrated by the different experts we utilise in the countries where we operate. Conversely, there are similarities and you can see this in some of the issues we have picked out. Hot Issues are designed to give you a flavour of our global perspective and should any of the items raise particular interest with you, please contact the designated person listed with that issue.

India Debates Bold Economic Reforms Indian Prime Minister Manmohan Singh has recently announced a series of economic reforms that will allow foreign direct investors to hold majority stakes in enterprises in key sectors including retail, aviation, and broadcast. The announcement comes after months of policy paralysis after several legislative attempts to open up more sectors to international business. Foreign companies will be able to hold up to 51 percent stakes in the multi-brand retail sector, 49 percent in domestic airlines and parts of the utilities sector, and 74 percent in broadcasting. At the same time, the government announced that fuel and cooking gas prices, which have long been subsidized by the government, will also see a 14% hike. Analysts have deemed economic reforms necessary given the country’s fiscal deficit at 6% of GDP, high inflation, slow economic growth, and a withdrawal of investment activities by foreign companies. The government’s decision to open up different sectors and increase the fuel price is widely seen to be first steps in improving the efficiency of the overall economy, cutting the fiscal deficit and restoring economic growth. Allowing majority foreign direct investment in the multi-brand retail sector is expected to improve value and choice for consumers, create new jobs, and enable Indian farmers to increase their earnings through more sophisticated distribution systems. Global companies like Walmart, Tesco, and Carrefour have welcomed the reform as they have been eyeing the vast Indian market for years but have not been able to enter and expand their business due to adverse government policies. Companies like IKEA may also find it easier to enter the Indian market with the relaxation of foreign investment rules. Opinions towards the reforms have been divided in India. Industry associations like the Federation of Indian Chambers of Commerce and Industry have

endorsed the reforms, as have some of the smaller political parties, many prominent companies, and investors. However, analysts say that the reforms are threatened by the exit of the Prime Minister’s largest ally, West Bengal Chief Minister Mamata Banerjee, from the government’s coalition. Previous proposals to allow foreign investment in the retail and aviation industry were stalled earlier this year amid opposition from the Trinamool Congress Party. With additional pressure mounting from nationwide strikes across India, led by opposition political parties and trade unions upset over the opening up of the retail sector and the hike in fuel prices, many observers are concerned that the government will again succumb to the opposition and withdraw the reforms. Despite analysts’ predictions that the government will likely persevere with these reforms given that general elections are due in 2014 and the ruling coalition is keen to see reforms push through to help promote India’s economic recovery, businesses should remain vigilant about the potential for successful opposition calls to roll back or scale down reforms. They should strengthen their engagement and form alliances with political supporters and industry bodies to lobby the government against any thoughts of backing down. In addition, as some political parties have opposed the measures to win constituents’ support, companies can also engage in conversations with the public and the media to influence public opinion by communicating the benefits of a more open economy. Burson-Marsteller’s public affairs and media relations teams are well-positioned to help companies in India achieve these goals.

Contact Medha Kalra - medha.kalra@bm.com Evelyn Kusnawirianto - evelyn.kusnawirianto@bm.com

Hong Kong Proposes Class Action Regime In an effort to expand access to judicial remedy, Hong Kong’s Law Reform Commission has proposed a class action regime to allow groups of people with a common complaint to sue as a class. Currently, Hong Kong only allows multiparty proceedings but that approach is rarely practiced because it requires claimants to have the same contract, defense and relief, and claimants also have to pay all or part of their opponent’s legal fees if they lose. The Commission recommends that the class action regime adopt an incremental approach and start with consumer fraud and product liability cases involving goods, services, and real property in order to avoid a flood of unnecessary litigation. Purchasers of securities will not be covered until five years after the regime’s implementation. If implemented, the class action regime will likely adopt an “opt-out” approach so that people in the same situation will be automatically covered in group litigations unless they opt out. The Commission also recommends that companies set up a litigation fund to pay legal costs or compensation, and that a public fund should be set up for consumer claims. To avoid an abuse of class action lawsuits, judges will also be given the power to decide if group litigation is the best option or if settlement outside of the court is more desirable. The proposal to set up a class action regime is perceived to be a result of the Lehman Brothers mini-bond matter in 2009 which has led to losses by tens of thousands of investors who have no viable means to sue banks for selling them the mini-bonds. Under this proposed regime, consumers who buy products sold by commercial banks and brokerages can seek permission to sue as a class. The class action proposal has generally been welcomed by the legal industry in addition to a number of government agencies and the Consumer Council. Large businesses and the financial industry are in opposition, including the Hong Kong Association of

