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Pinsent Masons bolsters its Trade Group in Düsseldorf

Pinsent Masons continues to expand its Competition, EU & Trade Group, with the appointment of competition law specialist, Prof. Dr. Hans Jürgen Meyer-Lindemann, as a partner in the Düsseldorf office.

Regarded as one of the leading competition practitioners in Germany, he joins from Dechert, where he was a senior partner. Hans Jürgen’s focus will be on clients within the Advanced Manufacturing & Technology (AMT) sector, including Life Sciences.

Hans Jürgen’s work includes handling high-profile merger control cases before the European Commission and national competition authorities; major cartel investigations in a variety of industries; and numerous litigation matters concerning both public and private enforcement before local and district courts, Germany’s Federal Supreme Court and the European courts.

Commenting on Hans Jürgen’s appointment, Alan Davis, Head of Competition, EU & Trade at Pinsent Masons said: “We are delighted to welcome Hans Jürgen to the Competition, EU & Trade Group. Hans Jürgen will work closely with the Head of our German Competition Team, Michael Reich in Munich. His outstanding reputation, track record and wealth of experience in German and EU competition law significantly strengthens our pan-European competition law practice advising on complex merger and anti-trust cases.”

Head of the Advanced Manufacturing & Technology (AMT) sector, Florian von Baum added: “Across the AMT sector, we are seeing more disputes with a competition law background and Hans Jürgen’s expertise means that we can support our clients as their needs develop and change. His skillset, knowledge and experience will enable us to deepen our ability to offer high quality competition law advice across the sector and I look forward to working with Hans Jürgen.”

His appointment follows the appointment of Robert Vidal, formerly head of Taylor Wessing’s UK competition team, in the Competition, EU & Trade Group in London and brings the number of partners in the Group across the UK and Germany to nine. The team is currently advising on EU, UK and German antitrust enforcement investigations in the pharmaceutical, financial services, construction and manufacturing sectors, as well as mergers and market investigations. The team is also advising on a variety of competition litigation matters, including follow-on and stand alone damages claims.

UK signs free trade agreement with South Korea

Great Britain has secured its first post-Brexit trade deal after signing an in-principle free trade agreement with South Korea.

The agreement, which International Trade Secretary Liam Fox signed with his South Korean counterpart Yoo Myung-hee in Seoul, seeks to maintain existing trade arrangements with the country after Brexit.

The Financial Times says it “comes amid growing uncertainty over bilateral trade conditions after the UK leaves the world’s single largest economic bloc”. The BBC adds that the agreement is “designed to provide stability under a no-deal Brexit”.

The Korea Times explains that there have been “concerns” that South Korean companies “may no longer enjoy the benefits” of current arrangements if the UK crashes out without a deal.

Great Britain and South Korea will largely maintain the trade terms that are in the current deal between Seoul and Brussels, which took effect in July 2011.

The Ministry of Trade, Industry and Energy said in a statement that the deal includes keeping zero-tariffs on South Korean exports such as auto parts and automobiles.

After the talks, Britain and South Korea also vowed to expand cooperation in emerging technologies such as hydrogen and nuclear energy.

Seoul’s trade minister Yoo Myung-hee said: “The deal is significant as it eased uncertainties sparked by Brexit, amid the already challenging environment for exports on the escalating trade row between Washington and Beijing.”

The two countries plan to ratify the deal before October 31st, the new deadline for Brexit.

Although the UK is South Korea’s second-largest trading partner among the EU members, it is its 18th-largest trading partner, accounting for less than 2% of South Korea’s overall trade.

Last year, South Korea’s exports to the UK were worth $6.36bn. The Asian country exports mostly cars and ships to Britain. Going the other way, the UK exports crude oil and automobiles to South Korea.

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When is the real Brexit deadline?

Less than 180 days to go and the pressure is on. Talks between the UK and the EU are at deadlock, with the intractable Irish border problem the biggest stumbling block. But here’s the catch: they must also set aside time for the deal to be reviewed and ratified by both sides.

In the United Kingdom, parliament must vote through the withdrawal agreement into law, while on the European side, it must receive the support from member states and the European parliament.

We all know that the clock is ticking. But political process on both sides means the real deadline is not 29 March itself. So just how much time is there?

