< PreviousQUARTERLY Q/2 – 2019 Sustainability Trends to Follow CREATING SUSTAINABLE VALUE At the same time, those same companies are becoming more aware of their role in society. Companies therefore continue to expand their activism on, and investment in, the issues that matter to their stakeholders. Here are some key sustainability trends to look for in Finland. Number one concern: Climate change According to a recent study of Finnish Business & Society (FIBS), 58% of the Finnish companies consider climate change to be their biggest sustainability challenge. This is not a surprise. It has been estimated by the UN Intergovernmental Panel on Climate Change (IPCC) that we may have as little as 12 years to limit climate change. The world does not change unless also companies change, says, for example, Peter Vanacker, CEO of Neste Corporation. Along these lines, companies are likely to invest more resources into prevention, mitigation and climate resilience. Most importantly, climate change is considered a common concern irrespective of the business sector. This means action is taken by all kind of companies and in various ways. To take an example, we have seen only the beginning of cost-cutting to flights in the corporate sector. #MeToo and diversity initiatives The #MeToo movement began to spread in October 2017 to address the widespread prevalence of sexual harassment, especially in the workplace. If 2017 was about speaking aloud, 2018 was in many companies focused on concrete change, for example in terms of internal policies and addressing workplace inequality. In 2019, there is still a lot to do, and many of the cases that were brought to court following #MeToo allegations are still pending. However, change in the attitudes can already be seen. The past years have been a landmark for women, but diversity initiatives need to address much more. As the workforce continues to grow more diverse, companies will need to focus on creating company cultures that speak to a wide range of perspectives. Recent studies confirm also the competitive advantages to organisational performance of diversity in e.g. gender, age, perspective, background, professional experience and ethnicity. To make diversity efforts effective requires clear strategies. This will likely be on the agenda of many companies in the near future. We will also see an increase in the number of companies ramping up their diversity hiring efforts. Call for management involvement Sustainability is increasingly positioned at the top of board agendas. From a legal perspective, sustainability can be seen as part of the corporate benefit that should always be taken into consideration in the decision making of a board. This approach has been taken forward by some recent studies in Finland and it is likely to affect the way a board addresses its responsibilities. Boards are in a unique position to connect sustainability also with corporate purpose and strategy. Once the value of sustainability is established, the business case will easily follow. With growing investor attention to sustainability, it is considered central to corporate competitiveness as well. Of course, in order for a board to take action, also management must be involved. This seems to be still a challenge, as sustainability is not always integrated into business operations, and it is often addressed only as a separate matter. This might be an area where we will see most development in the near future. Reporting and sustainability statements as the new normal Reporting has long been one of the first sustainability actions a company decides to take. The value of sustainability reporting is that it ensures companies consider their economic, environmental and social impacts, and enables them to be transparent about the risks they face. Sustainability is here to stay. Faced with a future of climate change, companies all over the world have confirmed that environmental sustainability is a key consideration. P10-120 Years of Thinking Ahead- As of 2018, EU law has required large companies to disclose information on the way they manage social and environmental challenges. Many companies also disclose their Codes of Conduct and environmental, social and governance (ESG) policies. The existence and application of such policies are of growing interest also to investors in connection with acquisitions and other corporate transactions. Although some smaller companies still apply a “wait and see” approach to sustainability reporting, it can be estimated that more and more companies prepare at least some kind of sustainability statement and make it available as a part of their corporate information. In a world where stakeholder expectations continue to evolve, being entirely silent is risky. If a company fails to tell about its sustainability practices, someone else will tell the company’s story. Human rights – from voluntary to legal compliance The UN Human Rights Council adopted the UN Guiding Principles on Business and Human Rights in 2011. Since then, there has been a consensus that human rights are not the sole responsibility of nation states. Global corporations and their suppliers must also respect human rights. Although many Finnish companies already take note of their human rights impact, there are companies that have hardly implemented the UN Guiding Principles. This is one reason why legal human rights initiatives have raised popularity around Europe. Currently at least France and the Netherlands have addressed companies’ human rights challenges through legislation. According to the Government Programme published by the new Finnish Government in June 2019, a human rights law might well be a reality also in Finland within the next four years. The legal approach to companies’ human rights responsibilities is being addressed initially also by the EU. For example, the Shadow EU Action Plan on the Implementation of the UN Guiding Principles within the EU was published in March 2019. Regardless of the outcome of these legislative proposals, human rights are likely to be one of the most discussed sustainability