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EU Top Court Rules Unrestrained Surveillance of Phone Data Unlawful

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The European Court of Justice ruled Tuesday that “general and indiscriminate transmission or retention of traffic data and location data” is banned.

The court was ruling on proceedings brought before bodies in the UK, France and Belgium dealing with these privacy and data surveillance issues.

The court found that the directive on privacy and electronic communications precludes “national legislation requiring providers of electronic communications services to carry out the general and indiscriminate transmission of traffic data and location data to the security and intelligence agencies for the purpose of safeguarding national security.”

The directive also precludes “legislative measures requiring providers of electronic communications services [and providers of access to online public communication services and hosting service providers] to carry out the general and indiscriminate retention of traffic data and location data as a preventive measure,” as these retention measures are in serious “interference” with fundamental rights guaranteed by the EU Charter.

However, where a member state is facing is a genuine and serious threat to national security, the directive does not “preclude recourse to an order requiring providers of electronic communications services to retain, generally and indiscriminately, traffic data and location data.” Provided that such an order is limited in time, is strictly necessary and is “subject to effective review either by a court or by an independent administrative body.” Strict exceptions are also made for targeted data collection on individuals believed to be involved in terrorist activities.

Finally, the court held that the directive “requires national criminal courts to disregard information and evidence obtained by means of the general and indiscriminate retention of traffic and location data in breach of EU law.”

Vietnam’s Automobile Industry and Opportunities for EU Investors

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Vietnam’s automobile industry has grown significantly in recent years. The average growth rate of domestically assembled vehicles was approximately 10 percent per year in the 2015-2018 period. With major manufacturers such as Toyota, Honda, Ford, Nissan, and Kia in the Vietnamese market, the number of spare parts suppliers have also invested in the industry giving the sector a much-needed boost.

The motorbike is ubiquitous to Vietnam, but with the country’s fast-growing middle class, car ownership is steadily rising. This growth, however, is likely to be stunted in the short term due to the COVID-19 pandemic but expected to resume in the long run as Vietnam reopens its economy.

Vietnam’s Industrial Policy and Strategy Institute predicts 750,000 to 800,000 vehicles will be sold annually by 2025 up from 288,683 in 2018.

The automotive industry is a major contributor to the GDP of many countries in the world:

Auto industry GDP

As displayed above, with such a high share in Vietnam’s GDP, the automotive industry has always received special attention from the government. There are currently many large automotive assembly and production projects in Vietnam with the aim of not only meeting domestic demand but also tapping into the regional market.

Local conglomerate Vingroup officially inaugurated its Vinfast factory on June 14, 2019, making it the first domestic automobile factory in Vietnam. The factory is not only state-of-the-art but also in line with Industry 4.0 standards.

However, the Vietnamese automotive industry faces stiff competition. Part of the reason for this is the zero-tariff policy between ASEAN countries that Vietnam is part of. Thus imports are cheaper than domestically produced vehicles.

Although Vietnam is one of the four largest automobile manufacturers in Southeast Asia, it has one of the lowest average localization rate in this region (only around 10-15 percent, and is still far behind Thailand, Indonesia and Malaysia).

In addition, the local automobile industry has not been able to invest in core and high technology products such as engine production and transmission systems. Localized parts are mostly of low technology products such as tires, seats, mirrors, glasses, cable harnesses, batteries, and plastic products.

About 80-90 percent of the main raw materials used to manufacture components are still imported. As a result, companies are required to import approximately US$2 billion to US$3.5 billion in components and parts for vehicle manufacturing, assembly, and repair each year.

For this reason, domestic automobile production costs are 10-20 percent higher than in other countries in Southeast Asia. As a result, the cost of cars produced domestically are at a disadvantage compared to completely build units (CBUs) that are imported.

Increasing car ownership

Vietnam imported more than 109,000 CBUs in the first nine months of 2019 with a turnover of US$2.4 billion as per official statistics. Compared to the same period in 2018, imported cars increased by 267 percent in volume and 257 percent in value.

