Companies often talk about the scourge of the silo, the farming storage metaphor that has come to represent teams or departments that operate on their own. However, with technology transforming virtually every industry on the planet, collaboration across sectors has become essential. Additionally, the COVID-19 crisis has highlighted the crucial role technology, specifically connectivity, plays as the backbone of our business world across all sectors, and once COVID-19 is brought under control or even eradicated, it will prove essential for social and economic prosperity.
Forging links in digital infrastructure projects
Jonathan Dames, a partner at CMS in London, says that his team’s practice traditionally centred on social and economic infrastructure and energy finance, but is increasingly shifting towards digital infrastructure projects, including fibre networks and data centres.
He says that these kinds of projects require close collaboration between traditional projects and project finance lawyers and their colleagues in Technology, Media & Communications (TMC), “We always had crossover, and enjoyed great collaboration with both the Infrastructure & Projects and Energy Sector Groups, for example, but now we are working with the TMC Sector Group much more closely because we are facing regulatory issues and regimes that we have never faced before such as Code Powers, the requirements of the Communications Act and related legislation.
“CMS has extensive infrastructure, energy and telecoms expertise and is able to bring it all together to create the skill set required to deliver long-term project financing to technology-based infrastructure projects.”
Additionally, the funding of digital infrastructure projects, such as the 10,000km EllaLink subsea cable between Brazil and Portugal, demands more complicated financing structures to cover the related risks and create the optimal capital stack to get the best all-in pricing. This has involved using mezzanine finance and vendor financing for construction, with a view to attracting cheaper operational period financing in the medium term. A subsea cable, crossing international waters and landing in multiple legal jurisdictions, is not, understandably, exposed to the same potential threats and perils as a hospital or a conventional power station or a wind farm on a single site. So, not all the usual rules, market norms, legal constructs and standard mitigants necessarily fit for a financing of this type of asset.
Rise of the machines
The CMS Intellectual Property (IP) Group has unsurprisingly been at the forefront of technological innovation, supporting clients in the identification, protection and commercialisation of their IP assets. Tom Scourfield, Co-Head of the group, is based in London and Warsaw, two cities well-known for their technology incubation. He observes, “We are not only seeing an increase in the use of technology in collaboration, but much more frequently, collaboration with technology itself.”
Artificial Intelligence (AI) is a growing area of focus. Patent applications for AI technologies have increased by 170,000 since 2013, according to a recent report by the World Intellectual Property Office (WIPO). In the field of AI patents, there is currently a fascinating debate around the question of patentability of inventions created by AI machines themselves. According to Tom Scourfield, “Beyond patents, we are also seeing an increased use of AI in detecting and monitoring counterfeits and other online brand harms. AI is also being used to supplement and support the analysis of similarities between competing brands, whether in terms of brand clearance or infringement scenarios.”
Whatever developments AI and other innovation may bring, he thinks that one thing is certain, “As IP lawyers, we always have to be forward-thinking, looking to protect and secure competitive advantages for our clients in markets and opportunities that are not even fully established yet.”
Pioneering new products
London Funds partner Christopher Luck sees a real appetite for new types of assets from the funds community. He says that digital technologies are transforming the back-offices of asset managers and are improving the customer experience. Fund managers are becoming better at storing and harnessing data, using blockchain technologies and platforms to make onboarding of know your customer (KYC) information and data protection a more streamlined process. The use of smart contracts is also becoming more prevalent.
Christopher Luck notes that the advent of tokenisation, the process of converting real assets into digital representations (tokens) on a blockchain, has opened up the investment market to a broader range of institutional and retail investors. “By democratising or creating more opportunities for investors, this is providing additional liquidity into a number of sectors, most notably real estate.” He says, “We are seeing tokens at their most advanced in the United States and Asia, and growing in the UK and Europe.”
Understanding new environments
In other more traditional sectors, lawyers are increasingly being expected to provide advice on how to deal with the challenges and opportunities that technology provides.
Mark Ziekman, Co-Head of the CMS Consumer Products Group, says, “In the consumer goods sector, blockchain is making an impact, providing the supply chain and customers with a greater degree of confidence in the provenance of a product and whether it meets key sustainability criteria.”
Customers, particularly millennials, are increasingly demanding information around traceability and auditability to have confidence in FMCG companies, logistics companies and retailers.
Furthermore, Mark Ziekman believes that technology in general has played a pivotal role in addressing widespread business disruption caused by COVID-19, enabling companies to transform their business models. Good examples are restaurants which almost instantaneously changed their business model to provide takeaways and food deliveries. Shops shifted their focus to selling online. These changes will not disappear in the aftermath of the COVID-19 pandemic.
Shifting regulatory landscapes
Regulators continue to face the ongoing challenge of keeping pace with innovation and the new market dynamics it creates. ESG factors have come to the fore in the minds of regulators as well and this thinking is only going to intensify.
Cristina Reichmann, a Bucharest based partner in the CMS Banking & Finance Group, says that regulators are always having to respond to new economic models and public sentiments. She has seen fast disruption in the banking sector CEE, “Romania, for example, has a history of innovation, previously emerging as a major international outsourcing hub and then becoming a fintech centre with a number of unicorns.” She points to agile banking and fintech, which are providing greater access and a broader suite of services to customers, and with this comes regulatory challenges. She says, “There are a lot of compliance aspects to be met and solved.”