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Focus on Regulation

Connected Vehicles in Focus at 2018 CES

In addition to displaying a wide array of next-generation connected vehicle technologies, the 2018 Consumer Electronics Show (“CES”) hosted lively discussion of the new possibilities that will be created as vehicles become capable of seamlessly communicating with other vehicles, infrastructure, and pedestrians.  In one panel, Connected Vehicles in Connected Ecosystems, participants from across industries explored what the shift means for data collection, business models, and ecosystems.

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Canada steps up human rights oversight of companies operating abroad

Last week, Canada announced the creation of the Canadian Ombudsperson for Responsible Enterprise (CORE), an independent officer who will be tasked with investigating allegations of human rights abuses linked to Canadian corporations operating abroad.

The CORE’s predecessor, the Extractive Sector Corporate Social Responsibility Counsellor, required the permission of a company to investigate a complaint and came under fire from NGOs for being ineffective.  Indeed, none of the six complaints it received since the role’s inception in 2009 were investigated or otherwise resolved.  The CORE will have the power to initiate investigations, and, if warranted, recommend remedies and monitor their implementation.  The CORE may also assist the resolution of disputes or conflicts between impacted communities and Canadian companies.

Although the CORE will not have the power to impose sanctions or penalties, its investigations and any findings or recommendations, will be made public. In his announcement on 17 January, the Canadian Minister for International Trade, Francois-Philippe Champagne, added that the government would also consider withdrawing trade advocacy support (or funding or political risk insurance from Export and Development Canada) if the CORE recommends it.

This is an unprecedented step, and one that will be of particular interest to the world’s mining industry – 60% of which is based in Canada. The initiative has already been welcomed by several Canadian mining companies.  Although the creation of the CORE was supported by advocates for mining-affected people, and the CORE will initially focus on the mining, oil and gas and textile industries, its mandate is expected to expand (within a year) to all other sectors in which Canadian companies operate abroad.

The CORE will report to Parliament, but will be independent from the Canadian government – in fact, its recommendations may include policy and legislative recommendations to the government itself.  A multi-stakeholder advisory body, including representatives of civil society and industry, has also been set up to advise the CORE and the government on the effective development and implementation of laws, policies and practices to encourage socially responsible conduct by Canadian companies operating abroad.

We will have to wait to see how effective the CORE is.  It is certainly to be hoped that the broad-ranging support for the creation of the CORE translates into constructive cooperation between government, business and nongovernmental organisations to achieve greater respect for human rights.

European Commission released GMP Guidelines for Investigational Medicinal Products

On 8 December 2017, detailed EU guidelines on good manufacturing practices (“GMP”) for investigational medicinal products for human use were adopted by the European Commission under the EU Clinical Trials Regulation. The document supplements the EU Delegated Regulation adopted in 2017 setting out GMP obligations for investigational medicinal products. The Delegated Regulation establishes a  pharmaceutical quality system for manufacturing operations.

The guidelines govern manufacture and import into the EU of investigational medicinal products for human use. The purpose of the GMP guidelines is to provide appropriate yet flexible tools to address specific issues related to good manufacturing practice requirements for investigational products. The document includes instructions concerning:

  • Pharmaceutical quality systems, in particular, product specification file which should include all of the essential reference documents to demonstrate compliance of investigational drug’s manufacturing with GMP and clinical trial authorisation requirements;
  • Personnel;
  • Premises and equipment;
  • Generation, control and retention of documentation, including specifications and instructions, ordering, manufacturing formulae and processing instructions, packaging and batch records;
  • Production, including packaging materials, manufacturing operations and modification of comparator products as well as blinding operations, packaging and labelling;
  • Quality control;
  • Release of batches;
  • Outsourced operations;
  • Procedures for complaints;
  • Recalls, returns and destruction of investigational drugs.

The guide also recognises a need for co-operation between manufacturers and sponsors of clinical trials under a technical agreement.

The guidelines will become applicable once the Clinical Trials Regulation enters into force, which is expected in 2019.

U.S. Department of Education Publishes List of Schools Under Civil Rights Investigation

This week, the U.S. Department of Education (“ED”) published on its website a list of “pending cases currently under investigation” by its Office for Civil Rights (“OCR”). Previously, OCR had released a list of higher education institutions under investigation for possible violations of law related to the handling of sexual violence and sexual harassment under Title IX. The new list is broader: it encompasses complaints bought under other civil rights laws enforced by ED, and it includes complaints against K-12 schools as well as higher education institutions.

