Understand Your Rights. Solve Your Legal Problems
Are boards of directors truly holding senior leaders accountable on the same basis as everyone else in the organisation? Ty Francis MBE, Chief Advisory Officer at LRN Corporation, explains why equal organisational justice — holding all employees accountable regardless of their rank or financial performance — is an essential building block of ethical corporate culture. Ty argues that it is ethical culture that sustains an organisation through the toughest times.
During 2020, as part of our annual Ethics & Compliance Program Effectiveness Report, we expanded our research to assess the impact of COVID-19 on ethics and compliance at more than six hundred companies worldwide, each employing thousands to hundreds of thousands of employees. The study provided a first, holistic look at how COVID-19 affected ethics and compliance efforts. The findings illustrated that strong corporate values sustained companies through the pandemic and its profound reshaping of work-life for most everyone.
As an additional view into the data, we looked at the role and impact of boards of directors on ethical culture, business outcomes, and ethics and compliance programmes. From the findings, it was clear that boards weren’t entirely successful in holding management accountable for failures of organisational justice. Only 64% of European boards of directors had taken an active role in ensuring that any misconduct by senior executives or excellent performers was effectively addressed. This suggests up to 36% are still providing exceptions for exceptional people, which is obviously corrosive to trust by the wider organisation. Interestingly, in South America, where (generally speaking) fewer organisations have robust ethics and compliance programmes, accountability was high, at 82%. This may be attributable to the recent slew of high-profile scandals ending with senior executives being terminated or jailed. Boards are paying closer attention.
The research shows that those companies whose boards doubled down on ethics and compliance have built even stronger ethical foundations, better positioning their organisations to meet future challenges consistent with society’s elevated expectations for business. When boards take an active role in ensuring that any misconduct by senior executives or high performers is effectively addressed, leaders are more accountable for behaving ethically, the ethical culture of the organisation overall is stronger, and ethics and compliance are more embedded in the business.
In fact, when boards effectively supported the ethics and compliance programme during the pandemic, ethics and compliance considerations played an important role in the organisation’s COVID-19 response. When boards send a clear signal that their leadership must behave ethically without question, those expectations cascade through the organisation and translate into action. The data shows that employees in organisations with boards engaged in measures of ethics and compliance accountability were 1.6x more likely to do the right thing, even if it’s not in their personal best interest.
Toxic culture and employee misconduct can ruin enterprise value. As Peter Drucker has famously said:
Culture eats strategy for breakfast.
Yet boards of directors face a dilemma: they recognise the urgency of their oversight responsibilities for culture and know the effect it has on overall strategy but acknowledge that culture is difficult to evaluate and shape. So why are boards still hesitant to get involved?
To uncover more about why this dilemma persists, we went deeper with the research. In collaboration with Tapestry Networks, we interviewed 40 directors occupying 80 board seats at major public companies. Last month we published the findings in the report, Activating culture and ethics from the boardroom. It is a treasure trove of anecdotal evidence that boards feel less secure in their ability to assess culture but universally agree it is essential.
“Board oversight of corporate culture requires a more proactive stance from the board than we’ve seen in the past,” said one director. “At times it has been an area of managing by exceptions—where you hear from management only when there are problems. But it requires intentional shaping from the board.” What directors do outside the boardroom—taking time to build relationships with senior leaders or visit facilities to observe the culture—is as important as what they do during board meetings and formal interactions with executives. Yet “intrusive oversight”—which can be a necessity in a high-risk area such as ethics and compliance—may itself damage the trust between the board and the senior leadership team that is necessary to creating and maintaining ethical culture.
Several directors emphasised that equal organisational justice is essential. Indeed, senior executives, because of their visibility and influence, are often held to higher standards on some matters. Disciplinary action against senior leaders and “superstars” sends a clear and positive message to the rest of the organisation that regardless of who commits malfeasance, there are consequences. As necessary as this is, directors say that some of the most challenging episodes of their board careers have come when they needed to discipline or terminate a high-performing CEO or another senior leader. “We had to terminate a senior leader who had circumvented a capital allocation rule,” a director recalled. “This person had been at the company for a long time, and was about a month from retirement, so it felt very cruel, but we had to be clear that you can’t do that at this company.”
