May 2012 Edition 12
Welcome This is the latest edition of “Hot Issues” from Burson-Marsteller’s Global Public Affairs Practice. Every month, “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 utilize 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.
Finland: Reform of digital communications agenda brings new business opportunities The Government of Finland is completing an ambitious review of its digital communications agenda. In an attempt to free a market under heavy regulatory burden, the Government wants to consolidate 10 individual acts and over 450 paragraphs of legislation. The aim is to make the Finnish digital communications market more attractive for new business opportunities. One of the most contentious issues concerns the allocation frequency bands for mobile networks and other digital transmissions, such as TV-broadcasts. The government wants to raise upwards of €100M from auctioning of fourth generation mobile internet bands, due to start early 2013. The new policy might also change the Finnish TV market fundamentally. In 2016, a “superyear” when all existing TV distribution permits are up for renewal, the Government may choose to also auction the TV permits instead of a qualitative criterion based competition done in the previous years. The Government’s planned changes might make the
Finnish market more attractive for new players – or on the other hand, much harder to compete in for the existing companies. Some parties of the government are after the additional resources from a successful auction, whereas others believe open competition would risk domestic TV channels. The playing field was changed recently by coding into law the operations of the Finnish public TV broadcaster YLE, including its financing by a mandatory tax for households. The digital communications agenda offers many possibilities for ICT, broadcast and media companies. A new TV channel FOX, owned by Robert Murdoch’s News Corporation through the film studio 20th Century Fox, opened recently in Finland, with ambitious plans for the future.
Contact Niilo Mustonen - niilo.mustonen@pohjoisranta.fi Matti Niemi - matti.niemi@pohjoisranta.fi
Russia: A new President Following his election victory, Vladimir Putin assumed the Presidential office once again on May 7th. Following Putin’s inauguration, his predecessor Dimitry Medvedev was appointed as the new Prime Minister and there is growing expectation of a significant Ministerial reshuffle and far-reaching personnel changes within government. These changes will mostly affect the positions and activities of state companies and companies of strategic markets with a particular focus on the natural resources sector. The promises made during the election will be scrutinised and held to account
because of the considerable social pressure that now exists for monopolies, state companies and the big private players. Because of the uncertainty around public policy in the short term and the changing media landscape, organisations need to assess quickly the reputational challenges facing them and put in place a robust communications plan.
Contact Ksenia Trifonova - Trifonova@m-p.ru
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Brussels: the rise of food taxes Over the past months, different food-related taxes have been pioneered in Austria, Denmark, Finland, France and Hungary, as well as in Switzerland. Italy, the UK and Ireland are also considering the introduction of similar measures, with an impact assessment on a tax on sugar-sweetened drinks to be presented to the Irish Health Minister in October this year, which will probably influence whether other countries undertake similar measures or not.
not yet a case for harmonisation, there is a big risk of a “domino effect” to introduce similar measures, not only in other EU Member States but also in other continents, which traditionally look at Europe as an example to follow. Some activities have been undertaken in Australia, for example, where a leading public health group has been calling on the federal government to tax junk food and use the revenues to subsidise healthy foods.
While health advocates draw an analogy with tobacco taxes and argue that these measures can represent an effective tool to fight obesity by decreasing the consumption of fatty foods, the food industry remains vehemently opposed to any such fiscal measures. Industry claims that they are regressive, do not lead to the desired health results, and have a negative business impact, and perceives them simply as an easy source of additional budget in a time of fiscal austerity.
While some fundamental questions are still to be answered - i.e. the scientific grounds for such measures, the impact (if any) of such measures on consumer choice, the impact of such measures on specific food sectors, and who should bear the cost of taxation - the reality is that some sectors of the food industry are already exposed to these measures in certain parts of Europe, bearing the additional costs and risking losing customers. If the process is not stopped and relevant arguments against food tax measures presented now, there is a significant risk that food taxes will become a natural part of national taxation systems in Europe, with other regions following soon after.
