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What to expect in 2020: a world tour
Practical Law UK Articles w-023-8124 (Approx. 9 pages)
What to expect in 2020: a world tour
by Alice Southall, for Practical Law Cross-border
| Published on 29 Jan 2020 • International |
Cross-border practitioners from around the world give their views on which developments will have the biggest impact on cross-border practice in 2020, and how the role of cross-border practitioners will change over the next few years.
We asked a select panel of cross-border practitioners from around the world for their views on which developments would have the biggest impact on cross-border practice in 2020 – and for their predictions on how the role of cross-border practitioners will change over the next few years.
Constitutional answers? Brexit, the Russian Federation, Hong Kong and the USA
2020 will see nations around the world execute both ordinary and extraordinary constitutional manoeuvres, all with consequences for cross-border practice.
Contributors from Europe and elsewhere named Brexit as a key harbinger of change in 2020. Some queried whether English law and jurisdiction could retain their dominance in cross-border matters, while others anticipated a drop-off in transaction volume as investors wait to see the shape of a future UK-EU relationship before proceeding. One foresaw the EU introducing a temporary regime to allow for continuity of cross-border financial services contracts.
"Brexit is the political event that we expect to have the biggest impact on cross-border practice in 2020. Many international companies (such as banks and insurance companies) have established their holding and subsidiary companies, or just branches, in the UK and relied on the EU passporting regime to carry out their business in the EU market. We therefore expect Brexit to trigger an EU regulatory transition discipline to cover the effects of agreements (such as banking loans and insurance policies) entered into by companies licensed to operate in the EU market by UK authorities and their EU counterparties."
Oreste Marchini, Francesco Marchini and Luca Pietrantuono, Tonucci & Partners
President Putin's January address to the Federal Assembly and the subsequent political reshuffle caused one contributor to raise the possibility, albeit remote, that 2020 may see the Russian Federation amend its constitution to reverse the precedence of international over national law. This would have significant consequences for international relations and cross-border practice, with one outcome being that international sanctions against Russia could become unenforceable.
Social unrest in Hong Kong following a 2019 attempt by mainland China to introduce a new law extending its extradition rights in that territory has impacted negatively on cross-border practice in the region. The challenge in 2020 will be to resolve tensions and rebuild investor confidence.
As ever, the US will cast a long shadow. The US presidential elections to be held in November 2020 – and the election campaigns running up to them – were mentioned by several contributors as pivotal events for cross-border practice this year.
Attitudes to foreign investment: China and the Russian Federation
The US's actions over the past few years were also predicted to continue to drive other nations' policy this year.
"The relationship between the two superpowers of the USA and China will continue to have the biggest impact on cross-border practice. This includes both the US-China trade war and conflicts between them and their smaller adversaries/business partners. Preparation for the US elections will dominate US trade politics in 2020, and we may see the global economy further decouple and national economies to become increasingly protectionist before, hopefully, turning back to globalisation in the years after."
Falk Lichtenstein, CMS China
In China, the response to the US-China trade war has been to open more sectors of the domestic market to foreign investment, principally through a new Foreign Investment Law in force from 1 January 2020, and related regulations and judicial interpretations.
"All these laws and regulations were introduced with a view to further opening up of China to the outside world. The fundamental principles and policies under this new legal regime, such as pre-entry national treatment plus negative list and equal treatment to Chinese and foreign investment, will encourage and promote foreign investment, protect the legitimate rights and interests of foreign investors and optimize the environment for foreign investment. Needless to say, the new Chinese legal regime for cross-border transactions is better than ever before and dramatic growth will be seen and achieved in this field."
Yue Liu and Zhou Ying, Jia Yuan Law Offices
The financial traffic is likely to be one-way only, however, as the more liberal attitude to foreign investors is not matched for Chinese investors wishing to do business abroad.
"The Chinese government is still closely monitoring outbound investments from China. For traditionally closed areas like overseas real estate, gaming, and sports, the Chinese authorities continue to restrict Chinese investors from converting RMB into the foreign currencies required for such deals."
