Commercial Awareness Update – W/C 6th March 2023

NGO’s CLAIMS AGAINST TOTALENERGIES DISMISSED IN FIRST FRENCH COURT DECISION ON DUTY OF VIGILANCE LAW

On 27 March 2017, French lawmakers enacted the duty of vigilance law, a legal framework that aims to hold companies accountable for human rights abuses and environmental damages resulting from their activities.

Under this law, large French companies must establish a vigilance plan that identifies potential risks of human rights violations and environmental damage resulting from their activities and implement measures to prevent and mitigate them.

Claims against TotalEnergies for the human and environmental impact of the EACOP

On 28 February 2023, a landmark decision was made in the first-ever case brought under France’s “duty of vigilance” law. The ruling was against TotalEnergies and related to the human and environmental rights impacts of the East African Crude Oil Pipeline (EACOP), a controversial project in Uganda and Tanzania that has faced widespread criticism for its potential human and environmental impacts.

The six NGOs that filed the suit argued that the development of the East African Crude Oil Pipeline (EACOP) failed to adhere to a “duty of vigilance” and requested that TotalEnergies be ordered to take urgent measures to remedy the situation.

The court’s dismissal was a major setback for environmental and human rights activists, who had hoped to use the “duty of vigilance” law to hold corporations accountable for their actions and prevent harmful projects from moving forward.

The Court’s Decision: dismissal on procedural grounds

The Paris Civil Court declared the application for injunction inadmissible on the grounds that the NGOs had not complied with two procedural prerequisites.

Firstly, the Court noted that the requests included in the formal mandatory notice sent to TotalEnergies before the judicial claim was filed were “substantially different” from the requests presented in the Paris Court during the hearing.

Secondly, the Court specified that it falls within the jurisdiction of the Paris Court to entertain the requests, and the said Court is entitled to render a verdict on the substantive issues of the case, as opposed to a court solely mandated to issue provisional measures in the context of interim proceedings.

As per the Paris Court, its jurisdiction ruling in interim proceedings is limited to cases where:

1. The company does not have a vigilance plan.
2. The company has an insufficient plan equivalent to not having a plan at all.
3. There is clear evidence of illegality.

However, in this case, the NGOs’ claims are suitable for consideration by the court ruling on the merits – that is, the Paris Court because:

1. TotalEnergies has a vigilance plan in place.
2. Numerous exhibits were submitted concerning its highly complex operations.
3. There are no current standards for what constitutes a vigilant corporation.

In light of the preceding, the Court held that the interim proceedings court does not have jurisdiction to thoroughly examine the claims due to their complexity, as outlined in the three points mentioned above. Therefore, the case should be referred to a court with the power to conduct a detailed review.

Furthermore, the Court specified that the law sets out a general duty of due diligence but does not refer to any guiding principle or pre-established international standard.

Future outlook and implications for the legal industry

While the ruling may seem to be a cause of concern, it should be noted that both the ruling itself and possible future developments could work to alleviate any potential adverse effects of the decision.

Firstly, it is essential to bear in mind that the claims were dismissed based on procedural grounds, thus leaving open the possibility of the appellate court rendering a future decision on the substance of the law. An appeal would provide an opportunity for the court to render a strong and definitive decision and to adopt an interpretation that is consistent with the spirit of the law.

Secondly, the ruling suggests that pursuing alternative legal routes, such as common proceedings on the merits, may afford the court greater jurisdiction to scrutinize the vigilance plan comprehensively. Therefore, such an approach may be more advantageous for non-governmental organizations seeking to hold companies accountable for human rights and environmental abuses.

Finally, the EU Corporate Sustainability Due Diligence Directive has established a unified EU-wide framework for corporate due diligence, which could supplement and reinforce existing national legislation, such as France’s Duty of Vigilance Law, thereby bringing nuance to this decision.

This Directive would provide additional guidance on the criteria for effective due diligence and how corporations can be held accountable for environmental and human rights violations. Furthermore, this Directive indicates the EU’s commitment to aligning with the UN Guiding Principles on Business and Human Rights.

