Record numbers of UK lawyers register in Ireland

UK law firms have ramped up preparation for Brexit by registering a record number of solicitors in Ireland but confusion remains about how many of them will be able to practise in Ireland and the wider EU after Britain leaves.

The Law Society of Ireland said its solicitors roll had received 1,560 applications in the year to date — more than 31 times the average annual rate in the years before the 2016 EU referendum.

Some 3,706 lawyers from England, Wales, Scotland and Northern Ireland have been registered since the beginning of 2016 as City firms scrabble to insulate themselves from Brexit’s effects.

Those include UK lawyers potentially losing rights of audience in European courts and seeing their ability to advise on European legal matters curtailed.

In August the Law Society of England and Wales warned that the legal sector in the UK could face a £3.5bn hit as a result of a no-deal Brexit.

“Typically, major international commercial law firms are the source of these transfers, in some cases hundreds from one firm,” said Ken Murphy, director-general of the Law Society of Ireland. “It is an extraordinary development.”

Elite UK firms Allen & Overy and Linklaters have among the largest numbers of lawyers signed up to the Irish roll, according to the Irish Law Society, with 287 and 250 respectively. Latham & Watkins has registered 155.

However, only 981 UK lawyers hold a “practising certificate” which allows them to work in Ireland, according to the Law Society. Firms said they were waiting for the outcome of Brexit to determine whether to pay the annual cost of £2,650 per person required to take the final test.

One top-tier UK law firm said only a “handful” of the hundreds of lawyers registered in Ireland had practising certificates, because of the cost and “the lack of clarity as to whether this will actually function as a workaround in a no-deal Brexit scenario.”

In March the Law Commission in Ireland announced new hurdles for lawyers hoping to rely on Irish practising certificates after Brexit, including requiring firms to have a base in Ireland and indemnity insurance issued within the country.

Catherine Hudson, head of risk at Fieldfisher, said: “This was a surprise. A lot of people applied to be on the register in Ireland because they thought it would be a good plan B. But then the Irish Law Society published a note putting constraints on their practising certificates, suggesting they were concerned not to be used as a flag of convenience for people with no real professional connection to the republic.”

A number of firms including DLA Piper, Covington & Burling and Simmons & Simmons have opened offices in Dublin, and avoided those issues. Others, such as Fieldfisher, have merged with Irish firms to gain a permanent foothold.

DLA Piper launched a Dublin office in May and has so far recruited 11 partners, many poached from top-tier Irish firms.

Lawyers said the shift would create a more active transfer market and potential pay inflation in the traditionally conservative Irish legal market.

However Barry Devereux, managing partner of Irish firm McCann FitzGerald, said: “The large Irish law firms have always competed fiercely with each other, both for talent and for clients, so I don’t expect the entrance of US or UK law firms to have an enormous impact.”

OECD Releases Minimum Tax Plan To Solve Digital Tax Issues

The OECD on November 8, 2019, released its plans for a minimum tax on corporate profits, which is one element of a two-pronged approach to solving the tax challenges arising from the digitalization of the economy.

In May 2019 the Inclusive Framework agreed a Program of Work for Addressing the Tax Challenges of the Digitalization of the Economy. The Program of Work is divided into two pillars:

  • Pillar One addresses the allocation of taxing rights between jurisdictions and considers various proposals for new profit allocation and nexus rules;
  • Pillar Two (also referred to as the “Global Anti-Base Erosion” or “GloBE” proposal) calls for the development of a co-ordinated set of rules to address ongoing risks from structures that allow MNEs to shift profit to jurisdictions where they are subject to no or very low taxation.

The OECD’s GloBE proposal is designed to give jurisdictions a remedy in cases where income is subject to no or only very low taxation. The proposal looks to minimize tax base erosion and profit shifting by ensuring that income is not inappropriately shifted to territories that levy no or low tax rates, by ensuring that income is subject to at least a minimum level of tax, wherever that may be. This would involve the introduction of a new effective tax rate test, which would also enable stakeholders to better determine in a harmonized way how much tax multinationals pay internationally, the OECD has proposed.

