The financial services industry is undergoing a radical transformation. Companies that can navigate this uncertain terrain will retain a competitive edge.
Global law firm White & Case LLP has advised Icade on its €600 million bond issue, with a maturity of ten years and an annual coupon of 1.625%.
Icade has simultaneously launched a tender offer on three outstanding bond issues, financed with the proceeds of the new bond issue. The bonds will be admitted to trading on the regulated market of Euronext Paris.
The bonds were issued through an international private placement to institutional investors. Crédit Agricole CIB, CM-CIC Markets Solutions, HSBC, Natixis and Société Générale Corporate & Investment Banking acted as joint bookrunners on the new issue.
As an investor and a developer, Icade is an integrated real estate player with a portfolio value of €10.8 billion at December 31, 2017. Icade shares are admitted to trading on the regulated market of Euronext Paris.
The White & Case team in Paris that advised on the transaction was led by partners Thomas Le Vert and Séverin Robillard and included partner Alexandre Ippolito, with support from associates Boris Kreiss, Guillaume Monnier and Guillaume Keusch.
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Global law firm White & Case LLP has advised a bank syndicate led by BNP Paribas, HSBC, J. P. Morgan and UniCredit on the €275 million high yield bond issuance by Nordex, a wind turbine manufacturer.
The high yield bond has a maturity of five years and a 6.5% coupon rate. The proceeds from the placement will be used for the early repayment of existing liabilities. The bond is certified as a ‘Green Bond’ by the Climate Bonds Initiative.
The White & Case team which advised on the transaction was led by partner Rebecca Emory (Frankfurt) and included partners Gernot Wagner, Karsten Woeckener, Vanessa Schuermann, Lutz Kraemer (all Frankfurt), Karl-Jörg Xylander (Berlin) and Bodo Bender (Frankfurt), local partners Sebastian Schrag, Florian Ziegler, Cristina Freudenberger and Thilo Diehl (all Frankfurt), counsel Alexander Born (Frankfurt) and associates Mansha Malhotra, Eva Maryskova, Irina Schultheiss, Justin Tevelein, Kirsten Donner and Tobias Gans (all Frankfurt). Lawyers from White & Case offices in the UK, Italy, France, Sweden, Singapore, Spain, Mexico, South Africa, Turkey and the US also advised.
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With the GDPR deadline passing the 100 day mark recently, the May 25th deadline looms closer. Many businesses have begun preparing for the new legislation, but its full implementation is likely to reveal some unforeseen challenges and it is anticipated that large fine headlines will be made before the year is out.
This article was originally published by Information Age.
See also:
A practical handbook on the EU's new data protection law
Cyber risk — best practices for incident preparedness and response
Data protection authorities (DPAs) are focused on encouraging compliance with the GDPR, but are expected to impose significant fines and other penalties where they feel that businesses are disregarding their GDPR compliance obligations. 2018 could well be the year in which DPAs fully bare their teeth.
Over the last 20 years, many businesses formed the view that EU data protection law was unlikely to be a major compliance risk, because the average fines are comparatively low, and the likelihood of incurring such a fine is also low in most cases. Conversely, the cost of compliance is relatively high, and often requires wholesale changes to business practices. Many businesses therefore decided that these costs were simply not worth it.
However, with GDPR introducing maximum fines of the greater of €20 million or 4% of worldwide turnover, EU DPAs will be looking to demonstrate that they have the power to shock businesses into action, where needed. We are likely to see at least one fine above the €10 million mark by the end of 2018.
Businesses will need to be agile and ready to quickly close gaps in their GDPR compliance strategy. Total compliance with GDPR is not always realistic. This is because the legislation is so wide-ranging in its application, and even businesses that have the right systems and procedures cannot always ensure that employees will make all the right choices.
Businesses also do not have limitless compliance budgets, and therefore need to take a risk-based approach, focusing efforts on their biggest vulnerabilities.
The GDPR lays out new rules around data breaches, with much tighter timeframes for reporting when personal data are lost or hacked. Businesses need to be ready to report data each breach to the relevant DPA within 72 hours of discovering that breach. This is an extremely tight timeframe, and businesses should ensure that they have clear internal procedures in place to ensure that it is met.
Many businesses under-estimate the risk posed by their hard-working and well-meaning employees. Much has been said about the threats posed by nation states and rogue hackers, but one of the biggest data security risks comes from decent people who are simply trying to do their jobs, and are struggling to do so in the face of well-intentioned but over-zealous IT security policies.
Such policies leave employees with few options when it comes to moving data around, which is increasingly a fundamental part of work. Diligent employees often know the policies, but are forced to find a way around the system in order to do their jobs.
For example, there have been cases of employees who are prevented from using USB keys to move data around. As a result they have begun uploading data to low-security cloud accounts, significantly increasing the risk of a data breach, and achieving the exact opposite of what the aims of the IT security policy.
Policies need to be GDPR-compliant, but this is not simply a tick-box exercise. Businesses must provide their employees with practical ways to complete necessary tasks – otherwise employees will find other ways of doing so, often creating unforeseen vulnerabilities.
