The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.
Article by Gina Asadi (recent BPP LLM Legal Practice (Solicitors) graduate)
For months the shared workspace provider, WeWork, has been struggling to revive its loss making business model. In order to keep the company afloat, SoftBank, the Japanese tech giant and one of WeWork’s shareholders frequently injected capital into WeWork, totalling up to $10.5 billion. In a final attempt to rescue WeWork from insolvency in October 2019, SoftBank agreed a multibillion dollar bailout.
The multibillion dollar deal would see SoftBank buying $3 billion worth of shares from existing WeWork shareholders, including shares worth around $1 billion from WeWork’s co-founder, Adam Neumann, and $350 million from Benchmark Capital; this is known as a tender offer. However, early April 2020 saw SoftBank pull out of the tender offer. SoftBank has stated that the reason for backing out of the deal was because WeWork had failed to fulfil certain conditions by 1 April 2020, such as, failing to obtain necessary antitrust approvals. SoftBank raised concerns over governmental investigations into WeWork’s filings for its IPO, as well as, criminal and civil investigations into conflicts of interest and self-dealing by Adam Neumann. Further, SoftBank’s decision was influenced by WeWork’s failure to finalise a joint venture in China.
In response to this move, a special committee of WeWork’s board has decided to commence legal action against SoftBank to require it to complete the tender offer or to pay compensatory damages. The special committee is arguing that SoftBank has breached its fiduciary duty to WeWork’s minority shareholders, who were promised liquidity. SoftBank has maintained its commitment to WeWork and argued that pulling out of the tender offer would not affect the company’s operations, strategy, customers and employees as the offer would have only benefited a few shareholders. Further, the withdrawal means that SoftBank no longer needs to proceed with a $1.1 billion in debt financing; maintaining its fiduciary duties to SoftBank’s shareholders.
WeWork had previously reassured investors that it had $4.4 billion in cash and cash commitments that will help the company fight the economic downturn. However, with WeWork’s business on the decline, the loss of the tender offer and the outbreak of the coronavirus WeWork’s future remains uncertain.
Article by Beth Zheng (LLB Law student at the University of Durham)
As coronavirus continues to threaten the future of businesses, functions of schools and daily activities, online video conferencing is needed more than ever. To keep in touch with friends and family, over the past few weeks, the popularity of online video services such as Skype, Microsoft Teams and Zoom has increased to reflect the millions of users around the world hoping to stay connected. Analytics firm SimilarWeb reported there was a 535% rise in daily traffic to Zoom’s download page whilst its app has been the most downloaded app in the US for many weeks. Before the pandemic, there were 10 million Zoom users which has now increased to over 200 million users daily. This popularity has further been reflected in Zoom’s stock price which increased by 67% from February 2020 to March. Yet, whilst these services have allowed people to connect quickly all around the world, Zoom, in particular has been criticised for its lack of data security.
During this pandemic, Zoom has notably been used by UK Prime Minister Boris Johnson for cabinet consultations amongst other high-profile leaders. It is therefore even more crucial that users can be assured their data will be safely secure and encrypted when discussing issues of national security. Yet unlike the UK, governments around the world have actively banned the service, with the US Senate, German and Taiwanese governments opting to use other services instead. India’s Cyber Coordination Centre have even published advice titled ‘Advisory on Secure use of Zoom meeting platform by private individuals (not for use by government offices/officials for official purpose’ reinforcing their belief Zoom does not have the suitable digital infrastructure to support secure and safe usage.
Zoom has since come under fire for its misleading statements over end-to-end encryption, with critics alleging there have numerous security flaws. It was reported that Zoom were using their own definition of ‘end-to-end encryption’ meaning they could access unencrypted video and audio in meetings. They were also able to access files and messages shared. In a Zoom call, users are reassured their meeting is ‘secured with E2E encryption’ with ‘in-meeting security capability’. However, in reality, a Zoom spokesperson recently admitted that it was not possible to enable E2E encryption for Zoom video meetings due to the type of connection the service uses. Therefore, video and audio content shared in a meeting will not be private from the company.
Besides this, as the level of usage has increased drastically throughout the Covid-19 pandemic, so too has the number of ‘zoom-bombing’, whereby unwanted users are able to intrude a Zoom meeting and often share content which is pornographic or racist. This has been common in educational zoom meetings, leading to many institutions banning the software. In the US,’Zoombombing’ has been such an issue that the US Federal authorities now have the power to charge those who engage in this activity. The first of these cases was on April 8th where a teenager in Connecticut was arrested on the grounds of computer crime, conspiracy and disturbing the peace.