Food taxes are currently not subject to harmonisation at the EU level, as fiscal policy remains a competence of Member States. However, the European Commission has recently recognised the growing momentum on the topic and admitted that if a “critical mass” of Member States were to introduce targeted fiscal measures there could be a case for EU harmonisation of food taxes. There is no doubt that even if there is
Contact Sylwia Staszak - Sylwia.Staszak@bm.com
U.S.: Controversial “Quickie” Union Election Rule Moving Forward In recent months, the National Labor Relations Board has adopted several sweeping new rules that expand the rights of labor unions under the National Labor Relations Act. One of the most controversial of these measures is the so- called “Quickie” Election Rule, set to take effect after a district court denied the motion for injunction filed by U.S. Chamber of Commerce. In addition to significantly decreasing the length of the campaign process, the Rule limits an employer's opportunities to communicate with employees over issues of union representation before a vote is taken. Unions argue that reducing the time to hold an election limits the ability of managers to intimidate workers. Employers counter that these changes effectively expedite the union election process while depriving employees of the ability to make a fully informed decision.
Under the NLRA, a labor union must petition the NLRB to hold an election, which historically took place an average of 56 days after the petition was filed and accepted. The Quickie Election Rule shortens this process by imposing several technical and procedural changes. First, Hearing Officers will have the discretion to deny a request for pre- election hearings and may limit the issues that can be raised, including whether certain employees are eligible voters. Aside from limiting an employer’s right to challenge certain aspects of the election before it is conducted, the change will increase the possibility that employers will need to bring post-election challenges due to voter eligibility issues. Second, a party will no longer have the right to file for review of a regional director’s decision and direction of the election. Finally, the Board will have discretion to hear and decide any appeals to
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the election process, whether they concern pre- or postelection issues, essentially denying employers the right to contest aspects of the election, regardless of timing. The cumulative effect of these changes will be to give unions a tremendous advantage over employers in the organizing process. Unions will have months to represent their side of the issue without employers being given formal notice that an organizing drive is underway and without the assurance that there will be a sufficient window of time to discuss unionizing. Furthermore, unfair labor practice charges dealing with union misconduct will only be dealt with after the election has taken place and even then, contested issues will no longer be automatically reviewed. Because of its unprecedented curtailment of employer rights, the new Rule has met substantial opposition, particularly from industry groups, such as the National Association of Manufacturers, and the pro- business Right. Following its adoption, The U.S. Chamber of Commerce and the Coalition for a Democratic Workplace filed a lawsuit in the Federal District Court for the District of Columbia challenging the Rule. On April 28th, the Court refused to delay implementation
based on violations of the first (free speech) and fifth (due process) amendments, and the NLRA, which mandates that employees be given the “fullest freedom� in exercising their rights. The legal battle, however, is ongoing; despite the initial ruling, the Court is expected to issue a formal decision on the merits by May 15th, before any election under the new rule would be scheduled. Given that implementation of the rule will likely take place in the absence of a court ruling to overturn the law, employers must address the effects the changes will have on their businesses. An employer will have to both campaign and prepare for what amounts to a trial at the same time, possibly in fewer than two weeks. Small businesses will be particularly burdened because the average small business owner does not have the resources to employ labor consultants and in-house counsel. The Rule also highlights the importance of consistent, proactive labor relations and communications policies.
Contact Wade Gates - wade.gates@bm.com
U.S.: Environmental Protection Agency Issues First Ever Rules to Regulate Hydraulic Fracturing The Environmental Protection Agency issued national limits on air emissions from hydraulic fracturing for the first time on April 25th. These regulations are the latest development in the ongoing public discourse surrounding the method, its economic potential, and environmental effects. While the environmental concerns are diverse, the rules address only the impact hydraulic fracturing has on air quality.
inevitable natural gas boom in a measured and cautious manner. The only federal law that regulated hydraulic fracturing air emissions was nearly thirteen years old and covered only natural gas processing plants. In contrast, the new rule applies to wells, storage tanks, compressor stations, and pipelines as well as bringing an estimated 1.1 million wells that are already producing oil and gas under regulation.
The regulations, which were issued in response to a US District Court decision requiring the agency to review air toxins and the natural gas industry, call for companies to use "green completions," a technology that captures the released gas and fumes in tanks and transports them via pipelines to be sold as fuel. Because the methane and benzene released prior to a well’s production are believed to contribute to greenhouse gas emissions, the EPA estimates that the new rules will cause a 95% reduction in harmful emissions from the more than 11,000 new wells each year.
