Edward Fennell’s Legal Diary – Edition 61

Friday June 11th 2021 Edition 61

Diary news, commentary, insights, appointments and e-vents from the legal world

SHORT THOUGHT FOR THE WEEK

Who are the ‘Unacknowledged Legislators’?

Big on the Agender – Image Courtesy of penguin Books

In the much celebrated words of poet Philip Larkin, sex was invented in Britain in 1963 and ‘Then all at once the quarrel sank/ Everyone felt the same.’

If only that were true, one might say. As the news yesterday demonstrated, issues of sexual abuse, sexting and gender identity stir up an increasing amount of contentious debate. And now the courts are required to step in and try to sort it out – at least up to a point (just as they did with the ‘Lady Chatterley’ trial which features in the Larkin poem). As Monica Kurnatowska, Employment partner at Baker McKenzie, observed regarding the decision in yesterday’s Maya Forstater EAT case. “This ruling  means that individuals are entitled not to be discriminated against because of gender critical beliefs and gives those beliefs the same legal protection as religious beliefs, environmental beliefs and ethical veganism.”

So beliefs – thought-crime, as some might see them – will be tolerated. But how those are beliefs may be manifested without offending the law is now the tricky area – and yet to be resolved in the Forstater case. “Employers will be watching closely for any guidance on how to handle employee conflict fairly and lawfully, while respecting the rights of all involved,” commented Monica Kurnatowska. Sadly the need to resort to law is a sign of growing social breakdown. If only it could be solved with a book of etiquette – or, better, a book of poetry.

The LegalDiarist

In this week’s edition

+ LEGAL DIARY OF THE WEEK

– Irwin Mitchell Appointed Legal Cox to British Rowing

– Building Better This Way with BDB’s new E-magazine

– The Forgotten Song of Clyde & Co

– IP Crime Reaches Top Ten

+ EXPERT COMMENTS OF THE WEEK: THE LAW DELAYED IS DIVORCE DENIED

+ LEGAL THINKING OF THE WEEK – CHANEL CROSSING Where’s the dividing line between luxury item and commodity product? considers Flavia Ștefura, Senior Associate, MPR Partners

+ LEGAL INSIGHT OF THE WEEK – WHAT IS THE ‘GLOBAL MINIMUM TAX RATE’ AND WILL IT HAPPEN?

ask Ian Borman and James N. Mastracchio of Winston & Strawn

+ LEGAL REVIEW OF THE WEEK – WHEN BUSINESSES GO WRONG The Insolvency Service’s new approach could hurt all company directors of Dissolved Companies argues Steve Thomas

APPOINTMENTS OF THE WEEK

with JMW Solicitors and Harneys

E-VENTS from Harvard, the Bingham Centre and ThoughtLeaders

LEGAL DIARY OF THE WEEK

Irwin Mitchell Appointed Legal Cox to British Rowing

With the Olympics just a few weeks away (oh, yes they are! oh no they’re not!) Irwin Mitchell has been announced as the Official Legal Partner to British Rowing. And its brief is not just to support the organisation’s legal work but also to help it deliver on its commitment to becoming more diverse.

Diversifying this crew? Photo Nick Middleton

It’s a big job.  The three-year deal will see Irwin Mitchell working in partnership with British Rowing’s in-house legal team plus its 530 clubs, 200+ events and 30,000 members to support their legal needs. These include IP and data protection, commercial advisory, risk management and disputes, employment, safeguarding and sponsorship.

 As is well known, the Brits are rather good at sports which involve sitting down on the water so the last 35 years has been marked by rowing as one of GB’s most successful Olympic events. And Irwin Mitchell will be supporting British Rowing to ensure that record continues. “With a proud history of working alongside sporting governing bodies both here and abroad, we’re very excited to be working with British Rowing to help them achieve their future aims and vision of representing a modern, diverse, British society,” said Hannah Clipston, partner and specialist sports lawyer at Irwin Mitchell

For British Rowing Andy Parkinson, the CEO, said, “We’re delighted to welcome Irwin Mitchell as our official legal partner and we’re excited at the potential this partnership has to deliver tangible change – not only to our affiliated clubs and members, but also with respect to our ongoing work in making rowing an inclusive and diverse sport that welcomes and has an offer for everyone.”

