August 30, 2018 ILN

Country Updates

Austria

In its decision of June 27, 2018, the Constitutional Court upheld the Austrian Squeeze-Out Act, which permits what is commonly referred to as a corporate squeeze-out. The law allows the corporate majority shareholders holding at least 90 percent of the shares in a company to force out dissenting minority shareholders without supporting justification or grounds, solely on the basis of the Act. Unlike the EU law basis, a connection to a takeover is not required. The Court found persuasive that minority shareholders’ interests are sufficiently protected by their entitlement to cash compensation, subject to judicial review, and that the vested interest of the majority shareholder prevails over the purely economic interest of the minority shareholder. Further, the Court found that there is a clear public interest in maintaining efficient corporate structures that allow Austrian corporations to react efficiently in rapidly changing national and international environments. Thus, the provisions enabling the majority shareholder to squeeze out minority shareholders are not disproportionate or unconstitutional. However, the Act does not apply to shareholders who hold less than 90 percent of the shares. Those shareholders will continue to find it difficult to remove dissenting minority shareholders if the company’s statutes do not contain appropriate provisions. Read the Constitutional Court decision June 27, 2018 (VfGH G 30/2017-31) (in German).

Contributed by Katrin Hanschitz, Partner, KNOETZL, Vienna, Austria

Canada

The Section of International Law and the Section of Antitrust Law in May jointly submitted comments on the Abuse of Dominance Enforcement Guidelines for the Canadian Competition

Bureau. The Sections provided recommendations for ways to refine the Guidelines, including as related to joint dominance, noncompetitor in a relevant market, barriers to entry, predatory conduct, zero-monetary price services, and safe harbors. Read the comments.

Italy

The Section of International Law and the Section of Antitrust Law in June jointly submitted comments on the Draft Guidelines on Compliance Programs developed by the Italian Competition Authority (ICA). The comments commend the ICA’s leadership to incentivize the establishment and maintenance of a culture of competition and compliance, as well transparency. The Sections provided recommendations for ways to refine the Guidelines, including as related to reporting violations, risk analysis, risk mitigation, recidivism, and liability for a violation by a subsidiary. Read the comments.

Poland

The European Union took additional steps in its infringement procedure against Poland over concerns that their judicial reforms are inconsistent with ensuring effective judicial protection and independence of national courts. Poland’s reforms include the forced retirement of roughly forty percent of Supreme Court judges in July, the premature dismissal of the Supreme Court Chief Justice in contravention of the country’s Constitution specifying a six-year term, the dismissal and new appointments of court presidents, and the removal of current judges from the national judicial council, which has a constitutional mandate to protect the independence of the judiciary. Further, Poland granted Parliament the authority to appoint the new replacements on the national judicial council. Also, a new law allows cases within the past twenty years to be re-tried by a newly created appeals chamber and permits the imposition of longer prison sentences, including for individuals previously acquitted of crimes. Read the documents released by the European Commission: Press Release on the decision to send a Reasoned Opinion to Poland regarding the Polish law on the Supreme Court (Aug. 14, 2018), Letter of Formal Notice concerning the law on the Supreme Court (July 2, 2018).

ABA President Hilarie Bass authored an article on the "Urgent Need for U.S. to Oppose Threat Against Judiciary in Poland" published in InsideSources on July 3, 2018.

Russia

Russia’s Supreme Court has issued clarifying guidance on new amendments to the Federal Law on Insolvency (Federal Law No 127-FZ, 26 October 2002, amended by Federal Law No 266-FZ, 29 July 2017). The law covers both insolvency and bankruptcy. The new provisions allow subsidiary liability by controlling persons where the debtor has insufficient assets to resolve the debts. Among the clarifications, the Supreme Court addressed factors related to who is considered a controlling person, the scope of subsidiary liability, the determination of joint liability, and factors that the court may use to decrease liability. The guidance also deals with the statute of limitations that establishes two terms. The first term is a three-year term that begins either when declaring a company bankrupt or at the end of bankruptcy proceedings. The second is a ten-year period starting from the commission of a wrongful act. If a claimant files a lawsuit after the expiration of any of these terms, the claim may be dismissed. Notably, the Court cannot proactively act to dismiss the claim due to an expiration of the statute of limitations; it can only respond to a request to dismiss the claim based on a statute of limitations expiry when brought by the controlling person. Read the Russian Federation Supreme Court Plenary Ruling on Certain Issues regarding the Liability of Persons Controlling the Debtor in Case of Bankruptcy, No. 53, Dec. 21, 2017.

Contributed by Vadim Absaliamov, Bachelor of Laws degree expected 2019, Higher School of Economics, Moscow, Russia

United Kingdom

The Section of International Law and the Section of Antitrust Law in July jointly submitted comments on the Draft Guidance Document on the CMA’s Investigation Procedures in Competition Act 1998 Cases (Consultation Document) developed by the Competition and Markets Authority. The Sections provided recommendations for ways to enhance the effectiveness of the proposed Guidelines. Read the comments.