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ZipTracker: Green Litigation and IPOs

We cover court cases and deals which law firms have been advising on this week.

Ludo Lugnani profile image
by Ludo Lugnani
ZipTracker: Green Litigation and IPOs

Hi ZipLawyer! I'm Ludo Lugnani and this is a ZipLaw newsletter called ZipTracker where we cover court cases and deals which law firms have been advising on. Use them to stand out in applications and interviews!

Today's newsletter is a 10 min read:

  • ⚖️ In Court: Court cases featuring Slaughter and May, Bryan Cave Leighton Paisner, Travers Smith, Penningtons Manches Cooper, Allen & Overy, Bird & Bird.
  • 🤝 Deals Time: Deals featuring Herbert Smith Freehills, Linklaters, Latham & Watkins, Hogan Lovells, Gowling and Eversheds Sutherland.

⚖️ In Court

Green Litigation

Summary: Environmental charity, ClientEarth, has taken Shell to court over the company's management of the risks posed by climate change. ClientEarth alleges that the board of directors of Shell has breached their legal duties by failing to implement an energy transition plan that aligns with the Paris Agreement. ClientEarth is seeking an order from the High Court to have the board adopt a strategy to manage climate risk in line with their duties. The claim has the backing of a group of Shell's institutional investors.

Key Points to note:

  • Duty of Directors under the Companies Act 2006: The first key point of this case is the duty of directors under the Companies Act 2006. Section 172 of the Act imposes a duty on directors to promote the success of the company. This case alleges that the board of directors of Shell has breached this duty by failing to implement an energy transition plan that aligns with the targets set out in the Paris Agreement. The Agreement aims to limit the rise in global heating to below 1.5°C compared with pre-industrial levels. This case is significant because it brings to the forefront the legal obligations of directors to manage the risks of climate change in the UK and potentially sets a precedent for future cases.
  • The Concept of Derivative Actions: A derivative action is a legal procedure where a shareholder can bring a claim on behalf of the company. This case marks the first time that a shareholder has brought a derivative action against a board of directors for its alleged failure to properly prepare for the transition to a green economy. It demonstrates how derivative actions can be used to hold directors accountable for their legal duties, and also highlights the importance of considering the role of shareholders in environmental responsibility.
  • Compliance with Dutch Court Judgment: In 2021, a Dutch court ruled that Shell must cut its global carbon emissions by 45% compared with 2019 levels over the decade. ClientEarth claims that the board's alleged failure to fully comply with this judgment is also a breach of its legal duties and wants the High Court to order Shell's board to adopt a strategy to manage climate risk in line with their duties and in compliance with the Dutch judgment. This highlights the potential for cross-jurisdictional enforcement of environmental obligations in addition to enforcement of climate-related rulings.

Who's advising on this?

  • ClientEarth is represented by Pallas Partners.
  • Shell PLC is represented by Slaughter and May.

⚖️ In Court

Truck Cartels

Summary: Dutch truck manufacturer, DAF, is being ordered to pay over £15.2 million to BT and Royal Mail as compensation for overcharging them through a long-running scheme to share pricing information with competitors and raise prices. The British competition tribunal ruled that DAF had caused both companies to pay more than they would have otherwise, and set the amount of liability at 5% of the "value of commerce over the whole of the relevant period." The companies had originally sought a combined £35 million in damages, alleging that they, along with other European companies, paid more than they should have for the heavy goods vehicles due to the truck makers participating in a cartel for medium-to-heavy trucks in Europe that lasted for 14 years.

Key Points:

  1. Cartel liability: This case highlights the consequences of participating in a cartel i.e. an agreement between competing firms to coordinate their market behaviour and restrict competition. In this case, the tribunal found that DAF's participation in the cartel for medium-to-heavy trucks in Europe caused BT and Royal Mail to pay more than they otherwise would have.
  2. Damages: Then we should also consider how damages are dealt with in major competition law cases like this one. In this case, the tribunal set the amount of liability at 5% of the "value of commerce over the whole of the relevant period," resulting in £13 million in damages for Royal Mail and £2.2 million for BT Group.
  3. Enforcing competition law: This case also highlights a growing trend in competition law cases to protect competition in the market and prevent anti-competitive behaviour such as price fixing. BT and Royal Mail filed their claims with competition authorities in the United Kingdom after the European Commission had fined several truck makers €2.93 billion for participating in a cartel, and BT and Royal Mail filed their claims with competition authorities in the UK following these findings. This case shows that companies can be held liable for their participation in cartels and sets an important precedent for cases with similar elements.

Who advised on this?

  • The claimants in the actions by Royal Mail, BT and another litigant, Dawsongroup, are represented by Tim Ward KC and Ben Lask of Monckton Chambers, instructed by Bryan Cave Leighton Paisner.
  • DAF is represented by Daniel Beard KC, Daisy Mackersie and James Bourke of Monckton Chambers, instructed by Travers Smith.