Companies will be given two years to comply with the new rules, which were already widely implemented by state laws and adopted by industry as best practices. Despite this attempt to balance environmental and economic interests, the EPA has faced criticism from both environmental and industry groups. Environmental groups argue that the regulations are far too lenient and criticize the decision to delay full implementation until 2015. Industry groups, on the other hand, claim that the rule is redundant and its reporting requirements impose costs that outweigh its benefits.
The standards represent the willingness of the EPA and the Obama Administration to address the
The implications of the new rules may go beyond the U.S. borders; foreign nations that are in the early
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phases of addressing natural gas drilling issues may be looking to the U.S. for guidance. Last summer, the European Parliament’s Committee on Environment, Public Health and Food Safety issued a report that called for “consideration to be given to developing a new directive at European level regulating all issues in this area comprehensively.” Furthermore, the New York Times has reported that more than 30 countries, including China, India and Pakistan, are now considering the legalization of hydraulic fracturing and developing countries could face
greater risks if the drilling method is used before adequate regulations are in place. As state and federal governments in the United States continue to wrestle with this issue, it will be important to monitor the debate closely.
Contact David Vermillion – David.Vermillion@bm.com
Hong Kong: Tightening of Rules Governing IPO Sponsorship Hong Kong’s Securities and Futures Commission (SFC), the city’s financial market watchdog, plans to launch a public consultation on proposals to tighten rules for financial institutions sponsoring initial public offerings (IPOs) in Hong Kong. The SFC plans to strengthen existing guidelines covering the conduct of listing underwriters and add new rules on how sponsors should conduct their due diligence on the companies being listed. Under the new plan, sponsors could be held liable for criminal or civil charges if the listing prospectuses are found to be inaccurate or incomplete. Analysts say that the proposed initiative will expose investment banks and even their employees to legal cases and fines if a deal is challenged, and will likely make listing in Hong Kong more expensive for companies because of the need for more due diligence. The move by the SFC is widely seen as a response to a string of scandals in the Hong Kong stock market that involved listed Chinese companies putting misleading information into the listing prospectuses or engaging in fraudulent accounting practices. These scandals have led to concerns that regulators and sponsors have not properly vetted all listing materials. Industry observers say that these events have eroded investors’ confidence in Hong Kong’s stock market. The SFC believes that holding sponsors legally liable will push financial institutions to be more careful in verifying information on the listing prospectuses, thus helping to solidify Hong Kong’s position as a major international financial center. The local media, investors, and lawmakers are generally supportive of tougher rules by the SFC, as some believe Hong Kong is already lagging behind Singapore and the United States in terms of holdings
sponsors liable for criminal or civil offences if it is found that they included misleading information in new share listings. However, international investment banks are opposed to a tightened regime as some analysts argue that compared to many other countries, Hong Kong already has strict vetting rules for new stock listings, including a requirement that both the Hong Kong Stock Exchange and the SFC must approve the listing. Some foreign banks have even threatened to leave Hong Kong if penalties instituted by the SFC are too harsh. Legal experts also say that the new proposal may affect the business of big US and European investment banks as they may no longer be willing to take on certain transactions to avoid risk. Such a move by those banks is expected to benefit smaller Chinese banks who are seen as willing to pick up that business. No details are available as to how listing rules would be changed and under what conditions sponsors would be held viable. Those details are expected to be decided after the planned public consultation which is projected to commence in May. Since the imposition of any legal liability would require revisions to the Securities and Futures Ordinance and other company laws in Hong Kong, it is thought that changes in those laws would not be submitted to Hong Kong’s Legislative Council for debate and voting until after a new legislature group is elected in September of this year.