Businesses may see the beginnings of a new trend in privacy litigation in 2018. Individuals will have significantly greater rights over their data under the GDPR and increased awareness could see consumers and activist shareholders using data protection law as a weapon, and as a way of reclaiming money.
Businesses need to identify where they might be at risk and be ready to defend their position. Financial provision for possible litigation (including insurance) may become an increasingly necessary part of life under the GDPR.
When it comes to privacy and data protection, 2018 has the potential to be a turbulent year. Keeping an eye on developments, and watching where regulators are focusing, will be key to developing a successful compliance strategy.
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Information Age
Tomorrow, on 1 March 2018, after 579 days of deliberations, the new arbitration rules of the German Institution of Arbitration ("DIS") will enter into force, replacing the previous 1998 DIS Rules. The 2018 DIS Rules include several notable novelties such as the introduction of a new administrative body and provisions on multiparty and multi-contract arbitration. The new DIS Rules will make DIS arbitration more attractive for international users and strengthen Germany's position as a seat for arbitration.
When will the DIS follow the example of other institutions and modernize its arbitration rules? This question of many arbitration practitioners was answered in late 2016 when the DIS started a very efficient reform process, which involved all key players in the German arbitration market and was completed in January of this year. The result is not a complete overhaul of the 1998 DIS Rules, but a balanced update in line with modern standards aimed at more efficiency, transparency and flexibility.
The goal to achieve more efficiency is reflected in new and stricter time limits (e.g. the respondent must now nominate its arbitrator no later than 21 day after the receipt of the request for arbitration and the president must be nominated within 21 days after the co-arbitrators were notified by DIS to do so, in both cases instead of 30 days), new procedural management techniques (e.g. case management conference 21 days after constitution of tribunal) and cost sanctions in the event of a delay. The new regulation concerning cost sanctions in Article 33.2 of the 2018 DIS Rules is similar to Article 28.4 of the 2014 Rules of the London Court of International Arbitration, but phrased in fewer words possibly leaving more discretion to the tribunal.
The main tool to achieve more transparency is a transfer of more administrative competencies to the DIS: The 2018 DIS Rules provide for a new body, the DIS Arbitration Council. This Council is in charge of certain administrative tasks that were handled by DIS tribunals in the past, such as the administration of deposits for fees and expenses (Articles 34 et seq.), decisions on the challenge or removal of arbitrators (Articles 15.4 and 16.2) or the review of the amount in dispute (Article 36.3). This does not mean, however, that the DIS is to turn into a "new ICC", as Secretary General Francesca Mazza, previously Secretary to the ICC Commission on Arbitration, constantly emphasized during the reform process. However, the 2018 DIS Rules enable the DIS to ensure that certain major procedural decisions are rendered according to the same and predictable standards. Moreover, the DIS has a right, but not an obligation to review arbitral awards (Article 39). An ICC-style scrutiny thus will not take place.
Flexibility is a key element of arbitration that arbitration needs to promote in order to be chosen in lieu of state court litigation. The 2018 DIS Rules promote flexibility by inter alia including more open regulations on the number of arbitrators even permitting any odd number and by allowing tribunals to grant ex parte interim relief if the purpose of the interim measure would otherwise be frustrated. Flexibility is also reflected in regulations addressing consolidation, multiparty and multi-contract situations (Article 8 and Articles 17 to 20). The approach to the latter is, however, conservative: Both multi-party and multi-contract arbitration are an option only if all parties have agreed or subsequently agree thereto.
Despite including novel regulations on interim relief, the 2018 DIS Rules do not provide for emergency arbitration, contrary to many other recently reformed arbitral rules. There are two explanations: First, the call for such relief before the constitution of a tribunal was not very loud during the reform process. Second, Germany’s arbitration law, the Tenth Book of the German Code of Civil Procedure, is currently also being updated and may in the future include regulations on emergency arbitration. The DIS wanted to avoid a clash with these unknown future rules.
Thanks to the modernized rules, the DIS is well positioned to compete on par with other arbitration institutions.
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© 2018 White & Case LLP
Global law firm White & Case LLP will retain 81 percent of its London trainees who are due to qualify in March 2018, after 13 of 16 trainees were offered and accepted positions at the Firm.
The newly qualified lawyers join global practices including Banking, Capital Markets, Commercial Litigation, International Arbitration and Mergers & Acquisitions, with two joining the Firm's Dubai office.
"Our demand for English law qualified lawyers continues to grow in London and across our offices globally, and is an ongoing business need despite economic and political uncertainties such as Brexit," said partner Justin Benson, who heads the trainee solicitor programme in London.
"The combination of a trainee programme that delivers consistently high retention rates, and a highly competitive salary and benefits package, ensures that White & Case is a compelling destination for talented, ambitious trainee lawyers. They join a firm that is known to support the development of its lawyers throughout their careers and has a strong track record of promoting its best associates to partner."
