AIFMD 2.0 – Draft RTS and Final Guidelines Published on Liquidity Management Tools
On 15 April 2025, the European Securities and Markets Authority (“ESMA”) published draft regulatory technical standards (the “Draft RTS”) and final guidelines (the “Guidelines”) on Liquidity Management Tools (“LMTs”), as required under the revised Alternative Investment Fund Managers Directive (EU/2024/927) (“AIFMD 2.0”).
Under AIFMD 2.0, ESMA is required to develop:
regulatory technical standards to specify the characteristics of the liquidity management tools set out in Annex V of AIFMD 2.0; and
guidelines on the selection and calibration of liquidity management tools by alternative investment fund managers (“AIFMs”) for liquidity risk management and mitigating financial stability risk.
The Draft RTS and Guidelines have been published following a consultation period by ESMA. The amendments introduced following the consultation are broadly seen as positive developments from ESMA, introducing greater flexibility for alternative investment funds (“AIFs”) in several cases.
Draft RTS
Some of the key provisions set out in the RTS include:
Redemption Gates
Redemption gates must have an activation threshold and apply to all investors. In the Draft RTS, ESMA has introduced flexibility in expressing activation thresholds for redemption gates. For AIFs, thresholds can be expressed in a percentage of the net asset value (“NAV”), in a monetary value (or a combination of both), or in a percentage of liquid assets. In addition, either net or gross redemption orders shall be considered for the determination of the activation threshold.
ESMA has also introduced a new alternative method for the application of redemption gates – redemption orders below or equal to a certain pre-determined redemption amount can be fully executed while orders above this amount are subject to the redemption gate. The purpose of this mechanism is to avoid small redemption orders being affected by larger redemption orders, that drive the amount of orders above the activation threshold.
Side Pockets
ESMA did not include any provisions in the Draft RTS relating to the management of side pockets, as ESMA concluded there was no mandate within the empowerment of the Draft RTS to allow them to do so.
Applicability of LMTs to Share Classes
The previously published version of the Draft RTS included provisions on the application of LMTs to share classes, requiring the same level of LMTs to be applied to all share classes (e.g. when AIFMs extend the notice period of a fund, the same extension of notice period shall apply to all share classes). ESMA has removed these provisions from the Draft RTS.
Use of other LMTs
Recital 25 of the Draft RTS clarifies that additional LMTs not selected in Annex V of AIFMD 2.0 may be used. These may include, for example, “soft closures” that consist of suspending only subscriptions, only repurchases or redemptions of the AIF.
Other Provisions
Other topics covered in the Draft RTS include swing pricing, dual pricing and anti-dilution levies, as well as redemptions in kind.
Guidelines
Some of the key provisions set out in the Guidelines include:
Selection of LMTs
In the selection of the two minimum mandatory LMTs in accordance with AIFMD 2.0 (set out in Annex V of AIFMD 2.0), ESMA states that AIFMs should consider, where appropriate, the merit of selecting at least one quantitative-based LMT (i.e. redemption gates, extension of notice period) and at least one anti-dilution tool (i.e. redemption fees, swing pricing, dual pricing, anti-dilution levies), taking into consideration the investment strategy, redemption policy and liquidity profile of the fund and the market conditions under which the LMT could be activated.
Governance Principles
AIFMs should develop an LMT policy, which should form part of the broader fund liquidity risk management process policy document, and should document the conditions for the selection, activation and calibration of LMTs. AIFMs also should develop an LMT plan, that should be in line with the LMT policy, prior to or immediately after the activation of suspensions of subscriptions, repurchases and redemptions and prior to the activation of a side pocket.
Disclosure to investors
AIFMs should provide disclosures to investors on the selection, activation and calibration of LMTs in the fund documentation, rules or instruments of incorporation, prospectus and/or periodic reports.
Depositaries
Depositaries should set up appropriate verification procedures to check that AIFMs have in place documented procedures for LMTs.
Other Provisions
The Guidelines also include certain other provisions that impose restrictive obligations on the selection, activation and calibration of LMTs (for example, preventing the systematic activation of redemption gates for funds marketed to retail investors).
Next Steps
The European Commission has three months (i.e. until 15 July 2025) to adopt the Draft RTS, although this period can be extended by one month. The European Commission also has the ability to amend the Draft RTS as required.
Once adopted by the European Commission, the Draft RTS will come into force 20 days following publication in the Official Journal of the European Union.
The Guidelines will be applicable from the day after the Draft RTS comes into force, although AIFMs of funds existing before the date of application of the Guidelines will have a 12-month grace period.
Munich Court Addresses Implementer’s Obligation To Provide Security in FRAND Negotiations
The Munich Higher Regional Court issued a decision concerning the fair, reasonable, and nondiscriminatory (FRAND) negotiation process and an implementer’s obligation to provide security if a license offer for standard essential patents (SEPs) is rejected. HMD Global v. VoiceAge, Case No. 6 U 3824/22 Kart, (Judgment of 20 March 2025).
In this case, the Munich Higher Regional Court attempted to fill a gap left by the Court of Justice of the European Union (CJEU) in Huawei v. ZTE regarding an implementer’s obligation to provide adequate security for royalties. This obligation arises when an implementer rejects a SEP holder’s license offer and the SEP holder rejects the implementer’s counteroffer, so there is no agreement on a license.
The Munich Court found that the implementer, HMD Global, provided an inadequate security that was based on HMD Global’s lower counteroffer. The Court explained that it is the SEP holder’s, here VoiceAges, final offer (i.e., the requested royalty) that is determinative for calculating the security amount that an implementer should provide. This is because a willing licensee must accept the SEP holder’s offer if a court declares it to be FRAND and the royalties subject to this offer must be covered by the security. The Court emphasized that an implementer can only establish that it is a willing licensee by making a counteroffer and providing adequate security after rejecting the offer.
However, the Munich Court left open the issue of whether security must be provided if the SEP holder’s final offer is obviously not FRAND, noting that there may be “special cases” where the SEP holder’s final offer may not be determinative of the security without further defining those cases.
The CJEU’s Guidelines to FRAND Negotiations Are Not a Rigid Set of Rules
The Munich Court also took a critical stance in response to the European Commission’s amicus curiae brief and found that the FRAND guidelines set by the CJEU in Huawei v. ZTE are not to be viewed as a rigid set of rules but rather as a “dynamic concept for negotiation.” A court is not limited to assessing the FRAND defense by strictly examining in sequence each step of the CJEU’s guidelines, which includes the following:
The SEP holder must send a notice of infringement to the implementer.
The implementer must declare to be a willing licensee.
The SEP holder must make a FRAND offer.
If the offer is not FRAND, the implementer is allowed to reject it but must make a counteroffer.
The implementer must provide adequate security for royalties if the SEP holder rejects the implementer’s counteroffer.
The European Commission argued that a court must examine each step before moving on to the next one. This means that, for example, once a court has found that the implementer is a willing licensee, the court must leave the implementer’s subsequent (possibly non-FRAND) conduct out of consideration and cannot undermine the implementer’s established willingness to take a license. A court must then assess whether the SEP holder’s offer was FRAND.
Instead, in view of the Munich Court (a view that is also shared by the Unified Patent Court (Local Division Munich, judgment of 18 December 2024, Case No. ACT_459771/2023, UPC_CFI_9/2023)), a court may consider the entirety of the parties’ conduct, including subsequent conduct, during FRAND negotiations. Therefore, a party may not rely on a formal omission by the other party, such as the absence (or inadequacy) of an infringement notice or a declaration to be a willing licensee in the early stages of negotiations, if the omission was remedied by the party’s subsequent conduct and the parties continued to negotiate with the goal of concluding a license. On the other hand, the implementer’s subsequent non-FRAND conduct may undermine its established willingness to take a license.