Boards now recognise culture as a strategic imperative, yet they also believe it receives insufficient attention due in part to lack of clear ownership at both the board level (Audit? Governance?) as well as at the management level (HR? E&C? CEO?). Companies organise in different ways, and define culture in different ways, yet there are means to measure culture quantitatively and qualitatively. It is possible to see whether or not a company is aligning its mission to its stated values and effectively defining tone from the top. For this to happen, there needs to be a management sponsor at the highest level of the organisation that prioritises it, and who has a clear line of sight into the boardroom. It’s a must for building the ethical underpinnings of the organisation for resilience and the best possible outcomes.
About the author: Ty Francis MBE is Chief Advisory Officer at LRN Corporation, a global leader in ethics and compliance solutions for global business. Prior roles include EVP at Ethisphere Institute and VP at the New York Stock Exchange.
The lawsuit, which was brought by former financial ombudsman Walter Merricks, was previously rejected by the Competition Appeal Tribunal (CAT). However, last Wednesday, the CAT authorised the landmark case which alleges Mastercard charged excessive “interchange” fees between May 1992 and June 2008. Mr Merrick’s case claims that these fees were passed on to the consumers as retailers increased their prices.
The case is being brought on behalf of all people aged between 16 and above who purchased goods and services from a UK business that accepted Mastercard between the aforementioned dates, unless they opt out of the suit. Mr Merricks had hoped to expand the scope of the case to include compound interest and the estates of the deceased to the claim. However, this was rejected by UK judges.
In a statement, Mastercard said it was “confident that over the coming months a review of key facts will further significantly reduce the size and viability of the claim.”
Fletchers Solicitors Serious Injury Litigation Executive, Ceri Dudley, reveals her top 5 tips for improving your chances at landing that prized legal grad job. Ceri talks you through the process, from networking and gaining work experience to acing your interviews.
The legal industry is a competitive one, to say the least, so getting your foot in the door can be somewhat of a challenge. The reality for any aspiring lawyer is that you are up against hundreds of credible candidates who are eager to impress. These same candidates will also have similar qualifications to you. So, it’s important to find your niche and seek ways where you will stand out from the crowd.
Although you will have heard this before, work experience is crucial here. Not only will this help you secure your first legal grad role, but it can also help shape the professional you become later in your career. My first tip is to actively seek legal work experience wherever possible. Work experience, in any profession, is an essential means of developing your knowledge and sharpening those ‘soft skills’ that accompany the ‘harder’ skill sets you’ll develop over time.
As a starting point, there are placement schemes, volunteering opportunities, even shadowing other legal professionals. Keep your eyes and ears open to legal vacation scheme placements. You may have to contact a range of law firms first, but many firms offer them and have plenty of advice on how to apply online. Ultimately, obtaining work experience will prove invaluable.
Another good option is university events. Universities often hold what are known as ‘mooting events’ and these are a good way to build your advocacy skills.
Before applying for a role, or even attending an interview for your dream position, preparation and research are key! My best advice here is to ensure you know the role you are applying for and what the company is looking for in a candidate. Spend time researching the company, its culture and its values. For example, here at Fletchers, our customers are at the heart of what we do. Spending time looking into the company and its ethos will assist you in explaining why you genuinely want to work for the company, as well as why you’re the right candidate for the role.
Sometimes, opportunity comes down to “who you know”. You may be thinking, “oh it’s fine, I’m still just undertaking my studies”, or “I’m just starting out. I can’t be expected to have lots of great contacts.” Well if that’s you, this is where networking can open doors.
Networking is a key aspect of building relationships within the legal industry. This is also especially important in an inherently competitive arena, such as law. Universities often put together law and career fairs and the importance of these cannot be overstated. Make sure you attend these events and actively seek advice from the experts.