The Firm's commitment to developing the careers of its lawyers was demonstrated in the 2018 partner promotions. Two of the seven London associates promoted to partner – James Greene and James Johnson – joined White & Case in London as trainees. Alexander Malahias, who was promoted to partner in Abu Dhabi, also joined the Firm as a trainee in London.
The Firm retained 86 percent of its London trainees who qualified during 2017. The training programme has been established for 20 years, provides experience working on complex, cross-border matters and guarantees a six-month international secondment.
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Global law firm White & Case LLP advised PFH on its acquisition of Uni Gasket Group.
PFH is an independent investment holding company which has been operating in Italy for more than 30 years. Uni Gasket is an Italian company active in the production of PTFE, rubber and silicone pipes and gaskets.
The transaction has been partially financed through a term and revolving facility agreement provided by Unione di Banche Italiane S.p.A. and Banco BPM S.p.A., which were also advised by White & Case.
The White & Case team in Milan which advised PFH on the transaction comprised partners Leonardo Graffi and Veronica Pinotti, associates Alessandro Seganfreddo and Fabrizia Faggiano and lawyer Luca Silviani. The team which advised the banks comprised partner Iacopo Canino and associate Adriana Tisi.
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In what has been hailed as a landmark decision, the High Court recently refused to allow the extradition of UK citizen Lauri Love to the USA for offences of cyber theft, activating the forum bar for the first time since its inception in 2003. Following Mr Love's test case, how far will the forum bar really be applied?
Back in October 2013 the FBI asked the UK's National Crime Agency ("NCA") for assistance in their investigation into the activities of Mr Love, whom the FBI suspected was involved in hacking US computers and stealing confidential data. The NCA in turn started their own investigation and that same month executed a search warrant at an address in leafy Suffolk, where Mr Love lived at home with his parents. Less than a year later, the Crown Prosecution Service decided not to prosecute, and instead let the US investigation take priority. The US authorities subsequently sought Mr Love's extradition so that he could face trial in America.
Following a contested hearing at Westminster Magistrates Court, a judge ruled in favour of the United States and held that Mr Love's case should be sent to the Home Secretary for her decision. Mr Love appealed to the High Court, relying (as he did in the Magistrates Court) on a concept called the forum Bar, which prohibits extradition to a category 2 territory (this includes the USA) if it would not be in the interests of justice due to forum considerations. He also argued that it would be oppressive, in all the circumstances, to extradite him. In support of the defence arguments, his lawyers called expert evidence from doctors, a psychologist and a US prison expert, who testified about his acute suffering with eczema, his struggles with Aspergers Syndrome, his precarious mental health and the risks of suicide, were extradition to be ordered.
The Lord Chief Justice presided over the case, with the High Court ultimately overruling the Magistrates Court decision in favour of Mr Love.
The forum bar as a defence to a person's extradition was introduced in 2003 following the refusal by the then Home Secretary Theresa May to order the extradition of Gary McKinnon to the United States for computer hacking offences. Mr McKinnon, like Mr Love, had Asperger's Syndrome and suffered from depression. The forum bar requires a court to consider a number of individual factors as part of any request for extradition to a category 2 territory, namely:
(i) The place where most of the harm took place;
(ii) The interests of any victims;
(iii) Any belief of a UK prosecutor that the UK is not the most appropriate jurisdiction;
(iv) The availability of evidence for a prosecution in the UK;
(v) Delay in either jurisdiction;
(vi) The desirability of all prosecutions taking place in one jurisdiction;
(vii) Connection of the defendant with the UK.
In Mr Love's case, the High Court found in favour of the United States on (i) above – the place where most of the harm took place being, of itself, a weighty factor in support of extradition. However, it found in favour of Mr Love on (ii) – since it held that were extradition to be ordered there was a significant risk that Mr Love would be unfit to stand trial in the US, (iii) – there was no such evidence from a UK prosecutor and (vii) – Mr Love's "entire well-being" was bound up with his connection to his parents here in the UK. The court remained relatively neutral on (iv), (v) and (vi).
Ultimately, the court found that whilst the considerations in (ii) and (iii) would not, on their own, have persuaded them, combined with (vii) - Mr Love's connection to his parents in the UK as a result of his particular physical and mental attributes - this was sufficient to operate the forum bar and decline to order his extradition.
In addition to the forum bar arguments, Mr Love's defence team advanced submissions that he should also be discharged under the provisions of the Extradition Act 2003 already dealing with oppression, specifically "if the physical or mental condition of the person is such that it would be unjust or oppressive to extradite him". There was extensive analysis of the medical and prison evidence, with the High Court coming to the conclusion that any measures taken in the US to prevent Mr Love from committing suicide would invariably involve him being separated from others and as a result of his own particular mental health difficulties would have a seriously adverse effect on his very vulnerable wellbeing. As a result, in addition to succeeding under the forum bar, the High Court found Mr Love's very particular circumstances to be such that it would be oppressive to order his extradition.