On the EU’s side, Danuta Huebner, who chairs the European Parliament’s Brexit committee, has suggested that approval could be granted as late as the 11 March 2019. Meanwhile, the fact that the EU commission has continually updated EU capitals and institutions throughout the negotiations means that they would be unlikely to reject the agreement – even if it were presented to them as late as March.

But there are several reasons why delaying the vote until March would be politically problematic. First, although national parliaments in the EU will not be voting on the withdrawal agreement, some heads of governments may still be still required, in line with their own parliamentary traditions, to discuss the deal before and after the vote takes place. The Danish parliament’s European committee, for example, has a strong tradition of organising hearings ahead of EU votes and, in some cases, has even managed to influence the government’s position.

Second, the EU is conscious that the longer it discusses the terms of the UK’s exit, the less time it will have to discuss the future trade and security relationship. The way negotiations are organised means that discussions about the future can only take place once a withdrawal agreement has been reached. Many predict these discussions to be far more complex and question whether a future deal can be reached during the transition period which, providing it goes ahead, will end in December 2020.

Third, businesses on both sides are demanding greater clarity on the UK’s position after March 2019. For them, the longer the talks last, the less time they have to draw up new plans.

For all these reasons, the EU has provisionally set the date of 17 November to vote on the withdrawal agreement. But it is also in the UK’s interest to reach a deal by the end of the year.

For starters, there is actually a UK legal requirement that the government reach an agreement with the EU by 21 January 2019. In the absence of an exit deal, the UK parliament could put pressure on the government to change course – it is not clear how the prime minister would survive such a vote.

But even if the UK and the EU did reach an agreement by January 2019, there is no guarantee that the UK parliament would support it. Worse still, if it did reject the deal, it is hard to see how both sides could negotiate and ratify new exit terms by March 2019. Faced with such a dilemma, is it time to be thinking about extending talks beyond March 2019?

Legally speaking, this could be possible. According to Article 50, talks can be extended beyond the two-year negotiating framework, although this would require the approval of all 27 member states as well as the UK. But politically, this might prove complicated.

First, it is unclear how long talks would be extended for. The EU parliament elections are planned for May 2019, so a Brexit vote would need to take place either before the elections or after a new parliament is in place. The elections will also lead to the appointment of a new commission in the autumn, possibly even a new president. The EU may be reluctant to vote before the end of the year.

Second, it is unclear what would happen to the transition period. Currently, the transition is due to end at the end of 2020, at the same time as the current EU budget. During this time, the UK would continue to be part of the single market and customs union – although it would have no formal say or vote over new EU legislation. As a consequence, the UK may be asked to contribute to the new EU budget if it wanted to continue accessing the single market and customs union beyond 2020. It is hard to see how UK politicians would accept this.

When voting takes place depends largely on how quickly the UK and the EU reach an agreement. If they fail to reach a deal by 21 January 2019, or if the UK parliament rejects it, then frankly, all bets are off.

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Business France focused on future, despite stalled negotiations

While the Transatlantic Trade and Investment Partnership hangs in mid-air, Robert Blumel is optimistic about French investments being made in the Southeast U.S. and conversely the potential for Atlanta-based start-ups and small-to-medium sized firms in France and Europe.

Having spent the past three years in Atlanta representing the Business France agency and four years beforehand in New York. Mr. Blumel told Advisory Excellence that he has seen “an increased interest from French companies to expand to the Southeast region and especially Atlanta.”

Business France was founded in 2015 to support the international development of the French economy and is responsible for fostering and supporting growth by French businesses as well as promoting and facilitating international investment in France.

As prime examples, Mr. Blumel cited Groupe PSA, a French multinational manufacturer of automobiles and motorcycles, which opened this year its North American headquarters in Atlanta, and Airbus S.A.S.‘s choice of Atlanta for its commercial drone subsidiary.

Granted PSA’s entry into Atlanta is part of a deliberately conservative foray executed with the use of its technology to determine potential markets for its array of products. Nevertheless it’s success in Europe augurs well for its Atlanta-based initiative.

Airbus’ wholly-owned subsidiary Airbus Aerial aims to sell its services to a wide array of industries in their efforts to capture helpful data from above through the use of drones or satellites.

This year Airbus Aerial received a Crystal Peach award from the Atlanta-based French-American Chamber of Commerce for its investment.