In my experience so far, you never know what valuable piece of information you may receive in helping you land that first grad job. The ambassadors at these events are there to help you and are usually more than happy to impart their knowledge and advice. Of course, Covid-19 presents new challenges to networking. Despite the global pandemic, networking can be just as worthwhile when done virtually and over the last few years, social media has become key to building a professional network. My advice here is to ensure your profile is not only up to date, but it paints you as you want law firms to see you. Actively engage in topical conversation and join relevant groups. These methods are a good way to market yourself and get your name out there.
I said it above, you will be up against many candidates with similar legal backgrounds, so what will make you stand out? Do you have any hobbies or non-legal skills? Do you undertake any volunteering? If so, it is important to put these across within your CV and to the firm that you are applying for. Often firms want to see the type of person that you are in addition to your legal qualifications, and this is a good way to illustrate this.
Last, and probably my biggest tip, is to work hard! There is no getting away from the fact that hard work creates success in law. This goes not only for the start of your career but throughout! Working in law can be really challenging, but it can also be really gratifying. It takes focus and determination to succeed. Sometimes, my job is not just a nine to five role, but seeing the changes made to our clients who have sustained serious injuries once a case has settled is incredibly rewarding.
Always remember why you want the role, put in the work and you will find the hard work and challenges are entirely worth it.
If you recently hired a professional and their negligent actions have cost you a hefty sum, damages, or injuries, then don’t let it slide. You can file professional negligence claims against those professionals and smooth everything out in court. However, you shouldn’t rush it. Accusing professionals of negligence will certainly require a lot of time and money. So if this is your first time doing this (and hopefully the last), understanding these claims will help you a lot. We’ve answered the FAQs that revolve around professional negligence claims. Below are only some of them.
Simply put, it’s a case that you’re bringing to the court with the premise that a professional committed negligent actions throughout your professional relationship with them. As the name suggests, you are claiming something against these professionals. It doesn’t matter what field of practice the professional is in. They may be a dentist, a lawyer, a doctor, an engineer, or a bookkeeper. As long as they failed to provide you with the right service that you hired them for, and this negligence cost you either physical or financial damage, you can make a claim. The reason for this is that every time you hire someone, you are always entitled to a service that’s executed with reasonable care and a high degree of expertise. These two elements are the reasons why you decided to hire a professional after all, right?
You can’t simply file a case against someone just because a simple and resolvable error was made. The reason has to be stronger than that to make a claim. Below are some of the elements which make a strong argument for professional negligence:
After establishing these factors and it was proven that the professional acted negligently, you will receive proper compensation. The amount of compensation is often equal to the financial losses and the cost of damages brought by the negligent action. The payment also covers the financial losses that you may suffer from in the future and the legal costs that you shelled out to make the claim.
The key step in filing these cases is to hire the best professional negligence lawyers. Just the filing alone is already an uphill battle because you’re dealing with a professional, who’s probably more well-versed in these situations or more well-connected than you. In short, you will need some backup.
After hiring the right lawyers, let them guide every step of the way. They will most likely tell you the requirements needed and what arguments and evidence will work so you can achieve the goal. And that is to make the negligent professionals pay.
The best time is always “as soon as possible”. And that’s because the Australian legislation often implements time limits for professional negligence claims.The said time limit depends on what jurisdiction you are in. For example, in Queensland, you are given a maximum of six years from the date when the professional did you wrong to file for professional negligence claims. If the negligent act resulted in injuries, in some cases, you might have shorter time limits like three years or so.
That’s why it’s better to call your lawyer immediately so you can understand the rules about professional negligence claims. This way, you’ll be on track to get the compensation that you rightfully deserve.
The FTC’s revised complaint, which is partly redacted, alleges that tech giant Facebook has a monopoly over social networking within the United States and argues that Facebook has deliberately made it difficult for other companies to compete. The FTC’s filing asks that the complaint is sealed for ten days.