Banks and the Hong Kong General Chamber of Commerce. Analysts say a class action mechanism would encourage higher standards of corporate governance as the potential to be sued in a class action would mean additional risks for businesses. Insurance companies will also have to be aware of the potential additional costs the regime may bring to the companies they insure. In addition, when the regime eventually extends to securities buyers and shareholders, risks related to the listing, selling and provision of investment advice for securities firms in Hong Kong will be significantly increased if both the class action regime and an earlier proposal to make initial public offerings sponsors liable for civil and criminal charges are adopted. The Department of Justice has indicated its readiness to adopt the proposal and will work towards drafting a bill before the end of the year. Government bureaus and departments have been asked to submit their positions on the proposal. While details of the proposed regime needs to be worked out by the relevant government institutions, businesses, financial firms, and the legal industry are expected to lobby the government and policy makers to influence the outcome of any draft bill based on their respective interests. Companies are also advised to monitor the developments of this new regime, start implementing systems to identify and manage the risk of class actions, and communicate the potential changes the new regime will bring to the way they conduct businesses. Burson-Marsteller’s public affairs team stands ready to help clients support this strategic communications process.

Contact Ian McCabe - ian.mccabe@bm.com Evelyn Kusnawirianto - evelyn.kusnawirianto@bm.com

Australia Prepares for More Stringent Product Marketing Regulatory Environment The recent ruling by the Australian High Court to enforce a blanket plain packaging order on the tobacco industry has sent chills through other industries, especially the food and beverage industry, over concerns that similar regulations will soon apply to

them. The High Court has ruled that, starting from October, cigarette manufacturers in Australia will be required to use identical plain packaging with no external brand imagery and to carry prominent health warnings, while all other cigarette brands sold in

Australia will be obliged to do the same starting in December. The Australian tobacco decision is a global test case that has won the endorsement of New York mayor Michael Bloomberg among others. The process has been closely observed by other governments. While there is a possibility that a World Trade Organization appeal by the tobacco industry may overrule the High Court’s decision, the ramifications of this ruling extend far beyond the tobacco industry in Australia. It is expected that intense regulatory oversight of one industry will inevitably encourage campaigners to look at other areas of business that attract highly polarized opinions. The idea that a company can manufacture and sell a legal product and yet be denied the freedom to brand their products has set a very interesting precedent for more government regulations in the marketing of products from industries that are associated with health or other societal concerns. Companies in sectors such as gambling, food and beverage, pharmaceutical and liquor are paying close attention to the development of this case as they are concerned that they will become susceptible to similar regulations. Already in the food and beverage industry, Australia’s health policy experts, consumer groups, and media have seized the momentum following the tobacco plain packaging order to call for the introduction of more stringent regulations for fast food marketing. Measures proposed include banning fast food ads during children’s television primetime, labelling of menus, and implementation of a front-of-the-pack “traffic-light” labelling system. The traffic-light system, which would require colour-coded ratings to

the levels of sugar, fat and salt on the front of the food packages, has been recommended by The Independent Panel Commissioned for the Review of Food Labels, with a decision expected to be announced by the end of 2012. The industry has argued that the system can be misleading for consumers, but with opponents increasingly calling for measures akin to the tobacco industry to be applied to the food and beverage industry, the likelihood of implementation of some type of labelling system will increase. As the regulatory environment for the food and beverage industry in Australia comes under scrutiny, companies in highly regulated industries are expected to seek platforms to engage both supporters and detractors in an effort to remain active in regulatory conversations. Companies should ensure that they have a comprehensive stakeholder identification and engagement program in place to build and strengthen alliances. Participation in relevant industry associations is also crucial to get involved in policy debates early in the process. In addition, companies should extend their corporate responsibility activities beyond philanthropy and include specific measures to address the core issues that affect their industry. Burson-Marsteller has the expertise to help companies in such industries as food and beverage and pharmaceutical to navigate the increasingly stringent regulatory environment in Australia.