Building Better This Way

It’s a cover story

Congratulations to BDB Pitmans for producing a great new e-magazine. Under the title Building Better it comes across strongly with a vivid and highly contemporary take on the role of law by, as it says, ‘highlighting the issues that matter – whether it’s climate change, ethical business, ground-breaking technology or the latest market trends.’

  The current edition includes articles on anti-slavery campaigning company Tony Chocolonely (which is working towards 100% slave-free product), what we can expect from the Covid-19 inquiry plus what’s required from retailers to inspire areturn to the high street. Worthwhile having a look.

Here’sthe link  https://www.bdbpitmans.com/building-better-magazine/?utm_source=Vuture&utm_medium=Email&utm_campaign=Building%20Better%20Magazine%204%20June%202021

The (Forgotten) Song of the Clyde

The advance of women into senior positions in law firms was demonstrated further this week by the election of the Canadian Carolena Gordon as the new Senior Partner at Clyde & Co.

Just important as her gender, however, is the fact that she is the first partner from outside the UK to hold the position. This has a particular resonance right now with the G7 meeting down in Cornwall and much talk about ‘Global Britain’. As historically a shipping firm, Clyde’s name was the embodiment of English law internationally. It was, you might say, UK-flagged. Now with its 50 offices worldwide in every continent – and including 14 offices in the Americas – one has to ask whether the firm has a national identity any longer. Significantly the firm’s website has no hint of its history. And despite what Boris Johnson (or indeed others) might feel, maybe this doesn’t matter any more.

IP Crime Reaches Top Ten

Here’s one of those stories which makes you question what’s real, what’s illusion and what’s fake It also makes you think what really matters. (For more see our comment on the Chanel case further down).

The results of a study released this week – European Citizens and Intellectual Property  – by the European Union Intellectual Property Office reveals that European consumers still find it hard to distinguish  between genuine and fake goods. But is that really a surprise? If it’s a very good, convincing fake how would the average consumer recognise the difference? If, that is, there is a difference. Especially when it comes to fashion items where does the value lie – in the design, in the craftsmanship or in the brand?

Of course, when we are talking about medicines then it is a different story. Thanks to Covid patients have become much more concerned over fakes recently due to a  proliferation of counterfeit medicines (such as antibiotics and painkillers) as well as personal protective equipment. Indeed it is calculated that 4 billion euros worth of counterfeit pharmaceuticals are traded worldwide annually while as much as 6.8% of EU imports – worth EUR 121 billion – are counterfeits.

So this area of IP law is down and dirty. “IP crime is a profitable activity involving organised crime groups and increased evidence shows links between counterfeiting and piracy as well as other crimes such as drug and human trafficking, cybercrime or fraud,” warns Christian ArchambeauExecutive Director of the EUIPO. “This is a long-standing issue, often interlinked with other types of illegal activities, which requires urgent robust, coordinated action.”

The result is that IP crime has recently been installed as one of the top ten EU priorities in the fight against organised crime. Yes, it’s serious. ‘Definately’.

EXPERTS’ COMMENT OF THE WEEK: THE LAW DELAYED IS DIVORCE DENIED

IT delays at HMCTS have frustrated the implementation of the new divorce legislation. This is what the experts said.

COLLYER BRISTOW

 “Those divorce lawyers of a sceptical disposition and long memories will not be particularly shocked to learn that the MoJ is “delaying” the introduction of divorce reforms. It will be recalled that the previous attempt to bring this into force on the statute books fell at the last hurdle back in 1996.

 This has always been something of a political hot potato and, as one may imagine, certain sections of society (including, quite possibly, a very recently married occupant of Downing Street) are unconvinced about the wisdom of “making divorce easier”. This has, however, just made life much harder for those who were told by their lawyers that they only had a month or so to wait to avoid having to cite their spouse’s behaviour as a reason for the breakdown of their marriage.”

