Difficult legal issues arise when computer software purports to enter into a contract. Electronic contracting is not a new concept. However, the rise of artificial intelligence and smart contracting means that these issues will become more important. They therefore deserve analysis. In this note, we consider two questions around capacity to contract and reversibility of performance which arise where two computer programs contract directly with each other, in circumstances where there is no separate written natural language contract and where there is no overarching contractual framework governing the interaction. While this is not a common scenario at present, it is likely to be seen more frequently as the use of electronic contracting becomes more common. These issues arise whether or not DLT is a feature of the underlying platform or software.
Blockchain and distributed ledger technology (DLT) have the potential to transform how securities are issued, traded and settled. However, the adoption of technology in the capital markets has not matched take-up in other areas of finance and trade and, so far, is used for enhancing existing elements of theprocess rather than replacing it with something new. In this briefing, we explore the reasons for this and share our experience of some of the developments in this area and other uses of technology in the capital markets.
Special purpose acquisition companies (SPACS) have been one of the hottest asset classes in the United States equity market, with record numbers launched in the first quarter of 2021. These "blank cheque" companies are essentially a shell company formed by investors to raise money through an IPO without a specific acquisition target having been identified. In this guide, we explore how SPACs work and the benefits and risks they present.
If Scotland were to vote for independence from the rest of the UK, Scotland would need to enter new cross-border tax arrangements. Scotland also wants to join the EU, which could have a profound impact on cross-border trade between Scotland and the rest of the United Kingdom (rUK), including a requirement for duties and a border infrastructure, as well as significant implications for financial services.
The European Commission has published a proposal for a Regulation on a Carbon Border Adjustment Mechanism (CBAM) to deal with the long-standing problem of 'carbon leakage' that impedes the EU's decarbonisation plans. It is part of the Commission's 'Fit for 55' initiative published today that will help it achieve the EU's new target for a 55% reduction in greenhouse gas emissions by 2030 (against 1990 levels). In this briefing we answer 10 key questions about the proposal
COP26 – the United Nations' 26th conference on climate change is expected to focus not only on the global climate crisis, but also to highlight the interconnected loss of biodiversity. These issues will have a huge impact on all of us – including businesses. At a recent Clifford Chance event, a panel of experts discussed nature-based solutions and the crucial role nature plays in combating climate change and sustaining national economies, as well as examining how state and private sector nature-based solutions could be financed.
Activist shareholders and NGOs targeting governments and businesses in relation to climate change are increasingly turning to litigation.
In this briefing, we share our experience to demystify NFTs and consider some of the key risks, and how the tokens are regulated across some key financial centres.
ESG: Dutch Court's Landmark Decision on Climate Change, Human Rights and Corporate Duties (May 2021)
In a landmark judgement, Royal Dutch Shell (RDS) has been ordered by the District Court of The Hague to reduce it CO2 emissions by 45% by 2030, as compared with 2019 levels. The case was brought by the Dutch branch of Friends of the Earth (Milieudefensie), a number of other NGO's, and over 17,000 individual claimants. The ruling sets a precedent for other companies that could face similar lawsuits.
The UK government, like many others around the world, is focusing on the perceived threat of hostile investors owning or controlling critical businesses or infrastructure and, as a result, enacted the National Security and Investment Act (NSI) in May 2021. When the regime becomes effective later this year, it will give the UK government very broad powers to block inward investment on national security grounds. In this briefing we assess the impact of the new Act on a wide variety of investments and financing transactions.
The development of sustainable finance continues to evolve across the Middle East – a region more readily associated with conventional energy resources such as oil and gas. Governments around the world continue to focus on climate policies and transition targets and the spotlight remains on green bonds and sustainable finance.
ESG: European Commission Finalises Taxonomy 'Technical Screening Criteria' For Climate Mitigation And Adaptation (May 2021)
The European Commission has finalised legislation containing the Technical Screening Criteria (TSC) for climate mitigation and adaptation activities supporting the Sustainable Finance Taxonomy Regulation. While the Commission has broadly retained the approach taken in its November 2020 draft, in some cases its approach to the details of the criteria has differed. This briefing looks at the finalised position.