This new antitrust case by the FTC comes amid increased scrutiny over the influence of Facebook and the way it has bought up its competitors. The case references a 2008 email from Facebook CEO and founder Mark Zuckerberg, in which he writes: “It is better to buy than compete.” Lawyers representing the FTC claim that the tech giant acted in accordance with this strategy, buying out rivals as soon as they became successful enough to be considered a threat. Amongst these purchases are Instagram and WhatsApp, which both make up a significant part of the Facebook company.
The FTC argues that Facebook should be forced to sell off Instagram and WhatsApp. The FTC has also requested that Facebook is restricted from making similar purchases in the future.
"Fire and Rehire” is increasingly being used by employers looking to introduce alterations to Contracts of Employment where employees disagree with the changes being proposed. In essence, it entails employers dismissing employees (with contractual notice), and then offering them new employment on revised terms.
Although controversial, it isn’t illegal when handled properly. It’s also nothing new despite growing media attention borne out of the pandemic. There are, however, indications that this practice is becoming more widespread, as a result of businesses struggling through lockdown. But what are the facts, and where do businesses, or for that matter employees, legally stand when it comes to “Fire and Rehire”?
Whilst banned in Ireland, Spain and France, “Fire and Rehire” is common practice in the UK. In fact, research by the TUC shows that since March 2020, almost one in 10 UK workers have been forced to reapply for their role on poorer terms and conditions, or risk being let go permanently.
It’s employees with less than two years’ service that are at the highest risk due to their limited employment rights, although this isn’t always the case. Recently, however, there is a growing perception that COVID-19 has been used as a cover to reduce workers’ rights. Unite remains extremely critical of the practice, specifically citing the disparity this creates for employees at a time of enormous adversity in the aftermath of the pandemic, during which substantial Government support was offered to employers, including provisions such as the Coronavirus Job Retention Scheme.
Statistics gathered by the GMB union back this sentiment, showing that three-quarters of people think “Fire and Rehire” should be outlawed. In January 2020, the Government launched an investigation into the practice with ACAS, however on 8 June 2021, the Government confirmed that whilst it condemned the use of “Fire and Rehire” as a negotiation tool, it would not be introducing legislation to ban the practice. As a result, it remains an option for employers dealing with a problematic issue.
“Fire and Rehire” is applied in a variety of situations by employers; there isn’t a uniform perspective on when it is, or isn’t, reasonable use. Circumstances may include:
When employers want to revise an employee’s terms of employment, there is often no straightforward solution. If the suggested changes bring about disadvantages to the employee, all alternatives have risks for employers and are likely to be opposed by employees (and their unions).
Terminating an employee’s contract and offering them a new one on reduced pay or benefits could leave employers open to Employment Tribunal claims. Dismissed employees, if they have the requisite length of continuous service, could bring claims for Unfair Dismissal/ Constructive Unfair Dismissal. Employees could also bring claims for breach of contract or unlawful deduction of wages claims in the civil courts and Employment Tribunal respectively. If employers fail to provide the relevant statutory/ contractual notice period during the process, they could also face claims of Wrongful Dismissal.
Not only is there the risk of claims, but employers need to be wary of the impact that “Fire and Rehire” will have on the morale of those employees who do continue to work for the employer and on future employment and retention rates.
Indeed, 67% of voters in a GMB union survey indicated that they would be less likely to use businesses who had employed the use of “Fire and Rehire”, which could have long-reaching repercussions for employers.
Even us lawyers can get “Fire and Rehire” wrong, as evidenced by the recent case of Khartun and Winn Solicitors which goes to show how difficult it can be to implement this process fairly, and how careful employers need to be when considering the use of “Fire and Rehire” practices. The Firm wanted to reduce employee’s hours and pay during the pandemic, however, their consultation process was not deemed to be meaningful, which left them open to claims when they implemented the “Fire and Rehire” practice following their consultation period. One of their employees, Ms Khartun, bought a claim against the Firm and was successful.
