Got a training contract interview coming up? Here are six topical issues that you could potentially be asked about, with some insight courtesy of members of BPP’s Commercial Awareness Society.
The Greek debt crisis is a topic that you should absolutely prepare yourself to be quizzed about, particularly if the law firm of choice has a strong UK and European practice. The interviewer has a wide choice of potential questions he could ask you, since this has been a continuing matter springing from the 2008 global financial crisis.
Questions could require some background on the factors that contributed to the debt crisis, and this will aid the interviewee in demonstrating that he or she has followed the news and that they are well aware that Greece’s political landscape has played a major role in this.
Other questions may concentrate on the applicant’s attitudes towards the agreed €86bn bail-out programme: you could be asked for your views on the terms of the agreement, allowing the assessor to see that you are capable of reaching your own well-informed opinions, an attribute most law firms require from a future trainee, while other typical questions could ask you to discuss what this means for both a law firm and its clients.
Below are some guiding example questions, with factors that you may decide to take into account:
‘Tell us briefly the main contributors to the Greek debt crisis. Do you think the austerity measures contained in the bail-out agreement will help to stabilise the Greek economy?’
Greece understated its debts for many years, and this was fully exposed at the outset of the financial crisis. It had been uncontrollably spending on its large welfare state, which included a generous public sector pay and early retirement age. The crisis has been further exacerbated by the mismanagement of successive Greek governments.
The biggest change under a potential third bailout is to the pension system, a main contributor to the crisis, which will finally see an end to the early retirement age. The broad pallet of reforms also includes a food and beverages VAT increase, a corporation tax rise of up to 28 per cent for small companies, and a €55bn asset fund that will help with both recapitalising Greece’s banks and in getting the economy up and running.
It is unlikely that the bailout under consideration will help to stabilise Greece because, as the International Monetary Fund has pointed out, it’s unrealistic to think the €300bn Greece owes to its creditors will be paid back without any debt relief at all. Germany, Greece’s main creditor, should lay off of Greece and allow the country to stabilise itself by forgiving some of its debts, just like Greece forgave its debts.
“There have been grumblings that the Eurozone hasn’t been as supportive to Greece as it should have. What are your views on that?”
We have seen Greece fighting to keep the €55bn asset fund in their country, thus being stripped of its sovereignty, whilst the Eurozone has been exposed as a ‘loan-sharking conglomerate that cares nothing for democracy’.
Nonetheless, the ‘euro family’ has been exposed as a payday lender with harsh terms, and the lack of trust between Eurozone members has been emphasised. Perhaps the UK’s referendum on its membership to the UK will be scheduled earlier than first thought.
How do you think the agreed Greek bailout will affect our clients, if at all, and how could a law firm like ours benefit from the effects of the Greece bailout? Which areas of law could we perhaps see an increase of work in?
You will need to research the particular areas of law of each firm in order to answer a question like this one. If the law firm is strong in international trade, for example, then you will need to consider the capital controls that will remain in place for the time being. This will affect a law firm’s clients, as they may not have received payment for their exports to Greece. This in turn, could increase work in litigation departments. The evidence of improved investor confidence after the agreement had been heard could also mean more deals/transactional work for lawyers.
Be prepared to have an opinion: is this bailout better in the long term, or should Greece have rejected the terms and started from zero by returning to the drachma?
Hogan Lovells, The Greek crisis: threats and opportunities
Shale oil and gas
What is the significance of Shale Oil & Gas within Britain’s energy industry?
With approaching carbon reduction targets and the decommissioning of other power sources, shale gas may be the answer to Britain’s energy self-sufficiency. The UK’s technically recoverable shale gas reserves have been estimated at 26 trillion cubic feet, while recoverable shale oil is at around 0.7 billion barrels.
If environmental challenges can be overcome, it is clear that shale can provide a significant answer to our energy needs, all while reducing greenhouse gas emissions.
What are the legal issues arising out of these developments and how will lawyers be needed?
Legal and environmental issues are currently holding back shale production in the UK. In January 2014, the EU issued a Recommendation to regulate shale gas exploration.
Further, the Department of Energy and Climate Change issued regulations requiring licenses and permits to be obtained before drilling. Planning permission is also aproblem, where any hydrocarbon activities within range of National Parks, or Areas of Outstanding Natural Beauty may be refused.
