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Eurozone crisis
How could it impact your business?
The Eurozone crisis may affect your business in different ways. In this Legal Alert we give an outline of potential issues that we believe could be relevant for e.g. M&A, payment obligations and specific contractual clauses. We have approached these issues from the perspective of doing business, or planning to do business, with foreign parties that run a higher than average risk of being "hit" by the current economic situation.
What if the Eurozone breaks up?
Politicians and news media are openly speculating about a possible exit of one or several countries from the Eurozone. Effective policy measures may still avert this scenario. Nonetheless, it is only sensible for multinational companies to continue planning for the substantial impact that a Eurozone break-up may have. Planning should be aimed at ensuring liquidity, mapping risks to the company and mitigating such risks where possible.
In this this Legal Alert, we give an outline from a legal perspective of potential issues that we think are relevant in this respect.
Corporate / Financial Markets
European Commission proposes new rules on market manipulation and insider dealing
The European Commission has published a proposal for a regulation to replace the Market Abuse Directive. The new regulation is designed to strengthen supervisors' investigative and sanction levying powers, to help fight market abuse in the commodities and derivatives markets, and promote that regulation keeps up with market developments. The key changes are:
- The scope of the rules will be extended to financial instruments that are only traded on new platforms such as multilateral trading facilities and organised trading facilities, and also to over-the-counter trade.
- The proposal clarifies which high-frequency trading strategies (HFT) fall under the prohibition against market manipulation.
- The regulation extends the options of reporting suspect transactions to suspect non-executed orders and OTC transactions. Supervisors will have the power to require telephone or data traffic records from telecommunications operators or inspect private documents if there is a reasonable suspicion of insider dealing or market manipulation. Supervisors will also have the power to enter private buildings, provided that they have prior judicial authorisation.
- The regulation obliges the member states to offer protection to whistle-blowers and sets common rules to encourage reporting of market abuse.
- "Attempt at market manipulation" is introduced as a new criminal offence.
- The new rules also apply to trade in emission allowances.
Finally, the Commission has published a proposal for a directive obliging member states to provide for criminal sanctions for insider dealing and market manipulation. The directive contains definitions of insider dealing and market manipulation. When committed intentionally, both should be regarded as criminal conduct. The member states have to ensure that the criminal sanctions they impose are effective and proportionate and provide an adequate deterrent. In addition, criminal sanctions will have to be imposed for inciting, aiding and abetting market abuse or attempted market abuse.
Proposed modernisation of Transparency Directive
The European Commission has published proposals for amendment of the Transparency Directive. The main changes are:
- The requirement to publish quarterly financial reports will be abolished for all listed companies. This should lead to cost-savings and discourage short-termism on financial markets.
- Investors will have to notify all financial instruments of similar economic effect as holdings of shares. This should prevent them from secretly building a controlling stake in a listed company ("hidden ownership"). According to the Commission, such practices can give rise to market abuse, low levels of investor confidence and misalignment of investor intentions.
- A system of country-by-country reporting (CBCR) will be introduced to increase transparency of payments (taxes, royalties and bonuses) made by oil, gas, mining and logging industries to their host governments worldwide. The current system is based on a single set of information at a global level and does not show a company's financial impact in each host country. The new system would apply to EU privately owned large companies, or companies listed in the EU, that are active in the extraction or logging industry.
- The new rules will also apply to trade in emission allowances.
The Transparency Directive covers only listed companies. As some of the proposed amendments are relevant to non-listed companies, the European Commission has proposed corresponding amendments of the Accounting Directives.
European Commission makes MiFID II proposals
The European Commission has put forward proposals to revise the Markets in Financial Instruments Directive (MiFID). The proposals consist of a directive and a regulation. The key elements are:
- Organised Trading Facilities (OFTs) will be brought within the regulatory framework of the MiFID
- New safeguards are introduced for algorithmic and high frequency trading ("flash trading").
- The transparency of trading activities in equity markets will be improved; exemptions would only be allowed in certain circumstances. The new rules also introduce a transparency regime for trade in non-equities markets.
- Supervisors will be able to ban specific products, services or practices if they jeopardise investor protection, financial stability or the orderly functioning of the markets. There will be stronger supervision of commodity derivatives markets.
- Stricter requirements will be set for portfolio management, investment advice and the offer of complex financial products. Independent advisers and portfolio managers will be prohibited from making or receiving third-party payments or other monetary gains. Rules on corporate governance and managers' responsibility are introduced for all investment firms.
