Sponsored briefing: Legal tech – Too much of a good thing?

Sponsored briefing: Legal tech – Too much of a good thing?

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Neota Logic

Nearly $1bn was invested in legal technology and New Law disruptors in 2018. That was across more than 50 funding rounds and included start-ups through to more established players, according to research from Investec. Venture capital, private equity, non-legal companies and trade buyers are increasingly interested in what they see as a highly-lucrative legal sector.

The frequency and scope of legal tech funding has also jumped markedly: a Thomson Reuters report in mid-2017 put investment into UK legal tech start-ups at just £16m in the previous 18 months. Hundreds of legal tech companies have subsequently popped up. Every law firm is quick to tout its latest innovation or partnership with a technology provider, while some even have incubators where they work with start-ups over several months, honing products. Continue reading “Sponsored briefing: Legal tech – Too much of a good thing?”

Sponsored briefing: 2019: diversity and new rules for Portuguese corporate issuers in debt capital markets

Sponsored briefing: 2019: diversity and new rules for Portuguese corporate issuers in debt capital markets

Diversity. This is a fair word to describe Portuguese debt capital markets in 2019. We have seen a bit of everything this year: new issuers, including Transportes Aéreos Portugueses, Sociedade Independente de Comunicação and Casais, SGPS, and from the public sector, the Autonomous Region of the Azores, frequent issuers, including Sport Lisboa e Benfica – Futebol SAD, Mota-Engil, José de Mello Saúde and Galp, and from new structures, including the combination of subscription and exchange offers to retail and institutional investors, and the segregation of books by types of investors (retail vs eligible counterparties and professional clients in retail offerings), and even a new prospectus regulation. Lastly, at the top of the list, new investors and alternative funding sources for Portuguese issuers. This is good news in a year that, on the regulatory front, turned a page with the enactment of the new EU Prospectus Regulation and related delegated regulations.

As from 21 July 2019, new rules were required to be followed in the preparation of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. New rules were also adopted in respect of related advertisements.

Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 (New Prospectus Regulation), although maintaining the essential structure inherited from its predecessor, introduced new requirements aimed at simplifying an issuer’s access to capital markets, notably frequent issuers or issues by small and medium-sized companies, and ensuring that the information contained in a prospectus is as useful as possible for its readers (potential investors).

Critical chapters of the prospectus, such as the summary and the section on risk factors, have also been affected. The summary was reduced and reshaped to be modelled as much as possible on the key information document, with the goal of making it shorter, simpler and easier for investors to understand. To achieve this goal, the language used in the summary should be plain and non-technical, presenting the relevant information in an easily accessible way. Following this route, summaries will become a more useful source of information for investors (notably retail investors), focused on providing key information that helps investors take more accurate investment decisions.

Rules regarding risk factors have also been amended and detailed. The main purpose of disclosing risk factors in a prospectus is to ensure that investors are aware of the major potential risks relating to the issuer and the securities, and that they make investment decisions based on their knowledge of these risks. In order to avoid long generic descriptions of risks that often serve only as disclaimers, the New Prospectus Regulation and related ESMA Guidelines require that the risk factors be limited to those which are material and specific to the issuer and the securities being offered or admitted to trading. The relevant risks are now required to be described adequately, organised by categories, and those considered most critical by the issuer should be presented first. The main reason for organising the description of risk factors according to these new rules is to present the information contained in a prospectus in an easily analysable, concise and comprehensible form. Whereas the above does not appear to constitute a great challenge for issuers, the need to assess (and eventually quantify) the impact of each risk on the issuer seems to be harder to address, notably because the information available may not be sufficiently reliable to be included in a formal document such as a prospectus. The New Prospectus Regulation and related ESMA Guidelines admit the use of a qualitative scale of low, medium or high, and precedents so far have shown that issuers tend to prefer this alternative.

Also of importance are the new rules in respect of advertisements, particularly the relevant required content. The word ‘advertisement’ is now required to be prominently included in any advertisements disseminated to potential retail investors, and legal disclaimers are required to include statements and recommendations to investors highlighting the need to read and consider the prospectus carefully before investing, rather than simply relying on the approval of a prospectus as a sign of endorsement of the securities being offered or admitted to trading. So far, these new rules have proven to be susceptible to being followed, although in some cases, notably television and radio advertisements or advertisements of more limited dimensions, the new rules have had an impact on the advertisement and its purpose.