Financial Institutions, Financial Investors and the Biden Administration's Policy Priorities (May 2021)
In this publication, Clifford Chance experts look at the interplay between climate priorities and financial regulation; corporate disclosure of climate risks; the rapid growth of retail and institutional demand for environmental, social and governance (ESG) investment strategies; and the renewed urgency of efforts to address the racial wealth gap in financial services.
The European Commission has introduced its proposal for the first-ever harmonised legal framework on artificial intelligence (AI), confirming the EU's role and ambition as a pioneer in the regulation of tech. We consider what this means for businesses, as well as how global regulators are responding. The AI Act, which was released on 21 April 2021, attempts to strike a difficult balance between two key objectives: promoting innovation and harnessing the benefits of AI, on the one hand; and addressing key risks and fears AI gives rise to, on the other. In so doing, it seeks to address some of the main concerns levelled at a general, horizontal framework, favouring a riskbased approach and taking account of specific sectoral issues.
The European Commission has published a proposal for a Corporate Sustainability Reporting Directive (CSRD) as part of a package of measures aiming to direct capital flows towards sustainable activities. Many organisations are already required to carry out non-financial reporting under the Non-Financial Reporting Directive (NFRD). However, current requirements lack detail so levels and standards of reporting vary enormously. As well as making it difficult for organisations to determine what information to report, it makes it almost impossible for investors and stakeholders to compare performance between different organisations. The CSRD also proposes amendments to existing requirements under the Transparency Directive, the Audit Directive and the Audit Regulation.
With COP26 (the United Nations climate change talks) fast approaching, the U.S. has announced its new Nationally Determined Contribution (NDC) under the landmark 2015 Paris Agreement, pledging to reduce greenhouse gas emissions by 50-52% below 2005 levels by 2030. The announcement was made at the President Biden's Leaders Summit on Climate, a virtual gathering of world leaders and representatives of civil society and the private sector, aimed at raising global ambition on climate action.
Cross-border M&A transactions can be far more complex than purely domestic transactions. With advanced planning and careful consideration of relevant issues, however, it is almost always possible to navigate this complexity successfully and achieve the parties' commercial objectives. Here is an overview of some of the key issues that should be considered by non-U.S. acquirers contemplating acquisitions or other strategic investments in the United States.
Tying executive remuneration and broader pay conditions to environmental, social and governance (ESG) measures continues to be a hot topic as the 2020-21 AGM and shareholder meeting season demonstrates. Here's what you need to know about the current status of ESG and remuneration globally.
In this extract from a recent Clifford Chance webinar, we explore the latest trends in US, EU and UK policy on economic sanctions and trade controls, including compliance and enforcement risks and potential changes under the Biden Administration.
This publication explores the changing discourse of leadership (both political and corporate), how such discourse presents opportunities in finance, and how legislative action may force the hand of holdouts in industry, all with a view of producing tangible milestones to measure progress of ESG initiatives.
2021 will be an important year in international trade. States continue to grapple with the COVID-19 pandemic and the resulting economic downturn. A new US administration has just taken office. Questions remain about tensions in the US-China relationship. High on the agenda are also digital services trade, trade and the environment, and the future of multilateralism. Here are five standout trends for international trade in 2021.
Five stand out trends for Fintech in 2021
There has been a renewed focus on the payments sector and its regulation. COVID-19 and its impact on spending habits and the Wirecard scandal are two of the contributing factors. But what’s next? We explore five themes likely to drive regulatory change for payments, as well as shape the enforcement policies of global regulators over the next 12 months.
On 24 December 2020, after roller-coaster negotiations, the United Kingdom and the European Union announced they had agreed a post-Brexit "EU-UK Trade and Cooperation" Agreement.
As part of his campaign to be elected as President of the United States, Joe Biden set out an ambitious climate plan which, among other things, calls for a goal of net-zero emissions in the U.S. by 2050 and actively combating climate change. This publication outlines the implications of the Climate Plan for the U.S. and the international community under the new Biden-Harris Administration.
Security token offerings or STOs, the issuance of digital tokens using blockchain or distributed ledger technology, are increasingly being seen as an alternative to mainstream debt and equity fundraisings. An evolution of the (supposedly) unregulated initial coin offerings or ICOs, STOs are typically structured to sit within securities law frameworks. This means much greater certainty for both fundraisers and investors, resulting in enhanced liquidity.
