Legal and business news from the IBA - June/July 2017
Trump withdraws from Paris Agreement as energy order faces legal hurdles
The 2015 Paris Agreement on climate change was carefully crafted to ensure the United States could participate, following years of intense international negotiations. By designing it as a non-binding deal instead of a treaty, former US President Barack Obama could sign up without needing the Senate to ratify it. But this also means the US can withdraw from the Agreement without consulting Congress – a step that President Trump is now taking – in a move that has been condemned by world leaders.
Exiting the deal is not a quick process. Article 28 of the Paris Agreement states that any party can give notice of withdrawal three years after entry into force. This means the earliest the US can formalise its intent is 4 November 2019. The exit then takes effect one year later, so 4 November 2020 – the day after the next US presidential election is scheduled to take place.
In the meantime, there is plenty Trump could do to undermine the Agreement. Implementation of his Executive Order on Promoting Energy Independence and Economic Growth, issued on 28 March 2017, would roll back many steps to curb the country’s greenhouse gas (GHG) emissions. An array of rules and regulations could be revoked, such as those to reduce emissions from the nation’s electricity generators and methane emissions at oil and gas facilities. But abolishing these rules is also a lengthy process.
‘An executive order itself – except for some kinds of government actions – doesn’t actually do anything, it just gives agencies direction,’ explains Kyle Danish, a partner at Van Ness Feldman. ‘You effectively have to propose a new rule to undo the other rule… the first obstacle is process.’
To undo a rule, or create an ‘unwinding rule’, the process is the same as it was to create it initially. First, the relevant agency – such as the Environmental Protection Agency (EPA) – needs to issue a notice of proposed rulemaking (NPRM) and have it open for public comment, typically for 60 days. In the final rule, the agency needs to include the evidence to support it, respond to any major criticisms arising from the comment period, and explain why it chose this path and not another option.
To file a NPRM, however, the agency needs to provide a reasoned explanation for the need for a new rule or revision to the existing one, such as a change in facts. ‘This is where it gets sticky for [the Trump Administration],’ says Cameron Prell, a counsel in Crowell & Moring’s energy group. ‘There are only two things driving this action: first, they don’t like the Obama era climate actions. Second, they don’t believe the Clean Air Act gives the EPA the authority to regulate emissions from stationary sources… [because] the Massachusetts et al vs EPA ruling was only applicable to vehicles’ [see box].
‘If they want to make sure there is no more legal authority for GHG regulation under the Clean Air Act, they have to go back and undo the endangerment finding,’ says Danish. ‘In order to defend that action against a legal challenge, they’d have to go back and prove that scientific thought is in the other direction.’
Massachusetts vs EPA 2007: the case that started it all
The legal foundations for former President Obama’s plans to curb GHG emissions lie in a 2007 Supreme Court ruling in Massachusetts et al vs EPA, which forces the federal government to regulate emissions.
The case arose from a 1999 petition that sought to force the EPA to regulate GHG emissions from new vehicles. In 2003, the EPA determined it lacked the authority to do so for climate change purposes under the Clean Air Act – and that, even if it did, it would not do so as the science linking GHG emissions and global warming was unsettled.
A coalition of states, cities and NGOs, led by Massachusetts, appealed the decision. In 2007, the Supreme Court ruled the EPA could regulate tailpipe emissions under the Clean Air Act and ordered the EPA to regulate GHG emissions, unless the EPA could prove they did not contribute to global warming.
This led to the 2009 ‘endangerment finding’, in which the EPA found that GHGs responsible for climate change are also a threat to public health, and consequently that it has the mandate to regulate them under the Clean Air Act.
With Congress unable to come to any agreement to curb emissions, the EPA used the endangerment finding to develop rules to cut emissions from both existing and new power plants, resulting in the 2014 Clean Power Plan. Early in 2016, the Supreme Court issued a stay on the plan, pending litigation in the DC Circuit. The latter court has since paused the litigation following a request by the Trump Administration to review the plan.