Cars with less than nine seats led imports – with about 75,848 vehicles valued at US$1.5 billion. This shows the increasing purchasing power and the changing demands of customers. In addition, the vehicles imported from the EU mainly come from Germany. As per the General Department of Vietnam Customs in 2018, 1,197 imported cars from Germany were registered in Vietnam. Germany’s ZF Friedrichshafen inaugurated its first plant producing chassis modules for cars in Haiphong in November 2019.

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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.

Adoption of EU Money Laundering Legislation

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As a Romanian law firm, we are aware of the issues concerning money laundering not only from a professional point of view (know your client), but also from advising clients of their liabilities.  This short article is to highlight issues which may not be immediately apparent and of which clients should be aware and at the same time to draw attention to registration and other requirements required under the Law.  We urge those in the relevant fields to contact advisors for further information as required.  The penalties are not insignificant.

In July 2019 Law no. 129 (“Law”) for the prevention and combating of money laundering and terrorist financing was adopted.

The Law established the national framework for preventing and combating money laundering and terrorist financing, and includes, but is not limited to authorities, institutions and private companies and individuals who carry on business in their own name.  This article is intended to give an overview of the legislation and some guidance as to how it will affect business in Romania and that business needs to be aware of its provisions and impact.

The Law transposed the two European directives, Directive (EU) 2015/849 which amended the Regulation (EU) no. 648/2012 of the European Parliament and Directive (EU) 2016/2258 amending Directive 2011/16.

The following persons and businesses in Romania are now subject to the Law and become reporting entities.  Romanian credit institutions, and branches of foreign credit institutions; Romanian financial institutions and branches of foreign financial institutions; administrators of private pension funds in their own name and for the private pension funds that they manage.  Providers of gambling services; auditors, accounting experts and authorized accountants, auditors, persons providing tax, financial, business or accounting advice.

Public notaries, lawyers and judicial executors if they provide assistance regarding the purchase or sale of immovable property, shares or social shares or elements of the fund; trading in and administration of financial instruments, securities or other assets of clients, transactions that involve sums of money or the transfer of property.

Persons involved in the establishment or administration of bank accounts, savings or financial instruments, organizing the process of underwriting contributions necessary for the establishment functioning or administration of a company.  Those involved in the establishment, administration or management of such companies; collective investment undertakings in securities or other similar structures, as well as participating on behalf of or for their clients in any operation of a financial character or targeting immovable property; service providers for companies or trusts; real estate agents.

Finally other entities and natural persons who trade like professionals in goods and/or provide services who carry out cash transactions whose amount represents the equivalent or more in RON of ten thousand EUR regardless of whether the transaction is executed through a single operation or through several operations that have a connection between them.

It can be seen by these definitions that the provisions of the Law are wide and potentially involve nearly every aspect of commercial life.

The Directives and the Law require that matters are now approached on a risk-based approach. Countries and their competent authorities and banks will have to identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk.

This will mean that these authorities can require that all relevant persons and bodies in Romania who could be involved, even without realising it in such transactions are to report any suspicious or potentially suspicious transaction.  Already several of our clients have been asked to justify certain transactions to their banks and authorities and more stringent reporting requirements will evolve over a period.

The risk-based approach is achieved, at a national level, through establishing the businesses and categories of reporting entities based on the analysis of the risk of money laundering and terrorist financing to which they are exposed and establishing administrative obligations on them in order to mitigate these risks.

The authorities also must assess the fulfilment of these obligations imposed by the measures that have been adopted and applied by the reporting entities according to their individual evaluated risks.

Romania has established its own office in relation to the prevention and combating money laundering (Oficiul Național de Prevenire și Combatere a Spălării Banilor) who will ensure the publication on its own website a summary of the national risk assessment and will transmit to the EU supervisory authorities the relevant elements of the national assessment.

In addition, the National Agency for Fiscal Administration is required to immediately send a report of suspicious transactions to the Office when applying Regulation (EC) no. 1.889 / 2005 regarding the control of cash entering or exiting the European Union and which it knows, or suspects or has reasonable reasons to suspect that the goods/funds come from the commission of offences or related to the financing of terrorism.