Whilst this case has demonstrated that, in the right circumstances, the forum bar is an effective tool to fight extradition, it does not mean that there will be a successful flurry of cases as a result. Mr Love’s physical and mental condition was such that the court had real concerns that he would be unfit to stand trial in the United States, and his connection to the UK through his heavy, almost child-like, reliance on his parents was particularly strong. Oppression, as a bar to extradition, also continues to require a very strong threshold and it was only Mr Love's combination of circumstances that caused the court to rule in the way they did. It may also be that the facts of Mr Love's alleged conduct amounted to the 'right type of offence' to allow the forum bar to be utilised in this country. Despite the gravity of the allegations, historically the courts of England and Wales have had a more complicated relationship with white collar offending, including computer hacking, than its counterparts in the US. The forum bar may have been lowered, but only for the "right" type of case.
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© 2018 White & Case LLP
Global law firm White & Case LLP has advised the European Investment Bank (EIB) on a strategic €550 million financing to ORES, one of Belgium's main gas and electricity distribution networks operators.
The financing will be used to make the network greener and more efficient. Brussels-based White & Case local partner Hadrien Servais, who co-led the Firm's deal team said: "White & Case has been advising the EIB on important transactions of this nature for a number of years, and this deal is another demonstration of the strength of our relationship."
The White & Case team in Brussels which advised the financing was led by local partner Hadrien Servais and counsel Willem Van de Wiele, with support from associates Aurélie Terlinden and Eline Souffriau.
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As part of Paris Arbitration Week, White & Case is pleased to invite you to a conference on the topic of: Perspectives on Arbitration in the OHADA Zone.
Speakers
Moderators
Thursday, 12 April 2018
Conference from 5:00 p.m. to 7:15 p.m., followed by a cocktail reception
White & Case, 19 Place Vendôme, 75001 Paris
Follow this link to request an invitation. If you have any questions please contact Reese Onate.
Paris
Global law firm White & Case LLP has expanded its Global Private Equity Industry Group and Global Mergers & Acquisitions Practice with the addition of Mike Weir as a new partner in London.
"Mike joins a talented roster of lawyers in our Global Private Equity Industry Group in London," said White & Case partner John Reiss, Head of the Firm's Global Mergers & Acquisitions Practice. "London is a critical pillar in the global financial marketplace; adding Mike to our London office reaffirms our goal to supplement our private equity and M&A capabilities to help achieve our clients' ambitions both in London and globally."
Weir's practice will primarily focus on the Firm's private equity clients. He will also be instrumental in helping build other key investor segments, including alternative capital providers, family offices and real estate. Weir joins White & Case from Jones Day, where he advised technology and real estate private equity bodies such as state-owned investment funds that invest in stocks and bonds, large institutional real estate funds and buyout funds that purchase companies.
"We look forward to working with Mike to develop a leading private equity hub in London that drives our wider EMEA and global practice," said White & Case partner John Cuningham, Regional Section Head, EMEA M&A/Private Equity. "Mike's experience advising real estate investor clients on their cross-border transactions will add additional focus and leadership for our broader Real Estate Industry Group, which works across private equity, finance, capital markets and tax."
Oliver Brettle, executive partner in London and a member of the Firm's Executive Committee, said: "The 2020 strategy includes reinforcing our Private Equity Industry Group and Global Mergers & Acquisitions Practice with leading teams in our strategic regions, particularly the UK. Hiring Mike supports the vision of having a top tier firm for our private equity clients in the London market."
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White & Case are sponsoring the Infrastructure Investor Global Summit, which is taking place on the 20-22 March 2018 at the Hilton Hotel in Berlin. The event is the largest global gathering of institutional capital devoted to infrastructure, with 1400+ senior industry leaders under the one roof.
Along with many other experts, Caroline Sherrell, a partner in our private equity practice in London, will be speaking at this year's event on, "Alternative asset strategy: Is the distinction between other asset classes and infrastructure blurring?". Also in attendance will be John Cunningham and Thomas Cambidge of our London office and Thomas Burmeister and Florian Degenhardt of our Hamburg and Düsseldorf offices respectively.
This Summit is intended for senior decision makers from funds, investors and advisors and will cover the topics outlined in the agenda.
For more information on the event, please follow this link.
For the latest brochure on our experience in this sector, please click here.
Global law firm White & Case LLP has advised J.P. Morgan, as mandated lead arranger and agent, on the financing of ADLER Real Estate AG's acquisition of up to 70 percent of Brack Capital Properties N.V. (BCP), a public limited liability company incorporated in the Netherlands and listed on the Tel Aviv Stock Exchange with total assets amounting to around €1.6 billion.
ADLER has entered into a share purchase agreement with Redzone Empire Holding Limited for the acquisition of a 41.04 percent stake in BCP. In addition, members of senior management at BCP have irrevocably undertaken to tender their respective shareholdings of a combined 5.62% in ADLER into the so called special tender offer (STO), which ADLER has launched for the purpose of acquiring up to 25.8 percent of the shares in BCP. In total, ADLER is thus targeting a shareholding of up to 70 percent. On the assumption that the maximum number of shares will be tendered, the acquisition volume amounts to around €539 million.