The Crystal Peach Awards ceremony is in its 14th year and other recipients for either inbound investment into the Southeast or outbound investment into France included Imerys, a French multinational firm specialised in the producing and processing of industrial materials.

Last fall Imerys USA Inc. celebrated the opening of its global Science & Technology Centre in Suwanee, Ga., one of nine networked centres around the world for the sharing of ideas, equipment and competencies across Imerys.

Mr. Blumel also pointed to the investments in France by Crystal Peach award winners Invest Asset Management SA/France, a branch of Invesco Ltd., an independent investment management company that is headquartered in Atlanta, and Cognira, a start-up specialized in cognitive retail analytics that received this year’s Crystal Peach entrepreneurship award.

He is especially supportive of Cognira’s entry into France which he has been assisting. “They are growing fast,” he said, acknowledging the role played by Business France in its development there.

“I see Atlanta becoming a vibrant start-up scene with very promising companies,” he added. “I have been identifying start-ups with great ideas, services or products and helping them in their business development strategies in France and in Europe.”

Among his activities as the agency’s director for the Southeast, he said that he is responsible for hosting delegations such as the representatives from 11 French paper company suppliers whom he introduced recently to South-eastern paper and board manufacturers.

He also has been selected to participate on juries such as those choosing companies for the Atlanta-Toulouse start-up exchange in 2016 and 2017, the Young Enterprise Initiative in 2016, a start-up competition organized by the French embassy in Washington, and the Crystal Peach Awards committee.

Additionally, he arranged for the CEOs of United Parcel Service Inc., AGCO Corp. and the Coca-Cola Co. to participate in the French International Business Summit held in January that drew to Versailles 140 of the leading executives of the world’s largest firms to learn first hand from French President Emmanuel Macron and the prime minister, Edouard Philippe, France’s desires for international investment.

Whatever delays negotiations over TTIP or tariffs may impose on French-U.S. business relations, Mr. Blumel said that at the local level cross-investment is progressing at a gallop, especially for start-ups and SMEs on both sides of the Atlantic.

“Atlanta-based start-ups are hot,” he said. “And Business France can help them in their business development in Europe and France.”

Mr. Blumel may be reached by email [email protected] or calling 347-567-1140.

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R3 talks legal loopholes for blockchain-based trade finance

Blockchain-based trade finance awaits one crucial component before it can fully realise its potential: the legal recognition of electronic instruments.

So say Alisa DiCaprio and Gabriella Zak from blockchain firm R3 in conversation with GTR.

While regulators are aware of this need and have begun considering updates to the governing rules around electronic instruments, bureaucratic barriers mean that legal changes could take years to adopt.

In the meantime, antiquated rules from a paper-based age could be supplemented with other existing legal documents or with a rulebook.

DiCaprio, who is global head of research and trade, and Zak, research analyst at R3, share their views on the optimal path forward.

GTR: How well equipped is current legislation when it comes to blockchain-based trade finance documents?

DiCaprio: Inconsistent best characterises the current legal governance of electronic instruments within trade finance. In the US, there are two contrasting situations under the Uniform Commercial Code (UCC), which provides standardised rules and regulations governing commercial business transactions across states.

Letters of credit have been allowed in electronic format since 1995. UCC Article 5 was revised to reflect accommodations to technological innovation and provide substantial legal coverage for electronic letters of credit. Including broader definitions of what deems a “record” or a “signature”, UCC Article 5 provides clear language that extends the domain of the law onto electronic instruments.

Negotiable instruments, in contrast, are governed by a rule that has not been updated since 2002. The definitive language contained within UCC Article 3 tethers legal jurisdiction to exclusively paper instruments. Notes or bills of exchanges registered on a blockchain fall outside the governance of the current law.

Thus, the term ‘negotiable instrument’ [within UCC Article 3] is limited to a signed writing that orders or promises payment of money.

Because blockchain-based trade finance solutions require electronic versions of negotiable instruments like bills of exchange and promissory notes, UCC Article 3 is currently insufficient.

GTR: What could be the possible solutions to this challenge, and how easy are they to implement?

Zak: A solution for blockchain-based trade finance may come in various forms: amend UCC Article 3, supplement it with the Uniform Electronic Transactions Act (UETA), or create a legal rulebook.

