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Weekly News Roundup: Amazon Workers Strike on Prime Day, Big Companies Fail to Report Deforestation Role

Here are the stories you might have missed last week in the world of corporate law. Read

Weekly News Roundup: Deutsche Bank Cuts Jobs, British Airways Faces Fines

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In Brief

Today's Top Story

Australian Regulator Loses Landmark Pension Fund Court Battle

The Australian Prudential Regulation Authority (APRA) lost a significant case Friday when Federal Court judge Jayne Jagot said it had not sufficiently proved its case that wealth manager IOOF Holdings had breached pension laws. Reuters (19 September) reports that Jagot said she "found APRA's approach unpersuasive," adding that she believed the regulator had failed to prove the "underlying facts." APRA was attempting to persuade the judge that IOOF used money belonging to pension fund customers to compensate them for losses caused by the company, arguing that five IOOF executives should be disqualified for failing to act in the interest of their clients. While Jagot dismissed the claims of wrongdoing, she has not yet made a formal decision about the future of the five executives. IOOF said it welcomed the ruling, and its stock increased by 8 percent in the aftermath of the decision. APRA said it was disappointed in the outcome. This was the second setback in two months for Australian regulators looking to address financial misconduct. The Federal Court last month said that the Australian Securities and Investments Commission (ASIC) had failed to persuasively make its case against Westpac Banking Corp., which the regulator accused of approving mortgages without proper credit checks.

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Legal Actions

PG&E Bondholders Ally With Wildfire Victims to Propose New Bankruptcy Exit Plan

Bondholders are taking another run at PG&E, the Wall Street Journal (20 September, Brickley, Blunt) reports, forming an alliance with victims of the wildfires that swept through California in 2017 and 2018 to chart a path out of bankruptcy for the state's largest utility. Court papers filed by a group of PG&E bondholders, among them Elliott Management Corp. and Pacific Investment Management Co., and by the official committee representing fire victims, petitioned for approval to put a Chapter 11 plan on the table that would compete with the San Francisco-based company's own restructuring framework. PG&E has proposed a bankruptcy plan that would cap the amount owed to wildfire victims at approximately US$8.4 billion, as well as pay US$11 billion to insurers and the people who invested in insurance claims stemming from the fires.

From "PG&E Bondholders Ally With Wildfire Victims to Propose New Bankruptcy Exit Plan"
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Sterilized Workers Seek to Collect Damages Against Dow Chemical in France

Earlier this week, a French court instructed Dow France to provisionally freeze shares worth US$110 million ahead of a trial set for January, reports the New York Times (19 September, Alderman), in an attempt to prevent the chemical company from transferring assets out of the country before the trial. The legal dispute originated a decade ago with a landmark ruling in Nicaragua against Dow Chemical, Shell Oil, and OxyChem, which was then called Occidental Chemical. The three companies developed powerful pesticides that were sprayed around banana plantations in Central America, sterilizing workers on a mass scale. Nicaragua ordered the three companies to pay victims and their families US$805 million, but the companies refused, claiming that they had not received fair trials and that the courts lacked jurisdiction. Workers have now sued the companies in France, where each company has considerable assets, in an attempt to secure the money awarded by the Nicaraguan court. A French judge in the Paris Trial Court is now set to decide whether court opinions in other countries can be enforced in France and, more generally, in the European Union (EU). If the judge sides with the plaintiffs, they will look to collect part of the US$805 million from Dow in France and then move to freeze and sell assets owned by Dow, Shell, and OxyChem in other EU countries, supported by an EU ruling that a court order issued in a member state is to be enforced in the EU's other member states.