The reporting entities as described above have the strict obligation to report to the Office transactions in cash, whose minimum limit represents the equivalent in RON of 10,000 EUR whether in Ron or foreign currency.  Credit institutions and financial institutions defined in accordance with this law will submit online reports on external transfers to and from accounts where the minimum limit represents the equivalent in RON of EUR 15,000.

Customer awareness measures for Reporting entities now impose an obligation to keep in written or electronic format all the records applying these measures.  These can be copies of the identification documents, the verification documentation of a transaction, including information obtained through the means necessary to comply with the know your client principal imposed on businesses.  This information must be retained for a period of 5 years from the date of termination of the business relationship with the client or from the date of the transaction.

The criminal investigation bodies will communicate to the Office annually the stage of resolving the information transmitted, as well as the amount of the amounts in the accounts of the natural or legal persons for whom the blocking was ordered, as a result of the suspensions carried out or of the insurance measures ordered.

The Know your Client measures are divided, according to the law, in standard measures, simplified measures and additional measures, depending on the degree of risk of the client.  The reporting entities must apply the standard measures of Know the client in the case of entities from which they receive funds greater than the equivalent in RON of EUR 1,000.

Another change is the one related to the politically exposed persons.  Not included in this legislation are references to presidential and state councillors but now are introduced members of the governing bodies of the political parties.

The Sanctions under the legislation have also been increased.  They range between 25,000 RON to 120,000 RON in certain cases.

For legal entities, breaches of certain provisions can be sanctioned with a warning or with the fine with a maximum amount of 10% of the total incomes reported for the last fiscal period.  The sanctions can be applied to the members of the board of management and to other people who are responsible for breaking the law.

In the event that any of contraventions committed by a financial institution, other than those supervised by the National Bank of Romania, and if the breach is serious, repeated, systematic or a combination the upper limits of the fines are for legal persons with RON 5,000,000 and for individuals RON 50,000.

Each company who is liable to supply reports and notifications must designate one or more persons with responsibilities in respect of the law.  The communication of the designated person’s identity will be made to ONPCSB only in electronic format.  The obligation to appoint a person does not apply to individuals who have the status of a reporting entity.

All reporting entities whether individual or corporate should establish internal policies and rules for managing the risks of money laundering and financing terrorism.  These should include policies in respect of the following (i) know your client, (ii) rules applicable to reporting, keeping records and all documents in accordance with the law, (iii) internal controls, risk assessment and compliance management and communication,(iv) protection of employees in the process and periodic training and evaluation of employees.

Depending on the size and nature of the company it is required to have an independent audit function for the purpose of testing policies, internal rules, mechanisms and procedures and monitoring these policies, internal rules, mechanisms and procedures.

The application of the above measures imposes the obligation to keep for a period of 5 years from the date of termination of the business relationship or from the date of the transaction in hard copy/electronic format all records obtained through the application of the measures including copies of identification documents.  This can include identification information obtained electronically.

If it is necessary to extend the period of keeping the documents in order to prevent, detect or investigate money laundering or terrorist financing activities, the reporting entity is obliged to extend the period for a further period indicated by the authorities.

At the expiration of any retention period, there is an obligation to delete personal data, except when other legal provisions require the retention of the data.

All the above will impose more administration on business both small and large.  Our advice is to confront the problem now before issues arise.  Money spent now in dealing with this issue will help resolve any problems which may arise in the future.

UK lawmakers vote in favor of EU withdrawal agreement

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UK lawmakers voted in favor of the second reading of the EU Withdrawal Agreement on Friday, leading the nation one step closer to leave the EU by January 31.

Parliament voted 358 to 234, a majority of 124, in favor of the Brexit bill. While lawmakers have agreed to the bill in principle, it will now be debated further by both chambers of Parliament in January.

Since its last reading in October, changes to the bill have been seen as controversial. If passed, the new bill would outlaw any extension to the UK’s transition period, which ends on December 31, 2020. Labour Brexit spokesman Keir Starmer warned parliament that refusing any extension beyond 2020 is “reckless and ridiculous” as it puts the UK at risk of “a bare bones deal or no deal at all.”

Since passed, lawmakers will now have another three days to discuss it further, beginning on January 7. The final vote will take place on January 9, and, if approved, the bill will be passed to the UK’s upper house to make a final decision on whether the bill becomes law.