BCP owns a real estate portfolio of more than 11,000 residential units in Germany, of which two thirds are located in prime locations. The portfolio is concentrated in major German cities, among them Leipzig (30 percent), Bremen (ten percent), Dortmund, Hannover and Kiel (nine percent each), overlapping with the existing ADLER portfolio.
The acquisition and the STO will be financed from existing cash in ADLER, the proceeds from the recent sale of its stake in ACCENTRO Real Estate AG and the sale of non-core residential assets in ADLER. These amount to a total of around €350 million. The balance funds are provided under an in-place bridge loan financing agreement entered into with J.P. Morgan.
The White & Case team which advised on the transaction was led by partners Jacqueline Evans (London) and Thomas Flatten (Frankfurt), and included partner Philip Broke (London) and associates Julian Brun, Nigela Houghton (both London) and Tobias Daubert (Frankfurt).
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On March 9th 2018, the Minister of Justice has unveiled the main lines of the upcoming reform regarding the radical transformation of the French judicial system.
On January 15th 2018 a plan for the radical transformation of the French judicial system was announced (the "Grands chantiers de la justice"), based on 5 key areas, including a plan for digital transformation.
On January 15th 2018, the conclusions of the "Grands chantiers de la justice" (launched on October 5th and 6th 2017 by the Prime Minister and the Minister of Justice) were presented in light of the 2018-2022 Justice Programming Act and the simplification of Civil and Criminal Justice Bills expected in the spring of 2018.
This presentation detailed plans to radically transform the French judiciary system, in consultation with legal practitioners, based on 5 major areas:
Several options for reform were outlined, with an emphasis on the digital transformation including: promoting digital mediation, creating single digital files and moving to paper free proceedings in both the criminal and civil field.
The conclusions will be analyzed in the light of (i) the report on open data for judicial decisions, under the direction of Loïc Cadiet, submitted to the Ministry of Justice on January 9th 2018 (the "Cadiet Report"); and (ii) developments in artificial intelligence.
The suggestions made by the "Cadiet Report" in respect of open data for judicial decisions should provide a more reliable and predictable knowledge of judicial decisions assisting companies based in France by improving legal certainty.
The current scope of open data for judicial decisions represents only 1% of the volume targeted by the French Digital Republic Act voted on October 7th (its implementation decree is yet to be published). Making judicial decisions openly available is not without difficulties, it must be done in a manner which respects the delicate balance between open data, which provides predictability, and the protection of business secrecy, crucial for the companies involved.
On March 9th 2018, the Minister of Justice reiterated the government willingness to improve and simplify criminal and civil procedure via digital transformation.
In respect of criminal procedure and the meaning and effectiveness of penalties, the preferred options are the simplification of investigation proceedings, alternative proceedings to prosecution and trial before the Assize court, as well as a better enforcement of penalties, the development of alternative penalties and simplification of penalties.
On March 9th 2018, the Minister of Justice announced the creation of district criminal courts without a jury.
As for the improvement and the simplification of civil procedure – which was partially reformed several times recently – the report suggests simplifying and modernizing civil procedure before first degree jurisdictions, which is the entry point into Justice. Preferred options are alternative dispute mechanisms, the creation of a sole and refocused judicial court, the creation of a single writ of summons, enhanced role of attorneys and the generalization of provisional enforcement.
The report recommends territorial reorganization of jurisdictions in this respect.
On March 9th, the Minister of Justice announced an adaptation of the territorial organization rather than a reorganization of jurisdictions.
It remains to be seen whether these « challenges », announced by the Chantiers de la justice, open the way for further in-depth reforms or whether they are just aimed to provide consistency with the reforms which have recently come into force?
The plan for the radical transformation of the French judicial system announced on January 15th 2018 is the first step followed by the main lines unveiled on March 9th 2018. The simplification of Civil and Criminal Justice Bills is expected in the spring of 2018 in light of the 2018-2022 Justice Programming Act.
Further information are available on the following links:
http://www.justice.gouv.fr/la-garde-des-sceaux-10016/voeux-de-la-ministre-et-restitution-des-chantiers-de-la-justice-31181.html
http://www.justice.gouv.fr/publications-10047/rapports-thematiques-10049/remise-du-rapport-sur-lopen-data-des decisions-de-justice-31165.html
http://www.justice.gouv.fr/art_pix/dp_chantiers_justice_20180308.pdf
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© 2018 White & Case LLP
In a judgment delivered last month, the English Court of Appeal considered the circumstances under which completion certificates under a PFI contract could be set aside for "manifest error".
The concept of "manifest error" is sometimes used in construction contracts and expert determination agreements as one of the limited bases for setting aside an otherwise "final and binding" certificate or determination.
The recent English Court of Appeal decision in Amey Birmingham Highways Ltd v Birmingham City Council [2018] EWCA Civ 264 examined the issue of whether four completion certificates issued by the independent certifier under a PFI contract could be set aside on the basis of "manifest error".
