UK Government’s future Partnership Paper on Foreign policy, defence and development: including proposals for co-operation on sanctions, cyber security, and the defence and security industries

The UK Government has released a Paper outlining the UK’s proposals for a future partnership with the EU regarding foreign policy, defence and development. The Paper highlights the UK’s shared interests and values with the EU regarding foreign policy and defence, and the UK Government’s offer and intention to work closely with the EU in the future in a partnership “unprecedented in its breadth”, and that is deeper than any other third country relationship. The Paper offers a number of insights into the practical ways in which the UK envisages that such cooperation will be achieved after Brexit, including in relation to sanctions, cyber security, defence and security, development and broader foreign policy. Continue reading

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Spotlight on investor protection: The Hong Kong Financial Dispute Resolution Centre implements a more moderate package of reforms

The Financial Dispute Resolution Centre (FDRC) in Hong Kong has issued its conclusions to its consultation on proposals to significantly expand the jurisdiction of the Financial Dispute Resolution Scheme (FDRS), its alternative dispute resolution scheme for conflicts between financial institutions and their individual customers. The FDRC’s consultation met with mixed responses, with respondents from the banking and securities sectors opposing the proposed changes while other respondents, including the Department of Justice and consumer rights groups, supported the suggested reforms. Given this, the FDRC has chosen to implement a more moderate package of reforms than those it originally contemplated (as outlined in our October e-bulletin).

The key changes from the consultation paper include:

  • raising the maximum claimable amount to HK$1,000,000. This is an increase from the current limit of HK$500,000, but significantly lower than the proposed increase to HK$3,000,000;
  • extending the limitation period for lodging claims from 12 months to 24 months from the date of purchase of the financial instrument or date of first knowledge of loss, whichever is later, rather than the 36 months previously suggested; and
  • that the FDRC will cease its current practice of providing case information such as application forms, mediated settlement agreements or arbitral awards, to the Securities and Futures Commission and Hong Kong Monetary Authority. However, it will continue to provide monthly reports regarding the number and type of disputes handled by the FDRC and information regarding systemic issues and suspected serious misconduct.

The FDRC also announced that it will enact a range of other reforms in a form largely unchanged from that proposed in its consultation paper. These include:

  • expanding the scope of eligible claimants by allowing “small enterprises” to bring complaints against financial institutions (FIs);
  • accepting applications for claims which are under current court proceedings without requiring the claimant to withdraw the case from court; and
  • introducing a voluntary referral system.

These reforms amount to a sizeable expansion of the FDRC’s jurisdiction. As foreshadowed in our previous bulletin, FIs are likely to see an increase in claims being accepted by the FDRC once these reforms are enacted, though this increase is likely to be smaller than that which would have resulted from the enactment of the FDRC’s original proposals. The amended terms of reference for the FDRS are expected to take effect on 1 January 2018, with the exception of the reforms allowing small enterprises to bring claims, which will take effect on 1 July 2018.

Our recent e-bulletin sets out the reforms in more detail. If you wish to discuss these further, please do not hesitate to contact our Hong Kong team featured on the e-bulletin or your usual Herbert Smith Freehills contact.

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TRUMP ADMINISTRATION IMPLEMENTS SECTORAL SANCTIONS TARGETING VENEZUELA

On August 24, 2017, President Trump issued a new Executive Order targeting the current Venezuela regime.  The next day, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced the implementation of broad new “sectoral” sanctions applicable to the Government of Venezuela and Venezuelan state-owned entities, including state-owned oil producer  Petroleos de Venezuela, S.A. (PdVSA). While the new Venezuelan sanctions fall well short of an embargo, and are patterned after the limited sectoral sanctions applicable to certain Russian entities, these developments represent a major change in US policy towards Venezuela and are likely to impact a broad range of international companies dealing in debt or other securities of Venezuelan state entities. Please click here for further details.

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Filed under Announcements, Sanctions and Money Laundering, US

Hong Kong Court of Appeal finds against bank on the basis that the bank’s exclusion of liability clauses were unconscionable and unreasonable

The Hong Kong Court of Appeal (CA) has recently affirmed a decision of the Court of First Instance (CFI), in which a ruling was made in favour of the plaintiff investors in a mis-selling claim against a bank, albeit on different grounds to that of the CFI (click here for the full judgment and here for our e-bulletin on the CFI decision). Overturning the CFI’s ruling on contractual interpretation, the CA held that the exclusion clauses in the bank’s services agreement did apply to the plaintiffs’ non-discretionary accounts. The CA however went on to find that the exclusion clauses the bank sought to rely on to limit its liability were unconscionable under the Unconscionable Contracts Ordinance and did not satisfy the requirement of reasonableness under the Control of Exemption Clauses Ordinance. This is the first decision of its kind where the court considered unconscionability in a banking context. Our recent e-bulletin examines the decision in more detail. If you wish to discuss this further, please do not hesitate to contact our Hong Kong team as listed on the e-bulletin, or your usual Herbert Smith Freehills contact.