Contact Ian McCabe – Ian.mccabe@bm.com Evelyn Kusnawirianto – Evelyn.kusnawirianto@bm.com
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Malaysia: Proposals to liberalize the Legal Sector The Malaysian government has announced plans to liberalize the country’s legal sector to allow foreign law firms to operate in Malaysia. Under a proposed amendment to the Legal Profession Bill, foreign law firms will be allowed to practice in Malaysia via an international partnership or qualified foreign law firm license. If passed, foreign lawyers could also be hired by local legal firms under certain conditions. There is currently no structure whereby foreign law firms may be licensed to practice in Malaysia. They can only operate as minority partners to local law firms, with their stake limited to a maximum of 30 percent. This proposal expands a limited plan initiated in 2009 to liberalize the legal industry by allowing up to five law firms to set up offices in Malaysia, but only to advise clients on Islamic finance matters. If the amended Bill is approved, a five-man selection committee, co-chaired by the Attorney-General and president of the Malaysian Bar Council, will be set up, and foreign law firms that want to set up offices in Malaysia or enter into a partnership with a local firm will be licensed by the committee. These firms will have to pay the Bar Council a license fee. Any unlicensed foreign law firm practicing in Malaysia would incur a maximum fine of RM 100,000. The proposal to liberalize the legal profession to allow foreign firms is widely viewed as part of the country’s effort to solidify its position as an international Islamic finance hub and concurrent efforts to expand the expertise of the legal industry. The liberalization of the legal market, long advocated by the country’s Central Bank, Bank Negara Malaysia, will be a complement to the Bank’s efforts to liberalize banking regulations
since the launch of the Malaysia International Islamic Financial Center initiative in 2006. Analysts believe that good legal service comparable to that provided in more developed countries can help Malaysia attract more foreign investors. However, the Malaysian Bar Council has been opposed to the idea of introducing foreign law firms as “stand-alone” firms for fear of hurting the development of local practitioners. Industry groups such as the UK Law Society have long lobbied for the liberalization of the legal sector in Malaysia, and international law firms like Norton & Rose LLP, Clifford Chance, and Allen & Overy have welcomed liberalization, although some have said there may not be a good business case to open an office in Malaysia if it would be restricted to Islamic finance matters. The details as to the areas these foreign law firms would be allowed to practice is still to be specified but industry observers believe that they will be restricted to Islamic finance, corporate practice matters, and international arbitration, while issues related to local Malaysian law will be restricted to local lawyers. Whether the Bill will be passed will largely depend on the result of the next general election and whether the Malaysian government will remain pro-liberalization. In any case, the success or failure of this Bill will have a knock-on effect not only on the legal professional, but also on the finance and other professions that are calling for increased liberalization.
Contact Evelyn Kusnawirianto - Evelyn.kusnawirianto@bm.com Joycelyn Lee - - Joycelyn.lee@bm.com
Singapore: Major Review of Employment Act On April 17, Singapore’s Ministry of Manpower (MOM) announced it would review the country’s Employment Act this year in a move that could spell higher costs and stricter labor rules for Singapore’s employers. At the same time, the Ministry said it would intensify efforts to ensure that current labor laws are followed.
The Ministry identified an increase in the number of professionals, managers and executives (PMEs) in Singapore and a growing reliance on outsourcing and contract workers as two trends driving the review. The Act, as it currently stands, provides limited protection to these categories of employees. If implemented,
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the Act is expected to cover a larger share of Singapore’s working population, possibly up to 60% of the total workforce. Although the MOM has not stated how the law might change, comments by activists in Singapore’s labor movement provide an indication of the amendments to come. There have been calls by labor groups to extend the Employment Act to increase the coverage of PMEs to go beyond just salary protection for junior managers and executives, and include minimum requirements such as universal provision of annual and medical leave. Two groups that may benefit from increased protection include independent contractors (freelancers) and contract or part-time employees. As contractors are forming a growing share of Singapore’s overall workforce, benefits may be extended to them. At the same time, protection for employees who currently fall under the Act could be strengthened in areas such as government-mandated medical benefits and minimum levels of health insurance. These developments are consistent with growing unease in Singapore about a widening gap between the higher and lower income groups. Last year’s election result, where the ruling People’s Action Party received the lowest share since Singapore’s indepen-
dence in 1965, was a telling indicator of the concerns of the new generation of voters. Recently, there have been public debates about a “wage revolution,” and some have called for increases for low-wage workers and a wage freeze for top income earners to narrow the income gap. The Singapore National Employers Federation, however, has warned against radical changes to the labor law as this may create disincentives for companies to attract or retain senior talent and it might be a disincentive for multinational companies considering an investment in Singapore. Such investments account for about 40% of Singapore’s GDP. The MOM has started accepting comments as part of the review, and a formal stakeholder consultation process will be launched in the second half of the year. The MOM is expected to work closely with labor and employer groups to ensure that the interests of both groups are taken into account as it considers future changes.
