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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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United States | Publication | October 2021
In Chamber of Commerce v. Bonta, in a 2-1 decision, the US Court of Appeals for the Ninth Circuit reversed in part a federal district court's order enjoining the State of California from enforcing Assembly Bill 51. The law had been blocked since shortly after it took effect in January 2020. AB 51 prohibits employers from requiring employees, as a condition of employment, to waive their rights to sue for discrimination, harassment and related claims in court. Termination and other forms of retaliation against employees who refuse to sign the agreements are unlawful. AB 51 does not invalidate existing arbitration agreements.
California officials defended AB 51 against a Federal Arbitration Act (FAA) preemption challenge on the grounds that the FAA covers state laws that invalidate agreements to arbitrate only and does not affect generally applicable state contract law as to consent and the voluntary nature of the parties' conduct before the existence of any agreement. The Ninth Circuit majority agreed, though it did invalidate criminal penalties included in AB 51 that would have applied to already executed arbitration agreements. Those same penalties (including fines and up to six months of incarceration), however, will continue to apply to unsuccessful attempts to enter into arbitration agreement.
In a colorful dissent, Judge Ikuta writes: "Like a classic clown bop bag, no matter how many times California is smacked down for violating the Federal Arbitration Act (FAA), the state bounces back with even more creative methods to sidestep the FAA." She noted the several cases in which the Supreme Court and appellate courts have found California law to preempted by the FAA. She cited Supreme Court authority at odds with her colleagues' decision, noted that the Ninth Circuit has created a split with two other circuits with this decision and predicted that the Supreme Court would again intervene. In her view, AB 51 clearly singles out employment arbitration agreements for unfavorable treatment in violation of the FAA and that (contrary to the California legislature's opinion) even arbitration agreements presented as take-it-or-leave-it adhesion contracts are not inherently non-consensual.
We expect the plaintiff will be preparing a request for en banc review by the Ninth Circuit. Barring further action by the court of appeals, this case presents a compelling basis for the US Supreme Court's intervention.
In light of this decision, employers should tread carefully and consider whether new employment arbitration agreements (even if there is no consequence for employees who opt out) are worth the risk until this AB 51 litigation has concluded.
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Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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On February 2, 2024, the Belgian Presidency of the Council of the European Union confirmed that the Committee of Permanent Representatives had signed the Artificial Intelligence (AI) Regulation, referred to as the AI Act. Approval by the EU Parliament followed on 13 March 2024, and the AI Act is likely to appear in the EU’s Official Journal around May 2024. The AI Act aims to establish a stringent legal framework governing the development, marketing, and utilisation of artificial intelligence within the region, thereby marking a significant advancement in the regulation of this burgeoning domain.
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The EU’s Artificial Intelligence Regulation, commonly referred to as the AI Act, is expected to come into force during the summer of 2024 (the AI Act). The AI Act will be the first comprehensive legal framework for the use and development of artificial intelligence (AI), and is intended to ensure that AI systems developed and used in the EU are safe, transparent, traceable, non-discriminatory and environmentally friendly.
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