No Review of the SEP Holder’s Final Offer if the Implementer Fails to Comply With Its FRAND Obligations After Rejecting the Offer
The Munich Court found that it need not review whether the SEP holder’s final offer was FRAND before assessing the implementer’s conduct after rejecting the offer.
The Munich Court explained that in general, whether a SEP holder’s final offer is FRAND is not decisive to the success of a FRAND defense because even if a SEP holder’s offer is not FRAND, the implementer cannot simply walk away from the negotiations. Instead, to comply with its CJEU negotiation obligations, the implementer must take further action, such as making a counteroffer and providing adequate security, to maintain a FRAND defense against a SEP holder’s injunction claim. In other words, the implementer will lose its FRAND defense anyway if it does not comply with its own FRAND obligations. Therefore, a court is only required to perform the time-consuming examination of whether the SEP holder’s final offer is FRAND if the implementer has complied with its own CJEU FRAND obligations.
Practice Notes
This judgment by the Munich Court strengthens the position of SEP holders. Implementers should consider providing security for royalties in the amount of the SEP holder’s final offer even if the relevant royalties seem to slightly exceed what might be considered as FRAND. Otherwise, an implementer risks a finding that it is an unwilling licensee, thus losing its FRAND defense.
It is also noteworthy that the Munich Court expressly allowed an appeal to the German Federal Court of Justice. This is rare in German case law and shows that the Munich Court is aware that its decision touches on a fundamental issue of FRAND law that still needs to be clarified by the German Federal Court of Justice. The appeal has already been filed (Case No. KZR 10/25).
EU Deforestation-Free Products Regulation (EUDR): Simplification is Taking Shape in EU Commission’s Guidance
On 15 April 2025, the European Commission issued a series of documents with a view to simplifying and amending Regulation (EU) 2023/1115 on deforestation-free products (‘EUDR’).
In line with the broader simplification trend that marks the beginning of the second Von der Leyen Commission, the documents bring about an easing in reporting requirements as well as clarification. They are expected to bring about together a 30% reduction of administrative costs, and considerably reduce the number of due diligence statements that companies need to file.
The initiative follows a period of high uncertainty in the end of 2024, during which discussions on the postponement of the EUDR’s application by one year were associated with a strong push for a reopening of discussions on the substance of the EUDR obligations. To avoid lengthy discussions, the Council and the European Parliament had at the time decided to only amend EUDR provisions setting out delays.
The updated EUDR Guidance and FAQ seem to aim to remedy certain concerns raised since, notably by the conservative majority at the Parliament (EPP), by introducing the following simplification elements:
Companies can reuse existing due diligence statements when goods, that had been previously placed on the market are reimported;
An authorised representative can now submit a due diligence statement on behalf of members of company groups;
Companies may submit their due diligence statements annually instead of a batch-specific declaration;
Non-SME operators and traders can now fulfill their duty to ‘ascertain upstream due diligence’ by collecting and referencing their direct suppliers’ DDS numbers, without systematically checking every single statement or being required to collect information included under Article 9
They are accompanied by a Draft delegated Act submitted for consultation until 13 May 2025, providing further precisions to the list of products included under Annex I of the EUDR (e.g. that are subject to the due diligence requirements), notably considering the exemption of certain packaging elements from the EUDR requirements.
While the above simplifications appear to remedy certain concerns of the industry, the choice of non-binding guidance ensures an efficient decision-making process but leaves some uncertainties in the implementation of the EUDR requirements. Ultimately, clarification by way of an amendment to the text of the EUDR itself could be required to bring about further clarity.
Nayelly Landeros Rivera contributed to this article
Skating on Thin Ice: The CAS Re-affirms the Field of Play Doctrine in the ‘Kyiv Capitals’ Case
What is the Field of Play Doctrine?
Regardless of the sport or the level of competition, refereeing decisions are inevitably the subject of question and complaint. Players, managers, clubs, fans, commentators, pundits and casual observers may all criticise the merits of officiating decisions – something undoubtedly made all the more prevalent by the multitude of camera angles, slow-motion replays and technology that define modern broadcast sport.
The “Field of Play” doctrine, a concept enshrined in the so-called lex sportiva and consistently applied by the Court of Arbitration for Sport (“CAS”), is based on the belief that the rules of the game, in the strict sense of the term, are not subject to judicial control. The rationale behind this “qualified immunity”[1] is twofold: (1) to ensure that match officials have the requisite authority and autonomy to make decisions, and (2) that sporting contests will be completed and thus deliver a result.
As per the 2017 CAS case of Japan Triathlon Union v International Triathlon Union[2], for the doctrine to apply, the following two conditions are needed:
“that a decision at stake was made on the playing field by judges, referees, umpires and other officials, who are responsible for applying the rules of a particular game” and
“that the effects of the decision are limited to the field of play.”[3]
Nonetheless, the doctrine is not absolute, meaning that field of play decisions may be disputed in narrow circumstances relating to integrity. These include instances where there is evidence of bad faith, malicious intent, fraud, bias, prejudice, arbitrariness and corruption.[4]
Hockey Club Kyiv Capitals v Ice Hockey Federation of Ukraine[5]
(i) Introduction
In an Award handed down by the CAS on 20 February 2025, the Ice Hockey Federation of Ukraine (the “Federation”) successfully argued that the CAS had no authority to review officiating decisions. The appeal to the CAS had been brought by Hockey Club Kyiv Capitals (the “Club”) in connection with a match during the 2023/2024 Ukrainian Men’s Ice Hockey Championship season.
(ii) Factual Background
The case concerns an incident that occurred on 3 February 2024 during a match between the Club and the Hockey Club of Dnipro (“Dnipro”).
Throughout the match, several incidents occurred which resulted in both teams receiving penalties. The Club received a total of 13 penalties for unsportsmanlike conduct (including kneeing, tripping, elbowing, and roughing) which were committed by several players and their Head Coach, Vadym Shahraichuk. By contrast, Dnipro received three penalties.
With 50 minutes and 48 seconds of the match played, the Club refused to continue and instead left the ice hockey rink, the score being tied a 2-2 at the time. This decision was, according to their Head Coach, due to “unfair and one-sided refereeing.”[6]
(iii) Procedural Background
Following the match, the Club appealed to the Federation Refereeing Quality Assessment Committee (the “RQAC”), citing twelve occasions during the match where the referees failed to impose a sanction. Although the RQAC subsequently ruled that the majority of the refereeing decisions were correct, they did identify several which had been overlooked.[7]
The Disciplinary Committee of the Federation consequently initiated proceedings to determine the application of sanctions against the Club, later opting to impose disciplinary and monetary sanctions on 5 February 2024.[8]
The Club responded by filing an appeal against the Disciplinary Committee’s decision to the Appeals Committee. However, this was unanimously dismissed on 26 February 2024.
Finally, having received confirmation that they could appeal the Appeals Committee ruling to the CAS, the Club consequently filed a Statement of Appeal requesting that the CAS set aside the decision.
Arguments advanced before the CAS
(i) The Club
In seeking relief, the Appellant Club advanced five core arguments:
That the technical defeat should not have been awarded. In supporting this argument, the Club maintained that the game had begun and so the referees had exclusive authority to determine the outcome. The Federation’s competence only extended to matches that did not take place and the referees could therefore not delegate to the Federation. The Club further submitted that the game had been stopped too soon (i.e. after only two minutes rather than 5 minutes) due to an error in the translation of the Official Rule Book on the Federation’s website.