On 31 December 2020, at the end of the Brexit transition period, UK firms will lose the passporting rights on which they currently rely to provide financial services in other EU jurisdictions. Instead, UK firms will need to consider the rules of each EU Member State to determine whether, and the extent to which, they will be able to continue providing services to clients in that jurisdiction.
True Brexit is nearly upon us, with the end of the transition period on 31 December 2020. What will this mean for the law and jurisdiction clauses in international contracts entered into after that date? In most cases, no fundamental change will be required, but the UK’s accession to the Hague Convention on Choice of Court Agreements may make exclusive jurisdiction provisions more attractive for some parties.
ISDA's IBOR Fallbacks Supplement and Protocol have been finalised and will be released on 23 October 2020. The Supplement, when it becomes effective on 25 January 2021, will implement risk-free rate fallbacks into the terms of new transactions and the Protocol will enable adhering parties to implement these fallbacks into the terms of legacy transactions. The broad scope of the amendments made by the Protocol, the range of agreements it covers and the availability of a series of templates and amendment agreements which can be used to tailor the terms of adherence, confront parties contemplating adherence with a series of major challenges.
Security token offerings, the issuance of digital tokens using blockchain or distributed ledger technology, are increasingly being seen as an alternative to mainstream debt and equity fundraisings. An evolution of the (supposedly) unregulated initial coin offerings or ICOs, security token offerings or STOs are typically structured to sit within securities law frameworks. This means much greater certainty for both fundraisers and investors, resulting in enhanced liquidity. In this report we consider how STOs are structured and some of the benefits and challenges, and explore the evolving regulatory landscape for STOs across Europe.
The payments landscape is changing rapidly. Central bank digital currencies (or CBDCs) and stablecoins have received growing attention, particularly around Facebook’s announcement of its proposed global stablecoin “Libra” in 2019 and the resulting regulatory backlash. Advocates hail them as the future for payments - an unmatched tool for financial inclusion and limiting financial crime, by linking payments to identity - while critics have concerns around regulatory standards and financial stability (in the case of global stablecoins) and whether the improvements are as impressive or distinct as supporters argue.
In the UK, regulators and the Sterling Risk Free Rate Working Group have long been urging loan market participants to transition away from using LIBOR on transactions. Whilst, to date, such transition has been challenging for the loan markets, recent publications such as conventions for the use of SONIA in the loan markets and the LMA's Rate Switch Agreement, will help to generate impetus for transition.
As the PRA and FCA launch their consultations on rule changes to reflect CRD V, pay and remuneration regulation continue to be areas of focus for financial services firms.
The discontinuation of LIBOR as an interest rate benchmark raises a number of issues for Islamic finance transactions. This briefing looks at the challenges ahead and outlines some of the potential solutions.
As of 1 January 2021, the UK Global Tariff (UKGT) will apply at the UK border to goods imported from countries with which the UK does not have a preferential trade agreement. This includes goods from major economies such as China and the US
The UK Department for International Trade (DIT) has unveiled its negotiating objectives for securing a free trade agreement with Japan. The DIT highlights textiles, agriculture, services and data exchange as key areas of focus.
In collaboration with Forbes Insights, we surveyed 300 senior c-suite executives from $1 billion+ companies on their hopes and fears for tech-driven growth*. Respondents were asked about their approach and attitude to artificial intelligence, ethics, adoption of new technologies, tech regulation, data, the impact of tech on jobs and tech expertise in their boardrooms. Their answers, together with in-depth perspective from interviews with global business leaders and our Tech Group experts can be found here.
With 2020 set to be a critical year for LIBOR transition, the infrastructure market will face some significant challenges as it transitions towards the use of risk-free rates (RFRs). We look at some of those challenges and the steps market participants should be taking now to ensure a smooth transition before the end of 2021.
The European Parliament confirmed the new class of European Commissioners with 461 votes in favour, 157 against and 89 abstentions on 27 November 2019. The new President of the European Commission, Ursula von der Leyen, and her team of European Commissioners took office on 1 December 2019 and will drive the EU’s agenda for the next five years. Ms von der Leyen, the former German defence minister, says that it will be a “geopolitical Commission,” signalling an intention to position Europe as a heavyweight on the world stage.
Financial institutions are focusing on market access in preparation for Brexit, but with the rise of deglobalisation, there is also a broader global trend towards limiting cross-border market access and tightening barriers.
