Last month the London Court of International Arbitration (LCIA) released its 2018 annual casework report. This showed a notable increase in the proportion of cases relating to banking and finance: up by 5%, from 24% to 29%. Although this can partly be attributed to the continuing growth in the popularity of arbitration, there are other specific reasons why this is happening in the banking and finance sector.
First, with the continued geographical widening of the financial markets, there has been an increase in both the number of financial products available generally, and also in the demand for those products from emerging markets. Taken together, the need for more certain prospects of both justice and enforceability across national borders should things go wrong become correspondingly greater and as such more arbitration clauses are being written into the underlying contracts. For transactions involving emerging markets particularly, an arbitration clause is often favoured where a party or asset is in a jurisdiction where the courts are perceived as less reliable and/or no agreement can be reached on the choice of national court.
Second, the increasing complexity of financial products, and therefore the corresponding increasing complexity of the cases involving them, makes arbitration a popular choice. The disputes that are arising require a deep understanding of both the financial products and the financial markets involved. There is concern that some national courts may have an insufficient level of judicial experience and proficiency for such disputes, especially as they can affect global markets (i.e. regarding industry standard contracts such as the ISDA Master Agreement). Arbitration allows parties to appoint arbitrators with the relevant experience for the matter in question, sidestepping this concern.
Third, political developments mean that the advantages of international arbitration have a greater premium compared to the court-based alternative. For example, uncertainties surrounding Brexit have been cited as a reason why international arbitration is increasingly being chosen by the London based financial services sector as their favoured dispute resolution mechanism. Currently, the UK is a member of the EU and subject to the EU Judgments Regulation 1215/2012. The EU Judgments Regulation provides a framework for the recognition of court judgments issued in one EU member state (i.e. the UK), in the courts of another member state. However, with the UK’s impending exit from the EU there is perceived uncertainty over the mechanisms by which the continued reciprocal recognition of court judgments between the UK and the EU will continue. Arbitration avoids that problem, relying instead on the New York Convention 1958 for both the recognition and enforceability of awards – there is still no convention that provides for the reciprocal recognition and enforcement of court judgments with anything remotely close to the widespread acceptance of the New York Convention for arbitral awards.
Due to the increasingly globalised world in which we live, where there is political and economic uncertainty not only in emerging markets but also in well-established financial centres like London, it is likely that the LCIA’s 2019 annual casework report will show when it is released next year another uptick in the proportion of cases from the banking and finance sector.
JHA is a specialist dispute resolution firm, with a track-record of advising clients from the banking and finance sector, as well as many other sectors. Our experts have led on cases under a variety of different institutional rules including the LCIA, ICC and ICSID Rules, in many different seats and subject to various governing laws.
A recent freedom of information request has revealed that HMRC is currently investigating several cases under the corporate criminal offence of failure to prevent the facilitation of UK tax evasion.
This corporate criminal offence, which was introduced in the Criminal Finances Act (CFA) 2017, places a positive obligation on companies to implement procedures to prevent the facilitation of UK tax evasion. While this offence applies to all companies, it is particularly aimed at banks, accountants and law firms, who are often regarded as unwitting ‘enablers’ of this type of crime.
Under section 45(1) of the CFA a company ‘is guilty of an offence if a person commits a UK tax evasion facilitation offence when acting in the capacity of a person associated with (the company)’. A company can defend itself if it can show the tax evasion facilitation offence was committed despite the company having had in place such prevention procedures as it was reasonable in all the circumstances to expect the company to have in place; or it was not reasonable in all the circumstances to expect the company to have any prevention procedures in place. The ‘failure to prevent’ offence can be punished by unlimited fines and orders for confiscation of assets.
The criminal investigations reported by HMRC show that some action is now being taken regarding prosecuting companies for financial crime, something the UK has been comparatively ineffective at in the past and is under increasing pressure to step up, as shown in the recent report by the Treasury Committee on anti-money laundering and anti-financial crime regime in the UK. The launching of these investigations by HMRC potentially marks a first step in the direction of pursuing effective prosecutions in this area and shaping the landscape of corporate liability in the UK in general.
It is not known how long these cases will take to investigate and it is likely that it will be many more months until we see the first prosecution in the UK for this offence. However, it is likely that the number of investigations brought under this legislation will increase over the next few years and companies should be prepared.
Joseph Hage Aaronson LLP’s (JHA’s) contentious tax team has contributed to the recently released Chambers & Partners Corporate Tax guide 2019. This highly regarded publication provides expert legal commentary on key issues and is considered one of the most comprehensive guides to this area of law for businesses worldwide.