The violation of the principles of publicity and openness, namely that the Club had not been furnished with sufficient information about the proceedings, the receipt of statements from third parties, the hearing (including the time, place and composition of the authority), and the opportunity to renew statements and provide objections.
The violation of the right to an effective remedy, with the Club alleging that the Federation conducted a secret proceeding which deprived the Club of an effective defence.
The violation of ethical norms due to conflicts of interest, with the Club alleging a “direct connection between the Referee and the Chairperson and Deputy Chairperson of the Appeals Committee.”[9]
The violation of the right to a fair trial, namely as a result of the aforementioned arguments.
(ii) The Federation
In response, the Federation advanced nine core arguments:
The inadmissibility of the Appeal. In advancing this argument, the Federation submitted that the CAS lacked authority relating to future issues and that the Club failed to identify the point being appealed along with the exact basis of appeal.
The lack of interest and/or legitimacy of the Appellant. The Federation argued that the Club had neither the direct nor personal interest required to appeal certain aspects of the decisions. As part of this argument, the Federation maintained that the Club’s Head Coach should have appealed the decisions in his personal capacity and that the Club’s final league position was not impacted by the technical defeat awarded.
The binding nature and correct application of the Federation Rules. In invoking the “chain of references”[10] principle, the Federation contended that the Club had, by participating in the championship, consented to and agreed to be bound by the rules of the Federation.
The fair trial objection according to the de novo principle. In invoking the de novo principle[11], the Federation further contended that the Club’s submissions concerning the lack of a fair trial were immaterial and that the CAS would correct “all procedural flaws.”[12]
The field of play doctrine. By relying on the doctrine, the Federation argued that the on-field decisions made by the referees were not reviewable by the CAS.
The absence of any conflict of interest in earlier proceedings. In rebutting the allegation that there was a violation of ethical norms due to conflicts of interest, the Federation asserted that there was no conflict of interest or corruption. They further highlighted that such an argument had only been raised by the Club upon appeal to the CAS and could have been submitted in earlier proceedings.
The respect of the principles of publicity and openness. Far from not being in receipt of information relating to the proceedings, the Federation considered that the Club had been made provided with the first instance decision. They submitted that they were thus “informed of the entire proceeding, including evidence and facts.”[13]
The absence of determination of the outcome of the Match by the Referees. The Federation asserted that the technical defeat finding was a “logical sanction” rather than “an unlawful “determining of outcome””[14] after the Club departed the hockey rink.
The troublesome widespread effect of CAS decision annulling the technical defeat. Finally, and perhaps most persuasively, the Federation highlighted that “annulling the appealed decisions would justify and legalize the abandonment of matches as a means of remedy against field of play decisions and would represent a precedent allowing clubs to abandon games if they are not in their favor.”[15]
Ruling of the CAS
The sole arbitrator, Ms Carine Dupeyron, held that jurisdiction of the CAS had been established in the case and that the Club’s appeal had been filed within the relevant time limits.
Ms Dupeyron further found that the Club’s appeal was both admissible and that the Club had a legal interest in appealing the decisions.
Moreover, Ms Dupeyron concluded that the relevant International Ice Hockey Federation and the Federation rules and regulations applied in the case, with Swiss Law and case law also applying due to the arbitration’s seat in Lausanne, Switzerland.
With regard to the match itself and in applying the Federation Rules, Ms Dupeyron reasoned that the game period had not ended when the Club departed the hockey rink and refused to continue playing. Despite ruling that the referees had applied Rule 73.2 rather than Rule 73.3[16] of the Official Rule Book 2023/24, this did not impact the ability of both the Disciplinary Committee and the Appeals Committee to examine the case.
In considering the disciplinary and financial sanctions imposed on the Club, Ms Dupeyron concluded that the Disciplinary Committee and the Appeals Committee had both the authority to impose such sanctions and to impose a technical defeat on the Club.
Finally, the Club’s submissions regarding the violation of ethical norms due to conflicts of interest did not find favour with Ms Dupeyron. She instead concluded “that the de novo appeal before the CAS cured the potential procedural flaws regarding the appealed decisions”.[17]
Therefore, Ms Dupeyron declined to allow the appeal – thus confirming the decision of the Appeals Committee of the Federation.
Impact of Ruling
The ruling serves as a timely reminder that the Field of Play doctrine will prevent sporting contestants from simply leaving the arena and appealing the decisions of officials, including in situations where appeal boards subsequently find refereeing to have overlooked inappropriate or unfair acts that occurred within matches.
Moving forwards, participants should therefore continue to be mindful of the doctrine and that it will apply save for specific circumstances relating to integrity. If such circumstances are not apparent, then participants are walking on thin ice when choosing to abandon matches prematurely and seeking subsequent judicial relief. As the case demonstrates, the likelihood is that the doctrine will be upheld, certainly before a CAS tribunal, and participants will suffer the regulatory consequences of their abandonment.
The full CAS Award is available here: CAS 2024/A/10449 Hockey Club Kyiv Capitals v. Ice Hockey Federation of Ukraine
[1] CAS OG 02/2007 Korean Olympic Committee v. International Skating Union; 2015/A/4208 Horse Sport Ireland & Cian O’Connor v. FEI.
[2] CAS 2017/A/5373.
[3] Ibid [Paragraph 51].
[4] For example, see the following cases: CAS 2004/A/727 Vanderlei De Lima & Brazilian Olympic Committee (BOC) v. International Association of Athletics Federations (IAAF), CAS 2008/A/1641 Netherlands Antilles Olympic Committee (NAOC) v. International Association of Athletics Federations (IAAF) & United States Olympic Committee (USOC), Aino-Kaisa Saarinen & Finnish Ski Association v. Fédération Internationale de Ski (FIS) CAS 2010/A/2090, CAS 2015/A/4208 Horse Sport Ireland (HSI) & Cian O’Connor v. Fédération Equestre Internationale (FEI).
[5] CAS 2024/A/10449.
[6] [Paragraph 9].
[7] These overlooked instances included “a tripping, a blocking, a player interference, and a hand-checking on behalf of the opponent team” [Paragraph 11].
[8] These included disciplinary and monetary sanctions on the Club; imposing a technical defeat in the match on the Club / awarding a technical victory to Dnipro; warning the Club that repeated refusal to continue upcoming matches will result in automatic exclusion from the Ukrainian Men’s Ice Hockey Championship; imposing two disciplinary sanctions on the Club’s player Pavlo Taran; imposing a disciplinary sanction on the Club’s player Serhii Chernenko; obligating the Club’s Head Coach Vadym Shahraichuk to familiarise himself and the players with the Federation’s golden rules; and warning the Head Coach that he would receive one-match suspensions for each major, disciplinary or game misconduct penalty of the Club’s players.
[9] [Paragraph 85].
[10] [Paragraph 97].
[11]De novo refers to the standard of review employed by an appellate court, with the appellate court reviewing the decision of a lower court as if the lower court had not rendered a decision.
[12] [Paragraph 103].
[13] [Paragraph 112].
[14] [Paragraph 114].
[15] [Paragraph 115].
[16] Rule 73.2 permits the team refusing to play only 15 seconds to resume the match when already on the ice, whereas Rule 73.3 permits 5 minutes for the team to return to the ice.
[17] [Paragraph 179].
Jonathan Mason also contributed to this article.
Germany’s Supply Chain Law at a Crossroads: The Implications of the Proposed Shift to the CSDDD
In April 2025, CDU, CSU, and SPD – the coalition parties almost certainly forming Germany’s next federal government – announced their intention to repeal the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz (LkSG)) as part of a broader initiative to reduce administrative and economic burdens. According to the coalition agreement, the LkSG shall be replaced with legislation implementing the EU Corporate Sustainability Due Diligence Directive (CSDDD) in a bureaucracy-light and enforcement-friendly manner. The reporting obligations under the LkSG shall be abolished immediately, and enforcement of existing obligations shall be suspended, except in cases of grave human rights violations, until the new EU-aligned framework enters into force and is implemented in German law.