Article written by Wanjiru Chigiti

THE HUMAN RIGHT TO CLEAN AIR

Nine-year-old Ella Adoo-Kissi-Debrah’s death from an acute asthma attack in February 2013 was especially notable due to a landmark coroner’s report listing the major contributory factor to her death as air pollution. The coroner noted that Ella ‘was exposed to nitrogen dioxide and particulate matter (PM) pollution in excess of World Health Organization guidelines, the principal source of which were traffic emissions’.

With calls for the deaths of Ella and that of countless but unnamed others to not be in vain and for England and Wales to adhere to the WHO guidelines, the Private Members’ Clean Air (Human Rights) Bill, tabled by Baroness Jones, was introduced to the House of Lords on 19^th May 2022. The Bill completed its passage in the House of Lords, gaining considerable cross-party support in the process, and received its first reading in the House of Commons on 5^th December 2022, with its second reading due on the 24^th March 2023.

The Bill and its sociological impact

The Clean Air Act of 1956 was the government’s first venture into reducing air pollution, with its enactment accelerated by the growing concern about the effects of the Great London Smogs from the 1950s through to the 1960s. Several amendments were made to the 1956 Act, eventually culminating in its repeal and the introduction of its replacement, the Clean Air Act 1993.

As mentioned, the shift in types and the increasing levels of air pollution in England and Wales have gradually surpassed WHO guidelines. These transferences bring with them premature deaths such as that of Ella Adoo-Kissi-Debrah, with the Office for Health Improvement and Disparities in its guidance, Air pollution: applying All Our Health, stating that ‘long-term exposure to air pollution can cause chronic conditions such as cardiovascular and respiratory diseases as well as lung cancer, leading to reduced life expectancy’, all whilst not overlooking the short-term effects of exposure such as shortness of breath, coughing and worsening asthma. Such detriment meant that new measures must be introduced to counteract new ‘norms’ and unprecedented pollution levels, consequently leading to better safeguarding of public health.

Furthermore, in hastening the urgency for the protection of public health, the United Nations, of which the United Kingdom is a founding member, on 28^th July 2022, historically declared that everyone has the right to a healthy environment, encompassing clean air, water and a stable climate.

As a result, the Bill, amongst other things, aims ‘to establish the right to breathe clean air, to require the Secretary of State to achieve and maintain clean air in England and Wales, (and) to enhance the powers, duties and functions of various agencies and authorities in relation to air pollution’. Accordingly, this ‘would require the government to limit the concentration of pollutants in the air in accordance with World Health Organization guidelines and scientific evidence’.

The Bill would also require the government to implement plans (such as introducing more clean air zones, improving educational tools on reducing emissions and more stringent monitoring of pollutants) and achieve and maintain clean air for all within a set period. There are also enforcement provisions applicable to the respective governments, corporations and organisations in holding them accountable should they contravene the requirements of the ensuing Act.

Considering everything, the Bill’s provisions stipulate better air quality by expediting lesser exposure to harmful elements, with the eventualities of reducing the pre-described outcomes whilst also facilitating the critical Article 2 of HRA 1998, the right to life.

*The right to clean air would be in addition to those contained in the HRA 1998; therefore, it would be an automatic right.

Impact on the legal sector

Notwithstanding that all law firms and legal practitioners must stay current concerning the latest legislation affecting their sectors, environmental and human rights law firms are set to have a busy couple of years ahead.

The Bill is said to catapult the jurisdiction of England and Wales into the elite group of few countries actively seeking to establish access to clean air as a human right. To go so far as to say that the government could guarantee clean air within any period set by the Bill is perhaps too ambitious; for stated reasons, it is not too far-fetched to suggest that very early on following enactment, the government and relevant bodies may have to counter claims for contravention of the provisions.

Claimants and public bodies will need substantial legal advice for such complex areas of law. Consequently, this translates into more business, thus, more income generated for human rights and environmental lawyers and law firms.