As the only firm ranked as band one in the UK for Tax: Contentious expertise by Chambers, JHA is delighted to have contributed to this internationally renowned guide. JHA’s chapter includes sections on: the taxation of inbound investments; the taxation of non-local corporations; the taxation of foreign income of local corporations; anti-avoidance and BEPS, among other key features of UK corporate tax law.
JHA’s contentious tax team uniquely brings together in one firm specialist tax QCs, experienced tax disputes solicitors, and forensic accountants. The team’s close client relationships enables it to be involved in some of the most high-value and complex corporate tax related cases. JHA’s selection as the sole UK contributor to this guide, as well as the top tier rankings achieved by the firm every year since its inception in both the Chambers & Partners and Legal 500 directories, are testament to its practitioners talent and experience as well as its uniquely integrated approach.
The chapter can be found here on the Chambers website.
Joseph Hage Aaronson LLP’s (JHA’s) contentious tax team has achieved the highest possible rankings in both the Legal 500 and Chambers & Partners UK guides.
These legal directories are the most highly regarded guides to the legal market in the UK and internationally due to their rigorous independent research process, which includes client and peer feedback.
This is the fifth consecutive year JHA has achieved these rankings, meaning that the firm has not left the top tier for contentious tax since its inception in 2013. JHA is the first firm to ever have gained this accolade of longevity in this practice area.
In the Chambers UK guide JHA is once again the only firm rated as band one in the UK for Tax: Contentious expertise. Chambers says “The firm’s technical ability is second to none and they look to achieve practical results for clients”. The team is praised for its “outstanding service” and described as “excellent, hard-working and easy to work with.” JHA also achieves four individual rankings with Graham Aaronson QC, Paul Farmer and Simon Whitehead ranked in band one and partner Michael Anderson recognised in band two.
The Legal 500 UK ranks JHA as a top tier firm for tax litigation and investigations. The guide highlights the firm’s “dominant position in the UK tax disputes market” enabled by its “concentration of ‘star individuals’.” Seven JHA lawyers are highlighted with Graham Aaronson QC and Simon Whitehead selected for the exclusive leading individuals list. JHA is the only firm have two individuals recognised here.
JHA’s continued success in both guides is testament to the firm’s dominance in the contentious tax space. Despite only recently celebrating its fifth birthday the firm is out performing long-established international heavyweights.
Founder partner Graham Aaronson QC commented, “Our close client relationships enable us to be involved in some of the most high-value and complex cases in contentious tax. Our rankings are testament to our uniquely integrated approach, which brings together the most relevant and experienced solicitors and barristers to set the case strategy that best meets each client’s needs. We then pursue that strategy with a carefully chosen team of lawyers and, where appropriate, forensic accountants.”
Founded in 2013, JHA has a multidisciplinary team of barristers, solicitors, forensic accountants, researchers and paralegals. The firm works to deliver the best results for clients, whether through a litigation, arbitration, mediation or settlement process.
View the full commentary on our team and lawyers by Chambers UK here and the Legal 500 UK here.
Ray McCann, Partner at Joseph Hage Aaronson and Deputy President, Chartered Institute of Taxation, gave evidence on the tax measures contained in the November 2017 Budget to the Treasury Select Committee on 5 December 2017.
To read the news article, please click here.
The European Commission has published EU proposals for the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US.
According to the Commision press release, these are specific proposals for legal text, setting out binding commitments which the EU would like to see in the parts of the agreement covering regulatory and rules issues. The proposals cover competition, food safety and animal and plant health, customs issues, technical barriers to trade, small and medium-sized enterprises, and government-to-government dispute settlement.
European Commission publishes TTIP legal texts as part of transparency initiative
As of 10 January 2015 the amended Brussels I Regulation will come into force. It will render cross-border judgments automatically enforceable across the EU.
An enforceable judgment in civil and commercial matters in one Member State will be automatically enforceable anywhere in the EU. This amendment puts an end to the exequatur procedure.
Cutting red tape: Savings of up to €48 million thanks to new rules for cross-border judgments
The Protocol and Interpretative Protocol between the UK and Canada, which were signed in London on 21 July 2014, entered into force on 18 December 2014.
The treaty will take effect as follows:
In the United Kingdom in respect of:
In Canada in respect of:
Canada: Entry into force of the 2014 Protocols to the 1978 Double Taxation Convention (as amended)
To view the news article, please click here. (Article is in Russian).
