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Perspective

Federal Reserve Board Adopts Final Control Regulation

Feb 20, 2020

On January 30, 2020, the Federal Reserve Board (the “Board”) adopted final rules (the “Final Control Regulation”) to provide increased transparency and consistency around determining when an investor company has “control” over a target company for purposes of the Bank Holding Company Act (“BHCA”) and Home Owners’ Loan Act (“HOLA”).[1] The concept of control under the BHCA has enormous regulatory consequences, and the Final Control Regulation represents a major undertaking by the Board to streamline a complex area of law by incorporating a clear set of factors and thresholds taken from a diverse web of precedents into an easily understandable framework of rebuttable presumptions of control. However, the Final Control Regulation appears to raise various interpretive issues and to leave significant room for continued consultation with Board staff on matters of controlling influence.

Perspective

SEC Publishes Frequently Asked Questions on Regulation Best Interest

Feb 19, 2020

On June 5, 2019, the U.S. Securities and Exchange Commission (the “SEC”) adopted Regulation Best Interest (“Regulation BI”) to improve investor protection by establishing a standard of conduct for broker-dealers making recommendations to retail customers. Firms must bring their operations into compliance by June 30, 2020. On January 10, 2020 and February 11, 2020, the SEC Staff published and then supplemented responses to a series of Frequently Asked Questions (“FAQs”) it has received regarding Regulation BI.

Perspective

CFTC Staff Issues Three Letters Providing LIBOR Transition Relief to Market Participants

Feb 17, 2020

The Commodity Futures Trading Commission (CFTC) has issued three no-action letters providing relief for swap transactions (and amendments to swap transactions) in connection with the expected market transition from using the London Interbank Offered Rate (LIBOR) and other interbank offered rates (collectively with LIBOR, IBORs). Letter 19-26 from the CFTC Division of Swap Dealers and Intermediary Oversight (DSIO) provides relief to swap dealers (SDs) from certain requirements under the de minimis registration exemption, uncleared swap margin rules, business conduct requirements, confirmation and documentation and reconciliation requirements. Letter 19-27 from the Division of Market Oversight (DMO) provides time-limited relief from the trade execution requirement. Letter 19-28 from the Division of Clearing and Risk (DCR) provides time-limited relief from the swap clearing requirement.

 

Perspective

Contracting with Disclosed Principals: Who is Your Counterparty?

Feb 13, 2020

It is often taken for granted that only the named parties to a contract can enforce it.[1] The English Court of Appeal has recently considered an important derogation from that assumption in the context of an arbitration claim.

In the combined appeals of Filatona Trading v Navigator EquitiesDanilina v Chernukhin [2020] EWCA Civ 109, the issue for the Court was the enforcement of a contract by a person who enters the contract as a disclosed and identified principal of a named party. The Court concluded that there is a heavy burden to show that the terms of the contract and/or the surrounding circumstances exclude a disclosed and identified principal from exercising rights under the contract.

Perspective

Corruption and its Effect on Termination Payments: Lessons for LatAm Project Finance Transactions

Feb 13, 2020

The landmark decision in the Ruta del Sol arbitration against the Agencia Nacional de Infraestructura – ANI, the Colombian government agency in charge of awarding concessions through public-private partnerships for the design, construction, maintenance, operation and administration of transport infrastructure in Colombia, addresses the key issue of whether governments must honor termination payments when the award of a concession or governmental agreement was tainted by corruption during the awarding process. In this landmark decision, the Arbitral Tribunal awarded the termination payments notwithstanding its declaration that the agreement was null and void, but did so (i) only in favor of those parties who had been unaware of the unlawful acts and who had acted in good faith and without fault (for example, the creditors); and (ii) in a substantially reduced amount and based on an unfavorable order of priority from the perspective of the financiers. 
The decision (pursuant to which ANI is required to pay approximately $61 million of the approximately $829 million requested by Ruta del Sol) provides valuable lessons for developers and financiers of projects in Latin America. This issue is a complicated matter, especially if the corruption is discovered during the construction phase and the government terminates the project based on a determination that the project is not in the public’s interest as corruption was instrumental in determining the need for such project initially. Third parties that act in good faith and provide goods or services or extend loans to the concessionaire in part in reliance on the government honoring termination payments are at particular risk during this phase if the project is never completed or otherwise fails. 

Perspective

Developments in the Infrastructure Sector

Feb 12, 2020

In this interview, Tim Sheddick, partner at Shearman & Sterling, highlights the key themes he believes will dominate the infrastructure sector in 2020.

Perspective

A Brief on the New Saudi Competition Law and its Implementing Regulations

Feb 12, 2020

The new Competition Law (the “Competition Law”) of the Kingdom of Saudi Arabia (the “Kingdom”) was enacted by Royal Decree M/75 on 29/06/1440 Hijri (corresponding to 6 March 2019) and came into force on 24/01/1441 Hijri (corresponding to 23 September 2019). The Implementing Regulations of the Competition Law (the “Implementing Regulations”) were issued by the Board of Directors (the “GAC Board”) of the General Authority for Competition (“GAC”) and came into force on 25/01/1441 Hijri (corresponding to 24 September 2019). The Competition Law replaced the previous Competition Law enacted by Royal Decree M/25 dated 4/05/1425 Hijri (corresponding to 22 June 2004). This article provides a brief overview of some of the key provisions of the Competition Law and the Implementing Regulations.

Perspective

LIBOR Transition: Fannie Mae and Freddie Mac to Stop Accepting LIBOR, Begin Accepting SOFR

Feb 11, 2020

The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) announced on Wednesday, February 5th, that they will stop accepting LIBOR-indexed adjustable-rate mortgages (ARMs) by the end of 2020. Additionally, the two government sponsored agencies announced that they will soon accept mortgages tied to the Secured Overnight Financing Rate (SOFR) later in 2020. This announcement from Fannie Mae and Freddie Mac to move away from LIBOR and begin accepting SOFR ARMs is an important step in the market-wide transition to the Alternative Reference Rates Committee (ARRC) recommended SOFR.

Perspective

Airbus Agrees Record-Breaking €3.6 Billion Settlement to Avoid Prosecution

Feb 11, 2020

On 31 January 2020, Airbus SE (Airbus) reached final agreements with the French Parquet National Financier (PNF), the U.K.’s Serious Fraud Office (SFO) and the U.S. Department of Justice (DoJ) in order to resolve investigations into allegations of bribery and corruption. The agreement reached with the U.S. authorities also resolves investigations by the DoJ and the State Department into inaccurate and misleading filings made by Airbus with the State Department pursuant to the International Traffic in Arms Regulations (ITAR).

Perspective

UK Government Consults on RAB Model for Supporting New Nuclear Build

Feb 10, 2020

In the last edition of our Energy & Infrastructure Insight, we discussed the UKs new-build nuclear program and the various challenges it is facing. In particular, we noted the anticipated publication of both an Energy White Paper and a consultation assessing the Regulated Asset Base (RAB) Model as a potential alternative to the FiT CfD model for financing UK nuclear new-build. In this article, we consider the evolution of the RAB Model for nuclear new build and how the industry has responded.