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The M&A Perspective - I/2017

11 April 2017

Anti-Corruption Legislation – On the Road to Global Zero-Tolerance?

Under Swiss law, bribery in a private context used to be an offense which was only prosecuted upon a complaint lodged by a victim. It was not perceived to be in the public interest to enforce law and order in that area in each and every case. Times change and with it also the anti-bribery legislation: Since 1 July 2016, Switzerland prosecutes bribery ex officio also if it is committed in a private context. Exceptions only apply to certain minor cases.

The change in Swiss legislation is only one of numerous efforts worldwide to clamp down on corruption. Most prominently, in an effort to target violations of the Foreign Corrupt Practices Act (FCPA), the U.S. Department of Justice (DOJ) announced in April 2016 that it is launching a one-year Pilot Program which aims at motivating companies to voluntarily disclose FCPA-related misconduct in order to receive a mitigation credit. This step followed the so-called Yates Memo, a memorandum issued to all federal prosecutors by Deputy Attorney General Sally Quillian Yates on 9 September 2015, in which the DOJ directed prosecutors to focus in their investigations of corporate wrongdoing on seeking accountability from the individuals who perpetrated the wrongdoing. As is known, Ms Yates has since left office but the Program seems to be here to stay. Just recently, the DOJ announced that the Program will continue in full force until the DOJ determines "whether to extend it, and what revisions, if any, we should make to it". The DOJ's extension of the Pilot Program indicates that aggressive FCPA enforcement is likely to continue, at least for the foreseeable future whilst the DOJ evaluates the Pilot Program.

While the detection of corruption is nowadays generally on the radar in M&A processes, the increased focus and the multiple efforts of state authorities around the globe to reveal and effectively punish illegal practices in that area make a careful assessment and analysis of a target business' practices more than ever an essential – if not vital – part of every due diligence process.

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Data Protection Laws in Motion – Challenge for Compliance and Due Diligence

Data protection is currently at the center of attention. This not only leads to stricter enforcement of current legislation, but also to the adaptation of existing statutes around the globe. For instance, the EU General Data Protection Regulation enters into effect as of 25 May 2018, and the Revised Convention on the Protection of Individuals with regard to Automatic Processing of Personal Data by the Council of Europe is ready to be ratified. In parallel, Switzerland is in the process of revising its Data Protection Act, which is expected to enter into force at the earliest between mid-2018 and early 2019. The flurry of new and partially amended legislation with sequential entries into force present two particular challenges for companies:
First, companies will need to closely monitor future changes in applicable data protection legislation and based thereon timely implement coherent internal policies. This task can prove tricky as those legislations are often interdependent, e.g. through a requirement of equivalent or adequate level of data protection. Also, in order to avoid multiple repeated adaptations of their compliance structure, companies will not only want to translate imminent changes into their own compliance framework but also anticipated short-term and mid-term amendments.

Secondly, the transitional rules play a key role. New legislation seldom has pre-effects and non-compliance with applicable law will most often not be "healed" by subsequent changes in the law. This leads to the conclusion that a due diligence on data protection compliance should not only statically analyze a company's existing data at a given point in time. Rather, with respect to each set of data, the review needs to take into account its individual fourth dimension: time. In practice: When was the data collected, when was it processed and which rules were applicable at that particular time?

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Europe à la Carte – Avoiding/Leaving the Purview of the European Court of Justice?

British Prime Minister Theresa May recently stated that Britain will not have truly left the European Union (EU), if it is not in control of its own laws. This means that by leaving the EU, Britain will also want to leave the jurisdiction of the European Court of Justice (ECJ), the EU's supreme judicial authority. This may prove rather difficult as Ms May also stated that Britain wants to retain the "greatest possible access" to the EU's single market following its exit. In its negotiations with Switzerland, the EU has insisted on an institutional framework agreement that comprises a mechanism to settle disputes in terms of agreements, with an EU preference for the ECJ to retain ultimate jurisdiction. It will be interesting to see (in particular from a Swiss perspective), what position the EU will take in its negotiations with Britain.

But it may actually be the other way round, i.e. Britain following the negotiations between the EU and Switzerland on that point: On 6 April 2017, Doris Leuthard, President of the Swiss Confederation, and Jean-Claude Juncker, President of the European Commission, announced that "all so-called blocked elements" in the negotiations between the EU and Switzerland have been unblocked, including the talks regarding an institutional framework agreement which are planned to continue by the end of the year.
Why this sudden activism? It may simply be a natural consequence of Switzerland's EU-compliant implementation of the mass immigration initiative last December. But it could also be Brexit negotiation tactics of the EU, as it could use the negotiations with Switzerland to send indirect messages to London, which is not an entirely pleasant outlook from a Swiss perspective. It raises the question whether Switzerland should be patient in that specific context, defer to Britain and say "Britain first".

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