The list is sorted by category of civil rights law enforced by ED (i.e., age discrimination, race and national origin discrimination, sex discrimination, disability discrimination, Boy Scouts of America Equal Access Act). The list is sortable by state, institution name, institution type, type of discrimination, and the date the investigation was opened. The list is also searchable.

OCR describes the list as a “snapshot of data” that reflects its enforcement efforts as of a particular point in time (i.e., the last Friday of each month). ED has said it will update the list on the first Wednesday of each month. According to OCR, inclusion on the list “means that a complaint was filed with OCR and the agency determined that a complaint should be opened for investigation.” An institution will remain on the list for as long as OCR “is still investigating” or “is otherwise working to resolve” the complaint.


FDA’s Proposed New Pathway for Devices Referencing Drugs (DRDs)

The Food and Drug Administration (FDA) may be closing in on solving one of its perennial regulatory problems, namely, the absence of a workable regulatory pathway for devices that seek to use older, mainly generic drugs in innovative ways. Under the current system, where a device sponsor proposes to label its device for use with a drug in a manner that may go beyond the existing drug labeling, FDA typically requires the submission of a new drug application (NDA). An NDA or supplemental NDA is often called for to modify the drug labeling to reflect the proposed use by the device. This puts the device sponsor in a regulatory box: (1) collaborate with the drug sponsor to seek the labeling change, (2) become a drug sponsor itself and file the NDA directly; (3) seek more general device labeling; or (4) abandon the program (at least in the U.S.). Where the drug is already available in generic form, device sponsors have found it nearly impossible to find a willing drug sponsor interested in developing new labeling for the drug. Further, device companies often reject the idea of becoming a drug sponsor where their device can be used with existing and already approved drug. All too often, we have seen device innovators choose the third and fourth options, leaving patients in the U.S. without access to potentially novel uses of well-established drugs. We call this the “cross-labeling problem” and we may now be heading toward a solution. Continue Reading

FCC Proposes Excluding Twilight Towers from Historic Preservation Review

The FCC has proposed to exclude so-called “Twilight Towers” from routine historic preservation review under Section 106 of the National Historic Preservation Act (“NHPA”) and its regulations.  Section 106 requires a federal agency to engage in a consultation process, which involves identification of a project’s adverse effects on historic and cultural properties and engagement with various interested parties, such as state or tribal historic preservation officers, the project sponsor, and other interested stakeholders, to address such effects.  Twilight Towers are towers that were built between March 16, 2001 and March 7, 2005 (“Twilight Period”) that either did not complete Section 106 review or have no documentation of Section 106 review.  The Commission inadvertently created the Twilight Period by adopting an exemption from historical review for towers built before 2001 and requiring historical review for towers built after 2005, but failing to clarify the Commission’s historical review rules and procedures for the Twilight Period.

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Digital Antitrust – Outlook for the European Antitrust Year 2018

With the New Year only a few days old, we want to present a short outlook what to expect from European antitrust enforcement in 2018, with a particular focus on Germany. One theme that is likely to feature even more than last year is the impact of antitrust law on digital markets. Antitrust law has become a force for disruption in the world of tech. Multi-billion fines for online platforms which are considered not to be sufficiently neutral. Dawn raids for denied access to data. Transactions blocked or unwound if a unicorn is acquired by the wrong player.

What started with the French-German Joint Paper on “Competition Law and Data” in May 2016 has developed into a trend that has sometimes been branded as “hipster antitrust”, referring to the uneasiness some academics and enforcers show with growing concentrations in the digital economy, and in particular in the field of digital platforms. While the term has been coined in the U.S., it seems that antitrust authorities in Europe are particularly attached to this concept. Continue Reading

The Crackdown Continues:  FDA Takes Action Against Company And Its Autologous Stem Cell Product, Alleging Significant Safety Concerns

Yesterday, FDA published a January 3, 2018 Warning Letter issued to American CryoStem for marketing Atcell—an adipose tissue derived stem cell product—without FDA approval and for several drug current Good Manufacturing Practice (GMP) violations observed during FDA’s  July 2017 inspection of American CryoStem’s New Jersey facility.  In a related press release, the agency cited the company as the latest in a series of stepped up enforcement activities to implement its comprehensive policy framework released in November 2017.