From "Sterilized Workers Seek to Collect Damages Against Dow Chemical in France"
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Labor and Employment

More Than 2000 Companies Give Staff Time Off to Attend Climate Strike

More than 2,100 Australian companies have given their staff approved time off to attend climate strikes led by Future Super on Friday, reports the Sydney Morning Herald (19 September, Noyes). The strike, which will take place in cities and towns across Australia, is part of a series of climate rallies organized by the Swedish teen climate activist Greta Thunberg. Some of the 2,100 companies have given employees leave to take a half day, while others have granted full days off for employees wishing to participate in the rally. Some companies have even pledged to participate in the strike themselves, with CEOs and other executives planning to attend. Simon Sheikh, CEO of Future Super, said some of the companies that had signed up for the strike have not previously taken a public stand on climate change. Sheikh said the wide-ranging participation indicates that climate change is an issue deemed serious by Australians of all stripes. "Usually it's employees mobilizing collectively against and lobbying an employer, but now it’s all of us standing together," he said.

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Cambodia, Facing EU Pressure, Raises Textile Workers' Wages

Cambodia on Friday bowed to pressure from the European Union (EU) and raised 2020's legal minimum wage for workers in its textiles and footwear industry to US$190 per month. Al Jazeera (20 September) reports that the 4.4 percent increase was brought about by pressure from the EU over Cambodia's human rights and political record, but that it still fell short of unions' demand for a US$195 monthly minimum wage. The garment industry is the country's largest employer and raises US$7 billion for Cambodia's economy every year, but faces danger as EU officials may suspend the country's special trade preferences. Cambodia currently benefits from the EU's Everything But Arms (EBA) trade program, which allows the world's least-developed nations to export most goods to the EU free of duties, but that could change depending on the outcome of the EU processes. The EU's reconsideration of Cambodia's trade status came after Cambodian opposition leader Kem Sokha was arrested and his party dissolved, leading to Prime Minister Hun Sen's party claiming all seats in the country's parliament.

From "Cambodia, Facing EU Pressure, Raises Textile Workers' Wages"
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Airbnb Announces Plan to Go Public in 2020

Airbnb unveiled plans to go public next year, reports Business Insider (19 September, Tweedie, Holmes). Airbnb has yet to clarify whether it has confidentially filed its S-1 IPO paperwork, which would include basic financial information for potential investors to consider. Airbnb was last privately valued at US$31 billion in the fall of 2017. The company also hasn't clarified how it plans to list its stock.

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Tax Issues

India Gives Companies US$20.5 Billion Tax Break to Try to Revive Growth

India's government cut corporate taxes Friday in a surprise move designed to revive private investment and lift growth from a six-year low, reports Reuters (20 September, Kumar). Finance Minister Nirmala Sitharaman announced that the effective corporate tax rate would be reduced from 30 percent to around 25 percent, which would give a US$20.5 billion break to companies. Sitharaman added that, starting from the current fiscal year, any domestic company has the "option to pay income tax at the rate of 22 percent" as long they do not seek any special tax incentives. She further lowered effective corporate tax further for domestic firms incorporated on or after 1 October to 17 percent, with the condition that they begin production by March 2023. Prime Minister Narendra Modi said the "historic" new rates would be friendly for investment "and result in a win-win for 1.30 billion Indians." The new rates make India slightly more competitive than Bangladesh, but slightly less competitive than Vietnam. After the announcement, Indian shares surged more than 6 percent for their best day in over a decade. At the same time, bond yields spiked to a near three-month high.

From "India Gives Companies US$20.5 Billion Tax Break to Try to Revive Growth"
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Brazil's Petrobras Confronts New Foe: Fuel Thieves

Brazil's state-run oil firm Petrobras now faces another obstacle to steady success—fuel thieves. Reuters (20 September, Slattery, Nogueira) reports that the firm has spent the last five years dealing with a corruption investigation, a tough recession, and unsteady crude oil prices, and must now deal with the fact that thieves are stealing millions of dollars worth of its fuel to sell on the black market. Last year, Petrobras recorded a record 261 instances of theft from its pipelines in the states of Rio de Janeiro and Sao Paulo, a drastic increase from the one recorded case as recently as 2014. Law enforcement officials said most of the thefts are committed by sophisticated criminal groups with their own equipment and trucks. In June, Petrobras CEO Roberto Castello Branco acknowledged that thefts cost the company's distribution subsidiary, Transpetro, about US$37 million per year. While that may seem astronomical, it is relatively small when compared to Mexico's losses, which routinely run northward of US$3 billion. That is why Brazilian officials are determined to stamp out the thefts early and prevent the situation from worsening. Transpetro has created a program designed to gather intelligence on criminal groups, track thefts, and share the findings with law enforcement. It is also reportedly close to signing formal agreements with Mexico’s Pemex and Colombia’s Ecopetrol to facilitate the sharing of anti-theft strategies.