This recent case, alongside a long history of “Fire and Rehire” cases, serves as a warning to all employers about the difficulties presented when implementing this process, and just how careful they really need to be.
“Fire and Rehire” shouldn’t be the first choice of action when wanting to introduce contractual changes; and is often a last resort. Employers should check if flexibility clauses are written into contracts. Whilst this may give employers the right to make reasonable changes, caution should be applied in relying on this as many unilateral amendments cannot be imposed regardless of this clause. Alternatively, employers can commence a period of meaningful consultation with the employee with a view to agreeing the changes.
Employers should only opt to proceed with dismissing and re-engaging employees once all possible options have been considered, judge both the risks of legal action, and decide the changes are absolutely unavoidable. In terms of the process, ACAS recommends that a fair dismissal procedure be followed, employees are given sufficient notice (statutory or contractual, whichever is longer) and employees are offered the right to appeal.
In principle, although “Fire and Rehire” is legal, it could be considered morally questionable and employers need to be confident that taking such action, on balance, is worth it.
About the author: Tina Chander is the Head of Employment Law at Midlands law firm, Wright Hassall and deals with contentious and non-contentious employment law issues, acting for small businesses to large national and international corporations. She advises on a variety of employment law matters, including all aspects of employment tribunal proceedings and appeals.
About the firm: Wright Hassall is a top-ranked regional law firm, providing legal services including: corporate law; commercial law; litigation and dispute resolution; employment law and property law. The firm also advises on contentious probate, business immigration, information governance, professional negligence and private client matters.
Arden’s analysis of Solicitors Regulation Authority (SRA) data showed a 47% decrease in the number of sole practitioners operating in England and Wales in the past decade, a drop of 1,700. Sole practitioners now only account for 20% of practitioners overall, compared to 33% ten years ago.
The number of partnerships (inclusive of LLPs) has dropped by 39% over the same period, a total decline of 1,822. Partnerships now account for 29% of regulated practitioners where this figure stood at 43% a decade ago. This combined decline has been counterbalanced by the number of incorporated companies, which has more than doubled over the past ten years, increasing to 5085. In 2011, incorporated companies constituted 22% of all regulated legal practitioners, compared to 51% now. However, in England and Wales, the overall number of regulated solicitors practices is down 9% in ten years as the market has consolidated.
Arden believes this shift towards more corporatised structures from traditional partnership models has been influenced by the added ability to attract external investment and power more effectual business models. Arden anticipates more firms will continue to look to corporatisation as markets consolidate. Arden believes the pandemic could serve as a catalyst to reshape the mid-market and high street. Traditional firms have been especially challenged by the pandemic due to the added pressures of long-term underinvestment in IT, an ageing equity Partner group, and limited and reducing capital reserves. Simultaneously, the concept of remote working has become increasingly appealing for many legal practitioners as they experience first-hand the healthy work-life balance it can help to restore.
John Llewellyn-Lloyd, Head of Business Services at Arden, has commented: "The legal sector has changed significantly over the past decade, but I think that level of change is nothing compared to the disruption and consolidation we could see over the next few years. The corporate model is winning its battle with partnerships as the legal management structure of choice and at the smaller end of the spectrum, the UK legal market is very fragmented indeed and ripe for consolidation. Covid has affected a quantum shift in the rate of consolidation. These practitioners are under significant pressure to invest in IT infrastructure and reduce back-office costs, but they lack the cash to do so. I believe we will see more and more of these sole practitioners and small firms join the legal consultants whose 'officeless' model suddenly looks highly appealing to many."
Tinder’s settlement to end a class action over its practice of charging over-thirties nearly twice as much for premium subscriptions has come undone. On Tuesday, the Ninth Circuit said that the strength of class members’ claims was undervalued by the proposed $24 million deal.
The US Court of Appeals for the Ninth Circuit also said that signs of collusion were not sufficiently considered by the district court, specifically the agreement’s inclusion of a “clear sailing provision”. This set out that dating app Tinder would not challenge the plaintiffs’ demand for $1.2 in attorneys’ fees. The appeals court has labelled this “excessive”.
