Europe Update (De Brauw's International Newsletter) - July 2011

Foreign Direct Investment

Contents

• Appreciation of the Netherlands' investment climate improves

Corporate / Mergers & Acquisitions

• European Commission consults public on European corporate governance framework
• Report on the future of European Company Law

Competition/Anti-trust

• European Commission clears proposed joint venture between DSM and Sinochem
• No EU anti-trust criminal enforcement

Tax

• Policy document on Dutch tax treaty policy published

Europe

• Public consultation on the future investment relationship between the EU and China

Intellectual Property

• European Commission reveals vision on single market for Intellectual Property Rights
• New proposals for unitary patent protection after ECJ's rejection of European and Community Patent Court

Foreign Direct Investment

Appreciation of the Netherlands' investment climate improves

The recently published Netherlands Foreign Investment Agency (NFIA) report "Netherlands' Investment Climate Survey 2010" shows that, despite the recent economic turmoil, appreciation of the Netherlands' investment climate in general has improved. The survey was conducted among foreign investors in the Netherlands from all over the world.

According to the report, 55% of the respondents considered the Netherlands' investment climate to be 'good' or 'excellent', while 39% found the investment climate to be 'fair'. The majority of the respondents indicated that their perception of the investment climate in the Netherlands had not changed compared to the previous year (2009).

The favourable tax climate and the highly-educated and qualified workforce are considered to be the most attractive features of the investment climate in the Netherlands, while the presence of the mainports (e.g. Schiphol Airport, Port of Rotterdam) was named as the most appreciated location factor. The respondents also referred to the Netherlands' strategic location within Europe and its logistical infrastructure as one of the attractive features of the investment climate in the Netherlands.

Click here to go to the website of the NFIA

Corporate / Mergers & Acquisitions

European Commission consults public on European corporate governance framework

The European Commission has published a Green Paper launching a public consultation on the effectiveness of the existing European corporate governance framework. The consultation aims to conduct a debate on ways to improve the existing framework. The Green Paper – The EU Corporate Governance Framework – focuses on listed companies and on the following specific issues:

• boards of directors – the managing and supervisory boards' effective functioning, diversity of expertise and background, and transparency of the remuneration policy
• shareholders – improving shareholders' engagement

The consultation is open until 22 July 2011. The Commission has agreed to issue a feedback statement in autumn 2011, summarising the results of the consultation.

EC consultation EU corporate governance framework

Report on the future of European Company Law

On 16 and 17 May 2011, the future of European Company law was discussed at a conference organised by the European Commission in Brussels. A Reflection Group, set up by the Commission in 2010 and comprised of company law experts from various member states, presented its report on the future of EU Company Law at the conference. Professor Harm-Jan de Kluiver, partner at De Brauw in Amsterdam and noted specialist in corporate law, corporate litigation and corporate governance, is a member of the Reflection Group.

After thorough analysis of EU Company Law, the Reflection Group has made several recommendations for further harmonisation of European Company Law. These recommendations include, amongst others, measures on improvement of:

• cross-border mobility of companies within the EU
• contribution of corporate governance and investors to the long-term viability of companies
• interests of groups of companies.

Conference on European Company Law: The way forward
Report of the Reflection Group

Competition / Anti-trust

European Commission clears proposed joint venture between DSM and Sinochem

On 19 May 2011, the European Commission cleared the proposed joint venture between DSM and Sinochem under the EU merger control rules. Sinochem is one of the largest Chinese State-Owned Enterprises (SOEs) and the joint venture will be mainly active in the field of certain antibiotics products. The proposed transaction was notified to the Commission on 8 April 2011.

When dealing with SOEs (regardless of nationality), the Commission will have to assess whether the SOE concerned should be viewed as an undertaking in its own right or as part of a larger "single economic entity" including other SOEs. Since by its very nature, an SOE is controlled by the State, the usual "control" test is not appropriate in the case of SOEs. The essential test is whether the SOE has independent commercial decision-making power and if not, what other undertakings should also be included in the scope. Recently, the Commission also applied the test in the context of Chinese SOEs, partly as a result of their increasing outbound investment activities and increasing turnover generated outside China.

In DSM/Sinochem, the Commission did not adopt a final position as to the exact scope of the "single economy entity" involving Sinochem but based its analysis on two alternative scenarios. The Commission concluded that even if all Chinese SOEs act as one entity, in the present case the combined market share would remain moderate, and there would still be sufficient competition in the relevant market from a range of large independent competitors. Therefore, the proposed transaction would not lead to competition concerns.