Lawyers will be required to advise International Oil Companies on these issues, and may be required to advise on matters of compensatory damages, should planning permission be refused after substantial investment.
How do these developments affect UK business?
It is clear that if the legal complexities surrounding shale are solved, shale has the potential to attract major business investment, both domestic and foreign. French company Total has recently invested $47m in UK shale, while other international oil companies such as Cuadrilla and IGas have already begun exploratory drilling.
Clearly, should the UK experience the levels of shale investment such as thatseen in the United States, the sector will create an abundance of new jobs and boost the economy.
To research more on this topic, take a look at…
Ashurst, Clearing the road for UK shale gas
Allen & Overy, Shale gas: do we need evolution or revolution?
Dentons, Shale gale blows on in 2015
Why did China’s stock bubble burst?
The Chinese stock market has fallen by 30 per cent after share prices more than doubled last year. The crash is a result of depressed commodity prices and a hiatus in global trade growth.
There have been many theories behind the cause of China’s stock market crash. One of the main ones is that the China stock bubble was fuelled by speculation which was not based on strong economic fundamentals i.e. when investors buy assets for more than they think the assets are worth, because they believe that they’ll be able to sell at an even higher price.
What effect has the crash had on businesses and investors?
As a result of this slump, 940 companies have now suspended trading on China’s two main indices. Unlike the vast majority of stock markets, many of those trading on China’s stock markets are individual investors instead of banks and pension funds, i.e. more than 80 per cent of investors are individuals. These individuals entered the stock market to vary their methods of managing their money. Almost 90 million people in China hold shares and the average loss since the stock market crashed has been more than £43,000.
What steps can businesses and investors take to mitigate the effects of the crash and how can lawyers assist?
There are few that think the measures that the government has introduced will be successful in combating the effects of the crash. Individuals should consider cutting their losses and selling their shares. Businesses should consider following their competitors and delisting from China’s stock exchanges to protect themselves from further crashes. Individuals can seek advice from their lawyer on how to do this alongside offering alternative investment methods.
Businesses will now need to find other ways of raising finance other than through equity finance such as IPOs. Alternative finance could come from private equity or hedge funds, which in turn may lead to increased M&A when these lenders want to exit i.e. sell their stake in the business – law firms with particular strengths in M&A will directly benefit from this anticipated trend. In addition, crowdfunding is also a potential source of raising finance.
To research more on this topic, take a look at…
Bloomberg View, The psychology behind China’s stock market bubble
National Living Wage
What is the National Living Wage and why was it introduced?
George Osborne announced the introduction of the National Living Wage in the July Budget in a bid to close the widening gap between poverty and wealth. The incentive behind this is to counter balance the increasing cost of living expenses caused by inflation while redistributing the wealth more evenly amongst society. The new National Living wage will come into force in April 2016 and be paid to workers aged 25 and above. Initially, it will be set at £7.20 an hour, with a target of it reaching more than £9 an hour by 2020. Part-time and full-time workers will get it.
Is this a sensible policy?
Arguably yes. With the noticeable pick-up in the economic outlook, the onus is being transferred onto the employers to fill the gap between the living and working wage. Emphasis is now being heavily placed on the ability to work, rather than assisting those who are living below the breadline. It must also be noted that the Budget also included an announcement that corporation tax will be decreased to 18 per cent by 2020 so that businesses can meet the living wage requirements.
Which industries will this affect the most?
For training contract interviews, you’ll need to have an idea on the sectors that will be most affected such as retailers, holiday and leisure companies and hospitality – especially those who rely on cheap labour to cut the costs of their goods or service. A good article to read up on about the implications of increasing the minimum wage is this one from Forbes.
What steps can businesses take to negate the increased labour costs?
A law firm’s clients may have to reduce the number of employees it has, however they will need to consider the impact that this will have on the efficiency of their business and whether that will cause any further loss in revenue.
One possible way for businesses to circumvent this obstacle may be by replacing workers with machinery. Business affected may also want to transfer the cost of labour on to the consumer by increasing its price of service or produce, reducing any additional benefits it provides to its employees, or considering the flexibility of introducing zero-hour contracts.
Also important to think about is the role lawyers would play in the reorganisation of creating a cost effective business structure, the need to draw up new contracts of employment and what the existing employees would be entitled to.
Here are some other useful links:
The Guardian, Should we pay a minimum wage or a living income?
The sharing economy
What is the sharing economy?