Approximately 240,000 members were provided with 50 free “Super Likes” under the pre-certification class settlements. Super Likes enable the dating app’s users to express heightened interest in another user, costing $1 each. Members who submitted claims, less than 0.745% of the settlement class, could also have their choice of either a $25 cash payout, 25 free “Super Likes”, or a free one-month subscription if they were no longer subscribed to the platform.
Tinder has agreed to stop charging users different prices based on their age, however, this is only with respect to subscribers in California and the dating platform reserves the right to offer discounts to users who are 21 years old and younger.
Due to the claims rate being low, Tinder is set to pay out less than $45,000 of the estimated $6 million cash portion of the settlement.
Flavia Stefura, Senior Associate at MPR Partners, shares the disadvantages of using your own name as a trademark with Lawyer Monthly.
There is power in names, or so the saying goes. That is most certainly true in the world of luxury fashion brands. Some of the most renowned fashion houses are named after their founders: Chanel, named after the famous Gabrielle (Coco) Chanel, Dior, after Christian Dior, Burberry, after Thomas Burberry, and the list goes on.
There is value and goodwill associated with famous names, and for such value to be protected from free-riders who would take advantage, designers resort to the legal protection of trademarks. Trademarks are signs that allow the holder to show that the products or services under that trademark are controlled by it and to distinguish them from the products or services of another undertaking. Registering a sign as a trademark prevents other undertakings from using the same or a similar sign for goods and services whenever there may be confusion between the trademark holder and other undertakings with respect to the origin of goods and services.
However, while the advantages of wide recognition and increased value of a trademark registered by a successful designer cannot be denied, in the complex world of trademark protection there are also pitfalls of using your own name as a registered trademark. First, there is the issue of clearance. If one wishes to register their name as a trademark or simply use it in commerce without registration, one must ensure the name is not already registered for the goods or services for which the registration is intended. Otherwise, there are risks of litigation and exclusion from the market under that name. A telling example was the case of Chanel Jones, an Indiana-based hair salon owner, who lost the right to use her first name for commercial purposes, in a dispute against the French fashion powerhouse Chanel.
Another matter to be mindful of when registering one’s own name as a trademark is to be aware that the trademark achieves its own standing and becomes separate from the natural person. Therefore, the name can be sold together with the business that it represents. Once sold, the natural person who once registered the name is no longer able to use the same name in connection with a similar business, or, possibly, with any other business.
Judging from the case law available on this topic, it seems that some designers have not been aware of this potential issue when selling their eponymous trademarks. Famous designer names who can no longer be used in trade by their original holders include Elizabeth Emanuel, the designer of Princess Diana’s wedding dress, Paolo Gucci, Karen Millen, Joseph Abboud (in his case, the designer can use his name in trade following a disclaimer that the products are not related to the ones of the assignee).
In the case of Elizabeth Emanuel, who had sold the trademark “Elizabeth Emanuel '' and later tried to have the said trademark revoked, the highest court of the European Union, the European Court of Justice, gave a preliminary ruling. The Court reasoned that “even if the average consumer might be influenced in his act of purchasing a garment bearing the trademark ‘Elizabeth Emanuel’ by imagining that the appellant in the main proceedings was involved in the design of that garment, the characteristics and the qualities of that garment remain guaranteed by the undertaking which owns the trademark.”. As a result, the “Elizabeth Emanuel” trademark would not be revoked on the reason that it would mislead the public as to the origin of the goods when the goodwill associated with that mark has been assigned together with the business making the goods to which the mark relates. Luckily for Elizabeth Emanuel, her story has a happy ending, as she settled with Boi Group, the current owner of the trademark, to sell her clothes under her name within the TK Maxx chain.
A cautionary tale can be taken out of these examples. When choosing an eponymous trademark, one should always consider what would happen in future ventures in case the registered trademark and goodwill are sold to a third party. Designers cannot simply sell their business for large amounts of money and then expect to create new businesses using the same name.
