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Commercial lawLooking on the horizonMary Kelly, Senior Associate14 September 2012
Topics• Groceries Code – Adjudicator Bill• Proposed Common European Sales Law• Eurozone crisis – potential contract risks•...
Groceries Code: an overview• Grocery Supply Code of Practice (“GSCOP”)  effective from 4 February 2010• Applies to retaile...
Groceries Code: an overview• All agreements between grocery suppliers and  retailers:  – incorporate GSCOP  – prohibit ret...
Groceries Code Adjudicator• Groceries Code Adjudicator Bill published May  2011 and sets out:  – Statutory basis for Groce...
Groceries Code Adjudicator• The GCA will be independent and initially  appointed for up to 4 years• Mechanism for dealing ...
Functions and powers of the GCA• Arbitration: referred by the supplier• Investigation: initiated by the GCA where it is  s...
Funding the GCA• The GCA will be funded as follows:  – adjudication: apportioned between the parties  – investigation: by ...
Practical tips for suppliers• Train sales and other commercial teams:  – on the scope of GSCOP  – the terms that can and c...
Practical tips for suppliers• Record any instances of non-compliance by a  retailer at the time they occur• Be clear as to...
Proposed Common European Sales Law• October 2011, the European Commission  published its proposed Regulation for a Common ...
Proposed Common European SalesLaw: what is it?• An optional sales law to sit alongside Member  States’ existing national r...
Proposed Common European SalesLaw: what is it?• Can be used for B2C or B2B contracts where at  least one party is an SME• ...
Proposed Common European SalesLaw: key provisions• Contract formation• Duties of disclosure of pre-contractual  informatio...
Proposed Common European SalesLaw: key provisions• Principle of good faith and fair dealing basis for  implying terms and ...
Proposed Common European SalesLaw: likely impact• Give rise to two parallel systems in each Member State  which could pote...
Proposed Common European SalesLaw: likely impact• The CESL is entirely optional in its current form• Member States can cho...
Proposed Common European SalesLaw: next steps• In order to be adopted the CESL will need to be  approved by the European P...
Eurozone Crisis: what is it?                                  Sovereign                                  debt grows       ...
Eurozone crisis: leaving the Euro• A Member State could leave the Eurozone   – by agreement (may or may not leave the EU  ...
Eurozone crisis: impact on pricing andpayment obligations• Lex monetae/money of account• Definition of “Euro”• Money of pa...
Eurozone crisis: analysis of contracts• Does price have to be in Euros?• Pricing converts to new currency  – Trigger event...
Eurozone crisis: analysis of contracts• Consider interaction with other contract clauses   – Force majeure   – Change in l...
Eurozone crisis: practical tips• Identify key/material contracts• Analysis of contracts for terms that relate to the  Euro...
Bribery Act: background• UK Bribery Act 2010 came into force 1 July 2011• Worldwide Reach• Active Bribery (giving a bribe)...
Bribery Act: background• Associated persons (AP)• Employees – presumed to be associated (section  8(5))• Agents and subsid...
Bribery Act: impact a year on• No high profile corporate prosecution...yet• So far only one prosecution under the Act (a  ...
Bribery Act: impact a year on• Despite lack of prosecutions, international  businesses have placed emphasis on Bribery Act...
Bribery Act: considerations• Risk analysis on contract-by-contract basis• Due-diligence into the anti-bribery procedures o...