⚖️ In Court

More Patent Trouble

Summary: Bayer is defending a recent attempt by Indian company Cipla to invalidate a patent for Bayer's blood thinner Xarelto. Bayer claims that Cipla is seeking to invalidate the patent in order to compete with a similar product, and has filed counterclaims to block any imports of potentially infringing Cipla products into the UK. Bayer argues that its patent is not invalid and that Cipla has applied to market a similar generic product in the UK. Two other pharmaceutical companies, Teva Pharmaceutical Industries and Sandoz, have recently filed claims in the High Court to revoke the same patent.

Key Points:

  1. Infringement Allegations: Bayer alleges that Cipla's generic product would infringe on Bayer's patent for a product called 'Xarelto', and has filed counterclaims to block any imports of potentially infringing Cipla products into the UK.
  2. Invalidity Allegations: Cipla has argued that the patent for Xarelto is invalid for various reasons, including that the information contained in the patent claims was already known to specialists in the field and that the patent does not contain enough information for a specialist to effectively replicate the invention. Bayer broadly denies these allegations.
  3. Competitor Challenges: Bayer's patent for Xarelto is facing challenges from multiple competitors, including Teva Pharmaceutical Industries Ltd. and Sandoz AG, who have also filed claims in the High Court to revoke the patent. This highlights the intense competition in the pharmaceutical industry and the importance of patent protection for companies to maintain their market position. It emphasises how companies must carefully defend their patents to ensure that they can continue to reap the benefits of their research and development efforts, while competitors look for ways to challenge those patents and gain access to the market.

Who advised on this?

  • Cipla is represented by Penningtons Manches Cooper.
  • Bayer is represented by Andrew Waugh KC and Alice Hart of Three New Square, instructed by Allen & Overy.

⚖️ In Court

A Lidl Copy?

Summary: Lidl is alleging that Tesco has infringed on two trademarks it holds for its logo, by using imagery of a blue square and a yellow circle in its loyalty card program (Clubcard). Lidl is arguing that this imagery is confusing to consumers and creates a false association with Lidl's own brand and reputation. Tesco is denying these allegations and is arguing that any confusion would be short-lived. The case was initially filed by Lidl in February 2021 but was delayed by Tesco's attempt to invalidate Lidl's trademark. It is now being heard in the High Court.

Key Points:

  1. Trademark Infringement: Lidl is alleging that Tesco has infringed on two of its trademarks for its logo through the use of imagery in its Clubcard program. Trademark infringement occurs when one company uses a trademark that is similar to or identical to another company's trademark and creates confusion among consumers.
  2. Consumer Confusion: The key issue in the case is whether the use of the blue square and yellow circle imagery by Tesco creates confusion among consumers and associates Tesco's prices with Lidl's low prices. Lidl's counsel argues that Tesco's own survey shows that 8% of customers surveyed thought the Clubcard branding was an ad for Lidl. Tesco's counsel argues that any confusion would be short-lived and would not affect a "reasonably observant and circumspect" customer.
  3. Bad Faith: Tesco has tried to argue that Lidl's trademark for a "wordless" variant of its logo, which consists of a yellow circle and a blue square, was registered in bad faith. The Court of Appeal ruled that Tesco could argue this in the High Court proceedings. The concept of "bad faith" in trademark law refers to the registering of a trademark with the intention of preventing another company from using a similar or identical trademark. If Lidl is found to have registered its trademark in bad faith, it could result in the invalidation of the trademark.

Who advised on this?

  • Lidl is represented by Benet Brandreth KC of 11 South Square, instructed by Tristan Sherliker of Bird & Bird.
  • Tesco is represented by Hugo Cuddigan KC of 11 South Square, instructed by Haseltine Lake Kempner.

🤝 Deals Time

Tobacco Pensions

Summary: British American Tobacco (BAT) has transferred the final £250 million of liabilities in its UK staff retirement fund to Pension Insurance Corp. (PIC), making the British American Tobacco UK Pension Fund the largest retirement scheme in the UK to be fully insured. The pension scheme carried out two previous transactions with PIC in May 2019 and July 2021, with a total of £3.8 billion in liabilities transferred.

Key Points:

  1. Full Insurance of Pension Fund Liabilities: BAT has now insured all £4.1 billion of liabilities in the pension fund, which covers 10,000 members. This represents a major milestone for the pension fund, as it increases the security of members' benefits and reduces risk.
  2. Phased Approach to Pension Risk Transfer: The phased approach taken by the pension fund, with three linked transactions, has moved the market forward in terms of what is possible in the pension risk transfer market. PIC's head of business development expects the approach to form a template for other large schemes.
  3. Buy-in Deals vs. Buyout Deals: The buy-in deal allows PIC to take over indirect responsibility for benefits for members of the pension plan in exchange for a one-off premium. This is different from a buyout, in which members become direct insurance policyholders and the company drops its responsibility for the pension scheme. This distinction is important for understanding the different types of pension risk transfer options available and their respective implications for the company and the members of the pension plan.