Contact Steve Bowen - steve.bowen@bm.com Evelyn Kusnawirianto - evelyn.kusnawirianto@bm.com

EU Commission plans for more women in the boardroom EU Commissioner for Justice and Home Affairs, Viviane Reding, is expected to table a proposal in October or November 2012 that would sanction companies whose supervisory boards are composed of less than 40% women by 2020. The move comes after a voluntary scheme failed to improve the gender imbalance in company boardrooms. The proposal already faces strong opposition. Nine EU member states, led by the United Kingdom, have signed a letter to Commissioner Reding and Commission President Barroso, stating that they do not support the adoption of legally binding provisions for the presence of women on boardrooms at the European level. The nine member states (UK, Bulgaria, the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta and the Netherlands), who would prefer that such action be left to national

governments, have sufficient weight in the Council to block the Commission’s eventual proposal. Germany and Sweden have not signed the letter, but do not support the Commission’s initiative. In the European Parliament, the Greens/EFA Group have sent their own letter to Commissioner Reding and Commission President Barroso, urging the Commission to put forward a strong directive with binding measures. MEPs from the committee on women’s rights and gender equality (FEMM) are largely supportive of Commissioner Reding’s eventual proposal.

Contact Rob Mack - Robert.Mack@bm.com

UK: Leading the Open Government Partnership The UK government has recently taken over the lead of the Open Government Partnership (OGP), a multilateral initiative launched in 2011 that aims to secure commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance. The OGP includes 57 member states and is overseen by a steering committee of governments and civil society organisations (CSOs). A key step in a country’s participation in the OGP involves establishing ongoing public consultation between government, citizens, CSOs and the private sector on the development and implementation of OGP National Action Plans. The expansion of the dialogue between governments and the private sector presents an opportunity for businesses to expand their position in the public sector service delivery space. Francis Maude, Minister for the Cabinet Office, has said: “Transparency drives prosperity and growth. It shines a light on underperformance and inefficiencies in public services and allows citizens and the media to hold governments to account." The UK government believes this

collaborative approach, driven by the publication of government data, will help to design and deliver better services for less. As lead chair, the UK is committed to promoting the argument that greater transparency drives sustainable growth, improves public services, promotes innovation and reduces corruption. To ensure national commitments are turned into actions the UK will also create an Independent Reporting Mechanism. The coming months of consultation will mean the OGP’s 57 member governments will be more open to in-depth discussions on how to improve public policy. This presents an opportunity for business to take a leading role in the open government conversation ahead of a high level plenary meeting to be held in London in March 2013 to discuss the OGP’s overall progress.

Contact John Young - john.young@bm.com

Norway: International disagreement on the new customs regulations The government coalition parties in Norway have agreed to change the customs regulations from adding a fixed amount to a certain percentage on top of the price of each kilo of certain agricultural products imported. This will take effect from 1st January 20131. The change in regulations will lead to increased customs on the products on beef, lamb and firm cheeses. This has led to a heated public debate in Norway. The reforms are of great importance to the Centre Party (former Farmers’ Party) which holds the Minister of Agriculture and Food, to satisfy their core voters after a tough settlement in the agricultural negotiations this spring. Norwegian companies are worried that the customs change will reduce their ability to import goods as the prices will rise, leading to less competition and poorer service to consumers. Major employer organizations are concerned the restrictions will

lead to counteractions from trading partners and worsen the conditions of Norwegian exporting companies. Sweden and Denmark point at the difficulties faced by European companies exporting their goods to Norway and the signal this sends to a Europe still tackling an economic crisis. EU’s ambassador to Norway, János Herman, has made it clear that the EU is discouraging protectionist tools and is working to develop a more liberal agricultural policy. The EU Commission is currently considering a response to Norway’s decision which is likely to be critical to the implementation of the new regulations.