 Toby Yerburgh, Partner

GOODMAN DERRICK LLP

“The delay in no  fault divorce is hugely disappointing  for those in legal circles who have been campaigning for the change but most importantly for  the many couples who have been waiting until Autumn this year to “kick start” their divorce proceedings because they wanted to have a “no fault divorce.   This delay will inevitably present emotional challenges for these couples but it may also have financial consequences if these couples decide to delay further until the legislation comes into force next year. For example, the value of the couples’ assets may fluctuate in the next 10-12 months and there is no guarantee that the levels of income of the couple will be the same next year. Any financial settlement will be based upon the couples assets and income at the time the financial agreement is made.  

 On the other hand however, by waiting for the “no fault divorce” to come in force next April, it may be easier for couples to reach a financial agreement as they are more likely to be amicable and less willing to incur legal fees by engaging in contested or protracted proceedings.”

Charlotte Coyle, Senior Associate

PAYNE HICKS BEACH

“Family lawyers have long bemoaned the current divorce laws and the hostility that can arise as a result of the “blame” culture encouraged and required by the current legal system.  Parties who are in agreement that the marriage has broken down are surprised and disappointed to find that they are then pitted against each other from the outset.

It is disheartening that this vital but long overdue legislation will become even more so following today’s announcement. HMCTS has been working on the online platform for some time, which is already up and running for the current divorce process. It is frustrating that the modifications to the system have not been expedited for this reform.

I am aware of a number of couples who have agreed to wait until the Autumn to formalise their separation, allowing them to divorce consensually, whose plans have now been thwarted.  The new Act seeks to encourage a more conciliatory approach to relationship breakdown, reducing conflict and its damaging effect on family relationships. The legislation sorely needs to be prioritised.  Parties should have the right to separate amicably and with dignity and the long awaited day cannot come too soon.”

Emily Foy, Senior Associate  

OSBORNES

 “This delay is a blow to couples who are seeking to divorce in the most amicable way, with the least impact on their children. Couples who perhaps have been ‘waiting it out’ may feel that they have no option now but to begin the process, citing unreasonable behaviour or adultery. This immediately introduces a contentious element into their divorce, which is sad for them and their families.”

Lisa Pepper, Partner

“While it is hugely disappointing that there has been a delay in bringing the Act into law, divorcing couples seeking a no fault divorce will now at least have a date to plan towards.

 “I understand that the delay is due to the need for the court IT system to be updated to reflect the law change. I am sure that all family lawyers and those seeking a divorce will appreciate the time it takes to resolve such issues, and that the courts must be given the necessary time to ensure a smooth process when the law is brought in.”

  Joanne Wescott, Partner

SEDDONS

 “This is hugely disappointing. Divorcing couples had been preparing themselves for no fault divorce to begin from Autumn 2021. It was never understood why this could not have been have implemented last year when the Divorce, Dissolution and Separation Bill received Royal Assent. Bearing in mind that the last set of ONS divorce statistics revealed that unreasonable behaviour remains the most common reason for divorce, cited by 49% of wives and 35% of husbands, the blame game needs to end sooner rather than later.”

 Neil Russell, Partner

LEGAL THINKING OF THE WEEK

CHANEL CROSSING: Where’s the dividing line between luxury item and commodity product? considers Flavia Ștefura, Senior Associate, MPR Partners

Marilyn Monroe was once famously asked ‘what do you wear to bed?’  She replied ‘Why, Chanel Number 5 of course’.  That is the kind of celebrity endorsement Chanel appreciates.  What it finds less fragrant is any infringement of its trademark which tarnishes its luxury brand.  That is what it accuses online store Cresplocker of doing in an English law suit. It argues the tarnishing comes from selling ‘Chanel’-branded goods alongside goods from other less luxurious brands; offering its trademarked goods online – which its policies do not allow; using the ‘Chanel’ trademark to describe the goods it sells in product captions in both its online store and in a store on e-bay; and not offering a luxury experience to customers.  It claims a test item it purchased arrived crumpled and not in the original packaging.

Crepslocker argues it is protected by the ‘trademark exhaustion rule’ under which, following a first sale of a trademark product by Chanel, or subsequent sales with their consent, the fashion house cannot then control further sales. Crepslocker also says the division Chanel makes between online and offline sales is artificial, and that Chanel has collaborated with sports clothing manufacturers, so cannot claim mixing its products with sportswear tarnishes its brand.

What is a high-end fashionista, not to say IP lawyer, to make of it all?

