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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.

2019 UN climate change conference begins in Madrid

The 2019 UN climate change conference began on Monday in Madrid, with leaders looking for solutions to reduce global carbon levels. Leaders originally planned for the conference to be held in Chile, but due to political instability, the conference was moved to Madrid, where it will take place over the next two weeks.

The conference started with statements from prominent leaders, notably António Guterres, the UN Secretary-General. Guterres urged leaders to select the “path of hope.” He characterized this choice as:

A path of resolve, of sustainable solutions. A path where more fossil fuels remain where they should be–in the ground–and where we are on the way to carbon neutrality by 2050. That is the only way to limit global temperature rise to the necessary 1.5 degrees by the end of the century.

The conference begins as new evidence shows record levels of greenhouse gases in the atmosphere. The World Meteorological Organization released a bulletin concluding that carbon levels were at 407.8 parts per million in 2018. Guterres mentioned the report in his remarks, noting that 400 parts per million were once considered “unthinkable.”

Global cooperation on reduced carbon emissions remains an uncertainty. US President Donald Trump ordered the US to withdraw from the Global Paris Climate deal. There is some speculation that the EU and China will be making a climate deal next September.

LDN PHOTO

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White & Case Advises Banks on US$1 Billion Notes Issuance

Global law firm White & Case LLP has advised First Abu Dhabi Bank P.J.S.C., Goldman Sachs International, HSBC Bank plc, Samba Capital & Investment Management Company and Standard Chartered Bank, as managers, on Samba Funding Limited’s issuance of US$1 billion Notes due 2024 under its newly established US$5 billion Euro Medium Term Note Programme.

“This issuance represents Samba Bank’s successful entrance into global debt capital markets and we were well-placed to advise the investment banks based both regionally and internationally on the establishment and issue under the new programme,” said White & Case partner Debashis Dey, who led the Firm’s deal team.

Samba Funding Limited is a wholly-owned subsidiary of, and the Notes are guaranteed by, Saudi Arabia-based international financial services provider Samba Financial Group.

The White & Case team which advised on the offering was led by partner Debashis Dey (Dubai & London) with support from counsel Xuan Jin (Dubai) and associates Michael Byrd (London) and Sarah Altukhaifi (Riyadh).

US Takes First Step To Leave Paris Agreement

The United States will become the first country to leave the Paris Agreement in one year.

The Trump administration announced its decision to withdraw from the global pact two years ago but just filed the official paperwork earlier in the week.

The Paris Agreement was officially agreed to by every nation on the planet in 2015 and outlines a basic framework on how to address climate change on a global scale.

The move to withdraw is part of an ongoing effort by President Trump to appease corporate interests and financial concerns in the name of “red tape reduction”.

All of this comes at a time when scientists are urging rapid action to avoid the worst impacts of the climate crisis. On Tuesday, 11,000 scientists officially declared a global climate emergency.

“Scientists have a moral obligation to warn humanity of any great threat,” said Dr Newsome from the School of Life and Environment Sciences. “From the data we have, it is clear we are facing a climate emergency.”

While concerns about global warming were first published in 1912, it wasn’t until the United Nations Intergovernmental Panel on Climate Change released its first report in 1990 that the world’s scientists united in their warnings of danger.

The vast majority of climate scientists agree that we have roughly eleven years left to limit fossil fuel use before “untold human suffering” is unavoidable, including extreme heat waves, drought, floods, plaques, poverty, starvation, famine, and war.

While only 61% of Americans say they are concerned about climate change, 70% of Americans believe environmental protections are more important than economic growth.

Yet, the majority of Republicans in Washington are on record as skeptics of science, so the administration’s decision falls directly into the party’s orthodoxy despite the ominous warnings.

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.

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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.

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.”