Contact Julie Remen - julie.remen @bm.com

1. Norway is an EFTA member and part of The Agreement on the European Economic Area (EEA). This is a commitment to the free movement of goods, services, persons and capital throughout the 30 EEA states. However, agriculture and fisheries policy, as well as the custom union are not covered by the EEA.

Honduras: Land conflicts African palm oil and sugar producers in Honduras have had large tracts of land invaded by peasant farming groups over the last three years. Northern Honduras has been exposed to much violence as gunfights ensue between these peasant activist groups and security guards hired privately to protect these lands from further invasion. The conflict originated prior to the coup of 2009, which deposed President Manuel Zelaya. During his tenure, Zelaya proposed land reform, which would give campesinos access to this land, arguing that this would be a “reclaiming of ancestral lands”. Current landowners defend the legal purchase of these lands, as well as the right to private property, and claim that these invasions have affected revenue, reputation, and access to international loans. The violence has set the stage for local economic instability and uncertainty, affecting potential and current foreign direct investment, and as a result, employment levels have suffered. These allegations also come at a time when Honduras is negotiating free trade agreements with Mexico and the European Union. The Government is powerless in this conflict – local police and the army are struggling to control the

situation, and attempts to pacify campesinos through government purchases of parts of these lands have backfired. Land conflicts are not new for Honduras. The country has faced criticism in the past over the influence and power of the United Fruit Company. Much of Central America faces similar issues regarding land reform. The invasions and criticism towards large landholders has expanded to Guatemala, where palm oil, sugar and mining industries have also come under intense scrutiny. Given Burson-Marsteller’s experience in Honduras, the public affairs team in Miami is working with clients in Honduras to support crisis and reputation management, as well as strategic CSR efforts, and stands ready to delve into further targeted analysis should the need arise.

Contact Santiago Fittipaldi - Santiago.fittipaldi@bm.com

Colombia: Auction process for 4G technology The Colombian Ministry of Information Technology and Communications expects to conclude the process to assign 4G licenses before the end of 2012, through a radio spectrum public auction. The auction includes incentives for those companies that will operate this 4G technology to promote the mass use of mobile Internet. Therefore, the participating operators should design commercial offers to enable students and teachers of public institutions with low income levels to access 4G services. The terms and conditions of the auction are being discussed in Congress. One of the main topics is to stimulate greater competition in the sector by taking proper measures. After discussions end, the statements will be published for those interested in participating in the auction. So far, 11 companies have expressed an interest to enter the auction: 4G Americas Ahciet, Azteca

Communications, Avantel, Claro (formerly Comcel) Colombia Movil (Tigo), Directv, ETB, GSMA, Nokia, Telefonica (Movistar) and UNE. This process is very important for the country's future development. Colombian advances in technology are growing and this represents a great opportunity for mobile technology operators to take part in the Government's decision to create more and better tools for high-speed Internet in the country. For the Ministry of Information Technology and Communications, increasing broadband speed in mobile telecommunications is a crucial factor for the country to achieve high levels of competitiveness and to help in reducing poverty, through IT inclusion.

Contact Miguel Angel Herrera - miguel.herrera@bm.com

U.S. Elections Set Tone for Future of Workplace Communications Companies throughout the United States are closely watching the current Presidential campaign, knowing that the outcome of November’s election could bring significant changes for workplaces across America – particularly in the way that companies are allowed to communicate with their employees. U.S. labor unions, which currently represent only one-in14 employees in the private workforce, energetically backed President Obama’s inaugural bid in 2008. Frustrated by the continuing decline in union membership, labor hoped for new laws, more restrictions and tougher penalties on business, all designed to make unionization easier. After an initial four years under the Obama Administration, key legislative efforts have failed and regulatory actions by the National Labor Relations Board (NLRB) have been muted. A legislative measure that would have facilitated unions’ ability to sign-up new members failed after extensive lobbying by both business and labor – although unions have vowed to continue pushing for change. More attention has focused on the NLRB and its role in setting – and readjusting – the guidelines for appropriate workplace communications. The NLRB is governed by five members appointed by the President, and a majority of the current members are former labor union officials. The work of the Board has been overshadowed by Constitutional arguments over recess appointments made by the President without Congressional review, as well as ethics charges levied against key officials. However,

