Competition and Corporate Law Developments
We are entering an era of significant change in the related spheres of competition and corporate law.
Over the coming period, we expect to see movement in key areas such as competition law enforcement, vertical agreements and investment screening. Meanwhile, the EU's ambition to make Europe the first climate neutral continent by 2050 continues to drive legislative and regulatory policy. Sustainability themes will remain firmly to the fore in terms of planned corporate reporting and governance obligations.
Domestically, there are indications that the COVID-19 pandemic is receding as a dominant concern. The government recently announced that emergency measures designed to relieve some of the governance burdens on companies during the pandemic have once again been extended, but are set to lapse at year end. Recognising the fundamental changes to business practices brought about by the pandemic, work is now underway to put virtual shareholder and creditor meetings on a permanent statutory footing.
Key Themes in Corporate and Competition Law
With long-awaited enactment expected over this legislative session, the Competition (Amendment) Bill 2022 transposes into Irish law the ECN+ Directive, a measure aimed at empowering Member State authorities to be more effective competition law enforcers.
- criminal fines of up to €50 million or 20% of turnover for ‘cartel’ offences;
- civil fines of up to €10 million or 10% of turnover and a range of other civil sanctions available to a new independent panel of adjudicators (adjudication officers) within the Irish regulatory agency;
- interim order powers in competition enforcement and merger control cases;
- a fully-fledged ‘whistle-blower’ or leniency regime with fine reductions for firms cooperating with the regulators;
- merger control powers for the regulator to compel notification and potentially unwind ‘below threshold’ mergers not subject to mandatory notification;
- additional CCPC ("Competition and Consumer Protection Commission") surveillance powers for criminal investigations.
The Screening of Third Country Transactions Bill (the "Screening Bill"), as it is been renamed, remains Priority Legislation in the Summer Legislative Programme 2022. As yet unpublished, we understand that it is now in the final stages of drafting.
The Screening Bill will establish a new Irish regime for assessing investments from non-EU countries in specified sectors where those investments could pose a risk to security or public order in Member States. From October 2020, Regulation 2019/452 on Foreign Direct Investment Screening introduced an information-sharing framework between Member States and the Commission concerning foreign (non-EU) direct investment deemed capable of affecting security or public order.
" The objective of the EU's Foreign Direct Investment Regulation is to make sure that the EU is better equipped to identify, assess and mitigate potential risks for security or public order, while remaining among the world’s most open investment areas."
European Commission press release, 5 April 2022
The precise scope of an Irish investment screening regime remains to be seen but all indications are that the Minister of Enterprise, Trade and Employment's powers will be widely drawn. A dedicated investment screening unit has been established in the Department of Enterprise Trade and Employment.
We understand that the Screening Bill could (as is the case with UK investment screening rules) contain a limited 'call in' power in relation to completed transactions. This would allow the Minister to call for review completed transactions, considered to pose a national security concern, and to retrospectively impose conditions or remedies.
The Screening Bill is now expected to be published this summer, with commencement expected closer to the end of the year.
"Businesses that embrace environmental, social and governance ("ESG") considerations and understand the value and risks inherent in their business may not only be able to avoid ESG risks but could also be in a position to use ESG disclosures to demonstrate their sustainability credentials, thereby attracting investors and consumers and availing of more favourable debt terms."
Robert O'Shea, Partner, Matheson, writing in the Irish Times, 5 May 2022
The proposal for a Corporate Sustainability Reporting Directive ("CSRD") now enters a decisive phase in the EU legislative process as trilogue negotiations between the EU Commission, Council and Parliament are underway with a view to formal adoption over the coming months.
Significant issues remain to be agreed and we can expect intense policy deliberations during the upcoming French EU presidency.
In summary, the proposed measures would:
- apply to all large EU companies and all companies listed on EU regulated markets. The scope of current disclosure legislation under the 2014 Directive 2014/95/EU is confined to large public-interest companies with more than 500 employees. This covers approximately 11,700 large companies and groups across the EU, listed companies, banks, insurance companies, other companies designated by national authorities as public-interest entities; (The new measures will cover some 50,000 entities in total);
- require companies to report in line with EU sustainability standards; and
- require the audit (assurance) and digital tagging of reported information.
The most significant issues at play concern timing (with proposals to defer or phase in reporting obligations), interoperability with other international standards, in addition to the exposure drafts and working papers recently issued by the European Financial Reporting Advisory Group (tasked with devising sustainability reporting standards).
Meanwhile, the recent proposal for a Corporate Sustainability Due Diligence Directive ("CSDDD") would bind EU companies to more stringent environmental, social and governance obligations with a related expansion in time of directors' duties under Irish law. A key objective of the CSDDD is to improve corporate governance sustainability practices, to better integrate risk management and mitigation processes of environmental, climate change and human rights risks and impacts, into corporate strategies.