This legislative shift is causing widespread uncertainty among companies, many of which have already undertaken significant efforts to implement the LkSG since it came into force in January 2023. The law currently obliges large enterprises with more than 1,000 employees since 2024 onwards to establish comprehensive due diligence mechanisms, including annual risk assessments, grievance mechanisms, and supply chain monitoring, with potential fines reaching up to 2% of global turnover in the event of non-compliance.
While some industry associations have welcomed the repeal as a step toward deregulation, the announcement has also raised significant concerns within the business and legal communities. Numerous companies have already made considerable investments to comply with the LkSG, establishing compliance systems, internal governance structures, and supplier monitoring mechanisms. The prospect of a repeal, especially after only a short period of application, has introduced legal uncertainty and operational ambiguity, particularly with respect to future compliance expectations.
From a legal perspective, the formal abolition of the LkSG would require a new act adopted by the parliament. Earlier attempts to initiate such a legislative reversal failed due to insufficient parliamentary support. Nevertheless, the linkage of national legislation with the EU’s CSDDD offers a feasible path for reform by way of harmonized substitution rather than outright repeal. The CSDDD covers both human rights and environmental obligations and applies not only to direct suppliers but, under certain conditions, also to indirect supply chain actors. Notably, the CSDDD introduces civil liability provisions and imposes obligations on a broader spectrum of business activities, including downstream operations such as recycling and distribution.
The EU Commission’s Omnibus proposals aim to address some of the implementation challenges previously identified under the LkSG. Proposed key modifications include limiting the scope of due diligence to direct business partners unless specific risks are identified further down the supply chain, reducing the frequency of effectiveness monitoring from annually to once every five years, and restricting the information that can be demanded from SMEs. These reforms are intended to strike a balance between ensuring substantive sustainability commitments and preserving economic viability, particularly for companies operating within complex global value chains.
Despite these developments, civil society organizations have strongly opposed the dismantling of the LkSG. The “Initiative Lieferkettengesetz”, a coalition of over 140 NGOs, religious institutions, and trade unions, has described the planned repeal as a serious regression in the protection of human rights and environmental standards. They argue that the LkSG has already led to tangible structural improvements and that weakening it sends the wrong signal to companies that have acted in good faith.
Meanwhile, supervisory authorities such as the Federal Office for Economic Affairs and Export Control (BAFA) have begun to enforce the LkSG with targeted inquiries and audits, particularly in high-risk sectors. These enforcement activities prompted many companies to accelerate their compliance efforts, contributing to the establishment of internal processes that may now remain relevant under the forthcoming CSDDD regime.
Considering the transitional phase between the phasing out of the LkSG and the implementation of the CSDDD, companies are advised to avoid dismantling existing due diligence systems prematurely. While certain regulatory relief may be on the horizon, reputational and legal risks remain, particularly in the event of adverse public exposure or litigation. Moreover, the CSDDD will introduce new obligations concerning environmental risks, for which most businesses will need to gather additional information and develop appropriate compliance tools.
In conclusion, the repeal of the LkSG marks a turning point in Germany’s supply chain regulation. While the transition to EU-level harmonization promises simplification in some areas, it also brings new challenges and legal uncertainties. Companies are well advised to maintain a forward-looking compliance posture, preparing not only for reduced national reporting burdens but also for the broader and more integrated responsibilities under the CSDDD.
Combatting Scams in Australia, Singapore, China and Hong Kong
Key Points:
Singapore’s Shared Responsibility Framework
Comparing scams regulation in Australia, Singapore and the UK
China’s Anti-Telecom and Online Fraud Law
Hong Kong’s Anti-Scam Consumer Protection Charter and Suspicious Account Alert Regime
The increased reliance on digital communication and online banking has created greater potential for digitally-enabled scams. If not appropriately addressed, scam losses may undermine confidence in digital systems, resulting in costs and inefficiencies across industries. In response to increasingly sophisticated scam activities, countries around the world have sought to develop and implement regulatory interventions to mitigate growing financial losses from digital fraud. So far in our scam series, we have explored the regulatory responses in Australia and the UK. In this publication, we take a look at the regulatory environments in Singapore, China and Hong Kong, and consider how they might inform Australia’s industry-specific codes.
SINGAPORE
Shared Responsibility Framework
In December 2024, Singapore’s Shared Responsibility Framework (SRF) came into force. The SRF, which is overseen by the Monetary Authority of Singapore (MAS) and Infocomm Media Development Authority (IMDA), seeks to preserve confidence in digital payments and banking systems by strengthening accountability of the banking and telecommunications sectors while emphasising individuals’ responsibility for vigilance against scams.
Types of Scams Covered
Unlike reforms in the UK and Australia, the SRF explicitly excludes scams involving authorised payments by the victim to the scammer. Rather, the SRF seeks to address phishing scams with a digital nexus. To fall within the scope of the SRF, the transaction must satisfy the following elements:
The scam must be perpetrated through the impersonation of a legitimate business or government entity;
The scammer (or impersonator) must use a digital messaging platform to obtain the account user’s credentials;
The account user must enter their credentials on a fabricated digital platform; and
The fraudulently obtained credentials must be used to perform transactions that the account user did not authorise.
Duties of Financial Institutions
The SRF imposes a range of obligations on financial institutions (FIs) in order to minimise customers’ exposure to scam losses in the event their account information is compromised. These obligations are detailed in table 1 below.
Table 1
Obligation
Description
12-hour cooling off period
Where an activity is deemed “high-risk”, FIs must impose a 12-hour cooling off period upon activation of a digital security token. During this period, no high-risk activities can be performed.
An activity is deemed to be “high-risk” if it might enable a scammer to quickly transfer a large sum of money to a third party without triggering a customer alert. Examples include:
Addition of new payee to the customer’s account;
Increasing transaction limits;
Disabling transaction notification alerts; and
Changing contact information.
Notifications for activation of digital security tokens
FIs must provide real-time notifications when a digital security token is activated or a high-risk activity occurs. When paired with the cooling off period, this obligation increases the likelihood that unauthorised account access is brought to the attention of the customer before funds can be stolen.
Outgoing transaction alerts
FIs must provide real-time alerts when outgoing transactions are made.
24/7 reporting channels with self-service kill switch
FIs must have in place 24/7 reporting channels which allow for the prompt reporting of unauthorised account access or use. This capability must include a self-service kill-switch enabling customers to block further mobile or online access to their account, thereby preventing further unauthorised transactions.
Duties of Telecommunications Providers
In addition to the obligations imposed on FIs, the SRF creates three duties for telecommunications service providers (TSPs). These duties are set out in table 2 below.
Table 2
Obligation
Description
Connect only with authorised alphanumeric senders
In order to safeguard customers against scams, any organisation wishing to send short message service (SMS) messages using an alphanumeric sender ID (ASID) must be registered and licensed. TSPs must block the sending of SMS messages using ASIDs if the sending organisation is not appropriately registered and licensed.
Block any message sent using an unauthorised ASID
Where the ASID is not registered, the TSP must prevent the message from reaching the intended recipient by blocking the sender.
Implement anti-scam filters
TSPs must implement anti-scam filters which scan each SMS for malicious elements. Where a malicious link is detected, the system must block the SMS to prevent it from reaching the intended recipient.