important policy debates have occurred over proposed “employee rights” posters and other communications mandates and restrictions. For corporate communicators, among the mostwatched areas of NLRB influence surrounds social media, and companies’ abilities – or lack thereof – to guide what employees can say and distribute via Facebook, Twitter or other social media outlets. In several cases closely watched by business, the NLRB has generally ruled that employees have great latitude in what they can post, despite their employers’ wishes. Moreover, the agency has ruled that many companies’ social media policies are “overly broad” and need to be re-written, even if no evidence exists that employees have ever disciplined under such policies. Many believe that the re-election of President Obama to a second and final term will escalate labor pressures for dramatic regulatory and legislative changes, while the election of Gov. Romney would bring more pro-business approaches. Nonetheless, companies are refocusing their efforts on building stronger cultural bonds with employees through enhanced communications no matter who is elected, which supports better business performance as well as greater engagement during difficult challenges.

Contact Wade Gates – wade.gates @bm.com

US: Tracking High-Speed Rail Progress Only months ago, high-speed rail plans in the United States seemed derailed, with governors in Florida, Ohio and Wisconsin rejecting federal funding to support plans for their states, citing spending concerns. Congress also cut the White House's six-year, $53 billion budget request. While it could be another year or two before Congress approves additional funds, most of the allotted $10 billion in the 2009 economic stimulus act is still intact. Those dollars were slated for high-speed rail and higher-speed rail (90 to 110 mph). About 153 projects are now in the works to use

$9.6 billion of the funding, according to the Federal Railroad Administration. The largely tax-funded and government-run nature of high-speed rail makes it a gamely target for political conservatives. Critics say it will never be successful because of Americans’ dependence on cars and that President Obama’s original budget plan did not mention most funding would be spent on track upgrades, not true bullet trains, which some argue is outdated technology. Conservatives also argue that most funding would go towards rail projects in the populationheavy Northeast corridor and in California, both

heavily Democratic areas. Other smaller projects are slated for corridors running from Portland, Ore., to Vancouver, British Columbia; from St. Louis to Chicago; and from Washington, D.C., to Charlotte, N.C.2 In recent months, however, Amtrak unveiled a $150 billion upgrade plan – including high-speed rail service – for the Northeast rail corridor that stretches from Boston to Washington, D.C., and California's Legislature approved $5.8 billion to start construction on a 220 m.p.h. rail line, starting in the state's Central Valley. In addition to government-supported plans, Texas Central High-Speed Railway is hoping to run a privately-funded Texas bullet train between Houston and the Dallas/Fort Worth Metroplex within a decade. Planners estimate the Texas Central project will need about $8 to $12 billion in investment ,

unlike California’s state-run project with budget projections originally at $34 billion, then $43 billion and $68.4 billion, and most recently being estimated to cost $98.5billion. The combination of federal funding spurring construction on high-speed rail lines and upgrades to existing infrastructure in multiple states with private interests like Texas Central Railway looking to develop might just be enough to get the vision of high-speed rail back on track in the United States – and with it will come not only opportunities for economic development, but also criticism and local community issues.

Contact Matt Burns – matt.burns@bm.com

2. Clayton, Mark. "Obama Plan for High-speed Rail, after Hitting a Bump, Chugs Forward Again." CSMonitor.com. Christian Science Monitor, 21 Aug. 2012. Web. 20 Sept. 2012. <http://www.csmonitor.com/layout/set/print/USA/2012/0821/Obama-plan-for-high-speed-rail-after-hitting-a-bump-chugs-forward-again>.