We are seeing an unprecedented volume of activity in the secondary market, fuelled by record levels of fundraising by dedicated secondaries funds and an increasing desire by GPs and LPs to explore ever-evolving secondary transaction structures, designed to deliver value and liquidity solutions. Yet, the secondary market is still commonly misunderstood, owing to its inherent complexities and bespoke ‘jargon’.
What can investors who are pressing ahead with expanding their UK property portfolios or commencing developments do to Brexit-proof their commercial leases and prelet agreements for lease? The laws governing these types of agreement in the UK will not change as a result of Brexit, and (thankfully) we know from the recent Canary Wharf v EMA case that Brexit is unlikely to result in frustration of these agreements. But with continuing uncertainty around potential disruption to supply chains, currency fluctuations, and labour shortages as a result of Brexit, there are still some steps that prudent landlords and developers can take now to avoid the worst of any adverse consequences that could flow from a chaotic Brexit.
With protectionism and deglobalisation on the rise in Europe, the US and elsewhere, China, by contrast, is championing globalisation. Its financial system is still relatively closed to international access, but the Chinese government has recently taken steps to open up access to its financial markets to foreign investors, in order to seek global capital. Although it remains at a relatively early stage, legislative changes such as the new Foreign Investment Law and links to the global financial system including Shanghai-Hong Kong Stock Connect are already having an impact and China’s influence in global financial markets may grow significantly if this trend continues.
Clifford Chance experts discuss these competing forces towards and against globalisation, focusing on five areas that are driving or challenging global approaches in financial regulation.
Clifford Chance experts assess the changing regulatory landscape as the Chinese government puts quality and affordability at the centre of its healthcare policy agenda.
In July, when campaigning to lead the Conservative Party, Prime Minister Boris Johnson promised party members that he would "roll back the influence of the state" by changing public procurement rules in order to favour UK companies when bidding for billions of pounds worth of Government work and turbo-charge the advantages of the UK economy. Here we look at how such a "buy British" pledge might be implemented, the effect it may have on British companies bidding for contracts outside the UK under WTO terms and the implications that such a policy might have on the UK agreeing Free Trade Agreements.
This briefing considers the challenges for Libra in the face of the financial crime concerns that have been raised since its announcement.
Clifford Chance experts, including of Counsel Michel Petite who worked for the EU for 27 years and was legal adviser to three Commission Presidents, assess the priorities for the new von der Leyen Commission.
Parliament might have thought it was prorogued but, if so, Parliament was wrong according to the Supreme Court. Parliament has now resumed its sittings. But what impact the Supreme Court's decision will have on Brexit is more speculative.
This briefing looks at how blockchain explorer software can assist financial institutions and crypto-businesses meet their own anti‑money laundering (AML) and sanctions obligations.
Clifford Chance experts consider the potential challenges, what this means for the tech sector and whether more could be done.
This briefing examines some of the key questions around crypto-funds and the issues that can arise for fund managers in this emerging area.
Amidst a flurry of campaign promises, policy announcements and discussions of parliamentary procedure, Brexit continues to dominate the UK political agenda.
The essence of Libra is that Facebook hopes consumers across the world will spend money in a new cryptocurrency. Its value will track a basket of fiat currencies, meaning that the value of a Libra against a particular fiat currency will inevitably fluctuate. That creates a problem for consumers: each time they transact, they’ll be making a capital gain or loss. In most countries gains will be taxable, meaning consumers will have to file a detailed tax return showing all their transactions and the exchange rate at the time, and pay any tax due. This seems to us to be a significant barrier to wide adoption.
A new report by the UK Climate Change Committee has recommended that the UK toughens its climate target to net zero greenhouse gas emissions (GHG) by 2050.
Coal projects are under pressure from governments, courts, businesses and investors as the momentum to reduce the use of coal builds. This publication explores some of the action being taken by the public and private sectors and the impact on the industry.
This briefing considers insider dealing risk arising when big data constitutes inside information and the manipulation risk arising from AI and machine learning.
This article, which was first published by the International Financial Law Review, highlights the legal, ethical and reputational risk that UK financial institutions face when using AI and suggest the steps that they should take now to minimise them.
Clifford Chance experts take a bird’s eye view of fintech developments across EMEA and how regulators are responding.
Israel, with its expertise in technology such as big data analytics, artificial intelligence, blockchain and computer vision, has established itself as a global centre for fintech.