Responsibility Waterfall
Similar to the UK’s Reimbursement Rules explored in our second article, the SRF provides for the sharing of liability for scam losses. However, unlike the UK model, the SRF will only require an entity to reimburse the victim where there has been a breach of the SRF. The following flowchart outlines how the victim’s loss will be assigned.
HOW DOES THE SRF COMPARE TO THE MODELS IN AUSTRALIA AND THE UK?
Scam Coverage
The type of scams covered by Singapore’s SRF differ significantly to those covered by the Australian and UK models. In Australia and the UK, scams regulation targets situations in which customers have been deceived into authorising the transfer of money out of their account. In contrast, Singapore’s SRF expressly excludes any scam involving the authorised transfer of money. The SRF instead targets phishing scams where the perpetrator obtains personal details in order to gain unauthorised access to the victim’s funds.
Entities Captured
Australia’s Scams Prevention Framework (SPF) covers the widest range of sectors, imposing obligations on entities operating within the banking and telecommunications sectors as well as any digital platform service providers which offer social media, paid search engine advertising or direct messaging services. The explanatory materials note an intention to extend the application of the SPF to new sectors as the scams environment continues to evolve.
In contrast, the UK’s Reimbursement Rules only apply to payment service providers using the faster payments system with the added requirement that the victim or perpetrator’s account be held in the UK. Any account provided by a credit union, municipal bank or national savings bank will be outside the scope of the Reimbursement Rules.
Falling in-between these two models is Singapore’s SRF which applies to FIs and TSPs.
Liability for Losses
Once again, the extent to which financial institutions are held liable for failing to protect customers against scam losses in Singapore lies somewhere between the Australian and UK approaches. Similar to Singapore’s responsibility waterfall, a financial institution in Australia will be held accountable only if the institution has breached its obligations under the SPF. However, unlike the requirement to reimburse victims for losses in Singapore, Australia’s financial institutions will be held accountable through the imposition of administrative penalties. In contrast, the UK’s Reimbursement Rules provide for automatic financial liability for 100% of the customer’s scam losses, up to the maximum reimbursable amount, to be divided equally where two financial institutions are involved.
CHINA
Anti-Telecom and Online Fraud Law of the People’s Republic of China
China’s law on countering Telecommunications Network Fraud (TNF) requires TSPs, Banking FIs and internet service providers (ISPs) to establish internal mechanisms to prevent and control fraud risks. Entities failing to comply with their legal obligations may be fined the equivalent of up to approximately AU$1.05 million. In serious cases, business licences or operational permits may be suspended until an entity can demonstrate it has taken corrective action to ensure future compliance.
Scope
China’s anti-scam regulation defines TNF as the use of telecommunication network technology to take public or private property by fraud through remote and contactless methods. Accordingly, it extends to instances in which funds are transferred without the owner’s authorisation. To fall within the scope of China’s law, the fraud must be carried out in mainland China or externally by a citizen of mainland China, or target individuals in mainland China.
Obligations of Banking FIs
Banking FIs are required to implement risk management measures to prevent accounts being used for TNF. Appropriate policies and procedures may include:
Conducting due diligence on all new clients;
Identifying all beneficial owners of funds:
Requiring frequent verification of identity for high-risk accounts:
Delaying payment clearance for abnormal or suspicious transactions: and
Limiting or suspending operation of flagged accounts.
The People’s Bank of China and the State Council body are responsible for the oversight and management of Banking FIs. The anti-scams law provides for the creation of inter-institutional mechanisms for the sharing of risk information. All Banking FIs are required to provide information on new account openings as well as any indicators of risk identified when conducting initial client due diligence.
Obligations of TSPs and ISPs
TSPs and ISPs are similarly required to implement internal policies and procedures for risk prevention and control in order to prevent TNF. This includes an obligation to implement a true identity registration system for all telephone/internet users. Where a subscriber identity module (SIM) card or internet protocol (IP) address has been linked to fraud, TSPs/ISPs must take action to verify the identity of the owner of the SIM/IP address.
HONG KONG
Hong Kong lacks legislation which specifically deals with scams. However, a range of non-legal strategies have been adopted by the Hong Kong Monetary Authority (HKMA) in order to address the increasing threat of digital fraud.
Anti-Scam Consumer Protection Charter
The Anti-Scam Consumer Protection Charter (Charter) was developed in collaboration with the Hong Kong Association of Banks. The Charter aims to guard customers against digital fraud such as credit card scams by committing to take protective actions. All 23 of Hong Kong’s card issuing banks are participating institutions.
Under the Charter, participating institutions agree to:
Refrain from sending electronic messages containing embedded hyperlinks. This allows customers to easily identify that any such message is a scam.
Raise public awareness of common digital fraud.
Provide customers with appropriate channels to allow them to make enquiries for the purpose of verifying the authenticity of communications and training frontline staff to provide such support.
More recently, the Anti-Scam Consumer Protection Charter 2.0 was created to extend the commitments to businesses operating in a wider range of industries including:
Retail banking;
Insurance (including insurance broking);
Trustees approved under the Mandatory Provident Fund Scheme; and
Corporations licensed under the Securities and Futures Ordinance.
Suspicious Account Alerts
In cooperation with Hong Kong’s Police Force and the Association of Banks, the HKMA rolled out suspicious account alerts. Under this mechanism, customers have access to Scameter which is a downloadable scam and pitfall search engine. After downloading the Scameter application to their device, customers will receive real-time alerts of the fraud risk of:
Bank accounts prior to making an electronic funds transfer;
Phone numbers based on incoming calls; and
Websites upon launch of the site by the customer.
In addition to receiving real-time alerts, users can also manually search accounts, numbers or websites in order to determine the associated fraud risk.
Scameter is similar to Australia’s Scamwatch, which provides educational resources to assist individuals in protecting themselves against scams. Users can access information about different types of scams and how to avoid falling victim to these. Scamwatch also issues alerts about known scams and provides a platform for users to report scams they have come across.
KEY TAKEAWAYS
Domestic responses to the threat of scams appear to differ significantly. Legal approaches explored so far in this series target financial and telecommunications sectors, seeking to influence entities in these industries to adopt proactive measures to prevent, detect and respond to scams. While the UK aims to achieve this by placing the financial burden of scam losses on banks, China and Australia adopt a different approach by imposing penalties on entities failing to comply with their legal obligations. Singapore has opted for a blended approach whereby entities which have failed to comply with the legal obligations under the SRF will be required to reimburse customers who have fallen victim to a scam. However, where the entities involved have met their legal duties, the customer will continue to bear the loss.
Look out for our next article in our scams series.
The authors would like to thank graduate Tamsyn Sharpe for her contribution to this legal insight.
Powering Africa’s Digital Future: The Challenge of Energy for Data Center Development
As the global economy increasingly digitizes, the infrastructure supporting this shift must evolve accordingly. In Africa, where the demand for digital services is surging — fueled by mobile penetration, fintech innovation, and a young, connected population — the case for expanding data center capacity is clear. However, the continent’s potential is hindered by underdeveloped energy infrastructure, presenting a significant bottleneck.
Why Data Centers Matter
Data centers form the backbone of digital transformation, underpinning cloud storage, AI applications, e-commerce platforms, and digital government services. According to the International Energy Agency (IEA), global electricity consumption by data centers is projected to exceed 800 TWh by 2026, up from 460 TWh in 2022. A significant portion of this demand comes from generative AI and machine learning applications, which consume up to 10 times more energy than traditional searches.
Africa, despite being one of the fastest-growing regions for digital adoption, accounts for less than 1% of the world’s data center capacity. The Africa Data Centres Association estimates that the continent requires at least 1,000 MW of new capacity across 700 facilities to meet demand. Yet, meeting this need will depend not only on digital infrastructure investments but also on solving a persistent and costly energy challenge.