Who advised on this?

  • Linklaters advised the trustee.
  • Herbert Smith Freehills advised PIC.

🤝 Deals Time

Italian IPO

Summary: EuroGroup Laminations, an Italian manufacturer of parts for electric vehicle motors, has listed its shares on the Euronext Milan stock exchange with a market value of €922 million. EuroGroup makes motor cores for motors and generators that are used in electric vehicles.

Key points:

  1. Transition to low-carbon economy: The T2 Energy Transition fund was created to invest in companies that are at the forefront of driving the transition to a low-carbon economy, and EuroGroup is a perfect candidate as it is a supplier for nearly 80% of the electric vehicle platform makers.
  2. Increase in demand from institutional investors: The success of the IPO highlights the increasing demand from institutional investors for opportunities in companies like EuroGroup, which are driving the transition to a low-carbon economy. Tikehau Capital, a Japanese private equity fund, acquired a 30% stake in EuroGroup in 2020 through its T2 Energy Transition fund, which invests in European companies that help in the transition to a low-carbon economy. EuroGroup is the only supplier for nearly 80% of the electric vehicle platform makers, and its orders have tripled from €1.5 billion to €5 billion since Tikehau's investment. Tikehau will now hold an 8.5% stake in EuroGroup following the IPO.
  3. Expansion and consolidation as a global leader: The IPO will support EuroGroup's continued expansion and consolidate its position as a global leader in the electric vehicle market. The company is in talks for another €2.5 billion of orders, and its orders have tripled since Tikehau's investment.

Who advised on this?

  • Linklaters advised the global advisers and book-runners of the IPO including JP Morgan, BNP Paribas, Intesa Sanpaolo (IMI CIB Division) and UniCredit.
  • Rothschild & Co acted as financial adviser to EuroGroup and Latham & Watkins acted as its legal adviser.

🤝 Deals Time

Fund Raise

Summary: 3i Infrastructure PLC raised net proceeds of £100 million through a share sale. The funds will be used to re-establish part of its £900 million revolving credit facility, as well as to fund the £28 million acquisition of Future Biogas. The acquisition makes Future Biogas a sister company to British renewable energy group Infinis Energy, and together, the two companies will form the largest producer of green gas in the UK.

Key Points:

  1. Revolving Credit Facility: The £900 million revolving credit facility that 3i Infrastructure had already drawn £555 million from by the end of 2022 will be re-established with the funds raised from the share sale. A revolving credit facility is a type of loan that allows a borrower to access a set amount of credit and pay interest only on the amount used.
  2. Acquisition of Future Biogas: The £28 million acquisition of Future Biogas, an oil and gas company based in Guildford, will also be funded by the share sale. This acquisition makes Future Biogas a sister company to British renewable energy group Infinis Energy and forms the largest producer of green gas in the UK.
  3. Essential Services Investment: 3i Infrastructure invests in operating companies that provide essential services, including renewable energy, subsea fibre cable, and waste-to-energy businesses. The proceeds from the share sale will provide the company with additional flexibility to fund attractive discretionary growth opportunities in its portfolio.

Who advised on this?

  • Herbert Smith Freehills advised the brokers.
  • Hogan Lovells 3i Infrastructure in connection with the offering.

🤝 Deals Time

Another pension deal!

The Arcadia Group, a retail empire that went bankrupt in 2020, has secured pensions for its former employees through an £850 million deal with insurer Aviva. The deal covers benefits for approximately 8,800 members of the Arcadia Group Pension Scheme and the Arcadia Group Senior Executive Pension Scheme. The Pension Protection Fund has been covering workplace plans since the collapse of the retail business.

Key Points:

  1. The Importance of Pension Protection Funds: This case highlights the role of Pension Protection Funds (PPF) in ensuring the security of pensions for employees in case of employer insolvency. The PPF covers pension plans where the sponsoring employer has become insolvent and pays benefits at a lower rate. PFF's efforts to secure a £385 million bailout for the Arcadia pension schemes made a big difference to secure protection for the schemes, as part of the company's voluntary arrangement in 2019 and leading them to this latest deal.
  2. The Significance of Buy-In Deals: The buy-in deal in this case is significant because it offers a step towards securing the pensions of the former employees of the Arcadia Group. As mentioned earlier, a buy-in deal allows an insurer to take over indirect responsibility for benefits in exchange for a one-off premium, which is a step away from a buyout where members become direct insurance policyholders.

Who advised on this?

  • Gowling WLG advised the trustee of the Arcadia Group Pension Scheme and Arcadia Group Senior Executive Pension Scheme.
  • Eversheds Sutherland advised Aviva.
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by Ludo Lugnani

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