The day after the executive order was published, the Trump Administration filed a motion of abeyance in litigation pending in the DC Circuit challenging the rule. Technically, since oral arguments were heard in 2016, the court could reject this motion and issue a decision. But on 28 April 2017, it granted the motion to pause for
‘Any action they take on the Clean Power Plan [developed by the EPA to cut power plant emissions] will take several years to resolve, as they have to go through administrative and legal processes,’ adds Prell. ‘There was no reason that they needed to do the executive order… [it] doesn’t alleviate the need go through the federal processes.’
‘There’s a lot of uncertainty on how the executive order and a lot of the Administration’s policy with regards to energy will play out over the next few years,’ says Michelle Ouellette, a partner at Best Best & Krieger in California and Chair of the IBA Environment, Health and Safety Law Committee. ‘The Administration is tackling these issues in a new way.’
Artificial intelligence and climate change will alter employment landscape, says IBA GEI reports
The increasing impact of automation and climate change on jobs and employment law is highlighted in two new reports from the IBA Global Employment Institute (IBA GEI).
'Artificial Intelligence and Robotics and Their Impact on the Workplace' argues that the current wave of automation, driven by artificial intelligence (AI), is creating a gap between existing and new legislation, and considers the need for changes to employment law.
The 120-page report focuses on future trends, and the likely impact of intelligent systems on the labour market, company structures, employee working time, remuneration and the working environment. It assesses the law at different points in the automation cycle, from the developmental stage, when computerisation of an industry begins, to what workers may experience as AI becomes more prevalent, through to issues of responsibility when things go wrong.
The 'Climate Change and Human Resources Policies Report' aims to contribute to emerging discussions about structural changes to business and the training needs of workforces transitioning to low-carbon economies. The soon-to-be-published report examines potential issues in relation to employment policies and labour laws, as well as drawing attention to what some countries are doing to help their employees adjust to industrial change.
Pascale Lagesse, Co-Chair of the IBA GEI, commented: ‘Among industry leaders, there is increased recognition that climate change will affect their business models at a fundamental level as a result of needing to comply with laws passed at a national level, following the ratification of the Paris Agreement. Each country will need to decipher how to implement the Agreement. Subsequently, many multinationals and large companies, while generally maintaining their culture, will need to adjust their organisations in a number of ways.’
'Artificial Intelligence and Robotics and Their Impact on the Workplace' can be downloaded at tinyurl.com/IBAGEI-Robotics
Global survey on why women lawyers leave law firms – update
The findings of IBA research into why so many women lawyers leave law firms and the legal profession altogether are to be presented at the IBA Annual Conference in Sydney. Carried out by the IBA Legal Policy & Research Unit, the project included an in-depth survey which closed on
30 April after receiving almost 6,000 responses. The results will be outlined in a report that will also set out practical measures for tackling the loss of women lawyers, including retention and re-engagement strategies.
Early bird deadline for Annual Conference
The deadline for early bird registration for the IBA Annual Conference in Sydney is Friday 21 July. This year’s event looks set to be another outstanding week. The opening ceremony takes place on Sunday 8 October, marking the start of a conference that brings together delegates from more than 100 jurisdictions to debate a wide range of topics in around 200 working sessions on all aspects of international law.
Last year’s Annual Conference in Washington, DC attracted 6,648 individuals representing 3,000 law firms, businesses, bar associations and other organisations worldwide.
To register for Sydney 2017 and benefit from the early bird offer, go to www.ibanet.org/Conferences/Sydney2017
Sydney kangaroo travels the world
You may have seen our intrepid kangaroo 'Sydney' travelling the world through our @IBAevents Twitter account to promote this year's IBA Annual Conference. If not, then type #IBASydney into your browser to follow his journey.
You don’t need to be a Twitter user to read the latest IBA tweets; simply visit twitter.com and search for @IBAnews or @IBAevents.