topics in the future – not least, because human rights are related to the effects of climate change, too. This will require more and more involvement also by legal experts. WHAT ELSE TO LOOK FOR? In 2019, investors continue to be interested in the sustainable finance market. Sustainable finance, as it is often defined, means any form of financial service which integrates ESG criteria into business or investment decisions. Regulatory initiatives for sustainable finance will be in a particular focus during the next months, driven by the European Commission’s efforts to create and regulate a green finance taxonomy. This will be high on the agenda also during Finland’s EU presidency in autumn 2019. While there are also many other trendy – and important – topics for sustainability actions, it is important to note that sustainability is not only “what” companies do, but also “how” they act. Recent years have witnessed the emergence of corporate activism. More than ever, dividing lines between activism and business are blurring, as companies become a force for fighting for social and environmental issues. This is particularly true in the US where Donald Trump’s policies provoke the corporate world, but corporate activism is on the rise also in Europe. The change is driven by both market forces, including stakeholder pressure, and value- based leaders. Participation and partnerships are often the first signs of this change. In Finland, we may, for example, expect to see more companies collaborating on initiatives to drive improvements in reasonable business practices or participating with pride in Helsinki Pride. Hanna-Mari Manninen, Partner, Head of Corporate Advisory, Compliance & CSR @hm_manninenQUARTERLY Q/2 – 2019 Unlocking the Possibilities of Smart Buildings INNOVATION POWERHOUSE Technology enabling such analysis is used, for example, in shopping centres to have a better understanding of the activities of building users or at offices to create more effective and harmonious workplaces. Before such technology is introduced to a company’s buildings, the GDPR and local laws should give pause for thought. It’s all about staying on top of the competition Nowadays it is possible to control various systems in a building, such as lighting, water usage and heating, through smart technologies. It’s the new normal if an office car park elevator knows which employee is walking towards it and is ready to take the person to the right floor without the person separately choosing the floor in the elevator. Knowing the number of users inside a public building, the average time spent inside the building and the most popular walking routes in the building are becoming important parts of the so-called people analysis for many businesses. It is clear that smart systems are becoming increasingly popular and the use of smart building technologies will only evolve. In many business sectors, being on top of the competition even requires riding the wave of smart technology. Naturally, nobody wants their business to fall behind. Stop and think We at D&I have had the pleasure of seeing the revolution of smart buildings at the forefront and being part of developing new ways to serve our Buildings around the world are becoming smart. It is possible to track the activity of the users of these buildings, connect customers with special offers and even analyse their moods. P12 client’s customers and helping our clients to make their offices nicer and more efficient places to work. Starting from questions related to finding ways to help employees to locate free working spots at an office by using location technology and moving to assess the lawfulness of mood recognition in public buildings has provided us with a wide range of visibility to different smart building possibilities. From our experience, introducing smart technologies to a company’s buildings should not be rushed – not even for the sake of staying on top of the competition. Instead, legal analysis from, e.g., data protection point of view should always be an integral step before the introduction of new smart technologies. The sooner this step is taken, the better. Usually the first questions to be asked and answered when assessing the new possibilities seem very simple. Is the data personal data? In what ways can relevant data be extracted? What kind of data is to be collected? Does the company have the right to process such data and how could the necessary legal basis be obtained? What measures should be taken to protect the rights of a person visiting the building? Who are the data subjects – employees or customers? Sometimes it turns out that the simplest questions are the hardest ones. For example, information capable of amounting to personal data is wide and varied and, hence, identifying whether certain information falls within its meaning may be complex. Essentially, anything that may relate to an individual can fall within the definition. Also, when -120 Years of Thinking Ahead- an individual can be identified from combining information from several databases of a company, the data will amount to personal data. Anonymisation may be the key But what if the data is anonymous or anonymised – could this be the key to introduce smart technologies to buildings in a more simple way? When carried out effectively, anonymisation can be used to protect the privacy rights of individuals. When anonymising personal data, the data is modified with the result that there is and remains no connection of data with an individual and, in consequence, the GDPR does not apply to such data. Therefore, in many cases, anonymisation may be the key. However, if the objective of data anonymisation is to be safely out of the GDPR’s scope, it must be carried out with due care and utmost diligence. For example, location data, which is often used in smart building technologies, is rarely anonymised just by removing the identities of data subjects or by partially encrypting some attributes. This is because the mobility patterns of individuals may be unique and, therefore, identifiable. Also, it should be