Post Brexit the UK Supreme Court is no longer bound by decisions of the Court of Justice of the European Union, (CJEU).  However, courts in the UK are free to have regard to CJEU decisions in their own rulings, and CJEU precedents tend to protect trademark owners. They support that controlling the sale channels and respect for the integrity of the original packaging are acceptable exceptions to the trademark exhaustion rule. It seems likely the UK courts will follow these established principles.

However, Crepslocker also kept used products in consignment from its customers, and here the courts would probably consider balancing Chanel’s rights, Creplocker’s, and the owner’s rights in the used products to have a platform to sell their goods on the aftermarket.

A win for Chanel may have a chilling effect on online resellers of other luxury brands. Maintaining the prestige and value of such brands by setting sales standards and determining sales outlets may protect the brands, its consumers and the large amounts they pay for the goods.  However, those consumers also need a resale outlet, and there is a demand for the products they own. Careful consideration will have to be given to whether the second-hand luxury goods market is different from the new luxury goods market, and whether the exception to the trademark exhaustion principle still applies. 

LEGAL INSIGHT OF THE WEEK

What is the ‘global minimum tax rate’ and will it happen? ask Ian Borman and James N. Mastracchio of Winston & Strawn

Last weekend the members of the G-7 (Canada, France, Germany, Italy, Japan, the UK and the US) reached an agreement that a global minimum tax should be implemented and the respective Treasuries will support a broader global effort.  While the reported rate would be 15%, and all individual country’s digital tax would cease, the details of how the minimum tax would be imposed, on what corporations, and on what terms, is unknown. 

Some sort of global minimum corporate tax rate has been talked about for many years – but the idea is currently having a renaissance under OECD proposals and the Biden administration. Some feel that the political capital may well be in place to bring new rules into force, even if these are imposed unilaterally. So, what is it and will it happen?

The purpose of a global minimum tax rate is to disincentivise the shifting of profits to lower tax jurisdictions. The idea was to force multinationals to pay tax in the jurisdictions where their goods and services are sold, but this has proved impractical, so the actual proposals are a little different.

The proposals are effectively an amendment of the US’s Global Intangible Low-Taxed Income (GILTI) tax rules, which mirrors the OECD’s BEPS Pillar II proposals which is intended to be a comprehensive agreement on jurisdiction-by-jurisdiction global minimum taxation.

A key part of the new proposals would require multinational businesses to calculate GILTI on a jurisdiction-by-jurisdiction basis, thus preventing the blending of low rate income with income from controlled foreign corporations operating in high tax-rate countries.

The proposals are certainly ambitious and many countries and organisations around the world have applauded efforts to limit countries’ ability to opportunistically set low corporate tax rates. However, what might seem simple is in fact enormously complicated.

Countries such as Ireland, which currently has a 12.5% corporate tax rate, see low levels of taxation as a key method of stimulating growth. As such, it seems unlikely that they will agree to the change and, with each European Union member state able to veto, it’s difficult to see a path to a minimum tax rate across the EU bloc.

It is difficult to know how effective a global minimum tax rate will be if adopted and implemented, but it seems likely that low tax jurisdictions will use any opportunity to replace low tax rates with other incentives by something else, potentially making labyrinthine tax systems even more complex. But with the G7 nations taking the first major step towards a global minimum tax rate, discussions are certain to continue across jurisdictions.

Ian Borman advises, at a strategic level, on business critical issues, including long term financial planning, regulatory issues, financial restructuring and disputes. James N. Mastracchio is a partner in the firm’s office in Washington D.C

LEGAL REVIEW OF THE WEEK –WHEN BUSINESSES GO WRONG

The Insolvency Service’s new approach could hurt all company directors of Dissolved Companies argues Steve Thomas of Excello Law

Image courtesy of FTC

When things go badly wrong in a business the dissolution process is a quick, simple and cost-effective way to have the company struck off the register. However, dissolving a company can mean that questionable conduct by directors is swept under the carpet. Some unscrupulous directors have unfortunately used dissolution as a way to avoid accountability or repaying creditors. So what’s to be done?

