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Commercial Awareness Update - July 2018
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<blockquote data-quote="Coralin96" data-source="post: 1248" data-attributes="member: 15"><p>I've been meaning to post this one for a couple of days now, but I thought I'd tie all the stories together. Enjoy <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile :)" loading="lazy" data-shortname=":)" /></p><p></p><p>Commercial Awareness Update 14 July to 24 July</p><p></p><p><strong>Government proposals to regulate foreign acquisitions</strong></p><p><strong></strong></p><p><strong>The Story: </strong>The UK government has released new proposals that give it the power to intervene in foreign acquisitions for national security reasons. Under the new proposals, businesses will be encouraged to notify the government if a transaction could give rise to a security risk. These proposals come as Western governments have increasingly scrutinised foreign takeovers, particularly in relation to China.</p><p></p><p><strong>Impact on businesses and law firms:</strong>The new proposals are likely to raise the cost and uncertainty of foreign acquisitions of business. Regulatory teams will have to undertake a risk-analysis to determine whether they are likely to be caught up by the rules, and if so, consider beginning an early dialogue with the regulator. The proposals are wide and could include a broad range of transactions including asset purchases and minority stakes. Parties may also want to consider how to minimise the likelihood of triggering national security risks, for example, by selling part of a business first.</p><p></p><p><strong>Financial services after Brexit</strong></p><p><strong></strong></p><p><strong>The Story: </strong>The UK's proposal to retain access to the EU for its financial services sector was rejected by Brussels. The UK had suggested an improved equivalence model, whereby the UK would respect EU regulatory rules, but also raise the EU notice period, which currently stands at one month for a cancellation.</p><p></p><p>Currently, the UK financial services sector relied on 'passporting' to gain access to the EU. This means that banks and other financial services firms are able to export services to the EU if they have approval of UK regulators, without having to seek approval from every EU state they wish to operate in.</p><p><strong></strong></p><p><strong>Impact on businesses and law firms:</strong>The uncertainty for UK financial institutions after Brexit is a big problem. Banks may need to exercise contingency plans and relocate all or part of the business into the EU so they retain 'passporting' rights to continue to serve the EU after Brexit. Law firms can expect a lot of Brexit-related advisory work and may set up Brexit advisory teams if they haven't already. One thing is for sure, the uncertainty created over Brexit means a lot of clients will be coming to lawyers for advice.</p><p></p><p><strong>Cash injection from China's central bank </strong></p><p></p><p><strong>The Story: </strong>The People's Bank of China injected $74 billion into the Chinese economy on Monday. This follows a similar move in June when the government cut the amount of money commercial banks needed to store at the central bank, in order to encourage bank lending.</p><p></p><p><strong>Impact on businesses and law firms:</strong>The injection comes amid slowing global growth and worsening trade relations with the United States, after Trump threatened more tariffs on China's exports to the US. China has also been trying to control its large amount of debt, which could see companies with weak cash flows collapsing and law firms seeing a rise in local restructuring and insolvency work.</p><p></p><p>While growth in China has been slowing, it is still far higher than Western economies, making it an attractive place for businesses. China has recently begun to relax foreign investment restrictions, which poses many opportunities for both businesses and law firms.</p><p></p><p><strong>Trump v Europe</strong></p><p></p><p><strong>The Story: </strong>It has been an eventful last few weeks between the US and the EU. Initially, they both came into conflict as the EU issued retaliatory tariffs against Trump and Trump threatened to impose tariffs on EU car exports.</p><p></p><p>This was followed by the recent Nato summit, which has been called one of the most divisive summits in its history. In that meeting, Trump accused the Germans of being "controlled by Russia". This comes as Trump has been criticised within his own country for taking a soft stance with Russian President, Vladimir Putin. That said, Trump did reaffirm one of Nato's core principles that an attack against an ally will be treated as an attack on all of Nato's members, which was something he shied away from in the past.</p><p></p><p>However, the picture may be different now. Discussions between Trump and the president of the European Commission, Jean-Clause Juncker, appeared to be a success as both agreed to move towards removing trade barriers on non-auto industrial goods.</p><p></p><p><strong>Impact on businesses and law firms: </strong>The recent events have made it difficult for businesses that trade between the EU and US as they've had to grapple with significant political uncertainty. However, if they move towards the elimination of trade barriers, this is likely to be a significant win for businesses, leading to a closer integration between the two. UK law firms should try to gain a foothold within the US sooner rather than later, or they may miss out on large amounts of cross-border legal work.</p></blockquote><p></p>
