All Things Legal March 2020
Gordon Kerr, EuRA Strategic Consultant for Legal
I am no longer a citizen of the European Union. So I hope that you will understand my need to drown my sorrows with a very fine old whisky.
Still, life must go on in our turbulent legal world and I am sharing with you, in this update, some thoughts on employee privacy rights, late payers, coronavirus, bribery ….. and, of course, Brexit.
As we emerge from the depths of our northern European winter, it’s lovely to think of warmer days just ahead. See you in Seville!
Brexit (1) – What Happens Next??
On 31st January, EU flags came down in London and the Union Jack was folded away in Brussels. After many twists and turns, Brexit has happened. We are now in a transition phase, until the end of this year, during which time the UK will continue to observe EU rules and nothing much will change.
Tricky negotiations ahead
The centrepiece of the new EU/UK relationship is intended to be a Free Trade Agreement, covering all aspects of the EU’s future relationship with the UK, such as tariff-free trade, security sharing, financial services and fishing rights. But the EU’s starting point is clear: being out can't be as good as being in.
The EU will be pushing the need for a “level playing field”, i.e. measures to reduce the risk of EU companies being undercut by British firms that benefit from the Free Trade Agreement. The EU intends that there should be future rules covering taxation, employment rights and environmental policies, and government support for companies, known as "state aid”.
For its part, the UK is very reluctant to agree to any such restrictions and has legislated that the trade deal must be concluded – and transition period ended – on 31 Dec 2020. This puts pressure on both sides and may be a difficult deadline to achieve. So there is still a real possibility that we will be faced with a no-deal Brexit at the end of this year.
Immigration
Freedom of movement rights, already exercised by EU and UK citizens, have been preserved. EU citizens who have moved to the UK before the transition period ends can continue to live and work in the UK but must register (free of charge) by 30th June 2021. After the transition period, EU citizens not already resident in the UK will have no special immigration rights and will be subject to the same “points based” immigration system as citizens of non-EU countries such as the US, China and India.
UK nationals living legally in an EU country at the end of the transition period will be able to stay and enjoy the same rights to work and reside as before. But anyone arriving after the end of this year will be subject to each EU country's immigration rules.
We don’t yet know what the post-transition arrangements will be for many of the practical aspects of travelling between the EU and the UK, such as medical cover, driving permits, mobile roaming charges and travelling with pets.
Summing Up
I can do no better than end with a quote from The Times:
“We know the rights of EU citizens in the UK will be preserved. We know nothing will change for a year. And we know that Northern Ireland will tread a different path from the rest of the UK. Beyond that pretty much everything about the future relationship with our closest neighbours is undecided and up for grabs”.
Brexit (2) - Good News for Amsterdam and Dublin
The Dutch government has lured 140 UK-based companies to the Netherlands since the Brexit referendum in 2016. 78 of these business relocations have taken place in the last year alone, and 425 other UK businesses are understood to be waiting for greater clarity on current EU-UK Free Trade Agreement (FTA) talks before committing to a Dutch move. The particular attractions of the Netherlands for British businesses are said to be the stable political climate and high level of spoken English.
Many of these companies are household names. Sony and Panasonic, the Japanese technology companies, are moving their European bases to the Netherlands. Media companies, including Bloomberg and the Discovery channel, are moving some London-based staff to Amsterdam. Gulfstream Aerospace has moved a logistics hub from London to Amsterdam.
Smaller companies are also moving to protect their European business. Rex London, a gifts and homewares business, has set up warehouses in the Netherlands. Press Red Rentals, a Telford-based equipment company, has opened a subsidiary in the south-eastern Dutch city of Roermond.
These moves from the UK, by businesses of all shapes and sizes, reflect current anxiety about Britain’s chances of securing a favourable trade deal before the end of the year. In many cases it’s a hedge against the continuing risk of a “no deal” Brexit.
The relocation picture is slightly different when it comes to the UK’s huge financial sector, based mainly in London. In this sector, Dublin appears to be the main beneficiary of Brexit, capturing around a third of all UK to EU relocations. The second most popular destination is Luxembourg, followed by Paris, Frankfurt and Amsterdam. The current prediction is that 5,000 financial jobs will move to the EU from the UK as a consequence of Brexit.
The outcome of FTA negotiations will determine whether these estimates of relocation volumes from the UK are accurate or just the tip of a very large iceberg.
Coronavirus: implications for businesses
As coronavirus spreads around the globe, relocation businesses, especially those with interests in east Asia — are beginning to face some difficult challenges.
Importers, exporters, business travellers and anyone involved in supply chains with China faces an impending crisis. For business executives, travelling east has become a problem. The US has warned its citizens not to go to China. The UK has advised against all travel to Hubei province and advised only essential travel to the rest of mainland China.
In addition, the UK chief medical officer has identified Thailand, Japan, South Korea, Hong Kong, Taiwan, Singapore, Malaysia and Macau as destinations where there is a risk of coronavirus being contracted.
If any of your employees are scheduled to travel to this region then steps should be taken to consider postponing those trips, or whether they can they be conducted by way of video or conference calls. Clearly, employee welfare must be the primary concern for any business and legal issues could arise if their welfare is not adequately protected.