In May 2010, Birmingham City Council ("BCC") entered into a contract with Amey Birmingham Highways Ltd ("Amey") relating to the rehabilitation, maintenance, management and operation of the roads and street lighting network in Birmingham for a 25 year period pursuant to the government's private finance initiative (the "Contract"). This project was described as the largest government highways sector PFI contract in the UK, with a total value of £2.7 billion.
The issue in dispute concerned data in a computer model of Birmingham's road network which fed into a computer programme that identified the maintenance works which Amey then had to undertake.
BCC challenged the independent certifier's approach to certification.
Clause 13.5 of the Contract provided that:
"As between the Parties the decision of the Independent Certifier to issue any Certificate of Completion, Certificate of Partial Completion or Certificate of Non-Completion at any time shall, in the absence of fraud or manifest error, be final and binding on the Parties but without prejudice to the right of either Party to make a claim under the Independent Certifier's Appointment." [Emphasis added]
One of the principal issues before the English Court of Appeal was whether milestone certificates 6 to 9 could be set aside for "manifest error", as they were issued based upon erroneous default data, rather than accurate survey data as required by the terms of the Contract.
Citing earlier case law, the Court of Appeal held that a "manifest error" in this context is "one that is obvious or easily demonstrable without extensive investigation".
The court held that milestone certificates 6, 7, 8 and 9 should be set aside for "manifest error", as these milestone certificates were issued based upon erroneous default data rather than accurate survey data as required by the Contract.
"Manifest error" does not represent a generally available legal ground for attacking an otherwise "final and binding" certificate or determination. It therefore needs to be written into a contract as a basis for invalidating a certificate or determination.
Where a contract does provide for a certificate to be final and binding except in the case of "manifest error", Amey v BCC confirms that a "plain and obvious" mistake will need to be established in order to challenge such certification.
There exists a tension between "oversights and blunders so obvious as to admit no difference of opinion", which are regarded as "manifest errors", and "errors of judgment" which are not so regarded unless they amount to gross negligence. Accordingly, if a certifier has relied upon the correct information and procedure in determining whether a milestone has been achieved, but has made an error of judgment as to whether a milestone has been achieved, in the absence of fraud, bad faith or gross negligence on the part of the certifier, the error may well be incapable of challenge unless a challenge is otherwise permitted by the particular contract. No doubt we will be seeing more cases in the future involving arguments over whether an error was a "manifest error", or something of a different character.
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© 2018 White & Case LLP
Global law firm White & Case LLP has advised Oaktree Capital Management, a leading global alternative investment management firm, on its sale of the SACO property portfolio, one of the UK's leading providers of serviced apartments with an extensive network of properties around the world, to Brookfield Asset Management.
"The mixture of operational and development assets in the SACO portfolio made this a particularly complex deal, ideally suited to our combination of leading private equity and real estate capabilities," said White & Case partner Richard Jones, who led the Firm's deal team.
The White & Case team in London which advised on the transaction was led by partner Richard Jones and included partners James Dodsworth, James Johnson and Michael Wistow, and associates James Pullen, Kasit Rochanakorn, Hillary Roberts, Helen Levendi, Paul Harrington, David Persaud, Kate Russell and Victoria Sharp.
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In the recent case of ICE Architects Ltd v Empowering People Inspiring Communities [2018] EWHC 281 (QB), the English High Court considered whether the wording of the payment provisions in a contract rebutted the presumption that a cause of action in respect of payment for work and services arises when the work and services have been completed.
The law prescribing limitation periods in the United Kingdom is set out in the Limitation Act 1980 (the "Limitation Act"), which requires that a claim must be brought within the prescribed time period from the date on which the cause of action accrued, to avoid the claim being time-barred. For example, section 5 of the Limitation Act provides a limitation period of six years for actions in respect of "simple" contracts (i.e. contracts other than in the form of a deed).
In an action for payment for works and services, the cause of action arises on completion of the work, unless the parties have agreed otherwise. In the case of ICE Architects Ltd v Empowering People Inspiring Communities, which was a simple contract, the central question was whether the default position had been displaced by the terms of the contract.
The Respondent ("EPIC") appointed the Appellant ("ICE") by letter on 10 July 2007 as the architects for a housing project being developed by EPIC. The letter included the following payment provision:
"You [ICE] will invoice EPIC on a monthly basis for work completed to date… EPIC Ltd will endeavour to make payment within 30 days of receipt (unless otherwise stated)."
In April 2009, ICE issued an invoice for its services provided in 2007 under the terms of the letter. In May 2015, ICE brought civil proceedings against EPIC for the balance of the invoiced amount. In its defence, EPIC argued that ICE's claim was time-barred pursuant to section 5 of the Limitation Act. ICE argued that the cause of action did not accrue until 30 days after receipt of the invoice because this is what had been agreed in the parties’ payment provisions. The court dismissed ICE's arguments and ICE appealed the decision.
The Court dismissed the appeal and held, amongst other things, that:
"who does work for another person at his request on the terms that he is to be paid for it, unless there is some special term of the agreement to the contrary, his right to payment arises as soon as the work is done."
