In Belgium, a new seven-party coalition government led by prime minister Alexander De Croo was installed in October 2020, following over a year of political deadlock after the May 2019 parliamentary elections. As was the case with the previous caretaker administration, and as with all governments worldwide, its number one priority has been to tackle the economic and health challenges arising from Covid-19.
Despite the pandemic being the main talking point of 2020, it had a limited impact on corporate and M&A deal activity in Belgium, which is a market that is mainly characterised by small and mid-sized transactions, rather than mega-deals seen elsewhere in Europe. Although the initial onset of Covid-19 led to a temporary slowdown in deal-making, the Belgian market has largely been resilient since then. It should be noted, however, that certain sectors have fared better than others. The technology and life sciences industries have been two notable bright spots of M&A activity, while other areas (such as non-food retail and tourism) have been impacted significantly. With government support being provided to businesses to ward off mass insolvencies, distressed transactions have been few and far between in 2020, although these are expected to increase in 2021.
Outside of the corporate sphere, law firms reported a notable increase in state aid-related advisory work, with national governments across the EU providing support to companies in sectors particularly impacted by the pandemic, including aviation, among others. Tax-related state aid litigation also continued to be a driver of activity.
On the antitrust front, the digital arena (and particularly the activities of tech giants) continues to be the standout area of focus at the European Commission (EC). Margrethe Vestager is now well into her second term as Competition Commissioner, and as Executive Vice President, she now has a broader mandate to coordinate European policy on the digital economy. In November 2020, the EC filed charges against Amazon for allegedly abusing its dual role as both a marketplace for independent sellers and as a seller of its own products, by using access to internal data to gain an unfair advantage over smaller merchants and give its own products preferential treatment. In addition, a second investigation into other possible competition violations by Amazon has also been launched. Also notable is that the EC opened two investigations into Apple’s mobile app store and payment platform over concerns that its practices restricted competition and kept prices high. On the transactional side, the EC launched an investigation into Google’s proposed $2.1bn acquisition of fitness tracking device manufacturer Fitbit.
Beyond its traditional role as an antitrust enforcer, the EC is expected to present the Digital Services Act package in December 2020. This new legislation is intended to create a more level playing field in the digital arena and end the dominance of the so-called “GAFA” (Google, Amazon, Facebook, Apple) giants, who are perceived to have become ‘too big to care’ about concerns over how they operate.
Elsewhere, another key theme is the continued interface between competition and foreign investment. In a key development, the EU’s new screening regulation on foreign direct investments took effect in October 2020; this creates a common framework for screening foreign investments from non-EU countries into the EU that may affect security or public order. On a similar theme, there are concerns about subsidies from non-EU states that facilitate acquisitions by foreign companies of enterprises in the EU, or support subsidiaries operating in the bloc. Following the publication of a White Paper on the distortive effects caused by foreign subsidies in the single market, the EC carried out a public consultation on the subject and legislative proposals are expected to follow in due course.
As a result of the Covid-19 pandemic, the social elections scheduled for May 2020 - in which employees elect company-level representatives for a four-year term – were postponed until November 2020. As such, firms have been kept busy advising clients on how to prepare for the elections, since candidates can be affiliated with unions and so the election results can reflect each union’s level of power and influence. Companies also need to delineate who is a manager or executive; the former may have a personal list of candidates outside of the union’s control, while the latter do not participate in the elections and can act for the employer within the social bodies. Employees and unions may also challenge the company’s approach throughout the process. In addition, and as another consequence of the pandemic, firms reported a significant increase in work relating to remote working.
In the real estate sector, as part of the ongoing reforms to the Belgian Civil Code, updated legislation on rem rights structures and real estate transactions (to name a couple of areas) was approved in January 2020 and is due to come into force in July 2021. The impact this legislation will have on the industry overall remains to be seen.
The General Data Protection Regulation (GDPR), which came into force in May 2018, remains a prominent source of work for law firms, as companies seek ongoing advice and assistance with data protection compliance issues. On the IP and IT front, cybersecurity continues to be a key area of instruction.
In the energy space, law firms reported a significant volume of work being generated because of the forced shutdown of nuclear plants, with the EU posting ambitious renewables targets (around 55%, up from 20%) by way of replacements. The regulation and prominence of hydrogen storage, in particular, is becoming more and more of a market factor.
Elsewhere, in the retail sector, questions of force majeure have arisen from the Covid-19 pandemic, with most chain stores having stopped paying rent to landlords and defaulting on other commercial contracts during the first lockdown. Many went bankrupt, while others were in judicial protection; with the Belgian government lifting its aid measures in July, it remains to be seen how the latter will continue to survive. Entities that are still afloat are rethinking distribution systems, reinforcing selective distribution and considering moving to purely online operations.
Given the natural increase in remote working across most sectors, and the demands placed on existing (and brand new) online/VPN working platforms, all law firms reported a rise in cybersecurity matters and stringent data protection consultation requests.
In the healthcare industry, firms reported a significant uptick in mandates over regulatory issues concerning medical devices and hospital operations, as well as disputes over payment and employee rights. In addition, practitioners have been advising clients on the wording of emergency protocols that were never expected to be enacted. There has generally been much less litigation with no time or money for drawn-out judicial procedures. Firms are anticipating an influx of new pharma clients in the near future, in light of the pandemic and increased demand for medicines/regulation that comes with it. Digital health service infrastructure is also being built from scratch in many instances too, with a view that this could be the way forward.
Covid-19 has also seen a rise in fraud cases and other potential criminal prosecutions. With companies struggling to survive, management misconduct has become an increased area of scrutiny. In addition, there has been an increase in insolvency-related work from creditors, boards of directors and individuals facing major financial difficulties.
The effects of Brexit are still rearing their head too, with questions from clients arising from the termination of trade agreements and further questions over the transition period agreed in the UK–EU Withdrawal Agreement. There is much uncertainty whilst a future trading relationship and security co-operation rules are being negotiated. In addition, with much EU legislation continuing to be adopted under the independent UK umbrella, questions have cropped up over the treatment of existing information and privacy laws.