The Energy Challenge: Costs, Capacity, and Volatility
Data center development will play a pivotal role in ensuring digital sovereignty and fostering a resilient, domestically-driven digital economy in Africa.
Sub-Saharan Africa exemplifies both the promise and the challenges of this transformation. While demand for digital services is accelerating, access to reliable energy remains a major obstacle. Many countries across the region grapple with limited energy access, high electricity costs, and outdated infrastructure characterized by frequent outages and heavy reliance on imported fuel sources.
This interplay of costs and reliability poses significant challenges for energy-intensive data centers. According to recent industry analysis, energy supply has emerged as the single most critical issue facing digital infrastructure investors. As demand for electricity rises—driven by AI, cloud computing, and the digitization of public services—grid expansion is struggling to keep pace. As a result, securing reliable, affordable power is now a top strategic priority for data center developers and investors alike.
Despite these challenges, several sub-Saharan countries—including Côte d’Ivoire, Gabon, and Senegal—are making significant progress. While legacy grid issues persist, these countries are actively investing in renewable energy projects that could create the enabling environment needed for sustainable data center growth.
Côte d’Ivoire: In June 2023, the country launched its largest solar power plant in Boundiali, delivering 37.5 MWp of capacity with an expansion target of 83 MWp by 2025. This project aligns with Côte d’Ivoire’s national goal to source 45% of its electricity from renewable energy by 2030.
Senegal: The Taiba N’Diaye Wind Farm, commissioned in 2021, is West Africa’s largest wind energy project, with a total capacity of 158 MW. It plays a central role in Senegal’s broader strategy to diversify its energy mix and reduce dependence on imported fossil fuels.
Gabon: Though less frequently spotlighted, Gabon is actively positioning itself as a renewable energy leader in Central Africa. In 2021, the government launched a hydropower development strategy to boost clean energy capacity. Notably, the Kinguélé Aval Hydroelectric Project, co-financed by the African Development Bank and IFC, will add 35 MW of capacity upon completion and help stabilize electricity supply in the Estuaire province, home to Libreville—the capital and potential hub for digital infrastructure. Gabon has also attracted investment in solar hybrid systems for rural electrification, aiming to reduce diesel reliance and support the decentralization of energy access. These initiatives create a more stable power framework suitable for future data center deployment.
Lessons from Leading Data Center Markets
Morocco is emerging as a pivotal player in North Africa’s data center market, driven by international energy investments and its strategic position connecting Europe, Africa, and the Middle East. Major global tech companies, including Oracle, Microsoft, Google, and Amazon Web Services (AWS), are drawn to Morocco’s rapidly expanding digital economy and its modern infrastructure. The country is fostering a favorable environment for data center growth through government-backed initiatives that enhance ICT infrastructure, making Morocco an attractive destination for both local and international data center operators.
The country’s stability and investments in renewable energy further position it as a sustainable choice for data center operations. With projects like those from Africa Data Centres, Gulf Data Hub, and N-ONE Datacenters, Morocco’s growing data center ecosystem is poised to meet the increasing demand for cloud computing and data storage across North Africa and beyond. By 2028, Morocco is expected to be a key hub for digital services, offering world-class data center facilities.
Looking to other pioneers in the continent, countries like Kenya and South Africa offer valuable lessons. Kenya, rich in geothermal resources, has attracted significant investments such as a $1 billion geothermal-powered data center from Microsoft and G42. This clean, non-intermittent energy solution provides a reliable power source for data centers. Similarly, South Africa is leading solar integration, with projects like the 12 MW solar farm being developed by Africa Data Centres and Distributed Power Africa, designed to power critical centers like Johannesburg and Cape Town. Such initiatives showcase the potential for public-private partnerships to address challenges of grid unreliability and position Africa as a growing leader in sustainable data center infrastructure.
These examples underscore the importance of strategic planning, infrastructure investment, and the integration of renewable energy sources in building resilient, sustainable data centers.
Policy and Legal Implications
From a legal perspective, developing a data center project requires meticulous contractual structuring. Long-term Power Purchase Agreements (PPAs) and Behind-the-Meter (BtM) agreements introduce project-specific risks — notably, the risk that delays in one part of the project (either the power plant or the data center) could lead to disruptions. Legal advisors must anticipate and address potential regulatory challenges, grid permitting complexities, and the need for future-proofing clauses to safeguard the project’s viability.
A comprehensive review of existing legislation, identification of key obstacles, and potential time-consuming issues (such as securing land) are crucial steps in ensuring the project’s success. Moreover, structuring energy supply projects to support data center operations is fundamental for ensuring the project’s bankability.
Conclusion: A Call to Action
Africa stands at a crossroads: with the right investments in both digital and energy infrastructure, the continent could leapfrog into a new era of economic autonomy and technological resilience. However, if energy bottlenecks are not addressed head-on, Africa risks falling behind just as the world accelerates into a data-driven future.
The roadmap is clear: invest in renewables, embrace innovative models like BtM PPAs, partner across sectors, and establish clear regulatory frameworks. Energy is no longer a background concern for digital infrastructure investors — it is the cornerstone. Data center growth and power sector development must now proceed hand-in-hand.
For Africa, this is not just a technical challenge — it is a strategic imperative.
Cross-Border Catch-Up: The Growing Global Trend of the Right to Disconnect [Podcast]
In this episode of our Cross-Border Catch-Up podcast series, Lina Fernandez (Boston) and Kate Thompson (New York/Boston) discuss the growing trend of “right to disconnect” laws that permit employees to disengage from work-related communications and activities during non-working hours. Kate and Lina explore how right-to-disconnect legislation is being implemented in various countries, including Spain, Peru, Colombia, Thailand, and Canada. Lina and Kate also highlight the importance for global employers to stay informed and compliant with these evolving regulations.
DHS Revokes Legal Status, Sends Parole Termination Notices to CBP One App Users in United States
On April 11, 2025, DHS sent a Notice of Parole Termination to individuals who utilized the Biden-era online appointment CBP One App to enter and stay in the United States on Humanitarian Parole while applying for asylum.
Previously, after attending an appointment at the U.S.-Mexico border, individuals were paroled into the United States for an initial period of two years. Once in the United States, individuals were eligible to apply for work authorization. Approximately 900,000 individuals entered the United States using the CBP One App. DHS has not revealed how many individuals have received the April 11, 2025, termination notice.
The termination notice directs individuals who have not obtained an immigration status other than parole to depart the United States within seven days or risk removal.
The notice states that recipients can utilize the new CBP Home App to arrange for their departure from the United States.
The announcement is the most recent of several DHS decisions terminating other programs including Temporary Protected Status (TPS) for Venezuelan and Haitian nationals, and the CHNV Humanitarian Parole program. Termination of TPS and CHNV parole have been temporarily enjoined as part of ongoing federal litigation. Judge Edward Chen, a district court judge in the Northern District of California, has issued a ruling halting the termination of Venezuela TPS. In response to the ruling, DHS has announced that Venezuela TPS has been automatically extended until Oct. 2, 2026, for individuals who registered under the 2023 designation, and until Sept. 10, 2025, for individuals who registered under the 2021 designation. Judge Indira Talwani, a district court judge in the District of Massachusetts, has issued a ruling halting the termination of Humanitarian Parole for citizens of Cuba, Haiti, Nicaragua, and Venezuela, also known as the CHNV program. Accordingly, an individual’s parole can only be terminated prior to their expiration date based on a case-by-case review.
Individuals paroled into the United States under the CBP One App who are not otherwise covered by the ongoing Venezuela or Haitian TPS or CHNV litigation should consult with an immigration attorney before making plans to depart the United States.