This article contains general information and should not be considered as legal advice.
Stephanie Limaco and Leigh Crestohl of Zaiwalla & Co examine the possibility of an increase in foreign investment in Venezuela, especially with regards to oil, and highlight the reasons regarding this new interest.
There seems to be renewed interest in Venezuela by high-risk appetite investors. Recently, a couple of private equity funds were seeking to acquire shares in Venezuelan companies and invest in Venezuelan financial assets, and some foreign companies and investment groups acquired private companies or established branches in Venezuela, including DirectTV, Cargill and Liberty Mutual Holding. An economic adviser at London’s EM Funding has said that the opportunities for profit in the first phase of economic recovery are “immensely high”.
One driver of this emerging interest is likely to be the expectation that the US Government may revise its Venezuela sanctions programme, or at least introduce more exceptions to the very severe sanctions rules currently in place. Another reason may be a potential change of approach of the Venezuelan Government, reflected by the liberalisation of the economy in the last few years and the anti-blockade law ratified by the National Assembly a couple of months ago. The fact that the country has the largest oil reserves in the world, the largest gas reserves in Latin America, and its power generation infrastructure, also explain the interest.
Recently, the Venezuelan Government adopted several measures that were seen as gestures of goodwill by the Chairman of the US House Foreign Affairs Committee, including the release from prison of a group of American executives of Citgo, an agreement with the World Food Programme and another with opposition representatives concerning Venezuela’s National Electoral Council.
Currently, the Biden administration is reviewing existing sanctions and one alternative approach that may allow for more targeted sanctions, assett forfeitures and indictments of Maduro officials. As talks between the Venezuelan Government and the opposition will soon resume in Mexico with Norwegian mediation, the EU, the US and Canada have indicated a willingness to review sanctions policies if there is meaningful progress in a comprehensive negotiation.
Sanctions relief for Venezuela, especially with regard to oil, would be essential for foreign investors because the country is subject to several concurrent and companies are usually inclined to over-comply rather than face the legal, commercial or reputational risks involved. The US sanctions regime is very extensive and applies potentially not only to US persons but also poses a risk of secondary sanctions for non-US entities. It includes broader sectoral sanctions, covering the gold and oil sectors, and transactions with the Government of Venezuela. Nevertheless, the US government recently authorised certain transactions involving the export or reexport of LPG to Venezuela, a relaxation of one of the restrictions imposed by the Trump administration.
The UK sanctions regime, in contrast, is only applicable to persons within the UK, and UK persons abroad. The list of Venezuela sanctions targets is more limited in scope than the US sanctions list, and it mainly consists of certain government officials and authorities (not commercial entities). However, investors would likely feel more confident if sanctions are also lifted or eased by the UK, Europe and other countries.
The government’s liberalisation of the economy from 2019 gave positive signals for private investors, who welcomed a relaxation of the rigid controls that had been in place for the previous 17 years. The elimination of currency and price controls led to a dollarisation of the economy, and by the beginning of 2020 more than half of transactions in Venezuela were in US dollars. Last November, a company started issuing fixed income dollar-denominated bonds in Venezuela, which was possible because of a change of rules by the government.
The recently ratified anti-blockade law, which allows an increase in private investment and the privatisation of state-owned and mixed enterprises, could also open a path to increased foreign investment in the oil industry. It is reported that Petróleos de Venezuela has started to sign Productive Services Agreements (ASPs) with new partners, giving more control to the private sector, although there is still uncertainty as to whether this will be successful.
Companies interested in investing in Venezuela will need to navigate multiple sanctions regimes, which can vary depending on changing political scenarios and circumstances. Potential investors should take prior advice from sanctions, compliance and export control experts. Further, these companies should obtain comprehensive legal advice to determine the best way to structure their investments to achieve maximum legal protection. Carefully drafted contracts, in particular choice of law and forum selection clauses, would be key in this assessment.