"clear words would normally be required before a contract should be held to give a potential or actual creditor complete control over when time starts to run against him."
The Court has confirmed that the limitation period of six years in a cause of action for payment for work and services under a simple contract commences from when the work and services were completed and not from the date of invoicing. However, in the wider world of contracting there are a number of other possibilities when the limitation period commences.
For example, a contractor's entitlement to payment may, by an express contractual provision, be made conditional upon the contract administrator issuing a certificate of the amount that the contractor is entitled to be paid. Money will, therefore, be due to the contractor because a certificate has been issued and not because the contractor has performed work that may require the contract administrator to issue a payment certificate. A contractor's cause of action will, in such cases, arise when the certificate of the contract administrator is given or ought to have been given.
Further, there may be two causes of action and two limitation periods where a contract contemplates a contractor being paid on an interim basis, as relevant work is performed, and on completion. The first is the limitation period that commences upon the contractor becoming entitled to an interim payment, and the second is the limitation period that commences upon the contractor becoming entitled to a final payment. Both relate to the performance of one tranche of work, against which the contractor is entitled to a single, maximum amount.
The decision in ICE v EPIC is a timely reminder of the need to consider carefully the application of limitation periods when negotiating contracts and when a dispute arises. In construction contracts, the position is often more complex, as the contractual payment provisions may influence when the cause of action accrued, and consequently when the limitation period has commenced.
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Global law firm White & Case LLP has advised Nordic Capital Fund IX (Nordic Capital) on the acquisition of Ober Scharrer Gruppe GmbH (OSG), one of Germany's leading providers of ophthalmology products.
The seller is Palamon Capital Partners, a London-based private equity firm. The parties have agreed not to disclose financial details. The transaction is subject to approval by the relevant authorities.
Nordic Capital is a leading healthcare investor. With the acquisition of OSG, it is further expanding its portfolio in the healthcare sector in German-speaking countries. Since inception, Nordic Capital Funds has invested in more than 20 healthcare platforms in Europe and the USA.
OSG was established in Fuerth in 1982 and is Germany's largest provider of treatments for major causes of blindness and visual impairment, as well as non-invasive treatments and diagnosis of eye disorders. The group currently employs 900 people in around 80 clinics in Germany.
The White & Case team which advised on the transaction was led by partner Stefan Koch (Frankfurt) and included partner Hendrik Roehricht (Frankfurt) and associates Tomislav Vrabec, Hugo Schwarz Leite, Sebastian Brenner (all Frankfurt), as well as partners Axel Schulz (Brüssels), Tim Arndt (Frankfurt) and Matthias Kiesewetter (Hamburg), local partner Matthias Bochum (Hamburg), counsel Katrin Ruebsamen (Berlin) and associates Paul Kohlhaas, Anne-Sophie von Koester, Sandra D'Ascenzo (all Frankfurt), Sebastian Stuetze, Reinhard Sucker and Julia Cornelius (all Hamburg).
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In February 2018, the first Conventions Judiciaire d'Intérêt Public ("CJIPs") – or French Deferred Prosecution Agreements ("DPAs") – were entered into for corruption charges between the Public Prosecutor's Office of Nanterre and two French companies. Companies should be aware of the importance of initiating a dialogue with French authorities and anticipating the controls undertaken by the French Anticorruption Agency (the "AFA").
Facts
In July 2011, the Chief Security Officer of Electricité de France, a French partly state-owned company, revealed to the French police that one of its employees was requesting commissions in exchange for the allocation or retention of public contracts. The company's security services themselves had been provided the information through a third-party whistleblower.
The Prosecutors of Nanterre initiated a preliminary enquiry in November 2011, which quickly thereafter led to the case being referred to a French investigative judge for criminal investigation. Following an undercover operation conducted in February 2012, the employee of the partly state-owned company was arrested and formally put under criminal investigation for charges of "passive" corruption (i.e. demanding or accepting a bribe). Subsequently, the investigation established that certain French companies of a relatively small or medium size, including Kaeffer Wanner ("KW") and Set Environnement ("SE"), agreed to pay bribes to this employee to keep their contracts for the maintenance of thermal power stations. In particular, KW admitted that its employees created an elaborate scheme to finance the bribes, by issuing fake invoices from foreign companies and lodging fraudulent expenses, which enabled them to pay several hundreds of thousands of euros in cash to the corrupt employee between 2004 and 2011.
Procedure
It should be recalled that a CJIP can be reached either during a preliminary enquiry (i.e. before the initiation of a formal prosecution) or during a criminal investigation conducted by an investigating magistrate (i.e. once a formal prosecution has been initiated). The latter option is only available when the legal entity placed under investigation acknowledges its liability for the charges brought against it, as well as the legal qualification attached to the charges. The two recent CJIPs were reached under this second procedure, which required the two companies to acknowledge their liability for the acts of "active" corruption (i.e. offering or conceding a bribe).