China Publishes Q&A on Administrative Policies for the Security of Cross-border Transfers
On April 9, 2025, the Cyberspace Administration of China (“CAC”) published a Q&A related to administrative policies on the security of cross-border transfers. Below is a list of certain of the questions published by the CAC each with a summary of the response from the CAC.
How can consistency of the criteria for the negative lists in different Pilot Free Trade Zones (“Pilot FTZs”) be ensured?
Pursuant to the Provisions on Facilitating and Regulating Cross-border Data Flow (the “Provisions”), the Pilot FTZs may each formulate their own negative list under the framework of the data classification and categorization protection. If a Pilot FTZ has issued a negative list, other Pilot FTZs in the same industry can adopt the issued negative list to avoid duplication. Currently, the negative list has covered 17 industries including automobile, drug, retail, civil aviation, re-insurance, deep sea field and seed industry
How should the necessity of cross-border transfers be understood and determined?
Pursuant to Articles 6 and 19 of the Personal Information Protection Law, the considerations for determining “necessity” include whether the processing of personal information:
is directly related to the purpose of the processing;
has minimal impact on individuals rights;
is limited to the minimum scope necessary to achieve the purpose; and
the retention period is limited to the shortest time necessary to achieve the purpose.
Therefore, an assessment on the necessity of a cross-border transfer must focus on the necessity of the cross-border transfer itself, the number of individuals impacted, and the necessity of the scope of data elements of the transfer. The CAC and the relevant competent industrial authorities intend to jointly refine and clarify the business scenarios of cross-border transfers in specific industries and provide more detailed guidelines in the future.
Can important data be transferred outside of China?
Yes, important data can be transferred outside of China if a security assessment determines that the transfer will not harm national security or public interest. As of March 2025, the CAC had completed 298 applications for security assessment on cross-border transfers, of which 44 applications involved important data and seven applications failed, which means the failure rate is only 15.9%. In these 44 applications, there are total 509 important data elements, among which 325 elements were approved for transfer and the pass rate is 64.9%.
Are there any more convenient channels for cross-border transfers between group companies?
If the scenarios for the cross-border transfers for multiple Chinese subsidiaries belonging to one group company are similar, it is permitted for the group company, as the applicant, to submit one consolidated application for security assessment or one consolidated filing of the standard contract (“SC”) for cross-border transfers.
Alternatively, if either of the Chinese affiliate and the oversea recipient obtains the certification for cross-border transfer, the relevant entities can carry out the data transfer activities within the certified scope. If a group company obtains such certification, it is permitted to transfer data within the group without concluding separate SCs with the affiliates in each country/region.
Is there a specific process for extending the validity period of cross-border data transfer related security assessment results?
The Provisions extend the validity period of the assessment results from two years to three years. Upon expiration of the validity period, if the data handler continues to carry out cross-border activities without any circumstances requiring re-application for a security assessment, it may apply to the local cyberspace administration authority for an extension 60 business days before the expiration of the validity period. The validity period of the security assessment results can then be extended for another three years. The CAC intends to revise and issue relevant policies related to the extension procedure to make conditions for cross-border transfers more convenient.
HM Treasury and FCA Proposals to Reform Regulation of UK AIFMs
On 7 April 2025, HM Treasury (HMT) published a consultation (Consultation) on the reform of the UK regulatory regime for alternative investment funds (AIFs) and their managers, alternative investment fund managers (AIFMs[CM1] ), and the Financial Conduct Authority (FCA) simultaneously published a call for input (Call for Input) on how to create a more proportionate, streamlined and simplified regime (the Call for Input and the Consultation together, the Proposals). The Proposals follow the UK’s implementation of the EU Alternative Investment Fund Managers Directive (UK AIFMD) in 2013 and the UK’s withdrawal from the European Union (Brexit) in 2020.
The Proposals aim to simplify the regulations relating to AIFMs and streamline the existing framework with the intention to make the UK more “attractive” for investment and to encourage growth within the UK economy.
The Current AIFM Regime
The current AIFM regime derives principally from the EU Alternative Investment Managers Directive (EU AIFMD). The application of this regime and the accompanying rules depend on whether an AIFM’s assets under management (AUM) exceed certain thresholds.
In the Consultation, HMT explains that these thresholds have not been updated or reviewed since the introduction of the EU AIFMD in 2013. HMT also describes the current regime creating a “cliff edge effect” where sudden market movements or changes in AUM valuations have inadvertently brought smaller AIFMs within the full scope of the AIFM regime, subjecting such firms to sudden and substantial compliance burdens which it believes has the potential to discourage growth.
HMT Consultation
As a result of the “cliff edge effect”, the Consultation proposes to remove the thresholds and allow the FCA to determine proportionate and tailored rules.
Additionally, HMT proposes two “sub-threshold” categories of “small registered AIFM” that are yet to be authorised:
unauthorised property collective investment schemes; and
internally managed investment companies.
In particular, the Consultation discusses the following key items:
relocating definitions of “managing an AIF”, “AIF”, and “Collective Investment Undertaking” to the Regulated Activities Order, with no change to the regulatory scope;
confirming that there are no plans to amend the UK National Private Placement Regime;
potentially removing the FCA notification requirements when certain AIFMs acquire control of unlisted companies;
prudential rules for AIFMs;
at this stage, there are no proposals to change the rules applying to depositaries, but the FCA is calling for further evidence on whether any changes could be warranted;
reviewing the requirement for appointing external valuers; and
regulatory reporting under AIFMD.
Call for Input
Three New AIFM Thresholds
In the Call for Input, the FCA proposes new categorisations for AIFMs relating to their AIFs’ aggregate net asset value (NAV) (rather than the AUM) of their funds. This metric should be friendlier for managers on the basis that the NAV takes also into consideration the firm’s liabilities and is closer to the “actual value” of the firm, instead of purely considering the value of all assets of the firm.
The Call for Input proposes three divisions and the ability to opt-up to a higher category:
1. Small firms (NAV of £100m or less)
This category of firms would be subject to essential requirements to ensure consumer protection and will “reflect a minimum standard appropriate to a firm entrusted with managing a fund.”
2. Mid-sized firms (NAV more than £100m but less than £5bn)
This category of firms would have a comprehensive regulatory regime that is consistent with the rules that apply to the largest firms, but with fewer procedural requirements. This should, it is hoped, result in the regime for mid-sized firms being more flexible and less onerous than for the largest firms.
3. The largest firms (NAV of £5bn or more)
This category of firms would be subject to rules that are similar to the current full scope UK AIFM regime but tailoring the rules to specific types of activities and strategies. The FCA also intends to simplify AIFMs’ disclosure and reporting requirements.
Other Key Points
Additionally, the Call for Input also considers the following points:
new rule structure for UK AIFMs managing unauthorised AIFs; and
tailoring the rules to UK AIFMs based on the activities they undertake – for example, differentiating between venture capital firms, private equity firms, hedge funds and investment trusts – and their category.
What This Could Mean for UK Asset Management
Driving economic growth is a fundamental point of the current Labour government’s agenda and can be seen through the Proposals. This is also one of, if not the, first time that the UK government and HMT have taken advantage of and embraced Brexit to deviate from the retained EU regulations in an effort to strengthen London as a finance hub.
While the rules relating to Undertakings for the Collective Investment in Transferable Securities (i.e., EU and UK mutual funds, known as UCITS) are unaffected by the Proposals, the Proposals suggest a significant rethink of the UK asset management framework. The Proposals could reduce the regulatory burden on many UK AIFMs, which should be a great benefit to the UK asset management industry post-Brexit. The Proposals therefore focus on emerging and smaller AIFMs in a bid to provide an environment where such firms can continue to grow, without restrictive administrative and regulatory burden.