Contact Joy Albert – Joy.albert@bm.com Evelyn Kusnawirianto – Evelyn.kusnawirianto@bm.com
Colombia: Law on information rights on the internet As a prerequisite for the implementation of the Free Trade Agreement (FTA) with the United States, Colombia issued the 201st Law of 2012, to protect intellectual property rights on the internet. This Law has been called “Lleras Law 2.0”, in reference to the presenting Interior Minister - Germán Vargas Lleras, and it being the second version of the legislation seeking to regulate liability for copyright breaches and the related rights on the internet.
the locally produced content to be broadcast in prime time.
The new regulation implemented the commitments made in the FTA on intellectual property rights; one of the hot topics in the bilateral negotiation of the trade agreement. It restricts free access to copyrightprotected digital music files, audio, video and editorial content. Furthermore, it clarifies that the reproduction of these types of files will be free and fully allowed when authorised by the author or the property rights holder. It also extends protection against copying and selling of illegal content to digital media.
The adoption of Lleras Law 2.0 has caused controversy, as detractors allege it violates freedom of information rights. One of the most controversial sections is number 13, which prohibits the re-transmission of signals over the internet without authorisation from the owner. Critics argue that this prohibition is evidence that lawmakers are not clear on digital convergence.
Aligning with the U.S. requirement for the ‘screen quota’, this Act decreased, from 50 to 30 percent,
For television channels and programme makers this law is a legal instrument to control who can reproduce their content. On the other hand, it opens new business possibilities for importing foreign shows and programmes and playing them in prime time, subject to legally buying the rights.
Contact Miguel Angel Herrera – miguel.herrera@bm.com
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Mexico: General Law on Climate Change A New Challenge for Companies The January edition of Hot Issues highlighted the General Law on Climate Change (GLCC) initiative which was approved by the Mexican Senate and sent to the House of Representatives to continue its legislative process. This initiative sought to promote the transition towards a competitive, sustainable and low carbon emission economy. However, chances for its approval were low, mainly because the private sector argued that such a law would harm the competitiveness of the Mexican industry. Although environmentalists have complained that the initiative is “wishy-washy”, on April 12th, after a long lobbying process with the private sector, the GLCC was approved by the House of Representatives and sent back to the Senate for its final review. There are several key elements that must be considered, now that the GLCC is almost a reality. Firstly, it establishes the goal of reducing the country’s greenhouse gas emissions, against the baseline, by 30 percent. Secondly, it sets a reduction of 50 percent of emissions by 2050 relative to levels in 2000. Thirdly, it creates the National Registry of Emissions, which is an instrument for individuals and corporations to register their annual direct and indirect emissions of greenhouse gases. Finally, the GLCC empowers the Inter-ministerial Commission on Climate Change, which will establish an emissions trading system, allowing some participants to have more emissions and urging others to reduce them.
These developments represent a new challenge for all companies because, gradually, they will be forced to adapt production processes in order to contribute to the mitigation of climate change. Depending on the approach of each company, these challenges can be a problem or an opportunity. If the decision is to remain opposed to this emerging policy, costs will be high and the problems imminent as climate change has reached the international, national and local arenas and the environment has been gaining importance with public policy creation. The transition to clean energies and alternative processes of production is a reality and, sooner or later, companies will have to be part of this process. Adapting and evolving within this new environment will require refreshed and strong communications and public affairs capabilities. Companies will also have to strengthen their network with the Mexican public sector in order to be informed, and also trained, about the steps needed to be taken during this transition process. The LXI Legislature ends shortly, so we will soon know whether the GLCC will be approved or not.
Contact Lucas Silva Wood – lucas.silva@bm.com
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