- The revised MiFID will also apply to the trade in emission allowances.
Tax
2012 Dutch Tax Bill
On 17 November, the Second Chamber of Dutch Parliament adopted the 2012 Tax Bill. The Tax Bill contains the following elements that are of particular relevance to foreign investors and other parties involved in M&A and other investments activities in the Netherlands:
- The deductibility of interest on acquisition debt, including debt owed to third parties, attracted to acquire a Dutch target company that will be included in a consolidated tax group (fiscal unity) with a Dutch holding company without any taxable activities, will be restricted if and to the extent:
- the acquisition-debt-to-purchase-price ratio exceeds the 'acceptable' ratio, which is 60% in the year of consolidation, reduced by 5%-points annually over the course of 7 years, down to 25% in year 8; and
- the annual amount of interest exceeds EUR 1 M.
- The restriction primarily affects domestic or foreign private equity funds and foreign corporates that acquire Dutch companies.
- Dutch cooperatives will be subject to Dutch dividend withholding tax in certain cases considered to be abusive. This could affect certain existing and future cross-border investment structures involving Dutch cooperatives.
- The conditions under which non-resident corporate investors with a substantial interest (≥5%) in a Dutch company are subject to Dutch corporate income tax will be further restricted and will apply to abusive cases only.
- Profits and losses attributable to foreign permanent establishments will be almost fully ring-fenced. This primarily affects Dutch financial institutions and Dutch oil or construction companies.
These measures will enter into force on 1 January 2012 following their adoption by the First Chamber of Dutch Parliament. The new restrictions on the deduction of interest will apply only to Dutch target companies included in a fiscal unity on or after 15 November 2011.
Click here to read more on these new rules.
Netherlands enters into new tax treaties with Hong Kong and Japan
New Hong Kong - Netherlands tax treaty to enter into force in 2012
The new double taxation treaty between Hong Kong SAR and the Netherlands signed in 2010 will take effect in the Netherlands from 1 January 2012 and in Hong Kong from 1 April 2012. The treaty is expected to strengthen the economic relations between these jurisdictions and will offer new tax-efficient structuring opportunities for companies in the Netherlands, Hong Kong and Mainland China.
Click here to read more in English and click here to read more in Chinese on the new Hong Kong - Netherlands tax treaty
New Japan - Netherlands tax treaty to enter into force in 2012
The new double taxation treaty between Japan and the Netherlands signed in 2010 has been ratified by the Netherlands. Following ratification by Japan before the end of November 2011, the treaty will take effect in the Netherlands and Japan from 1 January 2012. The treaty increases opportunities for tax-efficient cross-border business activities between Japan and the Netherlands, as compared to the current treaty of 1970. However, it severely restricts the possibility for Dutch companies held by non-residents to claim protection.
Competition / Anti-trust
EU General Court annuls antitrust fine imposed on Dutch packaging producer Stempher
On 16 November 2011, the General Court ruled on nine appeals against the Commission decision to impose a total of EUR 290 million in fines on 16 firms for their alleged participation in a cartel in the plastic industrial bags sector. The Court reduced the fine on Low & Bonar and its subsidiary Bonar Technical Fabrics from EUR 12.24 million to EUR 9.18 million and dismissed the other seven appeals. Stempher B.V. and Koninklijke Verpakkingsindustrie Stempher C.V. was the only one to see not only its fine annulled by the Court, but also the entire Commission decision in regard of it.
Click here to read more.
Intellectual Property
A different perspective on Samsung v. Apple: Guidance on enforcing FRAND pledged patents in the Netherlands
On Friday 14 October 2011, a Dutch court handed down an important decision in the ongoing, worldwide patent dispute between Apple and Samsung. The preliminary relief judge of the District Court of The Hague denied Samsung's claim for a preliminary (patent) injunction against Apple, accepting Apple's 'FRAND defence'. Although several sources have suggested otherwise, this ruling does not imply that it is no longer possible to obtain an injunction based on 'FRAND pledged' standard essential patents in the Netherlands. On the contrary, the decision provides guidance as to the approach that a patent holder should take in order to ensure that it can successfully enforce its FRAND pledged patents in (preliminary relief) court proceedings. The Court only found that Samsung had not complied with this approach.
Click here to read more.