kept in mind that the activity of anonymising data itself is considered being processing of personal data. In practice this means that even if the data collected from smart buildings is being quickly anonymised, personal data may still be processed and the GDPR could apply. Another important aspect to be noted is that the measures for data collecting might be under specific regulation. For example, collection of location data often requires the possibility of capturing device signals which is subject to conditions laid down in the electronic communications legislation. Jukka Lång, Partner, Head of Innovation Powerhouse @JukkaLang Henna Aukia, Associate @hennaaukia SO WHERE TO START? The essential element in developing smart buildings business is to understand thoroughly the technology and its effects and identify the challenges of the desired outcomes – regardless of whether they are related to the nature of data, the challenges of anonymisation or the group of data subjects. Just to name a few.QUARTERLY Q/2 – 2019 Let’s Write the Joint Victory Speech DISPUTE POWERHOUSE They try to demonstrate their strength by depicting threatening scenarios, making accusations, behaving in an aggressive and arrogant manner, and not showing the slightest willingness to find common ground. It is typical to withhold information because it is well known that anything you say can be used against you. In such negotiations, the parties may at most approach each other technically by taking small steps in terms of euros and, in the end, the church, so to speak, is built in the middle of the village, without any real grounds for doing so. This kind of settlement definitely does not strengthen the business relationship. Both parties are left to lick their wounds and the seeds of bitterness grow in the background of subsequent collaboration. However, what if disagreement was seen as an opportunity? When a disagreement arises, there is usually a lot of value on the table that the parties could share. If all the value that is lost in legal proceedings—lawyers’ fees, costs for the litigants and the client’s working hours, and for impaired business operations, destroyed personal When settlement discussions begin, the parties enter the meeting room and take their seats on opposite sides of the table. They dig in for a dispute and start throwing daggers at one another. relationships, sleepless nights, sleepy days and lost clients—was shared between the parties on the basis on mutual understanding, all these resources could instead be allocated to productive business operations. In that case, a settlement discussion could be seen in the same way as making any deal, where there is value on the table for the parties to share. The parties in the meeting room could then focus on strengthening collaboration and writing their joint victory speech on how to share all the money that otherwise would have been spent on the dispute and on how to divide the potential orders and create something new out of this together and emerge from the disagreement even stronger than before. Every disagreement is an opportunity to strengthen the business relationship. One of the best ways to make that possible is to focus in settlement discussions on sharing information with the other party. Typically, a disagreement arises from a lack of understanding on why the other party also thinks they are right. They usually have their reasons for this. Explaining these reasons to the other party often unravels the Every disagreement is an opportunity to strengthen the business relationship. “ - Jussi Lehtinen P14-120 Years of Thinking Ahead- Jussi Lehtinen, Partner, Head of Dispute Powerhouse Jan Ollila, Senior Partner tangled situation and, as a result, the parties find themselves closer to each other than ever before. However, this requires trust between the parties. This is why it is necessary to first get both parties committed to the structure of the negotiations. In our experience, structured settlement proceedings have great potential for finding a harmonious solution and strengthening the business relationship. This requires a change in attitudes. It often requires an external party on both sides so that a certain degree of objectivity can be maintained and the agreed structure is adhered to. A dispute consumes enormous amounts of an organisation’s financial and human resources, which are diverted away from productive business operations. This is why a settlement has value. And it is an opportunity. Jussi Lehtinen, Partner, Head of Dispute Powerhouse @jussi_lehtinenWHY TEAMWORK MATTERS?JOIN US We’re thinking ahead for the next 120 years. That’s where we need you. dittmar.fi/careersQUARTERLY Q/2 – 2019 Liability for Antitrust Damages Following Corporate Acquisitions SUBSTANCE MATTERS The reason is that in EU competition law liability can be attached to the assets of the infringer (i.e., the ‘undertaking’) and not to the legal entity. The judgment deals with a situation where the acquirer had taken over and continued the commercial activities of the acquired company, and the acquired company had ceased to exist, leaving the acquirer as the only viable defendant. Before this judgment, the ECJ has only applied this principle of economic continuity to fines imposed by competition authorities. Attributing liability for antitrust damages to an undertaking instead of a legal entity may expand in unexpected ways the legal exposure of companies in a company group that are considered to be part of the same undertaking and increase possibilities for forum shopping by claimants. Background In 2009, the Finnish Supreme Administrative Court found that seven companies had formed a cartel in the Finnish asphalt paving market in breach of national competition law and Art. 101 of the Treaty on the Functioning of the European Union (“TFEU”), and imposed record fines of EUR 83 million. Following the judgment, several municipalities and the Finnish state filed claims for damages. Among the companies found to have participated in the cartel were Sata-Asfaltti Oy, Interasfaltti Oy and