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MAS CLARIFIES STANCE ON DIGITAL TOKENS

On 1 August 2017, the Monetary Authority of Singapore (MAS) clarified through a media release that an offer or issue of digital tokens would be regulated if these tokens constitute products which are regulated under the Securities and Futures Act (SFA). In doing so, the MAS sent a strong signal that it would focus on the substance of the transaction, even if it is presented within the “cryptocurrency” wrapper.

MAS’ clarification comes in the wake of an increase in the number of initial coin or token offerings (ICOs) in Singapore. In June 2017, it was reported that blockchain startup TenX had raised close to US$80 million from a token sale. A Singapore based startup, Cofound.it, also launched the sale of its own digital currency in May 2017 to fund building of its blockchain-based platform to connect start-ups with investors and experts for funding and advice. Further ICOs are reported to be planned later this year.

This bulletin provides an introduction into ICOs and touches upon some of the market developments and regulatory issues surrounding ICOs and digital tokens. Please click here for more details.

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Herbert Smith Freehills assists with first prevention of corruption clause in Olympic Games host city contract

Sylvia Schenk, a consultant in our Frankfurt disputes team, has worked with global anti-corruption NGO Transparency International to secure the first prevention of corruption clause in an Olympic Games host city’s contract. The International Olympic Committee (IOC) announced on 31 July that the 2028 games would go to Los Angeles. Although the contract must be ratified by the full IOC membership in September, the IOC has, for the first time, included an anti-corruption clause in the contract accepted by the city. The document includes mandates for nondiscrimination, protection of human rights and prevention of fraud or corruption “including by establishing and maintaining effective reporting and compliance.”

Sylvia advises clients on compliance, sports law, sustainability and human rights. She began seriously working against human rights abuses and corruption in global sports in 2006 after a career as a track athlete, including competing in the 1972 Olympic Games in Munich. For further details, see the article in Corporate Counsel.

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Filed under Announcements, Bribery and Corruption, Herbert Smith Freehills

Corporate Crime Monthly Update – August 2017

Welcome to the August 2017 edition of our corporate crime update – our round up of developments in relation to corruption, money laundering, fraud, sanctions and related matters. Our update now covers a number of jurisdictions. For the full update on each jurisdiction, please click on the name of the jurisdiction below. Below we provide a brief overview of what is covered in each update.

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Filed under Bribery and Corruption, Corporate Crime, Herbert Smith Freehills

NEW SANCTIONS REPORTING REQUIREMENTS FOR NON-FINANCIAL SECTOR BUSINESSES

With effect from 8 August, the Government has introduced significant new reporting requirements in relation to EU asset freeze regimes. Previously, only businesses in the financial sector were subject to the obligations, found in UK financial sanctions instruments, to report specified information to the Office of Financial Sanctions Implementation (“OFSI“) in Her Majesty’s Treasury (“HMT“). From 8 August, further sectors, including auditors, external accountants, tax advisers and lawyers, have been brought within the scope of these obligations and may commit a criminal offence if they fail to comply with the relevant reporting requirements.

The European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017 (the “Regulation“) implements this change, and applies in respect of information received on or after 8 August. Continue reading

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Filed under Corporate Crime, Sanctions and Money Laundering, UK

UK GOVERNMENT PUBLISHES RESPONSE ON THE LEGAL FRAMEWORK FOR SANCTIONS POST-BREXIT

On 2 August 2017, the UK Government published its response to the public consultation on the UK’s future legal framework for imposing and implementing sanctions after the UK’s exit from the European Union (see our previous blog post).

The response sets out detailed answers to questions raised during the consultation, outlining the proposed powers for the imposition of financial and trade restrictions and the designation of individuals, as well as the proposed procedures under which such powers will be exercised. The Queen’s Speech on 21 June 2017 confirmed the Government’s intention to introduce a Sanctions Bill during the current Parliamentary session (2017-2019), with further guidance promised on certain issues in due course.

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Filed under Europe, Sanctions and Money Laundering, UK

Asset managers and their senior management (including MICs) warned of action for regulatory non-compliance in Hong Kong

Boards and senior management (including Managers-in-Charge of Core Functions (MICs)) of asset managers have been called on by the Hong Kong Securities and Futures Commission (SFC) (31 July 2017 circular) and the Hong Kong Monetary Authority (2 August 2017 circular) to ensure they maintain adequate management oversight of their firm’s business activities and to ensure maintenance of appropriate standards of conduct and proper risk management measures, after the SFC identified a number of potential regulatory concerns.

The SFC has said that it will continue to closely monitor asset managers and will not hesitate to take action against any licensed corporations and their senior management for failure to comply with regulatory requirements.

Our recent e-bulletin highlights the SFC’s concerns. If you have any questions or would like to know how this might affect your business, please feel free to contact William Hallatt, Hannah Cassidy, Natalie Curtis, or your usual Herbert Smith Freehills contact.

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Filed under Hong Kong, Regulatory Reform