In a new consultation on its proposal, which will run until December 2, 2019, the OECD has explained in detail how its proposed system will work.

According to the OECD, the four component parts of the GloBE proposal are:

  • an income inclusion rule that would tax the income of a foreign branch or a controlled entity if that income was subject to tax at an effective rate that is below a minimum rate;
  • an undertaxed payments rule that would operate by way of a denial of a deduction or imposition of source-based taxation (including withholding tax) for a payment to a related party if that payment was not subject to tax at or above a minimum rate;
  • a switch-over rule to be introduced into tax treaties that would permit a residence jurisdiction to switch from an exemption to a credit method where the profits attributable to a permanent establishment (PE) or derived from immovable property (which is not part of a PE) are subject to an effective rate below the minimum rate; and
  • a subject to tax rule that would complement the undertaxed payment rule by subjecting a payment to withholding or other taxes at source and adjusting eligibility for treaty benefits on certain items of income where the payment is not subject to tax at a minimum rate.

The OECD is proposing that the rules will be implemented by way of changes to domestic law and tax treaties. They would include a co-ordination or ordering rule to avoid the risk of double taxation that might otherwise arise where more than one jurisdiction sought to apply these rules to the same structure or arrangement.

The OECD said: “Like Pillar One, the GloBE proposal under Pillar Two represents a substantial change to the international tax architecture. This Pillar seeks to comprehensively address remaining BEPS challenges by ensuring that the profits of internationally operating businesses are subject to a minimum rate of tax.”

“A minimum tax rate on all income reduces the incentive for taxpayers to engage in profit shifting and establishes a floor for tax competition among jurisdictions. In doing so, the GloBE proposal is intended to address the remaining BEPS challenges linked to the digitalization of the economy, but it goes even further and addresses these challenges more broadly. The GloBE proposal is expected to affect the behavior of taxpayers and jurisdictions. It posits that global action is needed to stop a harmful race to the bottom on corporate taxes, which risks shifting the burden of taxes onto less mobile bases and may pose a particular risk for developing countries with small economies.”

The OECD added: “Depending on its design, the GloBE proposal may shield developing countries from pressure to offer inefficient tax incentives. The GloBE proposal is based on the premise that, in the absence of a coordinated and multilateral solution, there is a risk of uncoordinated, unilateral action, both to attract more tax base and to protect existing tax base, with adverse consequences for all jurisdictions. The GloBE proposal should be designed to achieve these objectives consistent with principles of design simplicity that will minimize compliance and administration costs and the risk of double taxation. To that end, the Program of Work calls for the consideration of simplifications, thresholds, carve-outs, and exclusions from the rules.”

The OECD intends that the GloBE proposal will operate as a top-up to an agreed fixed rate. The actual rate of tax to be applied under the GloBE proposal will be discussed once other key design elements of the proposal are fully developed, it said.

The consultation is seeking feedback on:

  • The use of financial accounts as a starting point for the tax base determination, as well as different mechanisms to address timing differences;
  • The level of blending under the GloBE proposal – that is the extent to which an MNE can combine high-tax and low-tax income from different sources taking into account the relevant taxes on such income in determining the effective (blended) tax rate on such income; and
  • Experience with, and views on, carve-outs and thresholds considered as part of the GloBE proposal.

Legal services: PwC

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New Zealand Parliament passes zero carbon bill

Lawmakers in New Zealand approved a bill on Thursday that aims to reduce the country’s non-biogenetic greenhouse emissions to zero by 2050. The Zero Carbon Bill provides a framework for limiting average global temperature increase to 1.5° Celsius above pre-industrial levels, as set forth in the Paris Agreement.

The bill establishes a Climate Change Commission, which will advise the government and monitor and review the government’s progress towards meeting the goal. The 2050 targets set forth are: gross emissions of biogenic methane to be reduced to at least between 24 percent and 47 percent below 2017 levels and net emissions of all other greenhouse gases to be reduced to zero. The separate targets for biogenic methane, the greenhouse gases released by livestock such as cattle and sheep, will make it easier for New Zealand to hit their zero emissions goal. Greenhouse gases from agriculture make up 48 percent of the countries total emissions.