We expect that this regulatory shift will be welcomed by the market as it has been a complaint for a long time that the current UK AIFMD regime has had too broad of an approach to apply to differing business models.
The Call for Input and the Consultation close on 9 June 2025. The FCA intends to consult on detailed rules in the first half of 2026, subject to feedback and to decisions by HMT on the future regime, while HMT intends to publish a draft statutory instrument for feedback, depending on the outcome of the Consultation.
The Call for Input and the Consultation are available here and here, respectively.
Leander Rodricks, trainee in the Financial Markets and Funds practice, contributed to this advisory.
Mergers and Acquisitions in Australia in 2025
A Recap: Expectations for 2025 Versus Reality to Date
2025 began with optimism that mergers and acquisitions (M&A) activity would continue to increase this year. In Australia and globally, 2024 saw the value of M&A activity increase on the prior year, with many surveys recording cautious optimism for increased deal flow in the year ahead across sectors and regions.
The key drivers of the expected upturn in M&A were the following:
Record levels of dry powder in private capital and private equity (PE) hands.
An expectation of further interest rate reductions.
The benefits of reduced regulation—cutting red tape was a mainstay of the policy promises of many of the political parties elected in 2024’s election cycles around the globe.
Greater political certainty following the unusually high number of elections globally in 2024.
Hot sectors, including technology, especially digital transformation, and artificial intelligence starting to deliver (or not) on its transformative promise, energy transition and financial services.
However, Q1 did not deliver on these early promises in the manner expected. In the United States, the expectations of greater certainty that dealmakers looked forward to because of single-party control of the White House and both houses of Congress was tempered by a lack of clarity on implementation.
Whilst directionally it remained clear through Q1 that significantly higher tariffs will be imposed by the United States on imports from many countries in addition to China, the extent remained unpredictable and the real motivations for introducing them uncertain. Similarly, whilst the new administration’s efforts to remove red tape were eagerly anticipated by many, the pace and extent of executive orders has surprised and is leading to widespread challenge, again undermining certainty.
Citing productivity and wage growth concerns, the Reserve Bank of Australia indicated at the end of March that further target rate cuts were unlikely in the near term.
Then the US “Liberation Day” tariffs were announced on 2 April, and the hopes of a more stable economic and political environment for M&A in 2025 were confounded. The sharp declines in global market indices immediately following their announcement is testament to the significant underestimation of the scope and size of the tariffs initially announced. Pauses on implementation, retaliatory and further tariffs, as well as bi-lateral tariff reduction negotiations, are set to continue to bring surprises for some time. Market sentiment will continue to decline as recessionary fears abound.
Meanwhile, Australia is gearing up for its own federal elections in May 2025, and economists currently predict that interest rate cuts of around one percentage point (in aggregate) are likely over the next 12 months, with the first cut predicted in May.
So, what for M&A in the balance of 2025?
Predictions
Trade Instability
In terms of the political forces shaping Australian M&A, Australia’s federal elections have already been trumped by US tariff announcements.1 We are at the start of the biggest reworking of international trade relations in over a century. With only 5% of our goods exports going to the United States, and (so far) the lowest levels of reciprocal US tariffs applied to Australia, the direct impacts to Australia’s economy are likely to be far outweighed by the indirect effects of the tariffs applied to China and other trading partners. Capital flows, including direct investment, must shift in anticipation of and in response to these changes, but forecasting the impacts on different sectors and businesses (and their effect on valuations) will remain complex for some time, weighing heavily on M&A activity until winners and losers start to emerge.
Foreign Investment
With a weak dollar and a stable political and regulatory environment, Australia will continue to be an attractive destination for inbound investment, not least in the energy transition, technology and resources sectors. Rising defence expenditure around the globe, and AUKUS, remain tailwinds for Australian defence sector investment. We expect further increases in Japanese inbound investment driven by their own domestic pressures. However, a report prepared by KPMG and the University of Sydney2 pours cold water on a further strengthening of interest from Chinese investors, despite the 43% year-on-year increase in 2024, citing Foreign Investment Review Board (FIRB) restrictions on critical minerals and, more generally, a move toward greater investment in Southeast Asia and Belt and Road Initiative countries.
FIRB
Last year, FIRB made welcome headway in shortening its response times for straightforward decisions. The recent updates to FIRB’s tax guidance and the new submissions portal are likely to require front-loading of the provision of tax information by applicants, which should further support a shortening of average approval times. These changes are welcome, as is the introduction of a refund/credit scheme for filing fees in an unsuccessful competitive bid. Whilst these changes will not affect the volume of M&A, they may well facilitate an increase in the speed of execution of auction processes.
Regulatory Changes
Whilst we do not expect the outcome of federal elections to be a key driver of M&A activity in 2025 overall, the slowing of FIRB approvals during caretaker mode and the potential backlog post-election will lead some inbound deal timetables to lengthen in the short term, especially if there is a change in government. In Q2, we expect Australia’s move to a mandatory and suspensory merger clearance regime will have the opposite effect. Even as full details of the new merger regime continue to be revealed, we expect some activity will be brought forward to avoid falling under the new regime at the start of 2026.
Larger Deals
Although surveys report an increase in total transaction value in 2024, they also show there were fewer transactions overall. After the rush of transaction activity in 2021 and 2022, and the proximity to the end of post-pandemic stimulus, it is perhaps too easy to characterise the current environment as one of caution. However, market perception is still that deals are taking longer to execute, with early engagement turning frequently into protracted courtship and translating into longer and more thorough due diligence processes. This favours a concentration on deals with larger cheque sizes, a trend mirrored in Australian venture capital (VC) investing in 2024 and which we see set to continue in 2025.
PE
Globally, PE deal volumes surged in 2024, with Mergermarket reporting PE acquisitions and exits exceeding US$25.3 billion and US$18.9 billion, respectively. There remains an avalanche of committed capital to deploy and a maturity wall of capital tied up in older funds to return. It is these fundamentals that are expected to drive sponsor deal activity, in spite of the ongoing global sell-off in equities. PitchBook’s Q1 results for Oceania PE bear this out. Corporates looking to refocus away from noncore operations or requiring cashflow will continue to find healthy competition for carve outs among PE buyers, and an increase on the relatively low value of PE take-privates in Australia in 2024 is predicted. Family-owned companies with succession issues are also expected to provide opportunities for PE buyers. Nevertheless, we expect more secondary transactions, including continuation funds, will be required to grease the cogs in these circumstances.
VC Exits
The rising prevalence of partial exits via secondary sales is shown neatly in the State of Australian Startup Funding 2024 report.3 Whilst those surveyed still rate a trade sale as their most likely exit, secondaries were next and IPOs were considered the least likely. The report notes 59% of surveyed Series B or later founders said they had sold shares to secondary buyers, and 23% of investors said they sold secondaries in 2024. Following the success of secondaries like that of Canva and Employment Hero, secondaries will continue to provide much-needed liquidity to founders and fund investors alike. There is also a recognition of the value of such transactions in advance of an IPO, because they bring in new investors who may be expected to stay invested longer post-float. With valuations settling following their retreat from pandemic highs, PE acquisitions of Australian venture-backed companies rose in 2024 especially from overseas buyers. With the launch of more local growth funds targeting these assets, we expect that trend to increase.
Footnotes
1. President Trump Announces “Reciprocal” Tariffs Beginning 5 April 2025 | HUB | K&L Gates2. Chinese investment in Australia shifts from acquisitions to greenfield – KPMG Australia3. State of Australian Startup Funding 2024 | Insights