The negotiations allegedly started out with KW and SE approaching the French prosecutors after the start of the criminal investigation. The CJIPs were concluded on February 14 and 15, 2018, and approved by the Vice President of the High Court of Nanterre on February 23, 2018. The CJIPs and the High Court's decisions became binding and public on Mach 7, 2018 after a ten-day opt-out period left to the two companies.
Financial penalties
Both KW and SE were fined in relation to the amount of benefit resulting from the payment of the bribes, which was calculated based on their respective gross operating surplus and the cap of 30% of average annual turnover over the previous three years (2014-2016), as required by the Sapin II Law.
It is worth noting that the calculation of the fines was adjusted based on several factors:
As a result, a fine of €800,000 was imposed on SE (€680,000 as disgorgement of illegal profit and €120,000 as an additional penalty), and a fine of €2,710,000 on KW (€3,3 million calculated as disgorgement of illegal profits having been reduced on the basis of mitigating factors, although there is no indication of the specific credits given for each factor).
Compliance programmes
SE was ordered to implement an anti-corruption compliance programme under a two-year monitorship of the AFA. As KW had already implemented a compliance programme, it was imposed an eighteen months-monitoring of this programme by the AFA. The costs of such monitorships is to be borne by the companies and will amount up to €290,000 for KW and up to €200,000 for SE.
Damages to the victim
The partly state-owned company had formally joined the prosecution as a legal entity with the status of partie civile. It was awarded €30,000 in both cases, to be paid by KW and SE within a month after the CJIPs became binding. Despite the lack of public information, one can assume that the investigation relating to the behavior of the corrupt employee still continues and may result in a trial.
The Sapin II Law, adopted on December 9, 2016 introduced a number of changes to the French anti-corruption framework, one of the most consequential being the CJIP procedure. The first CJIP was concluded by the French National Financial Prosecutor's Office with a major bank in November 2017 in relation to the laundering of proceeds from tax fraud. These two recent CJIPs represent a major breakthrough as they are the first negotiated outcomes reached in the context of an investigation for corruption, which lay behind the adoption of the Sapin II Law.
Cooperation and voluntary disclosure
These two CJIPs shed further light on the weight that the French prosecutors wish to give to cooperation by legal entities eager to negotiate a CJIP in the context of a criminal investigation. The first settlement of November 2017 underlined a lack of voluntary disclosure of facts to the French criminal authorities, and a lack of acknowledgement of criminal liability during the course of the investigation. In the two recent CJIPs, the French prosecutors go a step further by expressly confirming their willingness to sanction companies with lower fines if they agree to cooperate with the French authorities during the criminal investigation. The CJIPs do not specifically list the absence of disclosure of facts as an aggravating factor, but seem to suggest that adequate cooperation by the company could mitigate the lack of self-reporting.
Consequently, these cases have laid down the first milestones of what could become a French standard of cooperation designed for companies interacting with French enforcement authorities. Neither the French code of criminal procedures, nor the Sapin II Law, contain guidelines related to cooperation and voluntary disclosure similar to those described in the U.S. Principles of Federal Prosecutions of Business Organizations and the revised Corporate Enforcement Policy for the U.S. Foreign Corrupt Practices Act, or the U.K. DPA Code of Practice. One can expect the French Prosecutors' offices, or the Criminal Division of the French Ministry of Justice, to issue guidance in the future, either orally or through written guidelines, so as to further clarify the French rules.
Prosecution of individuals
Separate enforcement actions against managers and employees of KW and SE are explicitly mentioned in the two CJIPs. For the future, this confirms that French prosecutors will be engaging in parallel enforcement actions against individuals, although the CJIP will be silent on any potential individual culpability.
Compliance programmes and AFA's control
The importance given to the anti-corruption compliance program in the calculation of the fine, notably the whistleblowing mechanism as well as the disciplinary and remedial measures, shows that French and foreign companies subject to the Sapin II Law need to take further active steps to comply with the requirements set forth in the law. In particular, companies should anticipate controls undertaken by the AFA by making sure that their compliance programme runs effectively, procedures are ready and can be swiftly communicated to the AFA, and employees are properly trained for on-site inspections.
If companies discover any misconduct or any potential criminal offence in the context of their compliance programmes, they would be well advised to carefully assess the situation before eventually starting a dialogue with the AFA and/or initiating a disclosure process with French judicial authorities.
Opportunities for future CJIPs
These two recent CJIPs demonstrate that the French enforcement authorities are effectively starting to enter into CJIP negotiations in relation to acts of corruption that took place before the adoption of the Sapin II Law (i.e. prior to December 2016), even going back before the increase in penalties for corruption (i.e. prior to December 2013). This represents a strong signal given to companies willing to resolve pending charges or clean up internal shortcomings, irrespective of their size or location, that they will be welcome to approach French prosecutors with this objective in mind.
In the context of a surge in cross-border and multi-jurisdictional investigations, the CJIP offers wider strategic choices to French and foreign companies, which require them to thoroughly assess their risks and prepare a tailored defence.
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