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Commercial law leeds 2

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Commercial law leeds 2

  1. 1. Commercial lawLooking on the horizonMary Kelly, Senior Associate14 September 2012
  2. 2. Topics• Groceries Code – Adjudicator Bill• Proposed Common European Sales Law• Eurozone crisis – potential contract risks• A year on from the Bribery Act
  3. 3. Groceries Code: an overview• Grocery Supply Code of Practice (“GSCOP”) effective from 4 February 2010• Applies to retailers with a turnover of £1billion per annum• Overarching principle of “fair dealing”
  4. 4. Groceries Code: an overview• All agreements between grocery suppliers and retailers: – incorporate GSCOP – prohibit retrospective variation – prohibit changes to supply chain procedures (unless supplier compensated) – specify contributions to promotions (if any) – not require supplier to pay for shrinkage/wastage unless due to supplier negligence• Sets out dispute resolution procedure• Establishment of a GSCOP ombudsman to enforce compliance
  5. 5. Groceries Code Adjudicator• Groceries Code Adjudicator Bill published May 2011 and sets out: – Statutory basis for Groceries Code Adjudicator (“GCA”) – Functions and powers of the GCA – Funding the GCA
  6. 6. Groceries Code Adjudicator• The GCA will be independent and initially appointed for up to 4 years• Mechanism for dealing with breaches of the GSCOP by retailers• Provides a remedy for dealing with breaches of GSCOP, other than suing for breach of contract
  7. 7. Functions and powers of the GCA• Arbitration: referred by the supplier• Investigation: initiated by the GCA where it is satisfied that there are reasonable grounds that GSCOP has been breached• Enforcement: the investigation will be published in a report. The retailer may also be required to publish information about its breach and investigation• Advice and guidance: through publications or directly to either retailer or supplier
  8. 8. Funding the GCA• The GCA will be funded as follows: – adjudication: apportioned between the parties – investigation: by the retailer if the GCA is satisfied it has breached GSCOP or from a supplier if a complaint was vexatious or wholly without merit – other functions: to be divided equally between all retailers though a levy
  9. 9. Practical tips for suppliers• Train sales and other commercial teams: – on the scope of GSCOP – the terms that can and cannot be included in supply agreements – behaviours or practices of a retailer that would put it in breach of its obligations under GSCOP
  10. 10. Practical tips for suppliers• Record any instances of non-compliance by a retailer at the time they occur• Be clear as to whose terms apply and ensure that GSCOP terms are incorporated• Oral agreement should be confirmed in writing within 3 working days (make notes at the time to ensure accurate record of conversations)
  11. 11. Proposed Common European Sales Law• October 2011, the European Commission published its proposed Regulation for a Common European Sales Law (“CESL”)• The CESL is intended to facilitate cross-border transactions by providing certainty and reducing costs• As a Regulation, if adopted the CESL would have legal effect in every Member State in the same way as national laws with no action needed by a Member State to implement it
  12. 12. Proposed Common European SalesLaw: what is it?• An optional sales law to sit alongside Member States’ existing national regimes• Can be used for cross-border contracts for the sale of goods or digital content and services directly related to the goods / digital content (eg repair and installation), where at least one party is established in a Member State
  13. 13. Proposed Common European SalesLaw: what is it?• Can be used for B2C or B2B contracts where at least one party is an SME• Cover the whole life cycle of a contract including provisions on pre-contractual information, contract formation, cancellation rights, deliver and payment obligations and remedies for breach
  14. 14. Proposed Common European SalesLaw: key provisions• Contract formation• Duties of disclosure of pre-contractual information• The right to cancel and its consequences• Interpretation of a contract - based on “common intention”. Prior negotiation and subsequent conduct admissible for contractual interpretation
  15. 15. Proposed Common European SalesLaw: key provisions• Principle of good faith and fair dealing basis for implying terms and a duty to act in accordance with good faith• No conditions and warranties• In B2B contracts can only terminate if other party in fundamental breach• It does not include provisions re capacity, agency and illegality which will continue to be governed by national law