It is noteworthy that law firms are also those that must adhere to this Bill’s provisions; therefore, swift incorporation of the requirements into their ESG policies and organisational framework, as well as staunch adherence, would be tantamount to survival, and considering all the aforementioned, the accurate measure of the Bill’s success depends on reliable data evidencing improved public health.

Article written by Aqua Koroma

For the Clean Air (Human Rights) Bill, please click here

MERGER TALKS BETWEEN TRANSATLANTIC HOGAN LOVELLS

AND NEW YORK-FOUNDED SHEARMAN & STERLING HAS COME TO AN END

Earlier in December 2022, it was rumoured that the firms were discussing something ‘transformative’ to expand their growth and global strategic planning processes.

It was estimated that the Shearman-Hogan Lovells merger would create revenue of approximately £2.97 billion. Both firms stood to gain from the merger substantially. For example, Shearman is well established in the US and merging with a firm like Hogan Lovells would have provided further European geographical coverage. However, the firms closed talks after a negotiation period, citing that the merger did not appear to be in the best interests of both firms.

Why do law firms merge?

A key reason for law firm mergers is to gain rapid market and geographical expansion. A merger allows firms to diversify their practice areas and combine their strengths to increase total revenue. It can be extremely time-consuming and expensive for a law firm to do this independently; therefore, it is more strategic to identify firms with suitable compatibility to merge instead.

An example of global expansion is the merger between Herbert Smith and Australian firm Freehills in 2012 which gave the combined firm a platform to substantially expand across the Asia-Pacific region.

A ‘Swiss Verein’ is the most common structure for firms to adopt after an international merger. This structure allows global law firms to create a unified brand without sacrificing their legal liability and financial independence. However, it is essential to note that many mergers also occur due to financial pressures to improve performance and establish consolidation. These forms of mergers were prevalent following the 2008 recession.

Why did the talks come to an end?

Both of the firms were facing difficulties as a consequence of fluctuating markets from the pandemic.

For example, the global turnover of Hogan Lovells fell by 6.7%. The merger would have allowed the firm to gain further exposure to New York commissions. On the other hand, Shearman & Sterling faced their complexities with several partners departing the firm. Nonetheless, on the 2^nd of March 2023, the firms announced that the decision not to proceed with the merger was mutual.

The fact that the coalition did not occur is another example of how complex and challenging it is to conduct such deals among law firms. For instance, in 2019, a similar decision was made concerning a merger between Allen & Overy and Los Angeles-based O’Melveny & Myers, although this was due to difficulties in agreeing on a combined business valuation.

How does this impact law firms?

Law firm mergers can be complex due to ensuring equal consideration of both firms’ business interests. For example, after six months of negotiations, Womble Bond Dickinson recently abandoned discussions of a merger with BDB Pitmans.

This is not to say that law firm mergers cannot be successful. For example, the merger between Berwin Leighton Paisner and Bryan Cave was successful as the union created a transatlantic firm with its efforts to integrate, generating access to collaborative projects and global clients.

However, it is clear that law firm mergers require months of negotiation to ensure smooth transitioning, and if this does not look possible, it is always better to continue independently to avoid disruption.

Article written by Maheshini Rathakrishnan

THE NORTHERN IRELAND PROTOCOL: THE WINDSOR FRAMEWORK

On 27^th February 2023, the proposed Windsor Framework (the Framework) was introduced to the public. This agreement, reached between Prime Minister Rishi Sunak and Ursula von der Leyen, the President of the European Commission, modifies the Northern Ireland Protocol (Protocol).

The proposed agreement follows two years of negotiations since the Protocol’s enactment in January 2021, with the concord said to be ‘dealing with issues it has created and providing a new legal and UK constitutional framework’.

The agreement’s enactment depends on the collective acquiescence of the Democratic Unionist Party (DUP), the Joint EU committee and other governments party to the Framework.

The issues

The Protocol’s primary goal was to ensure Northern Ireland remained within the EU’s goods single market by implementing measures to prevent a ‘hard’ border; however, the Protocol is deemed an extremely contentious agreement, one which ironically imposes the ‘hard’ border it sought to prevent.