The China Council for the Promotion of International Trade has started issuing “force majeure” notices to protect local enterprises compelled to halt production because of the virus. Force majeure is a legal concept that allows a business contract to be suspended or terminated. If you have relocation contracts in place that are affected by coronavirus — through employee illness, quarantine, or governmental restrictions on trade or travel — then force majeure may give you legal protection against a claim that you have failed to deliver agreed services.
Even in Europe, staying on the right side of health and safety legislation means being prepared to put in place prudent measures. If infection rates rise steeply here, then employers may be obliged to introduce enhanced infection control procedures, such as increased frequency of cleaning and disinfection of touch points. Let’s hope that we don’t reach that stage.
Employee Privacy Rights
A recent decision of the European Court of Human Rights (Lopez Ribalda v Spain) concerned the thorny issue of when it’s okay to use CCTV to monitor employees. In this case an employer in Spain set up covert CCTV surveillance of staff in a supermarket following concerns about the amount of stock that was going missing. Goods valued at over €82,000 had been taken over a five months period before the employer set up video surveillance. The surveillance was in place for ten days and provided evidence of theft. As a result, several employees were dismissed.
Some of the employees raised court action against their ex-employer, arguing that their right of privacy had been breached and also that Spanish data protection law, which requires individuals to be informed about CCTV use, had been breached. The Court decided that the employer had a legitimate reason (suspicion of serious theft) to implement the surveillance and took into account that the surveillance continued only until the culprits were identified. Despite deciding in favour of the employer in this case, the Court made it clear that, generally speaking, the slightest suspicion of wrongdoing would not usually justify covert video surveillance.
In the UK financial sector, similar arguments are raging about what is legitimate monitoring of staff. For example, Barclays has been forced to scrap a computer monitoring system that tracked the time employees spent at their desks and sent warnings to those spending too long on breaks. Barclays said axing the tracking system was a response to "colleague feedback", which is code for a horrendous backlash from angry employees!
Aside from attracting bad publicity by adopting a "Big Brother" approach to workplace monitoring, it’s possible that Barclays could also have fallen foul of data protection law. Courts are generally reluctant to allow employers to carry out staff monitoring unless they can show that this is necessary and proportionate and does not severely impact employees' rights.
Even global banks have to comply with privacy rules!
Late Payment of Invoices
Late payment issues continue to plague the relocation industry and it can be difficult to find practical ways of ensuring that invoices are paid on time. A helpful ally in the UK is the Small Business Commissioner, who will mediate on behalf of companies with fewer than 50 staff that have payment disputes with large businesses.
In a recent report, the Commissioner said that jet aircraft and train maker Bombardier had been exploiting companies for at least two years. He found that six in ten of Bombardier’s invoices are paid late, with suppliers waiting an average of 116 days.
The Commissioner highlighted the mistreatment of one of Bombardier’s catering suppliers. Bombardier Transportation UK failed to pay four invoices to London-based Alistair Hugo Catering and Events, running up a £5,600 debt. The supplier, which employs 26 staff, said that one of its invoices was 223 days overdue by the time it was settled. The caterer made several attempts to resolve the issue but payment was only made once the Commissioner intervened.
The Commissioner stated that the company’s payment performance was “simply unacceptable”. It was “loud and clear that the supply chain is being exploited” and that “this has been the case for at least the last two years”. Bombardier has agreed to review its payment practices and report to the Commissioner within 60 days.
Hopefully this is the kind of direct action and bad publicity that will make all large companies think twice about exploiting their suppliers as a method of improving cash-flow.
Bribery in your supply chain
Anti-bribery laws can create challenges for all relocation businesses which sub-contract work to suppliers in other countries. Bribery carried out by your supplier can result in a criminal prosecution for your business, even although you did not approve of the bribe and had no knowledge of the payment. So understanding the level of risk of bribery in a country where you are planning to appoint a supplier is very important. The higher the risk, the more thorough your supplier risk assessment should be.
A recent report by Berlin-based, Transparency International, the leading global anti-corruption organisation, focused on the extent of bribery in India. According to their findings, more than half of Indians have paid a bribe to police or other government officials in the past year despite a pledge by the government to create a “corruption-free” country.
Bribes were most commonly solicited when registering land or property, followed by dealing with the police and tax and electricity officials. The survey, covering 20 of India’s 28 states, found that north-western Rajastan was the most corrupt, with 78 per cent reporting that they had paid some form of bribe. In Kerala, in the south, the figure fell to 10 per cent.
With 860 million people of working age in India, it suggests that more than 400 million bribes changed hands across the country. Transparency International India concluded that corruption remained “part and parcel of daily life in India”, particularly at the lower echelons of bureaucracy which, it said, was saturated with opportunities for “bribery and kickbacks”.
India is actually mid-table in the 2019 Corruption Index (80th out of 180 countries), so is a long way from being among the worst offending countries. For example, its anti-corruption rating is better than other countries with high relocation volumes, such as Turkey, Vietnam, Brazil, Egypt, Mexico and Russia.
At the “good” end of the latest league table are Denmark and New Zealand, followed closely by Finland, Switzerland, Singapore and Sweden.
As for India, despite the issues highlighted by Transparency International, we can take comfort from the fact that our EuRA members in India are all fantastic. And I wasn’t paid to say that!
The Legal & Tax Report is produced for The EuRApean by Gordon Kerr, EuRA’s Strategic Consultant - Legal Services. Gordon can be contacted at gordonkerr@gklegal.co.uk