Monday, December 15, 2014

BRUSSELS - The entire Belgian airspace is closed on Monday (15 December), as well as high-speed trains from Brussels to London, Paris and Amsterdam and local buses, trams and metro lines, as part of a general strike over public sector cuts.  Schools, government offices and private firms are also likely to be closed on Monday. Garbage will not be picked up and newspapers will not be delivered.
Serious traffic jams are expected around Brussels and Antwerp, with transport trade unions calling on truck drivers to join in and "paralyse the country".   Trade unions already staged a huge march which ended in violent clashes with police a month ago, when the government first announced the plans to save €11 billion over the next five years. The measures include scrapping an automatic indexation of salaries next year and raising the retirement age from 65 to 67 from 2030.
Belgium last month was flagged up together with Italy and France and given time until March to bring its budget in order or face extra scrutiny from the EU commission.
Unlike France, Belgium is sticking to the three-percent budget deficit rule, but its public debt is set to reach 107.8 percent of GDP in 2017, compared to 104.5 percent last year. Under EU rules, countries should keep their public debt below 60 percent of GDP.  In its assessment of the 2015 budget plan, the EU commission said Belgium is expected to boost its competitiveness if it scraps wage indexation, but that it "should reform the full wage-setting system in a structural way".   Belgium's general strike echoes protests in Italy on Friday, where transport was paralysed and schools and hospitals shut down for the day.  Like Belgian trade unions, their Italian counterparts were also protesting announced labour market reforms, which would make it easier for workers to be fired.
Prime Minister Matteo Renzi has come up with a "Jobs Act" that would make it easier to hire and fire, in order to get some of the 43 percent jobless young people into a job.
Italy is also under the EU's scrutiny for failing to reduce its debt burden, with the commission waiting for the labour market reforms to be implemented.
Authorities in France’s second-largest city have come under fire for issuing its homeless with ID cards that detail their health issues.  Human rights groups and government ministers have slammed the “yellow triangle cards”, comparing them to the Nazi-era Star of David that was sewn onto Jewish people’s clothes during the Holocaust.  “This is scandalous, it’s stigmatizing,” Christophe Louis, president of the homeless charity Collectif Morts de la Rue, told The Local.   “Wearing something that shows the whole world what illnesses you have is not only discriminating but it also breaches all medical confidentiality,” he said, adding that the symbolism in the design of the card is outrageous.  “Being identified by either a star or a triangle is horrific,” he said.  French human rights group La Ligue des droits de l’Homme said it was troubled by the resemblance “of this card and the yellow star that the Jews had to wear during World War II.” President François Hollande’s government in Paris has also reacted sharply to the initiative.  “I’m shocked. Forcing homeless people to carry a yellow triangle indicating the illnesses they might have is outrageous. You don’t point the finger at the poorest,” Social Affairs Minister Marisol told French daily Le Parisien in an interview published Thursday.  “You don’t write their illnesses on their clothes. Medical confidentiality, in particular, is a fundamental right. I want this local initiative to be stopped,” she said.  The card, an initiative Marseille's Town Hall and social services, identifies the person with his or her photo, name and date of birth.   It also specifies whether the person has any illnesses or allergies. The front of the card is adorned with a yellow triangle.  In their defence authorities say the purpose is to help health workers quickly come to the aid of a homeless person who has fallen ill or is in need of aid.  Over 100 of the identifications have been distributed already.  On Wednesday, about 100 activists and homeless people protested against the initiative outside the city’s town hall.   For its part Marseille Town Hall has been outraged by the criticism it has endured by issuing “the card that saves lives”.   In a statement given to The Local, one of Marseille’s deputy mayors Xavier Mery said: “I’m appalled by the absurd controversy surrounding this help card distributed by the SAMU (social medical emergency services)   "[The reaction] not only questions the necessity of a scheme for homeless people but also the commitment of the city, the SAMU and volunteers to come to the aid of those who need it the most”.