Business Insolvency – New EU Rules

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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.

Setting up a Company in the EU to become easier

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EU company law is being updated to reflect the digital age. The Council today adopted a directive that facilitates and promotes the use of online tools in the contacts between companies and public authorities throughout their lifecycle.

The directive will provide improved online procedures, creating a modern and safe way for businesses to dismantle the obstacles involving setting up companies, registering their branches or filing documents, especially in cross border operations.

Ana Birchall, Minister of Justice, Vice Prime Minister for the implementation of Romania’s strategic partnerships, interim

The new rules ensure that:

  • companies are able to register limited liability companies, set up new branches and file documents in the business register fully online;
  • national model templates and information on national requirements are made available online and in a language broadly understood by the majority of cross-border users;
  • rules on fees for online formalities are transparent and applied in a non-discriminatory manner;
  • fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned;
  • the ‘once-only’ principle applies, meaning that a company will only need to submit the same information to public authorities once;
  • documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats;
  • more information about companies is made available to all interested parties free of charge in the business registers.

At the same time, the directive sets out the necessary safeguards against fraud and abuse in online procedures, including control of the identity and legal capacity of persons setting up the company and the possibility of requiring physical presence before a competent authority. It maintains the involvement of notaries or lawyers in company law procedures as long as these procedures can be completed fully online. It also foresees exchange of information between member states on disqualified directors in order to prevent fraudulent behaviour.

The directive does not harmonise substantive requirements for setting up companies or doing business across the EU.

White & Case Advises on Polish MoF €2 Billion Green Bonds Issuance

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Global law firm White & Case LLP has advised the Polish Ministry of Finance on the €2 billion issuance of ten- and 30-year euro-denominated ‘Green Bonds’, maturing respectively on March 7, 2029 and March 8, 2049.

The €1.5 billion issuance of the ten-year Green Bond yields 1.057% with an annual coupon of 1%. The €500 million issuance of the 30-year Green Bond yields 2.071% with an annual coupon of 2%.

The bonds were issued under the Republic of Poland’s €60 billion Euro Medium Term Note Programme, and the proceeds will finance environmental projects according to the Green Bond Framework developed by the Ministry of Finance in line with the ICMA Green Bond Principles.

The buyers of the ten-year and 30-year Green Bonds were well diversified with, respectively, 47 percent and 43 percent of the allocations going to designated green accounts.

The White & case team which advised on the transaction was led by local partner Andrzej Sutkowski (Warsaw), with support from counsel Doron Loewinger (London) and associates Katarzyna Grodziewicz, Damian Lubocki (both Warsaw) and Luiza Salata (London).

EU launches new infringement proceedings against Poland

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The European Commission on Wednesday launched infringement proceedings against Poland by sending a Letter of Formal Notice regarding its new disciplinary regime for judges.

The notice alleges that the new regime “undermines the judicial independence of Polish judges by not offering necessary guarantees to protect them from political control, as required by the Court of Justice of the European Union.” Poland has two months to reply.

The Commission alleges that Poland has failed to meet its obligations under Article 19(1) of the Treaty on European Union and Article 47 of the Charter of Fundamental Rights of the European Union, which preserve the right to “an effective remedy before an independent and impartial court.” The Commission alleges that Polish law “allows to subject ordinary court judges to disciplinary investigations, procedures and ultimately sanctions, on account of the content of their judicial decisions.”

In addition, the Commission alleges that Poland’s regime does not ensure that a court can decide in first instance on disciplinary proceedings against ordinary court judges, because it gives the power to the President of the Disciplinary Chamber to determine the disciplinary court of first instance to hear a given case, “on an ad-hoc basis and with an almost unfettered discretion.”

The Commission is also of the opinion that Poland has failed to fulfill its obligations under Article 267 of the Treaty on the Functioning of the European Union (TFEU), which ensures courts’ right to request preliminary rulings from the European Court of Justice.

The EU’s concern about Poland not adhering to EU’s principles on rule of law is increasing. Last December the European Court of Justice ruled that Poland must “immediately” suspend the national legislation which lowered the mandatory retirement age for its supreme court judges.