[QUOTE="Coralin96, post: 1248, member: 15"] I've been meaning to post this one for a couple of days now, but I thought I'd tie all the stories together. Enjoy :) Commercial Awareness Update 14 July to 24 July [B]Government proposals to regulate foreign acquisitions The Story: [/B]The UK government has released new proposals that give it the power to intervene in foreign acquisitions for national security reasons. Under the new proposals, businesses will be encouraged to notify the government if a transaction could give rise to a security risk. These proposals come as Western governments have increasingly scrutinised foreign takeovers, particularly in relation to China. [B]Impact on businesses and law firms:[/B]The new proposals are likely to raise the cost and uncertainty of foreign acquisitions of business. Regulatory teams will have to undertake a risk-analysis to determine whether they are likely to be caught up by the rules, and if so, consider beginning an early dialogue with the regulator. The proposals are wide and could include a broad range of transactions including asset purchases and minority stakes. Parties may also want to consider how to minimise the likelihood of triggering national security risks, for example, by selling part of a business first. [B]Financial services after Brexit The Story: [/B]The UK's proposal to retain access to the EU for its financial services sector was rejected by Brussels. The UK had suggested an improved equivalence model, whereby the UK would respect EU regulatory rules, but also raise the EU notice period, which currently stands at one month for a cancellation. Currently, the UK financial services sector relied on 'passporting' to gain access to the EU. This means that banks and other financial services firms are able to export services to the EU if they have approval of UK regulators, without having to seek approval from every EU state they wish to operate in. [B] Impact on businesses and law firms:[/B]The uncertainty for UK financial institutions after Brexit is a big problem. Banks may need to exercise contingency plans and relocate all or part of the business into the EU so they retain 'passporting' rights to continue to serve the EU after Brexit. Law firms can expect a lot of Brexit-related advisory work and may set up Brexit advisory teams if they haven't already. One thing is for sure, the uncertainty created over Brexit means a lot of clients will be coming to lawyers for advice. [B]Cash injection from China's central bank [/B] [B]The Story: [/B]The People's Bank of China injected $74 billion into the Chinese economy on Monday. This follows a similar move in June when the government cut the amount of money commercial banks needed to store at the central bank, in order to encourage bank lending. [B]Impact on businesses and law firms:[/B]The injection comes amid slowing global growth and worsening trade relations with the United States, after Trump threatened more tariffs on China's exports to the US. China has also been trying to control its large amount of debt, which could see companies with weak cash flows collapsing and law firms seeing a rise in local restructuring and insolvency work. While growth in China has been slowing, it is still far higher than Western economies, making it an attractive place for businesses. China has recently begun to relax foreign investment restrictions, which poses many opportunities for both businesses and law firms. [B]Trump v Europe[/B] [B]The Story: [/B]It has been an eventful last few weeks between the US and the EU. Initially, they both came into conflict as the EU issued retaliatory tariffs against Trump and Trump threatened to impose tariffs on EU car exports. This was followed by the recent Nato summit, which has been called one of the most divisive summits in its history. In that meeting, Trump accused the Germans of being "controlled by Russia". This comes as Trump has been criticised within his own country for taking a soft stance with Russian President, Vladimir Putin. That said, Trump did reaffirm one of Nato's core principles that an attack against an ally will be treated as an attack on all of Nato's members, which was something he shied away from in the past. However, the picture may be different now. Discussions between Trump and the president of the European Commission, Jean-Clause Juncker, appeared to be a success as both agreed to move towards removing trade barriers on non-auto industrial goods. [B]Impact on businesses and law firms: [/B]The recent events have made it difficult for businesses that trade between the EU and US as they've had to grapple with significant political uncertainty. However, if they move towards the elimination of trade barriers, this is likely to be a significant win for businesses, leading to a closer integration between the two. UK law firms should try to gain a foothold within the US sooner rather than later, or they may miss out on large amounts of cross-border legal work. [/QUOTE]
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Commercial Awareness Update - July 2018
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