The Minister for Climate Change, James Shaw praised the bill:

Climate change is the defining long-term issue of our generation that successive Governments have failed to address. Today we take a significant step forward in our plan to reduce New Zealand’s emissions. … We’ve led the world before in nuclear disarmament and in votes, now we are leading again…This Bill belongs to New Zealand, and together we have ensured law that ensures we shift towards a low emissions country that keeps us all safe.

New Zealand joins more than sixty other countries that have committed to zero carbon emissions by 2050. However, the countries with the largest greenhouse emissions—China, India, and the US—are not on that list. On Monday US Secretary of State Mike Pompeo announced on twitter:

Today we begin the formal process of withdrawing from the Paris Agreement. The U.S. is proud of our record as a world leader in reducing all emissions, fostering resilience, growing our economy, and ensuring energy for our citizens. Ours is a realistic and pragmatic model.

A number of US states have passed their own zero emissions goals including California, Washington and New Mexico.

Business Insolvency – New EU Rules

The EU is giving reputable bankrupt entrepreneurs a second chance, and making it easier for viable enterprises in financial difficulties to access preventive restructuring frameworks at an early stage to prevent insolvency.

The Council formally adopted today the directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures. This decision marks the end of the legislative procedure.

The overall objective of the directive is to reduce the most significant barriers to the free flow of capital stemming from differences in member states’ restructuring and insolvency frameworks, and to enhance the rescue culture in the EU based on the principle of second chance. The new rules also aim to reduce the amount of non-performing loans (NPLs) on banks’ balance sheets and to prevent the accumulation of such NPLs in the future. In doing so, the proposal aims to strike an appropriate balance between the interests of the debtors and the creditors.

The key elements of the new rules include:

  • Early warning and access to information to help debtors detect circumstances that could give rise to a likelihood of insolvency and signal to them the need to act quickly.
  • Preventive restructuring frameworks: debtors will have access to a preventive restructuring framework that enables them to restructure, with a view to preventing insolvency and ensuring their viability, thereby protecting jobs and business activity. Those frameworks may be available also at the request of creditors and employees’ representatives.
  • Facilitating negotiations on preventive restructuring plans with the appointment, in certain cases, of a practitioner in the field of restructuring to help in drafting the plan.
  • Restructuring plans: the new rules foresee a number of elements that must be part of a plan, including a description of the economic situation, the affected parties and their classes, the terms of the plans, etc.
  • Stay of individual enforcement actions: debtors may benefit from a stay of individual enforcement actions to support the negotiations of a restructuring plan in a preventive restructuring framework. The initial duration of a stay of individual enforcement actions shall be limited to a maximum period of no more than four months.
  • Discharge of debt: over-indebted entrepreneurs will have access to at least one procedure that can lead to a full discharge of their debt after a maximum period of 3 years, under the conditions set out in the directive.

Next steps

This formal vote marks the end of the legislative process. The directive will now be formally signed and then published in the official journal. Member states will have two years (from the publication in the OJ) to implement the new provisions. However, in duly justified cases, they can ask the Commission for an additional year for implementation.

Background

The proposal was presented by the Commission on 22 November 2016. The new rules complement the 2015 Insolvency Regulation which focuses on resolving the conflicts of jurisdiction and laws in cross-border insolvency proceedings, and ensures the recognition of insolvency-related judgments across the EU.

The European Parliament formally voted on the directive on 28 March 2019.

Christina Blacklaws

KPMG hires ex-Law Society president

Former president of the Law Society Christina Blacklaws has been appointed as legal services ambassador at Big Four accountancy KPMG as it steps up its legal services offering.

Blacklaws, Law Society president from July 2018 to July 2019, will take up a part-time ‘strategic advisory role’ at the firm, helping to develop its legal practice.

Joining a team of 120, she will work on client solutions, talent engagement initiatives and legal innovation strategies, KPMG said. She will also focus on supporting women in law and leadership.