It brought with it increased costs and red tape for traders, significant disruption to trade and increased trade diversions and export bans on certain goods such as chilled goods (for example, cheeses and sausages) and some plants (such as seed potatoes and oak and beech trees).

These restrictions and disruptions continually undermined the economic standing of Northern Ireland. More tellingly and likely more worryingly, the Protocol threatened the derailment of the Stormont power-sharing agreement, owing to the DUP’s staunch refusal to appoint new ministers unless the restrictions so described were removed.

A brief overview of breakthroughs

• ‘The Stormont brake’ – The Protocol previously did not permit the influence of UK ministers, specifically Stormont ministers, to intervene or influence any EU laws applicable to Northern Ireland. Under the Framework, elected Stormont politicians can veto or influence EU regulations. The primary stipulation is that this measure applies to new and highly impactful EU rules.
• Additionally, the ‘Stormont brake’ permits the amendment of the Protocol. Previously, the EU had repudiated this possibility.
• Notwithstanding the usual public health and sanitary checks, chilled produce can now be imported freely into and exported out of Northern Ireland.
• The Protocol previously called for the EU’s barcode scanning requirements for some medicines. Such requirements meant disruptions to critical pharmaceuticals. The Framework eliminates those requirements and proposes dual regulation by the EU and the UK, thereby increasing availability in Northern Ireland.
• Well over 1,700 EU laws will no longer apply to the UK, and it is suggested that only 3% would apply to Northern Ireland, thereby augmenting the UK’s sovereignty, especially that of Northern Ireland.
• Currently, the Protocol permits only the EU to set VAT and specific duties, such as alcohol. Under the Framework, this responsibility will solely be that of the UK government.
• The EU previously could bypass UK courts, instead involving the European Court of Justice at first instance regarding infringements of its laws. The Framework will instigate a panel of EU and UK arbitrators as the initial step towards resolving such matters.

Overall, the Framework aims to remove the ‘hard’ border of the Irish Sea, creating a green lane for goods importing and exporting, thereby helping to eradicate the economic issues and lessen political unrest in Northern Ireland caused by its predecessor.

Impact on the legal sector

The Windsor Framework represents the relaxation of EU rules, specifically trading rules, which means a change in the mode of operation for many UK businesses.

Current restrictions and escalating costs under the Protocol meant some businesses could not expand into goods importation and exportation. However, those businesses may now reconsider following the enactment of the Framework. Such considerations dictate that importers must secure UK Trader Scheme (UKTS) authorisation and assess the requirement for customs clearance documents, for example, a General Certificate of Conformity.

New or renewed interests in imports and exports imply that business law firms will likely see an increase in queries concerning importation and exportation licences and corresponding documents, as well as advice on how best to transition into the new trading conditions and avoid contravening new rules.

Tax lawyers, firms, and the accounting sector may experience an upward spiral of VAT and duty queries and dealings, given that the responsibility for setting VAT will be entirely shifted to a different government with different internal rules. In general, law firms must keep abreast of the new regulations to remain good service providers to and for their new and existing clients.

There are bound to be differing opinions of the Framework, with the former prime minister, Boris Johnson, proclaiming that the proposed deal’ ties the UK to EU regulations that will crush efforts to innovate and diverge’ and, therefore, is unlikely to vote for its enactment. On the other hand, the Labour Party leader Sir Keir Starmer has urged his party to ‘put country before party’ and vote for the Framework’s enactment.

However, in agreement with Mills and Reeve LLP, ‘the Windsor Framework has been greeted with widespread enthusiasm so far and indicates the start of a warmer relationship between the EU and the UK’.

Nonetheless, no opinions matter should the DUP choose not to accept the new deal.

Article written by Aqua Koroma

For a brief introduction to the Protocol, please click here

For additional reading on the new agreement, please see The Windsor Framework: A new way forward and the Political Declaration by the European Commission and the Government of the United Kingdom