Amending UCC Article 3 presents the ideal solution. By redefining paper-based definitions, such as the meaning of “signature” and “possession”, to encompass electronic vernacular and context, most of the existing legal framework can be retained. This seems like a quick, easy solution, right?

Not quite. While amending UCC Article 3 may appear to be the most straightforward remedy, bureaucratic barriers could result in an estimated three to five years until revisions might be enacted. This estimate is based on the revision of UCC Article 5 which took eight years (1987-1995) to be enacted. This illustrates the immense challenge of updating laws. While UCC Article 3 will eventually need to be amended, there needs to be a solution in the interim.

What if we supplement UCC Article 3 with the UETA which has expanded legal recognition of electronic signatures? While the UETA extends the language within UCC Article 3 to have electronic meaning, there are numerous issues still left unaddressed including enforceability against intermediate transferors.

A third solution, and one most reasonable in the short term, is the creation of a legal rulebook. A rulebook could incorporate three major components: a detailed statement of agreed upon rules describing the rights and obligations of negotiable-instrument transactions on a blockchain, residual rules for the governance on unresolved issues, and a choice of forum.

As of 2018, rulebooks are being pursued by most blockchain solutions in trade finance.

GTR: What other moves are you seeing towards creating regulatory change around electronic trade finance documentation?

DiCaprio: Amendments to existing regulation have already begun, with groups include the International Chamber of Commerce Banking Commission (ICC), the Bankers Association for Finance and Trade (BAFT), and the United Nations Commission on International Trade Law (UNCITRAL) initiating the process of revising their respective international trade rules.

Law firms and industry leaders have also become increasingly involved. Shearman & Sterling lawyers are leading the way on prevalent fintech-related elements such as blockchain, cryptocurrency and artificial intelligence, innovating solutions for the “new normal” of ever-changing regulations, non-traditional competitors, cybersecurity threats and the need to increase capital for new revenue streams.

In 2018, many law firms joined R3’s Legal Centre of Excellence. The initiative arms the global legal community to best engage with the changing legal definitions forming around blockchain technology, as well as positions them to partner with the growing R3 ecosystem.

GTR: What if the necessary regulatory change does not happen? What will this mean for the adoption of blockchain in trade finance?

DiCaprio: The broad reach of blockchain means that regulators and lawmakers across the globe have published reports, provided guidance and engaged in activities to understand how regulation can be updated to meet the needs of trade finance on blockchain.

A lack of regulatory change does not necessarily inhibit the adoption of blockchain in trade finance. Though it is not ideal, a rulebook solution accomplishes many of the same aims. Entities seek assurance in the enforceability of their agreement with other parties, and a robust rulebook with a proper choice-of-forum can provide this confidence. The benefits of blockchain within trade finance far overshadow the concerns of regulatory revision if an alternative solution exists.

GTR: What can banks – and other players keen to get involved in blockchain – do in the meantime?

Zak: For entities who intend to embrace blockchain but are hesitant due to its current legal state, an interim rulebook solution can be used. It provides greater assurance in blockchain-based trade without the need for immediate regulatory change. While revisions to UCC Article 3 may take years, rulebooks can be created at any time without speed constraints. Its progression from idea to reality only depends on the co-operation of the network actors involved. Ultimately, a rulebook solution will speed up the application of blockchain to trade finance.

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London business confidence rises to highest since EU referendum

The balance of firms in the capital reporting they are optimistic about the prospects for their firm rose to zero per cent in the second quarter – a 10-point quarterly increase – the London Chamber of Commerce and Industry will say.

Larger firms were more confident than smaller businesses, for whom the confidence reading remained negative on balance.

The poll of more than 500 firms showed that expectations for both the London and the UK economy remain negative on balance, as they have done for two years. The survey was carried out before the Cabinet’s recent agreement on a Brexit negotiating position or the subsequent resignations of two ministers.

Colin Stanbridge, LCCI chief executive, said: “Despite an improvement in many of these figures much still needs to be done to ensure London businesses continue to prosper, now and in the future.”

More firms reported that domestic demand fell than increased during the second quarter, although the fall-back was somewhat compensated by an increase in export demand.

Meanwhile, firms’ reported capital investments remained in negative territory, in spite of an improvement over the quarter.