Saudi Arabia: major privatisation programme heralds post-oil era
Emad Mekay, IBA Middle East Correspondent, Cairo
In a consumer-oriented market like Saudi Arabia, there’s no shortage of things to buy. But now, power companies, the postal service, hospitals and even football clubs are up for grabs. The country is in the midst of a privatisation fever proponents say is necessary to create jobs and diversify the economy away from oil.
While the oil-rich Arab country has been flirting with privatisation for years, the new rallying call came in earnest from the Washington-based International Monetary Fund in late 2015, when it warned that Saudi Arabia risks depleting its financial assets in just five years. The Saudi regime, which has often looked to foreign expertise for economic direction, has responded with a remarkable level of urgency.
A few months after the warning, King Salman's son and de facto ruler, Deputy Crown Prince Mohammed bin Salman, announced Vision 2030, the country's strongest and clearest push towards privatisation and economic change. The bottom line is that the country needed to respond to an unprecedented $98bn budget deficit following oil prices falling below $40 per barrel – down from nearly $100 a year earlier.
Almost immediately, price hikes ensued. Fuel prices jumped by 46 per cent at the pump. A tax on foreign workers’ remittances was mooted but is yet to be implemented. The government says it will impose a value added tax, a fee on foreign workers and a tax on ‘harmful products and extra luxurious products’. News of plans to cut subsidies were carried in the local press.
The word privatisation was once taboo in the rich welfare state of Saudi Arabia. It was considered a snub against the ruling family's ability to provide for public services from its riches and extend their ‘generous’ benefits to citizens. Privatisation has now become a buzzword for economic planning.
‘The lower oil price is definitely one of the reasons for accelerating the privatisation programme at this stage, as it prompted the rulers to make tough decisions,’ says Omar Al-Rasheed, Attorney-at-Law with Riyadh-based Omar Al-Rasheed & Partners. ‘Prices have previously been even lower than the current level. Many other factors, including the size of the Saudi population and the new leadership in Saudi Arabia, also contributed to the move.’
One priority for the Saudi government has been breaking the news to the public about a more energised privatisation programme, as well as higher fees and taxes. The approach has been to show how taxes and fees in Saudi Arabia compare favourably to advanced economies, such as the United States and some European countries, where taxes are higher and standards of living still high.
The lower oil price is definitely one of the reasons for accelerating the privatisation programme, as it prompted the rulers to make tough decisions
Omar Al-Rasheed & Partners; Secretary-Treasurer,
IBA Arab Regional Forum
‘There is an urgent need to diversify government revenue away from oil. The push started in 2016 and will expand over the coming years,’ declared Saudi Al-Yaum newspaper, citing the Vision 2030 Fiscal Balance Program, in January.
The privatisation plan aims to increase non-oil revenue to $120bn a year by 2020 and growth to $266bn by 2030, while completely offloading subsidies from the already over-stretched government. No sector will be spared. Just under 300 hospitals and 2,259 health centres will be privatised by 2030 according to the Saudi Ministry of Health.
The Saudi postal service is among the first government-owned agencies marked for a quick sale. This will be done through a holding company that will manage other communications, transport and money transfer agencies. The aim is to increase the postal service's revenue from 1bn Saudi riyals ($267m) to 2.75bn riyals ($734m) by 2020, which will also eliminate government subsidies to the service.
The real prizes in the privatisation programme will be oil and petrochemicals companies, but airports, tourism, media, education, power companies and even some services related to the Ministry of Justice also will be put up for sale, according to statements from the government.
Legal experts say that, despite the enthusiasm inside Saudi Arabia for the programme, the legal framework needs fine-tuning. Grahame Nelson, who heads the Riyadh office of Al Tamimi & Company, told Global Insight that Saudi Arabia needs to establish ‘the sort of legal framework that will be seen as foreign investor friendly.