The available experience shows that the changes introduced by the New Prospectus Regulation have been successfully handled by issuers and that complying with these new rules has neither discouraged the use of capital markets, nor affected timelines for the approval of a prospectus, notably in Portugal, where this responsibility falls on the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários), as was the case in the first new prospectus-compliant public offering targeting the retail market – the combination of subscription and exchange notes issue launched by Mota-Engil in October. Therefore, with the benefits of a renewed legal and regulatory framework and of an environment where low interest rates facilitate access to funding, 2020 is likely to follow in line with the current year, promising continued intense activity and diversity.

For more information, please contact:

Pedro Cassiano Santos (pictured, left)

Partner and head of the banking and finance practice

E: pcs@vda.pt

Hugo Moredo Santos (pictured, centre)

Banking and finance partner

T: +351 21 311 3366

E: hms@vda.pt

Benedita Aires (pictured, right)

Banking and finance partner

E: bla@vda.pt

VdA

Rua Dom Luís I, 28

1200-151 Lisbon

Portugal

www.vda.pt

Sponsored briefing: Med-arb: a hybrid approach to ADR and its applicability in Turkey

Sponsored briefing: Med-arb: a hybrid approach to ADR and its applicability in Turkey

Matur & Ökten’s Bahar Nalan Danış discusses combining mediation and arbitration

Today’s world is changing at a dazzling speed, and so is the way we deal with disputes. Although originating from thousands of years ago, we may well state that alternative dispute resolution (ADR) in its modern meaning was developed in the 20th century and has continued to evolve ever since, due to its fast solution-providing rate, which suits the requirements of modern business life.

In the last few decades, different forms of ADR have gone global. The forms that make up ADR include mediation, arbitration, negotiation, ombudsman services, consensus building and new hybrids of these processes, including med-arb, which features characteristics of both mediation and arbitration.

Brief background

Before reviewing the essence of med-arb, it is important to understand the meaning of each process, as well as their growth as ADR processes.

Mediation and arbitration have operated separately for many years. Mediation is the procedure wherein a neutral and impartial professional acts as a mediator, who facilitates the communication between conflicted parties and assists them to find a resolution. If the matter is resolved, parties sign a binding agreement. The advantages of mediation are that the parties craft their own solution and it is more affordable. The most common criticism addressed to mediation is that it does not guarantee a final resolution.

Arbitration, on the other hand, is more of a court-like process, where parties attend hearings, submit evidence, etc, based on which the arbitrator makes a binding decision. The benefit of arbitration is that it is faster and more efficient than traditional litigation. It is, however, criticised for being adversarial and the parties have limited control of the resolution.

The two methods can seem pretty different from each other in terms of the principles they rely on and how they work, yet great results are produced when they are combined together. The parties are guaranteed an outcome in med-arb, either through mediation or arbitration. Therefore, interconnecting mediation and arbitration can save time and cost in settling. It has become the most applied form of combined ADR processes over time, with an increased attention in the recent years, especially after the successful examples set by IBM v Fujitsu and Federal Deposit Insurance Corporation v Cherry Bekaert & Holland.

Two worlds colliding

Med-arb can be applied in different ways, the most common of which is the conduct of mediation and arbitration consecutively. In this method, the parties first try to resolve their dispute through mediation, aka ‘pre-arbitral mediation’. In case no understanding can be reached fully or partially within the pre-specified period or the time determined by the mediator/med-arbiter, parties continue with arbitration for the whole dispute or partially for the sections they cannot agree on. It is statistically shown that most cases of med-arb turn into successful mediations with no requirement for arbitration.

It is possible for both stages to be followed up by the same person who acts as the med-arbiter, which is known as the ‘med-arb same’ model. Or, a mediator and an arbitrator manage each respective phase, which is the ‘med-arb different’ model.