Asfalttineliö Oy. These cartel companies were acquired by Skanska Industrial Solutions Oy, NCC Industry Oy and Asfaltmix Oy. The new owners were fined by the Supreme Administrative Court for the conduct of the cartel companies they had acquired, whether the new owners had participated in the cartel or not. The new owners transferred the assets of the cartel companies to themselves, continued the business activities of the cartel companies, and liquidated the On 14 March 2019, the European Court of Justice (“ECJ”) handed down a judgment that acquirer companies may be liable to pay damages for the anticompetitive conduct of acquired companies. empty cartel companies. A number of municipalities claimed damages from the new owners, arguing that they had to bear liability for the harm caused by the cartel companies they had acquired. The new owners denied liability by arguing that they were separate legal entities from the cartel companies they had acquired, and that the damages claims should have been directed at the liquidated cartel companies and/or their previous owners. Following contradictory judgments from the District Court and Court of Appeal, the Finnish Supreme Court on 19 December 2017 filed a request for a preliminary ruling from the ECJ asking whether the parties liable for antitrust damages are determined on the basis of national law or EU law, and whether in a private law action for damages a company which has continued the economic activity of a cartel participant may be liable to pay compensation for harm caused by a breach of Article 101 TFEU. The ECJ’s judgment The ECJ held that the attribution of liability for infringements of EU competition law is determined in accordance with EU law, not national law. The cartel prohibition in Art. 101 TFEU uses the concept of an ‘undertaking’ to identify the party liable for the infringement. The ‘undertaking’ is an EU competition law concept and its interpretation therefore falls under the jurisdiction of the ECJ. The ECJ further held that liability for antitrust damages is attributed to the undertakings that participated in the cartel. This follows directly from Art. 101 TFEU which identifies undertakings as the subjects liable for a cartel. The ECJ ruled that it does not matter whether the liability is for public enforcement fines or private enforcement damages; the concept of undertaking must be interpreted similarly in both types of enforcement. Both types of enforcement are integral parts of a system of P18enforcement that is intended to ensure the full effectiveness of EU competition rules and to deter and punish anticompetitive behaviour. Referring to its previous case law on fines, the ECJ recalled that an undertaking is an economic unit. In other words, liability for infringements can be attached to the commercial assets that were used to commit the infringement, regardless of legal form. In case of a restructuring where an infringing legal entity ceases to exist but another legal entity takes over and continues the commercial activities, the successor entity can be held liable if, from an economic point of view, the two entities are the same. The ECJ now confirmed for the first time that, in addition to fines, this principle of economic succession also applies to antitrust damages. The ECJ’s reasoning is that otherwise it would be possible to evade liability for competition infringements simply through restructurings, sales or similar legal or organizational changes. Implications of the judgment The judgment raises a number of implications. First, following a corporate acquisition, the acquirer may unknowingly acquire the antitrust damages liabilities of the target of the acquisition, even if the acquirer itself never participated in the infringement. In particular, this means that an acquirer may not be able to shield itself from the target’s antitrust liabilities by only purchasing the assets of the target. The ECJ’s ruling applies to past, present and future acquisitions, making the potential scope for new damages liabilities wide indeed. Second, attributing liability to an undertaking instead of a legal entity and applying the ECJ’s existing case law on undertakings can expand the legal exposure of companies in unexpected ways. The economic succession that featured in this particular case is unlikely to be a common scenario in damages claims, especially if claimants can use joint and several liability to target other cartel companies. Probably of more importance is that, based on the ECJ’s established case law, an undertaking can cover a number of legal entities in a company group. The most common application of this aspect of the concept of undertaking is parental liability where a parent company is held jointly and severally liable for fines with a subsidiary, even if the parent did not participate in the subsidiary’s anticompetitive conduct. Based on the ECJ’s reasoning, this now seems to apply to antitrust damages as well as fines. Furthermore, because an undertaking can cover different legal persons in different EU Member States, the judgment is likely to make it easier for claimants to establish anchor defendants in jurisdictions that claimants consider favourable. Over the coming years, innovative claimants and law firms are sure to test the boundaries of this judgment to its limits as they seek new applications for this ruling. Third, the ECJ has now essentially copied into private enforcement a concept that was developed in and traditionally thought to apply only to public enforcement. This raises the obvious question of whether there are other EU law concepts and principles that have been developed and so far been used only in public enforcement but that could be applied also to private enforcement. Finally, the judgment underlines that antitrust damages are clearly a new type of damages actions where even well-established national law concepts may be called into question as this new field of law slowly takes form. Dittmar & Indrenius represents a number of claimants in the asphalt cartel damages litigation. Toni Kalliokoski, CounselNext >