Sunday, December 14, 2014

Internationally renowned Russian opera singer Anna Netrebko has donated 1m roubles (£12,000; $19,000) to a theatre in rebel-held eastern Ukraine and posed with a rebel flag. Netrebko said her gift to the Donetsk opera and ballet theatre was "a step to support art where it is needed now".   Russian Channel 5 TV showed her giving the cheque to Oleg Tsarev, a leader of the armed separatists in Donetsk.   Russian government support for the rebels has been denounced by the West.  The famous soprano made her donation in St Petersburg, where she is a star of the Mariinsky Theatre. She said performers in Donetsk were struggling on with their art despite the freezing cold.  Other top names in Russian culture have also voiced support for President Vladimir Putin's stance on Ukraine, notably the government's annexation of Crimea and support for the pro-Russian separatists in Donetsk and Luhansk.  The Russian celebrities backing the Kremlin over Ukraine include variety singer Iosif Kobzon, film director Nikita Mikhalkov, conductor Valery Gergiev and viola virtuoso Yuri Bashmet. ...  The European Union has amended sanctions against Russia’s biggest lenders like Sberbank and VTB on long-term financing, and eased some sanctions on the oil industry. The EU says Russia’s biggest lenders - Sberbank, VTB, Gazprombank, Vnesheconombank and Rosselkhozbank - will now be allowed access to long –term financing should the solvency of their European subsidiaries be at risk.   The announcement released Friday refers to “loans that have a specific and documented objective to provide emergency funding to meet solvency and liquidity criteria for legal persons established in the Union, whose proprietary rights are owned for more than 50 percent by any entity referred to in Annex III [Russian banks – Ed.].” The EU has also specified the terms and conditions on which it can lift the ban on providing equipment for oil exploration.   Its supply is still banned to Russia itself, or the exclusive economic zone and offshore territories. However, EU said it may “grant an authorization where the sale, supply, transfer or export of the items is necessary for the urgent prevention or mitigation of an event likely to have a serious and significant impact on human health and safety or the environment.”  This basically clarifies the position of the latest set of EU sanctions. The notion of “Arctic oil exploration” means the embargo is applied to oil exploration on the offshore Arctic. “Deep water exploration” means any operation extracting oil carried out deeper than 150 meters below the surface.  The sanctions target the finance, energy and defense sectors. In July 2014 the EU issued a “sectoral list” which includes Sberbank, VTB, Gazprombank, Russian Agricultural Bank (Rosselkhozbank) and Vnesheconombank. The lenders were cut off from long-term (over 30 days) international financing.  The EU has banned three Russian energy companies Rosneft, Gazpromneft and Transneft from raising long-term debt on European capital markets. It has also halted services Russia needs to explore oil and gas in the Arctic, deep sea and shale extraction projects.

Saturday, December 13, 2014

European Union negotiators reached agreement on the bloc’s 2015 budget under a deal that also provides increased funds to pay outstanding 2014 bills.   The accord on the EU’s 141 billion-euro ($174 billion) spending plan for next year followed U.K. resistance to paying a 2.1 billion-euro surcharge to the 2014 budget. Under a compromise reached last month, Britain and eight other countries would have until Sept. 1, 2015, to transfer their extra payments without being charged interest.  “This agreement allows us to safeguard the budgets of member states and facilitates the search for resources for growth,” Italian Finance Minister Pier Carlo Padoan, whose government currently holds the rotating EU presidency, told reporters today in Brussels. The deal allows the bloc “to avoid any future problems,” he said.   The 2015 budget accord needs formal approval by EU governments and the European Parliament later this month.  The negotiated package “provides for an increase of payments by 3.5 billion euros to tackle the unprecedented scale of unpaid bills” in this year’s spending plan, the EU said in a statement. The increase in payments is covered by additional revenue from fines, a surplus from the 2013 budget and the revised estimates of surcharges on EU nations, which were the result of a changes to economic-output data dating as far back as 1995.  After Britain objected to the size of its surcharge, a new system is being implemented that will give EU nations that face surcharges from the bloc the right to gain nine extra months to pay the amounts in the event of “exceptional circumstances.”

Friday, December 12, 2014

Off-shore lending in US dollars has soared to $9 trillion and poses a growing risk to both emerging markets and the world's financial stability, the Bank for International Settlements has warned.
The Swiss-based global watchdog said dollar loans to Chinese banks and companies are rising at annual rate of 47pc. They have jumped to $1.1 trillion from almost nothing five years ago. Cross-border dollar credit has ballooned to $456bn in Brazil, and $381bn in Mexico. External debt has reached $715bn in Russia, mostly in dollars. A chunk of China's borrowing is disguised as intra-firm financing. This replicates practices by German industrial companies in the 1920s, which hid their real level of exposure as the 1929 debt trauma was building up. "To the extent that these flows are driven by financial operations rather than real activities, they could give rise to financial stability concerns," said the BIS in its quarterly report.   "More than a quantum of fragility underlies the current elevated mood in financial markets," it warned. Officials are disturbed by the "risk-on, risk-off, flip-flopping" by investors. Some of the violent moves lately go beyond stress seen in earlier crises, a sign that markets may be dangerously stretched and that many fund managers do not really believe their own Goldilocks narrative.