Michael Weng and Jessica Foo, Global Law Office
In the Russian Federation, by contrast, there appears to be an increasingly restrictive attitude to foreign investment as US and EU sanctions continue in force. Contributors forecast that 2020 would see growing scrutiny of cross-border deals, particularly in strategically important sectors, and that the criminal law may be invoked in matters that elsewhere would be the subject of commercial litigation or arbitration. For cross-border practitioners, the silver lining is that there will be increased demand for their expertise.
In parallel, there is likely to be increased economic and regulatory intervention by the Russian state, designed to facilitate domestic deals.
"Given the continued international pressures, including sanctions, and their palpable effect on projects that are crucial to the economy, it may be expected that the overall trend of the Russian government’s support of the development of the Russian economy and boosting industrial growth will continue to have a substantial impact on cross-border practice in 2020. Apart from Russian 'countersanctions', such measures may include continued regulatory steps aimed at localizing manufacturing operations and IP (that is, replacing imported goods and IP with local ones), as well as further increase in the use of such instruments of government support as special investment contracts and agreements to protect and encourage investments, aimed at long-term investments in major projects of utmost importance."
Natalia Abtseshko, Vegas Lex
Regional free trade agreements: Asia, Africa and South America
If some parts of the world are seeing a trend towards protectionism and localisation, contributors also noted that 2020 could also see the advent of two major free trade agreements.
In Asia, the Regional Comprehensive Economic Partnership (RCEP), if signed, will create a trading bloc between fifteen nations making up almost one third of the world's population and gross domestic product. The agreement, between the members of ASEAN and other nations including Australia, China and New Zealand, is forecast to drive cross-border practice in the Asia-Pacific region once implemented.
In Africa, a milestone towards greater intra-continental integration will be reached in July 2020, as members of the African Continental Free Trade Area (AfCTFA) have until then to reduce cross-border tariffs in order to promote trade.
"The African Continental Free Trade Area (AfCFTA) was established on 30 May 2019 by accession by 54 (out of 55) countries to a framework agreement, having protocols on intellectual property, competition law and investment, amongst others. The AfCFTA aims to ensure free movement of businesspeople and investment between member states, to create a continental market for goods and services. It also aims to improve the competitiveness of African industry by better allocating resources and by creating opportunity for scale production. The member states have agreed to promote trade liberalisation by reducing cross-border tariffs by 90% in the short term (by July 2020), with even further liberalisation thereafter."
Dina Biagio and John McKnight, Spoor & Fisher
2020 may also see the introduction of a new West African currency, provisionally to be called the "Eco", in the countries making up the Economic Community of West African States (ECOWAS). However, Nigeria, while a member of both ECOWAS and AfCTFA, may buck the trend towards greater economic cooperation.
"The closure of Nigeria's land borders in 2019, which came on the heels of Nigeria signing the Africa Continental Free Trade Agreement, has had a huge economic impact on cross-border trade with Nigeria's neighbours, and has called into question whether the continent's largest market will lead the charge as the continent seeks to move towards increased intra-African trade."
Ozofu Ogiemudia, Udo Udoma & Belo-Osagie
In South America, 2019 saw the successful conclusion of a trade agreement between the Mercosur bloc and the EU, following decades of negotiations. However, contributors noted that political tensions between Brazil's president Jair Bolsonaro and Argentina's new president Alberto Fernández may threaten the stability of that bloc in 2020. During his election campaign, Mr Fernández suggested that he may seek to revise the trade agreement. In response Mr Bolsonaro claimed that Brazil could leave Mercosur. At the least, antagonism between the two leaders could create an uncertain economic and political environment in the region.
When the possibility of a recession, which some have predicted to hit, is added in, all these factors mean that 2020 will be a year requiring swift reactions and quick decisions from cross-border practitioners.
Legal hotspots in 2020: data protection, consumer rights, intellectual property law – and climate change regulation?
Themes emerged in terms of those areas of law that jurisdictions around the world have been focusing on in the last few years, and which contributors thought would have a continued prominence in 2020.
In Cuba, China and Germany, intellectual property law has been the subject of recent activity. Cuba has made its trademark data available on Tmview, allowing cross-border practitioners worldwide to conduct a more comprehensive initial screening of rights. In China, trademark law was shaken up in 2018 and 2019, meaning that foreign investors attracted to the jurisdiction can expect a strengthened rights regime going forward. Forthcoming amendments to Germany's Patent Act were predicted to make Germany a more attractive venue for patent litigation.