Pharma: Supplementary Protection Certificates for combination products conditionally possible
The European Court of Justice ruled on 24 November 2011 that a marketing authorisation (MA) granted for a multi-disease vaccine of which not all active ingredients fall within the basic patent, does not prevent the granting of a supplementary protection certificate (SPC) for an active ingredient specified in the wording of the claims of the basic patent. Disharmony existed in Europe regarding the applicability of Regulation 469/2009 to "combination products". This ruling now means that innovative pharmaceutical companies can benefit from SPCs even when the patent does not protect the combination product for which an MA was granted. However, an SPC cannot be granted for the combination product as such but only for the patented part of the combination product.
Click here to read more.
European Court of Justice: Use of well-known trademarks as AdWords
On Thursday 22 September 2011, the European Court of Justice handed down its long-awaited decision in Interflora v Marks & Spencer. This case deals with the use of trademarks in keyword advertising on the internet, specifically the use of well-known trademarks as AdWords.
The ECJ gave an unexpectedly broad interpretation the use of well-known trademarks as AdWords in internet referencing services. Based on this decision, competitors will be allowed to use trademarks with a reputation of a competitor as a keyword – and therefore benefit from the reputation – even if the competitor only offers an alternative product and no comparison whatsoever is made with the products or services sold under the well-known trademark.
On the other hand there is some good news for trademark proprietors. Every other use (use for other goods and services) of a well-known trademark as an AdWord will in principle be seen as taking unfair advantage of that trademark. The ECJ furthermore recognises that the use of a well-known trademark as an AdWord might lead to the dilution of that well-known trademark, although the use of a well-known trademark as an AdWord by only one competitor will, however, not be enough to establish dilution.
Click here to read more.
International Arbitration
ICC revises rules of arbitration
The International Chamber of Commerce (ICC) has published revised rules of arbitration which will enter into force as from January 2012 and will apply to ICC proceedings commenced after that date. The 2012 Rules of Arbitration will replace the current rules of arbitration that have been in force since 1998.
The 2012 Rules of Arbitration can be found on the website of the ICC: http://www.iccwbo.org.
Under the 2012 Rules of Arbitration it is possible to appoint an emergency arbitrator before an arbitral tribunal is constituted. Further, new provisions are included that enable parties and arbitrators to manage ICC arbitral proceedings more effectively. Also the rules regarding joinder and consolidation of proceedings are amended.
Click here to read more about the most relevant changes.
Energy & Environment
More transparency in EU wholesale energy markets
As mentioned in a press release of the Council of 10 October 2011, the Council adopted the EU Regulation on energy market integrity and transparency (REMIT) on the same day, following a first-reading agreement reached by the European Parliament.
The REMIT is part of the implementation of the third liberalisation package. Its aim is to protect end consumers and to achieve this, a transparent market as well as clear market rules are needed for energy traders. The Regulation consists of rules to prevent market manipulation and insider trading on wholesale energy markets in the EU as well as establishing requirements to publish inside information. Under the REMIT, ACER (the 'Agency for the Cooperation of Energy Regulators') has been given new responsibilities such as monitoring trading activities in wholesale energy markets in close collaboration with national regulatory authorities. ACER will also establish a European register of market participants based on information provided by the national regulatory authorities.
The REMIT has been published on 8 December 2011 in the Official Journal of the European Union. It will enter into force on 28 December 2011 and is binding in its entirety and directly applicable in all Member States.
Click here for more information on REMIT (Regulation on energy market integrity and transparency)
Recent developments in European energy infrastructure
The European Commission has adopted a plan for EUR 50 billion to improve European networks. The plan was presented as the "Connecting Europe Facility" (CEF) and will finance projects which fill the missing links in Europe's energy, transport and digital backbone as well as promoting a greener economy.
EUR 9.1 billion (of the EUR 50 billion worth of investments) will be allocated to trans-European energy infrastructure for the period 2014 - 2020 in order to help meet the EU 2020 energy and climate objectives. The CEF implements commitments made by the Commission last year. These commitments include a proposal for a regulation on guidelines for trans-European energy infrastructure. The proposed regulation will grant priority to 12 strategic trans-European energy infrastructures (corridors and areas) as well as set rules to identify certain projects of common interest (PCIs). Compared with other projects, these PCIs will go through a special permit procedure (faster, easier and more transparent) and be supervised by a single competent authority as designated by each Member State. EU financial means are available for these PCIs. EU funding will be supported by the EUR 9.1 billion out of the EUR 50 billion boost by the CEF.
Click here for more information on the Energy Infrastructure for Europe 2020