Since then, Zoom CEO, Eric Yuan, has apologised for the data breaches, stating the service was not ready for the influx of new users. On a more global level, Yuan has immense pressure rooted in his ties to China, who are a dominant force and have been criticised for using their dominant technology practices to exert influence over foreign countries.
Other companies such as Google and Facebook publish transparency reports which show the statistics of government requests for data and the number they satisfy. Human rights group Access Now recently openly called for Zoom to release a transparency report, giving users a better insight into how their data is stored and used. In this competitive market, Zoom must quickly adapt and improve their security infrastructure. Although the service has implemented new features such as requiring more passwords and waiting rooms to access sessions, the report that around 530,000 accounts and passwords are being sold on the dark web will not be encouraging for the company, as they seek to dominate a popular market against well-establish competitors who have a better history of data security.
As law firms consistently engage in sensitive client information, it will be even more crucial for users to be aware of the security breaches surrounding new popular video conferencing software. Nevertheless, technology such as Zoom has provided immense benefits for families, businesses and schools alike, as work is able to be continued from home and families can continue to connect online.
Article by Jamie Howarth (LLB Law student at ULaw)
Joining BP and other big oil companies, Royal Dutch Shell pledged yesterday (16th April) to become net-zero by 2050. The energy group intends to cut the carbon intensity of its products by 30% by 2035, and 65% by 2050, as well as cutting emissions from its own operations to net-zero.
Ben van Beurden, CEO, said that Shell must have long-term priorities regardless of the current situation. The difficult issues of low oil prices and lack of demand resulting from Covid-19. Since the start of the year, Shell’s share price has dropped significantly, and it recently took out a large credit facility in order to protect its dividend. Van Beurden believes that the company owes it to its customers and society to continue with its net-zero efforts.
Adam Matthews, from the Climate Action 100+ group, which campaigns for companies in the oil and gas sector to be more responsible for their emissions, stated that, ‘it will be by developing and supporting net-zero pathways in these sectors that we will achieve the goals of the Paris Agreement’. Regardless of Shell’s positive ambitions, activists are still pressuring the company to reduce emissions further; they argue that the new targets are not in line with the essential element of the Paris Agreement, which is to limit global warming to 1.5% above pre-industrial levels. Similarly, Greenpeace UK believe that ‘a credible net-zero plan from Shell would start with a commitment to stop drilling for new oil and gas’.
However, despite the reaction of various lobbying groups, Shell was still one of the first energy companies to set emission targets, and these new reduced targets will pave the way for others in navigating the environmental issues associated with the sector.
Article by Zyeraph Bucalan (Final Year LLB Law, University of Leicester)
The overreaching economic impacts of Covid-19 have prompted major changes in the aviation, financial and technology industry (to name a few); cruise ship businesses are not an exception. Faced with severe financial setbacks and a lack of government support to keep them ‘floating’ above the crisis, businesses are forced to muster robust plans to weather through the storm.
Recent headlines of coronavirus outbreaks onboard ships, such as the Diamond Princess quarantined in a Japanese port, have cast a spotlight on the state of cruise companies. The world’s three largest cruise firms – Carnival Corporation, Royal Caribbean and Norwegian – account for around 80% of the global market share, representing $60bn of the cruise line market. However, preventive measures to tackle the coronavirus have seen the Centers for Disease Control and Prevention (CDC) temporarily banning the firms from sailing in US waters. In reaction to government policies, the three large firms have suspended voyages and extended operational pause.
Other limits have raised issues for the industry. The industry’s core market is affected as government officials in the US and UK strictly advised those over 70s to not go cruising. Many countries are not welcoming cruise ships, for instance, Canada has closed its ports for large cruise ships until July 1st. This policy is likely to be followed by other countries, worsening the issues of ships being ‘stranded at sea’.
The restrictions have seen a dramatic fall in the three large firms’ share prices, down by 70-80% since the beginning of 2020. In comparison, it is around a 60% for airlines and 30% for the American stock market. Nevertheless, the US has agreed a $25bn rescue package for 10 of the country’s biggest airline as part of the $2trn emergency relief bill passed by Congress in March. However, the cruise industry has been excluded from this fiscal stimulus, increasing risks for the industry being unable to survive an extended shut down.
Carnival has taken action to mitigate the risks with plans to raise $6bn from issuing new shares and bonds. We may be expecting to see other cruise ship businesses following the same approach as they struggle to stay afloat during this crisis.