The Warning Letter and press release provide insight as to how FDA will apply its November 2017 guidance on “minimal manipulation” and “homologous use” for human cell and tissue products (HCT/Ps), including the 36-month enforcement discretion period for autologous products that do not raise “potential significant safety concerns.”

As described below, FDA found that the product did not qualify to be regulated only as an HCT/P because it did not meet the criteria for homologous use or minimal manipulation, which means that the product generally cannot be marketed without an approved Biologics License Application (BLA).  However, more significant is FDA’s determination, reflected in the Warning Letter, that even though the product was intended for autologous use, it does not qualify for enforcement discretion under the guidance because it raises “potential significant safety concerns.”  The risk determination in the letter identifies: (1) the intended, non-homologous use for serious or life-threatening diseases; (2) the more than minimal manipulation during processing that alters the original relevant characteristics of the adipose tissue; and (3) the higher-risk routes of administration, which “could cause a range of adverse events, from infections to death.”  In addition, the GMP deviations relating to sterility assurance, described below, likely amplified the agency’s concern about the risks associated with the routes of administration.

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Forum non-conveniens and access to remedy in transnational business and human rights litigation: an update from Brexit Britain and a glance across the pond

What is forum non-conveniens?

According to the principle of “forum non-conveniens” (or inconvenient forum), a court has the power to dismiss a civil action where an appropriate and more convenient alternative forum exists.  Variations of the principle exist in most common law jurisdictions, including England, Canada, the USA and Australia.

In this post, we look at how forum non-conveniens applies in transnational business and human rights cases.  First we compare the approach of the English and Canadian courts in light of a series of recent decisions.  Then we consider its impact on access to remedy where the rule of law in the jurisdiction where the human rights impact takes place is weak and make some practical suggestions about steps which a business can take to reduce the risk of an adverse human rights impact and associated litigation in the UK or Canada.

How does it apply in transnational business and human rights cases?

Conventionally, forum non-conveniens made it difficult for the victims of business related human rights impacts to “export” their claims from the state where the impact occurred (the “territorial state”) to another state with jurisdiction, for example the state where the parent company of the alleged defendant is domiciled.

The situation in England

Under English law, the appropriate forum is the one in which the case may most suitably be tried in the interests of all the parties and the ends of justice.  This involves a two stage test.  First, the party resisting jurisdiction (usually the defendant) must establish that there is an alternative forum which has jurisdiction and which is clearly more appropriate than England.  If the defendant succeeds in doing so, the court will move to the second stage.  At this point, the burden switches and the party which wants to proceed in England (usually the claimant) must establish that, in the interests of justice, the action must proceed in England (Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460).  It is at this, second stage, that the English courts will consider evidence about access to remedy in the territorial state.  The unavailability of legal aid or alternative methods of litigation funding (such as conditional fee arrangements), a lack of capacity at the local bar, political interference in judicial proceedings and judicial corruption may militate in favour of an argument that the interests of justice are best served by proceeding in England.  However, the threshold which claimants must surmount is high and a significant amount of discretion is given to judges.  This high threshold is justified on the basis of comity (loosely defined rules of mutual respect) and the equality of states.  English judges are understandably reluctant to be seen to judge the quality of justice in other sovereign states.

For as long as the UK remains bound by European rules on jurisdiction (the Recast Brussels Regulation and Lugano Convention) and subject to the jurisdiction of the European Court of Justice, forum non-conveniens arguments are not available to a defendant domiciled in the UK or another European state (see our previous post on the recent Vedanta judgment).  This significantly restricts the scope of the doctrine.  Further, in the first instance judgments in Vedanta and Unilever, the courts found that, where there is a real issue to be tried as between claimants and an English parent in the English courts, this will “virtually conclude” the issue of appropriate forum in favour of England thus extending the restriction to foreign domiciled subsidiaries.