Turkish practice

Arbitration in Turkey is regulated under the International Arbitration Law No. 4686, dated 2001, whereas mediation is a much newer concept introduced to Turkish law in 2012 via Law No. 6325 on Mediation in Civil Disputes (Mediation Law). Neither law specifically refers to med-arb as a dispute resolution method, however it can be understood from the wording of Article 5/1 of the Mediation Law that there is no obstacle to applying arbitration following the mediation process. The said article, taking its basis from Article 10 of UNCITRAL Model Law on International Commercial Mediation, stipulates that ‘parties, mediator or third parties cannot allege the followings as evidences or testify as witness on these, when a lawsuit is filed or arbitration is resorted to regarding the dispute’.

On the other hand, Turkey passed Law No. 7155 on Legal Proceedings for Monetary Receivables of Subscription Agreements, which became effective as of 2019, requiring ‘mandatory mediation’ for commercial cases as a prerequisite before filing legal action. According to Article 23/18 of the cited law, in cases where there is an arbitration clause, such compulsory mediation condition shall not apply.

As for the question of whether a mediator can act as a med-arbiter under Turkish law, Communiqué on the Mediation Law dated 2013 set forth in Article 12/4 that the mediator cannot assume later the duty of an arbitrator in relation to the same dispute. This Communiqué was abolished and replaced with a new one in 2018, which does not refer to such prohibition. On the contrary, it is specified in Article 4/6 of Mediators’ Ethic Rules announced by the General Directorate of Mediation that the mediator can actually act as an arbitrator if the parties in conflict agree so in writing.

A first in the world: groundbreaking move from Turkey

As an exciting new development, the Istanbul Arbitration Centre (ISTAC) has just published rules governing med-arb on 15 November 2019 on its website, which has become the world’s first institutionalised written med-arb rules. By presenting the ‘first of its kind’ rules, ISTAC aims to widen the prevalence of med-arb.

We have witnessed many commercial disputes, both local and multinational, being settled in Turkey, especially in Istanbul via arbitration.

Med-arb can be more effective than arbitration indeed, as the parties will participate in the mediation phase in sincerity and good faith, knowing that if they fail to reach an agreement, they will lose control over the outcome and have to go along with the med-arbiter/arbitrator’s decision. It can also be more efficient than mediation, since parties will be more likely to assert reasonable demands and demonstrate a more conciliatory attitude than in mediation alone, increasing the opportunity for a more satisfying result for all involved.

We hope this two-tier system will also become a preferred choice of settlement in Turkey in the years to come.

For more information, please contact:

Bahar Nalan Danış, attorney at law – mediator (Young Mediators Initiative of the International Mediation Institute)

Matur & Ökten & Karayel Keßler Law Office

İnönü Cad No:24/4

Gümüşsuyu, Taksim

Beyoğlu

Istanbul

T: +90 212 260 1062

E: bahar.danis@maturokten.com

www.maturokten.com

Sponsored briefing: Turkey M&A outlook: 2020 and beyond

Sponsored briefing: Turkey M&A outlook: 2020 and beyond

Gamze Çiğdemtekin (pictured, left) and İpek Batum (pictured, right) of Çiğdemtekin Çakırca Arancı assess what lies ahead for the deals market over the next few years

Global economic uncertainties have affected the M&A market, and the recession in the Turkish market was as expected for 2019. According to the data reported on M&A transactions in 2019, the volume of the total M&A transactions in Turkey was $7.4bn. While many economists predict the M&A market may slightly fall in 2020, Turkey’s New Economic Program has optimistic targets that give confidence to investors to take advantage of the current market and expect higher returns in the next three years. Furthermore, there are significant opportunities still available for investors, with emerging sectors taking the spotlight. Continue reading “Sponsored briefing: Turkey M&A outlook: 2020 and beyond”

Sponsored briefing: Notable developments in Turkey’s oil and gas policy

Sponsored briefing: Notable developments in Turkey’s oil and gas policy

Yazıcı’s Kerem Arıç explores three key areas of growth for the country’s energy sector