Contributors noted that jurisdictions around the world have been inspired to review their data privacy and security laws by the EU's GDPR. The Brazilian General Data Privacy Regulation (LGPD) will take effect in August 2020; the Californian Consumer Privacy Act (CCPA), which gives consumers more rights over their data and personal information online, came into force on 1 January 2020. Tough regulatory responses to non-compliance with such regimes were thought likely to continue.
One contributor anticipated that consumer rights generally would be granted more protection worldwide – and foresaw changes particularly in the area of product liability.
"Governments are promulgating more laws and regulations that create significantly more powers protecting the rights of the consumer, especially in emerging markets. For example, many jurisdictions are creating frameworks for class action lawsuits. At the same time, regulators are being given greater powers to enact regulations, investigate consumer-related issues and to impose greater sanctions against manufacturers and others within the supply chain. Any product that is the subject of any claim or regulatory action in one jurisdiction will likely have the same problem in any other jurisdiction(s) in which it is sold, given the increased flow of information across borders."
David Goh, Squire Patton Boggs
It remains to be seen whether climate change, too, will result in jurisdictions around the world introducing new laws and regulations to drive corporate behaviour on the one hand, and mitigate its effects on the other. Events like Australia's bush fires may well result in rapid and long-term change to how jurisdictions regulate entities looking to do business within their borders.
Challenges or opportunities? Calls for creative responses to new technologies and political shifts
Contributors noted that in addition to advising their clients on the evolving international landscape, in 2020 cross-border practitioners would need to get to grips with the impact that advances in technology will have on cross-border practice.
On a day-to-day level, contributors saw that technology had the potential to simplify their lives, with more than one expressing the hope that document review software and improved translation technology could make their work more efficient, and that blockchain might prove to provide a robust solution to managing the preparation, settling and execution of documents.
Alongside their application in cross-border matters, practitioners will also have to understand the wider implications of new technologies such as blockchain and AI, in order to advise their clients: a challenge that some contributors saw as an opportunity to develop a new specialism.
"Practitioners must try to predict the consequences of such changes and advise clients accordingly. This requires professionals to look beyond the mere status quo, for example by advising clients on risks and opportunities created by new technologies even in the absence of a specific legal framework, in light of possible initiatives taken more and more frequently at supranational level. Disruptive technologies such as blockchain and Artificial Intelligence are at the heart of a variety of regulatory initiatives, which are likely to result in changes to the status quo."
Ernesto Apa, Portolano Cavallo
However, while having useful applications, technology was seen as a tool to grasp rather than the defining feature of current cross-border practice. The main challenge that contributors foresaw was the need for cross-border practitioners to find a way to handle and thrive on the increasing complexity of their professional obligations, as clients expect them to be up to date on fast-paced political, economic and legal developments in multiple jurisdictions, provide nuanced and detailed advice, and assist them in spotting opportunities and avoiding emerging risks.
"Creativity" was the attribute that contributors thought practitioners most needed in the years ahead, whether advising on dealing with emerging markets, rapidly evolving legal matters, or the international political landscape in 2020 and beyond.
"The advance in technology is a one-way street – there is no going back. The lawyers who will succeed in this new 'era' are the ones who see technology as an ally and embrace it, rather than a threat to fight against. The legal databases will 'do the legal work' in terms of analysing data and drafting templates, and the role of the cross-border practitioner will shift into a more creative one. The value of the Lawyer will rest in a deep understanding of the client’s business and where it stands in the context of the political and regulatory environment, in order to properly identify risks and advise in managing and overcoming such risks."