Thursday, December 11, 2014


After two bailouts totaling  €240bn (£192bn) since 2010, Greece wanted to switch back to market financing from the start of next year.   In October the government proposed breaking free of all financial oversight, but investors took fright at the suggestion, causing a sudden spike in the country’s bond yields.   The alternative is a back-up credit line from the eurozone that Athens could tap in an emergency. However, the troika, concerned about a potential €2bn budget gap in Greece’s finances, has asked for more information on pension reform before granting the measure. Greece has also brought forward presidential elections to December 17, which could see the conservative-led government replaced by the Syriza party. Alexis Tsipras, Syriza’s leader, has fought his political campaign on an anti-troika ticket.

Wednesday, December 10, 2014

Oil and Gas: Consequential loss – Another parenthetical profits dilemma - In yet another “consequential loss clause” case that will be of interest to the oil and gas industry, the English High Court confirmed that it would construe such a clause in a manner that assumed that a direct loss of profits was not intended to fall within excluded “consequential loss” unless the clause clearly indicated this was the case.  As a result, the words “Neither party will be liable to the other for any indirect or consequential loss, (both of which include, without limitation, pure economic loss, loss of profit, loss of business, depletion of goodwill and like loss)” were insufficient to exclude a claim for loss of profit directly following from the breach.   In May 2011, Polypearl Limited (“Claimant”) and E.ON Energy Solutions Limited (“Defendant”) entered into two written agreements, a Master Agreement ("Master Agreement") containing general terms and conditions for the supply of certain cavity wall insulation products (the “Products”); and an Insulation Scheme Event Transaction Document ("ISETD").   The Defendant argued that it was not obliged to purchase a set quantity of products under the ISETD and denied that it was in breach of its terms. The Defendant also submitted that, if it was required to purchase that set quantity, the Claimant’s losses were excluded under the Master Agreement, as a loss of profits. The wording of the relevant exclusion clauses in the Master Agreement stated:
(10.1) "Neither party will be liable to the other for any indirect or consequential loss, (both of which include, without limitation, pure economic loss, loss of profit, loss of business, depletion of goodwill and like loss) howsoever caused (including as a result of negligence) under this Agreement, except in so far as it relates to personal injury or death caused by negligence".
Decision
The Court considered that the wording of Clause 10.1 of the Master Agreement in parenthesis was ambiguous since it was not clear whether the wording in parenthesis meant that all loss of profits claims were excluded (whether or not such losses were indirect losses), or whether the wording in parenthesis referred to indirect loss of profits claims only.
However, the Court decided that the words in parenthesis were subordinate to the phrase "indirect or consequential loss" and were not an attempt to place a direct loss in the indirect category since it was very unlikely that businessmen would intend to exclude liability for direct loss and the clause must therefore be construed in accordance with common business sense. Clear words would be required if the parties intended to abandon remedies for all losses (and therefore for any breach of the agreement), and the clause did not clearly indicate this.
The Claimant’s losses of profits were held to be direct losses since such losses were the most obvious losses arising from the Defendant’s breach.
The Courts construe exclusion clauses strictly and absent express wording to exclude a particular type of loss, the Courts will be slow to give an expansive interpretation to an exclusion clause in a contract and will not deem a claim for direct loss of profits to be a claim for indirect loss of profits, unless express wording is included. The case provides further illustration that if the parties intend to exclude claims for a specific type of loss, then this should be very clearly stated within such a clause.
Aficionados of “consequential loss clause” debates will recognise that a similar parenthetical dilemma was resolved in the same manner by the High Court in Markerstudy Insurance Co v Endsleigh Insurance Services [2010] EWHC 281 (Comm).
Interestingly in Glencore Energy UK Ltd v Cirrus Oil Services Ltd [2014] EWHC 87 (Comm) the High Court also recently decided that losses relating to a failure to take delivery of crude under Section 50 of the Sale of Goods Act, were not a “loss of profits” that could be captured by a widely drafted exclusion clause that expressly excluded direct loss of profit.