Due to its dependence on oil and natural gas imports, Turkey has been in need of structural changes in its energy sector. Although the share of natural gas in power generation was significantly reduced in 2019, the overall reliance on natural gas and oil imports creates major challenges both from a commercial and strategic perspective. To overcome these challenges and increase its energy security, the Turkish government made a fundamental decision to move from a role of investor to a role of policy maker and regulator. As a result, Turkey’s oil and gas policy has been mainly driven by the following ground rules: Continue reading “Sponsored briefing: Notable developments in Turkey’s oil and gas policy”

Sponsored briefing: Mediation on the rise in Turkey

Sponsored briefing: Mediation on the rise in Turkey

Eda Cerrahoğlu Balssen (pictured, left) and Sezin Dündar (pictured, right) of Cerrahoğlu discuss the legal requirement for mandatory mediation in commercial disputes

Turkey was introduced to mediation in 2012 with the adoption of Law No. 6325 on Mediation in Legal Disputes (Mediation Law), which regulates the mechanism of voluntary mediation. Continue reading “Sponsored briefing: Mediation on the rise in Turkey”

Sponsored briefing: Notable developments in construction law and practice

Sponsored briefing: Notable developments in construction law and practice

Yazıcı’s Bilge Müftüoğlu on the effect of government incentives on the energy sector

There are major criteria that investors consider in advance of determining the type and extent of their investment in any sector and the energy sector is no different. Incentives granted by states are one of these as they have considerable impact on construction contracts of projects involving infrastructure and energy, such as power plants. Continue reading “Sponsored briefing: Notable developments in construction law and practice”

Sponsored briefing: Termination of distributorship agreements

Sponsored briefing: Termination of distributorship agreements

Ecem Yıldırım of Apak Uras outlines how distributorship agreements are dealt with under Turkish law

a) General explanations

We are living in a world where, day by day, customers’ demands for more products that are not manufactured in their own countries increase. Furthermore, the continuing growth in the financial world has also led businesses to expand into new geographical locations. As a result of this, in order to fulfil the demands of their customers and businesses’ expansion targets, more and more companies prefer distributorship agreements as a way to enter into new markets. Distributorship agreements can be defined as agreements in which the supplier and the distributor agree on the supply of certain products to the distributor who will be selling, promoting and marketing such products within a specific region. In these type of agreements, the distributor acts on his own behalf and account, and aims to increase the sale of the products in the specified region in order to gain more revenue over the purchase prices.

Distributorship agreements are considered sui generis agreements under Turkish Law and as in most countries, they are not directly regulated and defined by the provisions of law in Turkey. Such gap is filled by court precedents, the doctrine in accordance with article 1 of the Turkish Civil Code and the equity principle. Even though Turkish legislation does not include any specific provisions related to the distributorship agreements, in accordance with Turkish doctrine and court precedents, certain provisions set forth for agency agreements shall be applicable to the distributorship relations.

b) Termination of distributorship agreement

The termination of a distributorship agreement can be made by either ordinary termination or extraordinary termination (based on justified reason). In general, ordinary termination is made by notifying the other party in advance whereas the extraordinary termination can be made without complying with any time period.

Extraordinary termination

Pursuant to Turkish law, the distributor’s breach of a primary obligation is evaluated as a justified reason (eg, payment default, the refusal of notifying its business activities, fraudulent conduct). In addition to these, reasons such as non-increase in the sales, marketing and promotion of the product, decrease in the purchasing price of the product and change in the payment method may be signified as examples of justified reasons.

Ordinary termination

Under Turkish doctrine, in line with the freedom-of-contract principle, parties can include a clause that gives rights to the parties to terminate the agreements with or without any cause. In practice, Turkish law considers a 90-day notification period in advance of the effective date of the termination as a reasonable period to terminate the agreement without cause. Under Turkish doctrine, the courts can at their discretion determine the appropriate time to notify the other party as being six months in respect of agreements executed for more than a five-year period.

c) Distributors’ claims arising from termination

Another typical characteristic of a distributorship agreement is that it can be executed as exclusive and non-exclusive. Depending on the type of agreement, distributors’ claims arising from the termination of the distributorship agreements differ accordingly. There are two main different compensation claims that arise pursuant to Turkish law:

Portfolio compensation

In accordance with article 122/5 of the Turkish Commercial Code, unless deemed inequitable, this provision (claiming portfolio compensation) shall be applicable to the termination of the exclusive distributorship agreements and other similar permanent agreements providing monopoly rights. In order to claim portfolio compensation, the termination of the distributorship agreement by the distributor should be based on a justified reason, or if the distributorship agreement is terminated by the supplier without justified reasons, the payment of this compensation should be equitable, the supplier should continue to receive notable benefit from the clients even after the termination and the distributor should lose its right to receive remuneration.