Débora Sejtman Gartner and Luciana Tornovsky, Demarest Advogados
Cross-border expert panel
Practical Law would like to thank the following for their contributions and comments:
Natalia Abtseshko, Vegas Lex | Author of materials including Restrictive covenant clauses Q&A: Russian Federation |
Ernesto Apa, Portolano Cavallo | |
Dina Biagio, Spoor & Fisher | Author of materials including Intellectual property right licences Q&A: South Africa |
Luca Borghi, SZA Studio Legale | Author of materials including Secondment agreements Q&A: Italy |
Dora Chow, Zhong Lun Law Firm | Author of materials including Intellectual property right assignments Q&A: Hong Kong |
Jessica Foo, Global Law Office | Author of materials including Anti-corruption (joint ventures) Q&A: China |
Alan Friel, Baker & Hostetler LLP | Author of Direct marketing Q&A: US |
David Goh, Squire Patton Boggs | Author of materials including Product liability Q&A: Hong Kong |
Marco Gubitosi, Legance Avvocati Associati | Author of materials including Legal systems in Italy: overview |
Legend Guo, Schinders Law | Author of materials including Letter before action Q&A: China |
Nicolas Groffman, Harrison Clark Rickerbys | Author of materials including Product regulation, safety and recall Q&A: China |
Sebastian Heim, Beiten Burkhardt | Author of materials including Intellectual property right licences Q&A: Germany |
Jimmy Huang, Zhong Lun Law Firm (with Joyce Yan) | Author of materials including Intellectual property right assignments Q&A: China |
Fabio Kupfermann Rodarte, Levy & Salomão Advogados | Author of materials including Corporate loan facilities Q&A: Brazil |
Henry Liao, Schinders Law | Author of materials including Attachment orders (freezing injunctions) Q&A: China |
Falk Lichtenstein, CMS China | Author of materials including Consumer contracts Q&A: China |
Yue Liu, Jia Yuan Law Offices | Author of Supply of goods Q&A: China |
Paul Lombard, Willkie Farr & Gallagher | |
Caroline Marchi, Machado Meyer Advogados | Author of materials including Restrictive covenant clauses Q&A: Brazil |
Oreste Marchini, Tonucci & Partners (with Francesco Marchini and Luca Pietrantuono) | Author of materials including Agency Q&A: Italy |
John McKnight, Spoor & Fisher | Author of materials including Confidentiality Q&A: South Africa |
Ozofu Ogiemudia, Udo Udoma & Belo-Osagie | Author of materials including Earn-out, locked box and retention Q&A: Nigeria |
Raimondo Premonte, Gianni Origoni Grippo Cappelli & Partners | Author of materials including Put and call option Q&A: Italy |
Donato Romano, Gianni Origoni Grippo Cappelli & Partners | Author of materials including Pensions issues in cross-border acquisitions Q&A: Italy |
Eduardo Salomão Neto, Levy & Salomão Advogados | Author of materials including Loan signing and drawdown (CP) Q&A: Brazil |
Oriol Ramon Sauri, Vidal-Quadras & Ramon | Author of materials including Intellectual property right licences Q&A: Spain |
Débora Sejtman Gartner, Demarest Advogados | Author of materials including Deadlock and termination Q&A: Brazil |
Sidharrth Shankar, J. Sagar Associates | Author of materials including Part 1 – Standard Clauses "Boilerplate" agreement: India |
Anton Sitnikov, Bryan Cave Leighton Paisner Russia | |
Peter S. Sloane, Leason Ellis | Author of materials including Advertising Q&A: US |
Raquel Stein, Souto Correa Advogados | Author of Agency Q&A: Brazil |
Luciana Tornovsky, Demarest Advogados | Author of materials including Control and minority protection Q&A: Brazil |
Andrea Tortora della Corte, Legance Avvocati Associati | Author of materials including Asset acquisition documents Q&A: Italy |
José Carlos Wahle, Veirano Advogados | Author of materials including Secondment agreements Q&A: Brazil |
Wayne Wang, Zhong Lun Law Firm (with Cindy Wang) | Author of materials including Memorandum of understanding (commercial) Q&A: China |
Michael Weng, Global Law Office | Author of materials including Asset acquisition documents Q&A: China |
Chris Williams, Bracewell LLP | Author of materials including Sponsorship Q&A: United Arab Emirates |
Zhou Ying, Jia Yuan Law Offices | Author of Supply of goods Q&A: China |
Sergey Yuryev, CMS Russia | Author of materials including Product liability and safety in the Russian Federation: overview |
Xin Zhang, Global Law Office | Author of materials including Lending and taking security in China: overview |
For more such resources, see Practical Law's Cross-border resource centre.