In order to protect against such abuse, the government has recently given the Insolvency Service new enforcement powers. Indeed, it is widely predicted that many UK companies which were kept solvent by the government’s Covid supports will soon be wound up. The government could well be one of the creditors left out of pocket. That is especially likely given widespread uptake of the government’s Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) loans. If a Company is dissolved and has unpaid BBLs and CBILs then those directors may fall under the radar and will not be in the cross hairs of a Liquidator.

Ordinarily, the only way for the creditors of a dissolved company to recover their funds is to restore the company and then to bring an action against its directors. This process is costly and takes time to complete. Therefore, the government has now given the Insolvency Service the power to investigate the conduct of directors of dissolved companies with outstanding government loans. 

While the government is right to protect its interests, there is a danger that these new enforcement powers could be used too aggressively in a scattergun approach against all companies which were dissolved with government loans outstanding. However, many such companies will have been acting properly in taking the loans in a genuine effort to keep their business afloat.

The directors of such companies should take action to limit the risks which these new powers present. Directors should keep clear documentary evidence to prove what the loan was for, what the motive behind the application was, and what was the money spent on. They should keep detailed minutes of board meetings where a company decides to dissolve, and clear evidence showing the rationale for their decision making processes. Such documents could be crucial in defeating any claims made by the Insolvency Service for disqualification to act as a director, or against other sanctions which the service may seek to impose. It is crucial to be able to show that there was no breach of duty by the directors and that, accordingly, no sanctions or bans should be administered.

The government’s efforts to protect its loans are understandable and welcomed but perhaps more thought should be given as to the process of a Company entering into Dissolution, which is administrative and open to abuse i.e. stop the Company being dissolved in the first place. However, the Insolvency Service should exercise discretion when deciding which directors to target with its new powers and this power seems to be akin to locking the door after the horse has bolted.

Steve Thomas is a specialist Insolvency dispute resolution and Insolvency litigation lawyer at Excello Law.

www.excellolaw.co.uk

APPOINTMENTS OF THE WEEK

Suzanne Staunton has been appointed as a partner in the Employment team of JMW Solicitors LLP in their London Office. Prior to working in private practice, Suzanne spent many years at the independent bar, giving her a unique perspective for clients throughout the litigation process. Staunton has worked closely with legal counsel, employment counsel and HR staff members as well as high net worth individuals and executives on a range of employment law issues.

Anita Rai, head of the Employment, London at JMW Solicitors said, “In London, we are continuing to attract the best legal talent in London. Suzanne is an excellent addition to our busy employment team. As an experienced litigator, Suzanne enhances our complex discrimination and whistleblowing capabilities.”

Having been admitted as an attorney of the Grand Court of the Cayman Islands, Moesha Ramsay-Howell has been appointed as an associate to Harneys’ Litigation & Insolvency practice.

 Moesha was born and raised in the Cayman Islands and started out her legal career after becoming the recipient of a Cayman Islands Government scholarship. This allowed her to complete her tertiary education, which included her bachelor’s degree and a postgraduate diploma in Legal Professional Practice.

Moesha is a member of the International Women’s Insolvency and Restructuring Committee (Cayman) and is a board member of the Cayman Islands Legal Practitioners Association. When she is not working or studying, Moesha volunteers at Legal Befrienders, a family resource centre where she provides free legal advice. She is also heavily involved in the Prison Literacy Programme at Her Majesty’s Prison Service Cayman Islands. 

E- VENTS

HARVARD LAW SCHOOL CENTER ON THE LEGAL PROFESSION

ThoughtLeaders4PrivateClient Webinar ‘Succession Planning for Modern Families’ in your legal diary?

Sarah Williams and Jessica Henson of Payne Hicks Beach are respectively chairing and speaking at the ThoughtLeaders4 Private Client event on 14 June 2021.

With modern science advancing at great speed, they will discuss what this means for succession planning. Complexities over legal relationships and inheritance are pure examples of some of the challenges for private client  lawyers thrown up by surrogacy and modern family dynamics.

Topics to be discussed include:

• The law surrounding surrogacy – introduction to, and update on, the position in the UK and key jurisdictions
• The complex web of parental rights flowing from surrogacy
• Why private client practitioners and trustees need to be up to date on the issues
• The role of the Human Rights Act
• Fertility preservation
• Modern family dynamics and trusts
• Settlors’ wishes and public policy

Webinar booking link: https://bit.ly/3uCHz6Y

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