Nick Roome, UK head of legal services, said: ‘Our team is a fast-growing specialism within KPMG, with clients more frequently requiring integrated advisory solutions. We currently have a broad range of expertise across the legal spectrum but having Christina on board will give us another dimension. Her knowledge, expertise and ear-to-the-ground approach when it comes to the issues impacting our sector will help give us an additional edge in the market.’

Blacklaws added: ‘We’re operating in an increasingly challenging business environment, but, equally, it is an exciting time of growing enlightenment: we all know our sector needs to evolve to best support our clients and our colleagues alike.’

Empowering women in the legal profession was one of Blacklaws’ chief priorities as Law Society president. She also focused on social mobility and innovative and sustainable legal practice. The family specialist previously practised at TV Edwards and Co-Operative Legal Services.

‘Stubborn, wrongheaded’ approach to family law will fail

The federal government’s approach to family law will see it advocate again for a “bad law” to be passed by parliament, which it failed to pass in the last term, argues the Law Council president.

Speaking on Monday night at the Newcastle Law Society’s Annual Members’ Dinner, LCA president Arthur Moses SC said that we are “on the eve” of the government reintroducing the “fundamentally flawed merger bill”, which will see the abolition of the specialist Family Court.

“The government’s stubborn and wrongheaded approach to family law will see it advocate again for a bad law to be passed by parliament – a law which it failed to pass in the last parliament. This approach is not only irrational but is extremely disrespectful to the views of the significant stakeholders in the family violence services sector,” Mr Moses said.

“These dedicated professionals who understand this area better than any member of the government have made it clear that this policy will hurt children and families. As lawyers and members of our community, we all have a stake in this, regardless of where and what we practice.”

He reiterated that “specialisation matters” when it comes to addressing the inherent issues with the family law system.

“There is a dire need to resource and reform the family law system. We do not accept, though, that the way the government has sought to go about this would deliver meaningful reform,” he said.

“Last year, the Attorney-General announced in May a proposal to merge the specialist Family Court into the generalist Federal Circuit Court. There was no consultation with the community or the profession over the proposal – only with three heads of jurisdiction.

“The Law Council vehemently opposed the merger last year, and we will continue to oppose it because we do not support bad policy that will hurt children and families. With or without further amendment, we remain concerned that the merger will result in the loss of a standalone, dedicated Family Court as we know it, to the detriment of those in need of specialist family law assistance.

“Further, we do not accept the purported efficiencies it has been claimed the merger will produce. Rather, we are concerned it will further increase cost, time and stress for families.”

The merger fails, Mr Moses continued to alleviate the “fundamental problems plaguing the system”, including the risk of victims of family violence falling through the cracks.

“Abolishing a standalone specialist family court, whether directly or by abeyance, is no fix. Refusing to inject desperately needed funds and resources into a crippled system unless the parliament votes for the government’s plan is certainly no fix,” he argued.

“We are not alone in holding these concerns – they are shared by stakeholders and family violence support providers including Women’s Legal Services Australia, Rape and Domestic Violence NSW and Community Legal Centres.

Instead, the profession needs to retain a specialist, standlone family court, there must be “alternative holistic structural reform of the system”, and the government must adequately consult with stakeholders and carefully consider their recommendations.

“To suggest any one of these propositions is ‘radical’ is a fake argument. There should be nothing radical about the concept that critical social justice infrastructure should not be irrevocably altered without informed consultation and discussion with those who use the court, work in the court, or whose lives are irreversibly shaped by its decisions,” Mr Moses said.

Alexander McMyn Joins White & Case as a Partner in Singapore

Global law firm White & Case LLP has expanded its Global Banking Practice with the addition of Alexander (Xander) McMyn as a partner in Singapore.

“Singapore is the key financial hub in the Southeast Asian bank finance market, which has matured significantly in recent years with a marked increase in sophisticated financial sponsor activity,” said White & Case partner Eric Leicht, who leads the Firm’s Global Banking Practice. “Xander’s addition sends a clear signal that White & Case is determined to continue growing its role advising clients across Asia-Pacific on their most important financing transactions.”