However, this restriction is not cast in stone.  Firstly, the Court of Appeal in Vedanta did not endorse the first instance judge’s reasoning.  Instead it concluded that the judge was “entitled to this view” before unilaterally stating that: “There must come a time when access to justice in this type of case will not be achieved by exporting cases, but by the availability of local lawyers, experts, and sufficient funding to enable the cases to be tried locally.”  This leaves it open to judges in similar cases to conclude that, notwithstanding the existence of a parallel claim against a defendant domiciled in the UK (or another European state), England is not the appropriate forum in which to hear a claim against a foreign defendant.  Secondly, the post-Brexit application of the existing rules on jurisdiction is shrouded in uncertainty.  One possible outcome is that the European rules will cease to apply and the English courts will revert to common law rules on jurisdiction, according to which the restriction on forum non-conveniens would not apply.

Developments in Canada

Meanwhile, in Canada, a series of recent decisions have been decided in favour of claimants seeking to bring claims against Canadian companies for human rights impacts associated with their overseas operations.  In these cases, the courts did not follow the two stage approach of the English courts.

In Garcia v Tahoe Resources Inc. [2017] BCCA 39, the Court of Appeal for British Colombia held that Canadian jurisprudence “reflects a more unified approach” to the application of forum non-conveniens.  Instead, all factors and concerns must be weighed together, in one stage, with the overall burden on the defendant to establish that the alternate forum is in a better position to dispose fairly and efficiently of the litigation.  This means that, unlike England, evidence about access to remedy in the territorial state ranks equally amongst other factors (such as access to witnesses, documents, costs etc.).  When presented with evidence of corruption and injustice in the territorial state, the Canadian court will ask whether the evidence shows a real risk that a suit there will not provide justice.  This approach makes it easier for victims of human rights impacts in states where the rule of law is weak to export the claim to Canada.  Given that over half of the world’s mining companies are headquartered in Canada, this is a development of considerable practical significance.

A similar approach was adopted by the same court in Araya v Nevsun Resources Ltd [2017] BCCA 401.  This case involved allegations of complicity by a Canadian mining company in forced labour, slavery and torture committed by the Eritrean government.  Nevsun applied for a stay of proceedings in Canada in favour of the territorial state (Eritrea) on the grounds of forum non-conveniens.  However the application was dismissed on the basis that there was a real risk of corruption and unfairness in the Eritrean legal system and the decision was upheld on appeal.

Conclusion – what does this mean in practice for multinational businesses?

  1. In England, the scope to argue forum non-conveniens remains, for the time being, restricted by European rules. This means that companies domiciled in the UK (and elsewhere in Europe) cannot argue forum non-conveniens in the English courts.  However, in light of the appeal judgment in Vedanta, non-European subsidiaries brought into the jurisdiction as part of a claim against their UK parent may be able to argue forum non-conveniens.
  2. Where it does apply, forum non-conveniens according to the English formulation remains a powerful tool for parties seeking to resist jurisdiction. Claimants must, for example, produce cogent evidence that they will not be able to access a remedy in the territorial state in order to satisfy an English court that it should accept jurisdiction.  However, this is not impossible.  In two recent cases (Unilever and Vedanta), the court was willing to accept that rule of law problems in the territorial state created a real risk that the claimants could not obtain substantial justice.
  3. The “unified approach” of the Canadian courts appears less deferential to comity and will in practice make it more difficult to argue that Canada should not accept jurisdiction over the extra-territorial human rights impacts of Canadian companies. However, all of the English cases mentioned in this post (Unilever, Vedanta, Tahoe and Nevsun) are subject to further appeal.  Watch this space in 2018 to see whether this trend continues or whether there is a convergence of approach.
  4. Irrespective of their country of domicile, to reduce the likelihood of litigation for an extra-territorial human rights impact, businesses should be vigilant to prevent the impact occurring in the first place. They should take steps to understand, manage and mitigate human rights risk throughout their value chain.
  5. Long term investors may wish to consider investing in the rule of law in a host state as a means to preventing the export of cases to jurisdictions such as England and Canada. Ultimately, the interests of justice and international comity are best served where victims can access a remedy in the territorial state, without exporting the case to Europe or North-America.  Where the rule of law is weak, this may be academic.  However, where litigants have access to funding for litigation, a capable bar and a capable, properly trained and impartial judiciary there will be no need to export the case and no justification for doing so. Hogan Lovells offers low or pro-bono advice to businesses which want to strengthen the rule of law through our Rule of Law 2030  Get in touch with julianne.hughes-jennett@hoganlovells.com or peter.hood@hoganlovells.com to find out more.