Further reading: Our legal alert on European Commission clears proposed joint venture between DSM and Sinochem (in English and Chinese)

No EU anti-trust criminal enforcement 

The European Commission is not in favour of personal sanctions for anti-trust violations. This follows from a speech by Cecilio Madero Villaerjo, Anti-Trust Deputy Director-General of the European Commission's Directorate General for Competition. According to Villaerjo, criminal enforcement of European anti-trust law could come at the expense of anti-trust investigation conducted by the European Commission, as persons facing personal sanctions will more easily be inclined to frustrate the Commission's research and destroy evidence.

The complete speech of Cecile Madero Villaerjo

Tax

Policy document on Dutch tax treaty policy published

The importance of tax treaties for the Dutch economic and fiscal climate is reconfirmed in the policy document on tax treaty policy that was published by the Dutch Ministry of Finance in February 2011. The policy document sets out the tax treaty policy that will be followed by the Netherlands in negotiating new tax treaties and amending existing treaties. In addition, it focuses on some recent developments.

One of these developments regards the residency for tax treaty purposes of pension funds and other tax exempt entities. For example: the document makes clear that from now on (semi-)open-ended collective investment schemes investing in certain classes of financial instruments will be supported by the Netherlands in claiming protection under Dutch tax treaties, except if the Netherlands specifically agrees with the other treaty partner that certain treaty benefits will not be available.

The complete policy document(98 p.) and the summary(6 p.) (in Dutch only)

Europe

Public consultation on the future investment relationship between the EU and China

Trade between China and the EU continues to increase, but investment flows between the two regions remain limited in comparison. European investors identify China repeatedly as a location that holds great untapped potential. However, China's growth, and the prospects that it offers for foreign investors, have been accompanied by growing concerns on the part of European investors about the lack of a level playing field in China because of persistent barriers and an uncertain business environment.

In the context of an Executive-to-Executive meeting on 29 April 2010, European Commission President Manuel Barroso and Chinese Premier Wen Jiabao instructed their respective teams to study the options for enhancing the bilateral investment relationship between the EU and China. To this end, a "Joint EU-China Investment Task Force" was launched in the summer of 2010 to explore the scope for deeper cooperation on investment, including considerations of a possible stand-alone investment agreement. Against this background the European Commission launched a broad public consultation to gather views from relevant stakeholders regarding the future EU-China investment relationship. The consultation was open to all stakeholders within the EU and in third countries until 5 July 2011.

More information on the public consultation

Intellectual Property 

European Commission reveals vision on single market for Intellectual Property Rights

The European Commission published its strategic vision on intellectual property rights on 24 May 2011. This communication presents the Commission's overall strategic vision for delivering the true single market for intellectual property. It also sets out the Commission's proposed key initiatives aimed at accomplishing this:

• reform of the patent system in Europe and accompanying measures
• modernisation of the trade mark system
• creation of a comprehensive framework for copyright in the digital single market
• complementary protection of intangible assets
• enhancing the fight against counterfeiting and piracy
• international dimension of intellectual property rights.

The European Commission's strategic vision and the press release

New proposals on unitary patent protection after ECJ's rejection of European and Community Patent Court

The Court of Justice of the European Union (ECJ) issued its Opinion 1/09 on 8 May 2011, stating that the creation of a European and Community Patent Court is not compatible with provisions of EU law. The draft agreement on the creation of a European and Community Patent Court, drafted by the Council of the European Union, would, amongst other things, confer exclusive jurisdiction to an international court outside the institutional and judicial framework of the EU in relation to a large number of private appeals related to European Community law.

The ECJ's Opinion 1/09and the press release

Following the rejection of the draft agreement by the ECJ, the Commission has presented two new proposals concerning unitary patent protection:

• Proposal for a Regulation of the European Parliament and of the Council implementing enhanced cooperation in the area of the creation of unitary patent protection
  The proposal of the European Commission
• Proposal for a Council Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangement.
  The proposal of the European Commission
• Accompanying document to the Proposal for a Regulation of the European Parliament and the Council implementing enhanced cooperation in the area of the creation of unitary patent protection and Proposal for a Council Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements.
  The complete document (50 p.)andthe summary (7 p.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.