The sharing economy is a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations. The rise of this phenomenon has been facilitated by advancement in technology.
How prevalent is it?
The scale of the global drive toward a technology-driven sharing economy can be demonstrated by something as commonplace as booking a holiday – you can exchange your pounds to Euros using WeSwap, book an Uber rideshare to the airport and stay in someone else’s home rented through Airbnb. Despite the convenience, personability and cost-savings these sharing platforms offer to customers, they face a number of legal issues.
Will this trend continue? Are governments supportive of the on-demand economy?
One of the major challenges for the on-demand economy is uncertainty. While Amsterdam may have passed an “Airbnb-friendly law” which permits residents to rent out their homes for up to two months of the year to a maximum of four people at a time (taxes apply), most governments and local authorities have not codified the law in this area. Where no legislation or regulation is in place, there is a higher risk that breaches in local law will result in hefty fines, as was the case in Barcelona where Airbnb was fined €30,000 in 2014 for breaching local tourism laws.
Therefore, sharing platforms need to be aware of and keep up-to-date with local legislative and regulatory changes and then adapt their terms and conditions accordingly. By way of example, as of 2014, Airbnb began charging and collecting hotel taxes to all reservations made in San Francisco to ensure compliance with the local laws.
The sharing economy has not only disrupted the market but is also disrupting the law. With the need for more legal certainty and regulation that is fit for purpose in relation to the way that sharing platforms operate, it is possible that many governments will follow in Amsterdam’s footsteps by adopting a policy of “tax to share”.
To research more on this topic, take a look at…
The Guardian, AirBnB’s legal troubles: what are the issues?
UK Governement: Unblocking the sharing economy: an independent review
Entrepreneur.com, Latest news about the sharing economy
Why are counterfeit goods such an issue?
Businesses in the fashion industry invest every year great part of their revenues in building their brands and reputation in order to establish themselves in the market and associate their brand and companies with the production of high quality products.
However, counterfeit products are usually made of cheaper materials, using the names and logos of more reputable companies for their own financial benefit. This leads to diffusion of a brand. When a brand has been built to achieve certain status and image of quality and exclusivity or being associated to a way of living, its reputation in the market can be severely affected when inferior products are being used and sold on a larger scale, which can make the brand less attractive to its target customers.
What are the factors behind this becoming a more prominent phenomenon?
Counterfeit goods have become a greater issue for businesses due to the advances in technology and manufacturing, which has facilitated the production and distribution of all sorts of products all across the world, taking advantage of the constant customer demand.
E-commerce has been the most common and frequent means to sell counterfeit goods. The internet has provided an easy way for customers to access websites that provide these allegedly authentic goods sold by companies which pretend to be authorised retailers for the brands they are selling.
It is now estimated that approximately 20 per cent of the products sold online are actually fake, with China being the main country of origin as it is estimates that it produces 70 per cent of counterfeit goods. Retailers, such as Karen Miller and Salvatore Ferragamo, are now working closely with online providers to fight and stop copy-cat products.
Websites such as Alibaba, Ebay, WantThatDress or Etsy have been accused of knowingly selling counterfeit goods and companies are seeking injunctions due to trademark infringement and courts order to stop the selling of these products.
Are there any other concerns apart arising from such goods?
Yes, there are health and safety issues that inferior products can cause to the public. This is due to the fact that most counterfeiting companies do not take the quality control tests that legit companies are required to pass and customers end up paying money for products that do not have the quality standards they are investing in. Due to the lack of quality control tests, the counterfeit goods may be made using material that would be harmful when worn.
Is anything being done to reduce this phenomenon?
In the last years, the authorities have been more involved in identifying and stopping counterfeiting.
The offences it involves usually include financial fraud and trademark infringement. There are various actions that can be taken against companies that are found guilty of selling counterfeit goods which include: imposition of large fines, injunctions, orders for immediate cease in production and distribution.
To research more on this topic, take a look at…
Wigs and Gowns
- Fakes are never in fashion
- Warning on dangers of counterfeit GHDs as Manchester police seize counterfeits
- Karen Millen blocks £2.6m worth of counterfeit sales
- Lipsy resolves counterfeit case
- Salvatore Ferragamo intercepted 90,000 counterfeits in 2014
- Alibaba rejects Kering’s counterfeit lawsuit
The Style of the Case
Sheila Nsue Nfono