McMyn has more than a decade of experience in Asia-Pacific and is recognized as a leading lawyer in the region’s finance market. He advises creditors, sponsors and borrowers on a wide range of transactions and has a particular focus on key investment destinations such as India, Indonesia and Australia, as well a thorough knowledge of other emerging Asia-Pacific markets. McMyn’s breadth of experience in the region is reflected in the variety of structures with which he is familiar – clients turn to him for advice on event-driven, structured and limited-recourse financings as well as commodities-related investments. Recently, a significant amount of McMyn’s work has involved the reassessment and restructuring of transactions that have not performed in the current environment. He joins White & Case from Hogan Lovells, where he was a partner, and brings nearly 20 years of experience.

“Xander is a leading lawyer with a substantial reputation in the Asia-Pacific finance market and strong relationships with key financial institutions in Singapore and across the region,” said White & Case partner Baldwin Cheng, Regional Section Head, Asia-Pacific Corporate, Finance & Restructuring. “Xander adds materially to our Asia-Pacific banking team, which is tier one ranked in Greater China and Japan, and he will play a particularly important role as we continue leveraging our capabilities in Southeast Asia.”

White & Case partner Eric Berg, Head of Asia-Pacific, said: “Xander’s arrival is a further demonstration of our ongoing pursuit of the Firm’s strategic growth priorities in Asia-Pacific. A combination of lateral additions and internal promotions have added ten new partners in the region over the past year, and these lawyers have strengthened our strategically key disputes, finance and M&A practices in Australia, China, Japan, Hong Kong and Singapore.”

Disparity warning as solicitors react to prosecution fee increase

Criminal defence practitioners may have to take direct action if the government fails to fix a pay disparity that will be made worse by revised fees announced for prosecution advocates, a practitioner group chief has warned.

On Friday the CPS unveiled a package of revised fees for prosecution advocates which it believes addresses concerns over unused material and trials involving multiple defendants. However, the news received a cool reception from the defence community.

Bill Waddington, chair of the Criminal Law Solicitors Association, said he was pleased to see money dripping into the severely underfunded criminal justice system.

‘However, this payment is for prosecution work and does nothing to assist the publicly funded defence system which has been cut to the bone over years with slice after slice being imposed by respective governments. It is now time for politicians to take the crisis in the criminal justice system seriously before it is completely destroyed,’ he said.

He said: ‘This exacerbates a pre-existing problem. For instance CPS costs are recovered according to a notional rate of £69 per hour whereas defenders do so against a benchmark rate of only £45 per hour, less than a CPS paralegal. If a local authority prosecutes the case they can recover as much as £110 per hour.’

Troman, a solicitor and higher courts advocate at London firm Powell Spencer & Partners, said there is ‘ample evidence’ of a recruitment and retention crisis in criminal defence work. ‘Many solicitors train in private defence practices but, once they have gained experience, look to secure a position at the CPS or else leave the profession. This trend will increase.’

LCCSA members ‘are growing impatient with the inertia surrounding the criminal legal aid review and will note that this fee increase only came out following direct action‘, Troman said. ‘If that is the only language the Ministry of Justice understands then the message to this side of the profession is clear’.

The ministry is reviewing criminal legal aid fee schemes. Work has been accelerated on five areas, including unused material – however, the review will not be finished until late 2020.

Brexit and the implications for your Intellectual Property Rights

What will the Brexit mean for your intellectual property (IP) rights? Will Britain leave the European Union (EU) without a deal? Or will the Prime Minister manage to get the British Parliament to vote in favour of a Plan B-deal? The Brexit will have consequences for trademark rights, design rights, copyright and patent rights that involve the UK and the EU. Start prepping to protect your IP before Brexit!

The Brexit does not just impact organizations doing business in or with the UK from a commercial trade perspective (e.g. customs and import). You should also think about the ‘crown jewels’ of your organization (e.g. trademark rights, design rights, copyrights or patent rights) covering the European Union.

Brexit will impact every company having intellectual property, licenses and distribution agreements within the EU or UK scope.