‘Some important elements are already present – low tax rates and attractive government incentives, for example,’ he says. ‘However, one pressing area relates to the securities; many of the conventional forms of project finance securities are not currently available, though the proposed Commercial Pledge Law will hopefully go a long way to solving that problem.’
The country also needs wider publication of laws in foreign languages such as English, and to further free up rules governing foreign investments, adds Nelson.
Al-Rasheed, who also serves as Secretary-Treasurer with the IBA Arab Regional Forum, adds that the Saudi government needs to include more local expertise in the process of preparing the legal framework because of its knowledge and understanding of the economy.
From a legal standpoint, he says, the programme will need to introduce better disclosure and cut red tape. ‘I believe procedure and transparency in the judicial system should be improved,’ says Al-Rasheed. ‘The government is working towards rapidly improving the system by allocating more resources, and by introducing an improved legal system to attract more investors from all over the world. Lawyers in Saudi Arabia constantly complain about the slow improvement in the system. In some cases, it takes several years to come to a decision because of bureaucratic delays and unnecessary procedures.’
Whistleblower debate at European Parliament
On 29 March 2017, the IBA Legal Policy & Research Unit participated in a roundtable on whistleblower protection at the European Parliament. Convened by the Greens–European Free Alliance group, the discussion saw Members of the European Parliament, civil society and academics exploring the added value of European Union action on whistleblower protection. It then compared sector-specific legislation (for example, employment and trade) with an approach legislating across all sectors.
New IBA corporate members
Information provider LexisNexis and Indian chemical manufacturer Godrej Industries are among the latest organisations to have joined the IBA as corporate members.
This membership is specially designed to cater for the in-house legal departments of leading international corporations. With one annual payment, all lawyers of a corporation’s worldwide operations can become full members of the IBA wherever they are located.
This year’s membership renewals are still taking place – a renewal guide is available via the ‘Membership’ section of the IBA website to help members through the steps. If you need assistance, email: email@example.com
King's College London hosts first immersive weekend of new elite, world-class, professional LLM
King’s College London’s new Executive LLM programme, run jointly with the IBA, staged its inaugural immersive weekend on 6–9 April.
Taught part-time over two years, the advanced Master of Laws course blends online learning modules with five London-based immersive weekends.
The Executive LLM is designed to equip talented lawyers with advanced legal, commercial and policy knowledge, as well as sectoral expertise.
During the first weekend, hosted at the Dickson Poon School of Law at King’s, students explored advanced negotiation skills and cutting-edge legal challenges under the guidance of leading academics and practitioners from the School. They also worked in small teams on a sector case study covering either energy and natural resources, technology-based enterprises or major projects.
The immersive weekends are also an opportunity for students to meet each other, broaden their international professional networks, and hear from
prestigious and inspirational speakers.
For more information about the Executive LLM, go to www.kcl.ac.uk/executiveLLM
LPRU project support for committees
The IBA Legal Policy & Research Unit (LPRU) carries out research and projects on matters relevant to the IBA, the legal profession and the broader global community, and that fall within the objectives of the IBA Constitution and promote the rule of law.
The LPRU team can work with, and provide additional (human) resources, guidance and advice to, committees wishing to undertake projects for the IBA, its members and the wider legal profession.
Any project proposed by an IBA committee must first be approved by its relevant division’s leadership, that is, the Legal Practice Division, Section on Public and Professional Interest or Bar Issues Commission. As resources are limited, there is no guarantee that the LPRU will accept any given project proposal, even if approved by the relevant division leadership.
To assist the division leadership and LPRU in identifying projects that best meet the IBA's requirements, and how to best prioritise between projects, please download and complete the project proposal form at tinyurl.com/LPRU-Project-Proposal. Completed forms should be emailed to LPRU@int-bar.org.
If a proposed project is approved, division leadership and the LPRU will endeavour to respond to the proposal within four weeks of receipt, or may contact applicants to request further information.