  16. 16. Proposed Common European SalesLaw: likely impact• Give rise to two parallel systems in each Member State which could potentially be costly and difficult to manage• Certain provisions are biased in favour of customers in B2B context e.g. duty on supplier to disclose pre-contractual information• Limited application to EU cross-border contracts means businesses will potentially need 3 sets of terms: – domestic transaction terms – EU cross-border transaction terms – worldwide transaction terms (although Member States can choose to extend its application to domestic contracts)
  17. 17. Proposed Common European SalesLaw: likely impact• The CESL is entirely optional in its current form• Member States can choose to apply the law to B2B transactions generally• There is no suggestion that a supplier is obliged to offer CESL at the request of a customer if the supplier does not already offer it• Generally negative reaction in UK to the proposals - there remains a question as to whether there will be much take up of CESL even if adopted
  18. 18. Proposed Common European SalesLaw: next steps• In order to be adopted the CESL will need to be approved by the European Parliament and the Council of Ministers, then published in the OJEU.• The Commission intends to have the CESL agreed in time for the 20th anniversary of the European Union internal market on 1 January 2013. This is an ambitious timetable. The CESL would come into force 20 days after publication and apply 6 months after that
  19. 19. Eurozone Crisis: what is it? Sovereign debt grows Increasing debt burden Lack of and growth in decreasing economy Government revenues Lending is higher risk so Increasingly cost of difficult to borrowing service debt increases
  20. 20. Eurozone crisis: leaving the Euro• A Member State could leave the Eurozone – by agreement (may or may not leave the EU at the same time) – by unilateral departure (in breach of EU law)• Introduction of replacement currency• What will legislation say?• Quick depreciation of replacement currency
  21. 21. Eurozone crisis: impact on pricing andpayment obligations• Lex monetae/money of account• Definition of “Euro”• Money of payment• Governing law• Jurisdiction• Financial impact
  22. 22. Eurozone crisis: analysis of contracts• Does price have to be in Euros?• Pricing converts to new currency – Trigger event – Exchange rate• Pricing remains in Euros – Define Euro – Place of payment – Exclusive jurisdiction for English courts – Payment in Euros – “No impact” clause
  23. 23. Eurozone crisis: analysis of contracts• Consider interaction with other contract clauses – Force majeure – Change in law – Termination• Risk profile of the deal/walk away? – Right to renegotiate price – Termination right – Material adverse change clause
  24. 24. Eurozone crisis: practical tips• Identify key/material contracts• Analysis of contracts for terms that relate to the Eurozone and identify risks associated with these terms• Consider whether any variations to the contractual relationship would be desirable at this stage• Drafting future contracts in such a way as to minimise risks associated with a potential Euro crisis becoming reality
  25. 25. Bribery Act: background• UK Bribery Act 2010 came into force 1 July 2011• Worldwide Reach• Active Bribery (giving a bribe)• Passive Bribery (accepting a bribe) New corporate offence of “failing to prevent bribery” – strict liability• New corporate offence of “failing to prevent bribery” – strict liability• Defence for the business if it takes “adequate procedures” – i.e. it takes all possible measures that are proportionate and reasonable to prevent bribery occurring
  26. 26. Bribery Act: background• Associated persons (AP)• Employees – presumed to be associated (section 8(5))• Agents and subsidiaries – possibly associated (section 8(3))• Suppliers of goods – depends on the circumstances• Joint ventures – partners are probably APs and also joint venture companies
  27. 27. Bribery Act: impact a year on• No high profile corporate prosecution...yet• So far only one prosecution under the Act (a court official for receiving payments to make traffic offences disappear from a court database)• Serious Fraud Office (SFO) – Oxford Publications case – no prosecutions because witnesses in overseas jurisdiction/difficulties obtaining evidence• BUT Oxford Publishing still ordered to pay almost £1.9 million in voluntary settlement plus SFO costs.
  28. 28. Bribery Act: impact a year on• Despite lack of prosecutions, international businesses have placed emphasis on Bribery Act compliance• Non UK entities are using UK Ministry of Justice guidance to ensure they have adequate defence in place• Rising number of organisations and countries are placing importance on anti-bribery/corruption
  29. 29. Bribery Act: considerations• Risk analysis on contract-by-contract basis• Due-diligence into the anti-bribery procedures of APs (contracting parties and especially those who using sub-contractors) or requiring parties to enter into anti-bribery undertakings• Remedies other than termination for breach of anti-bribery clauses e.g. liquidated damages, forced removal of employees / directors who have acted illegally to manage risk without losing benefit of contract
  30. 30. Any Questions?

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