Although the uncertainty about the Brexit remains, you should know that whatever happens, you should start preparations. For instance, what happens with the UK coverage of your EU trade mark and design registrations? Should you amend the territorial scope in your intellectual property contracts? A mere reference to the ‘EU’ may become difficult to interpret. This blog outlines the potential implications concerning your intellectual property rights following a Brexit.

Impact of Brexit on European Trade Marks and Designs

EU trade marks and designs are granted by the EU Intellectual Property Office (EUIPO). Currently, companies and individuals owning a registered EU trade mark or design have their trade mark or design right protected across all EU member states including the UK.

After the Brexit, existing EU trade mark and design registrations will no longer include protection in the UK. However, even in case of a ‘no deal-scenario’, the UK government ensured that the rights in all existing registered EU trade marks and designs will continue to be protected and enforceable in the UK by providing an equivalent trade mark or design registered nationally in the UK.

If you have pending applications for trademark or design rights in the EU at the Brexit date, you may refile your application with the UK Intellectual Property Office under the same terms for a UK equivalent right. For a period of 9 months from exit, the UK government will recognize filing dates and claims to earlier priority and UK seniority recorded on the corresponding EU application.

Impact of Brexit on Copyrights

Various international treaties (such as, the Berner Convention and the WIPO Copyright Treaty) govern the protection of copyright. Under these rules, countries provide cross border copyright protection. These rules are luckily not dependent on the UK’s membership of the EU. As a consequence, copyright protection in the UK for EU protected works will largely remain unchanged.

What about database rights and other EU specific IP legislation?

The EU copyright system is based on EU legislation so it only extends to EU member states. Although the protection rights under EU legislation will be preserved in UK law, cross-border IP protection mechanisms will be different. For example, in the event of a no deal-Brexit, there will be no obligation for EU member states to provide database rights to UK businesses. As a result, owners of UK database rights may find their rights unenforceable in the EU. So companies may need to consider other forms of protection for their databases.

Impact of Brexit on Patents and supplementary protection certificates

Only a few areas of UK patent law are derived from EU legislation. Probably the most important issue here is patented pharmaceutical products and chemical compounds. EU law provides for an additional period of protection after a patent has lapsed, the so-called ‘supplementary protection certificate’.

In addition, EU law provides for compulsory licenses to be granted for UK manufacture of a patented medicine for export to a country with a public health need. Also, EU law demonstrates that certain studies, trials and tests using a patented pharmaceutical product will not be regarded as an infringement of the patent.

Luckily, regardless of the Brexit, any relevant EU legislation (including its implementation in UK law) will remain. This means that the supplementary protection certificates, compulsory licenses and exempted studies and trials will be kept under UK law.

What about the Unitary Patent?

Under the European patent regime, a European patent application essentially forms a bundle of national applications. Each application needs to be validated per EU member state. The Unitary Patent will be one inseparable right covering 26 EU countries. The UK is one of those 26 countries. They ratified the Unitary Patent system only in April 2018 which indicates their desire to be part of this system in spite of Brexit.

However, the Unitary Patent protection cannot be separated from the general principle of the EU’s Internal Market. As a consequence, and especially in the event of a ‘no deal-Brexit’, it is questionable whether the Unitary Patent protection will remain applicable to the UK once it has left the EU. If not, it means that businesses seeking patent protection in the UK will still need to commit to the national UK patent system.

Exhaustion of IP rights after Brexit

Another topic for your business to consider, is the so-called exhaustion of intellectual property rights. ‘Exhaustion’ limits intellectual property rights. Once an IP protected product has been legitimately put on the market anywhere in the EU, the IP rights (e.g. prevent the resell or other commercial use) over such product can no longer be exercised because these rights are exhausted.

In a ‘no deal-scenario’, products rightfully placed on the UK market after Brexit, will not be considered exhausted in the EU. As a result, if your company exports products from the UK to the EU you may still require the IP owner’s consent.

To discuss potential effects of the Brexit on your IP rights, please do not hesitate to contact Lukas Witsenburg from Penrose. Email: l.witsenburg@penrose.law or telephone: +31 (0)20-240 0710.