From "Brazil's Petrobras Confronts New Foe: Fuel Thieves"
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Drugmaker Insys Wins Bankruptcy Court Approval to Sell Off Opioid

The drugmaker Insys Therapeutics Inc. received court permission Thursday to sell its fentanyl spray Subsys to a buyer who agreed to market the drug only for use by cancer patients, according to Reuters (19 September, Raymond). US bankruptcy judge Kevin Gross in Wilmington, DE, issued his approval of the sale. While six state attorneys general initially opposed the sale, they withdrew their objections after being assured that the buyer, Wyoming-based BTcP Pharma LLC, would only market it to treat cancer patients. This is the first time that a bankruptcy court approved the sale of an opioid as the country grapples with an opioid epidemic that has been blamed for almost 400,000 overdose deaths from 1999 to 2017. Insys will receive royalties that could reach US$20 million, which will be used to satisfy creditors. Several former Insys executives and employees face individual criminal charges related to allegations that Insys paid doctors kickbacks to prescribe the drug to patients, even when they did not have cancer.

From "Drugmaker Insys Wins Bankruptcy Court Approval to Sell Off Opioid"
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Ryanair Boss O'Leary's EUR€99 Million Pay Sparks Investor Revolt

Almost half of Ryanair shareholders voted against a pay deal that could give CEO Michael O'Leary EUR€99 million, reports the BBC (19 September). According to Ryanair, just 50.5 percent of investors voted in favor the pay deal. The deal would give O'Leary the significant sum from stock options if he doubles Ryanair's profits or share price. After the vote, a Ryanair spokesman said the airline would consult with its investors and incorporate some of their suggestions and advice into policies for the upcoming year. In the last financial year, Ryanair's profit dropped over the last year and O'Leary said Thursday that he foresees cutting between 500 and 700 jobs. The shareholder displeasure comes while the airline is also trying to navigate pilot strikes.

From "Ryanair Boss O'Leary's EUR€99 Million Pay Sparks Investor Revolt"
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Corporate Finance

Rule to Identify Audit Partners Doesn't Improve Audit Quality

A rule requiring public companies to identify an individual audit partner in financial reporting has had little impact on audit quality, new research cited by the Wall Street Journal (18 September, Maurer) suggests. Two years ago, the Public Company Accounting Oversight Board (PCAOB) started requiring US public companies to disclose the name of individuals overseeing independent audits as a means of promoting accountability and transparency. Firms have since named the lead audit engagement partner on a form that is required to be filed within 35 days of the annual report. When it was first proposed, the rule was certainly divisive. Public accounting firms warned it would increase individual partners' legal exposure and audit costs without improving the quality of an audit. The rule doesn't appear to have had the effect the PCAOB sought, according to the study, which will be published by the American Accounting Association in the September/October issue of its academic journal, Accounting Review.

From "Rule to Identify Audit Partners Doesn’t Improve Audit Quality"
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Corporate Social Responsibility

Amazon Orders Electric Delivery as Part of Going Carbon Neutral by 2040

Amazon CEO Jeff Bezos announced that the company will be stepping up its efforts to reduce its climate impact in the months and years to come, reports TechCrunch (19 September, Etherington). As part of this commitment, the e-commerce giant will be ordering 100,000 electric delivery trucks from Rivian. Amazon says it is now endeavoring to meet its goal of becoming carbon neutral by 2040, a decade earlier than is outlined by the United Nations Paris Agreement.

From "Amazon Orders Electric Delivery as Part of Going Carbon Neutral by 2040"
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