Compensation for damages

The distributor can request compensation for his damages, which may include his actual losses and deprived profit. In this context, if the distributor has leased a place or made expenses for promoting activities, etc, considering that the distributorship relation among them will continue, then the distributor can claim compensation for the damages that they have incurred in making these investments.

d) Conclusion

In summary, both the legislation and the practice of Turkish doctrine draw the path for the termination process of the distributorship agreement. However, as every distributorship agreement constitutes a unique and sui generis relationship between the distributor and the supplier, it is vital to consider the period of the distributorship relation, the amount of investment made by the distributor, preparation activities for the relevant markets and products, and the obligations of the parties set forth in the distribution agreement during the termination process.

For more information, please contact:

Ecem Yıldırım, associate, Apak Uras Law Firm

E: ecem@apakuras.com

www.apakuras.com

Sponsored briefing: Restrictive measures against Turkey by the EU

Sponsored briefing: Restrictive measures against Turkey by the EU

Vona Law Firm’s Gül Özdinç sets out a criticism of the European Council’s new regulation concerning restrictions on Turkey

The European Council adopted a framework for restrictive measures against Turkey for its drilling activities in the Eastern Mediterranean with Regulation (EU) No 2019/1890 of 11 November 2019.

The framework will make it possible to sanction individuals or entities responsible for or involved in drilling activities of hydrocarbons in the area. The sanctions consist of a travel ban to the EU, and an asset freeze for persons and for entities. And yet the framework did not refer to any names of individuals and entities. According to the regulation, the definition will be based on the following items:

a) Being responsible for or involved in, including by planning, preparing, participating in, directing, or assisting, drilling activities in relation to hydrocarbon exploration and production, or hydrocarbon extraction resulting from such activities, which have not been authorised by the Republic of Cyprus within its territorial sea, in its exclusive economic zone or on its continental shelf, including in cases where the exclusive economic zone or continental shelf has not been delimited in accordance with international law with a state having an opposite coast, activities which may jeopardise or hamper the reaching of a delimitation agreement.

b) Providing financial, technical or material support for drilling activities in relation to hydrocarbon exploration and production, or hydrocarbon extraction resulting from such activities, referred to in point (a).

c) Being associated with the natural or legal persons, entities or bodies referred to in points (a) and (b).

The regulation refers to funds and economic resources together: cash, securities, bonds, rights of set-off, letters of credit and bills of lading, and any kind of asset, whether tangible or intangible, movable or immovable, which are not funds but may be used to obtain funds, goods or service.

The regulation aims to prohibit almost all commercial activities with sanctioned individuals or entities, unless authorised by the regulation or by the relevant competent authority. The competent authorities may authorise the release of certain frozen funds or economic resources under such conditions as they deem appropriate according to the regulation.

It is obvious that both parties need each other: whereas the European bloc needs to co-operate with Turkey on migration, NATO, countering terrorism and energy transmission, Turkey needs the EU to continue its commercial activities. Our consideration is that the regulation violates international law and procedures of the UN Security Council, and we believe that the related parties will finally reach a common understanding that may satisfy all parties looking from different perspectives.

Currently, the EU has not published a name list and we do not see a practical reason not to continue trading with Turkey. However, Vona recommends its clients prepare their security nets by defining counterparties that could be a potential target of the sanctions and analysing the risks under the current relations, and setting out a plan B in case the counterparty is listed by the council.

For more information, please contact:Gül Özdinç, partner

Vona Law Firm

Caddebostan Mah Prof Dr Hulusi Behçet
Cad No: 14 K: 7 D: 8

Kadıköy

34728 Istanbul

E: gul@vonahukuk.com
T: +90 216 372 2816 (E: 23)

www.vonahukuk.com