With the wildfires afflicting again the country, and a general election in early October, the Portuguese cabinet launched two programs to combat the climatic changes and their negative effects on the environmental, social and economic domains: Program of Action and Adaptation to Climate Change (P-3AC) and Program of National Strategy of Active Cycling Mobility (ENMAC).  

In the P-3AC program, the Portuguese Cabinet established as priority action lines, the prevention of rural fires, the improvement of soil quality, water management and urban vulnerabilities, reserving, to the effect, a financial package of 372 million euros to be spent up to 2020.

This package includes (i) 129 million euros to implement urgent measures, such as planting fire-resilient forest species, promoting the reduction of fuel biomass through intermunicipality structures, reconfiguration of telecommunications networks in forest areas and the installation of a communication system to alert the rural populations; and (ii) 127 million euros to make water consumption more efficient, for instance, favoring the conversion of crops to less water-demanding species, varieties and cultivars or promoting the installation of rainwater harvest system to support the industrial activity and improve the water savings.

The Portuguese Government forecasted a total spending of 560 million euros in coastal protection until 2030, to promote a more resilient coastline to erosion and coastal flooding and the removal of structures or buildings in high risk zones.

In parallel, the ENAMC program puts in place active mobility strategies in large urban areas for the 2020-2030 decade, with the intent of reducing the culture of individual transport.

Recognizing the health, traffic, economic and environmental benefits brought by cycling mobility, the program targets having 10,000 km of cycle paths until 2030 in the urban areas and creating an awareness program to universalize this mode of transport. Among the objectives of this program we can find:

  • having cycling as extracurricular subject in the schools;
  • building an articulated system of cycling stations;
  • changing the Road Law to increase favorable and safer conditions for the users of this cycling vehicles, for example, creating more strict rules about the behavior in the cycling paths and assessing the chance of attenuation of the injured person's guilt as a cause of exclusion or reduction of compensation in the event of objective liability.

In addition, the Labour Law will be amended to improve conditions, in the medium and large companies, for workers to use bicycles, such as the right to specific space and bike lockers.

 

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2019-07-25
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António de Macedo Vitorino

Legal 500 - Interview with António de Macedo Vitorino

Senior Partner António de Macedo Vitorino talks differentiation and success in today's market, forward-thinking strategy and the true meaning of 'adding value' to clients.

 

1) What do you see as the main points that differentiate Macedo Vitorino & Associados from your competitors?
Attention to the details, clarity, looking one step ahead. Generally, firms will tell you that they can deliver the best service and that they are commercially aware, but only a few can actually deliver. This is because any firm is only worth what their lawyers are capable of doing. If you have a talented team and the right business procedures, you can excel. For us, the key elements in service delivery are the attention to the quality of our processes down to the smallest points, not overstepping your role and to understand and really listen to your client. Not many firms do that. We cannot pretend that we are the best, but we like to pride ourselves in not falling short on our promise to clients: clarity, straight to the point, no legal jargon.

 

2)  Which practices do you see growing in the next 12 months? What are the drivers behind that?
Data protection, M&A, banking and real estate. These are the areas we are seeing expanding in the market. We expect growth to continue despite the uncertainty that is felt caused by Brexit and US/China tensions. The real estate boom seems close to its end but before slowing down there will be a period of continued growth. There are several projects in the pipeline that will keep the economy and law firms busy for at least the next 12 months. On data protection and privacy, we have only scratched the surface. The use of personal data for client profiling and service and product customization will be the next big thing. Trading of data and b2b services using personal data will continue to grow. So, we see this as one of the big market opportunities for the next 12 months and beyond. Transactional services in M&A and banking are also expanding. We are now around pre-crisis levels, but we expect this to improve.

  

3) What's the main change you've made in the firm that will benefit clients?
Updating our internal IT systems and moving to an extremely secure cloud system. Clients don’t see it but it is changing the way we collaborate, the way we produce documents with the changes being made simultaneously by many lawyers working in the office, from home or anywhere where they have an Internet connection. We work faster and better. It’s a revolution as big as the use of email in the nineties.


4) Is technology changing the way you interact with your clients, and the services you can provide them?
Yes. We can now share workspaces with clients and bring them in on the document creation process. Sharing and working on documents in a single point of access has already changed the way we do due diligence work. We are now a long way from the days we had to go to a physical data room to look at documents and take notes. You can access virtual data rooms. That has been a big change, although people seem not give it too much credit.
Sharing actual work spaces and promoting collaborative working will more than double the speed at which you can negotiate and produce a contract, a legal opinion or a court brief.
We are now doing it internally with extraordinary results. We need to bring in the client and other stakeholders to the document production process. We will gain in the speed at which we work and also in the quality of the end product. The technology is available. We only need to start doing things in a different way. In the next ten years, collaboration tools and systems will be the norm.
In 5 to 10 years Artificial Intelligence tools will also be used on a day-to-day basis, but we are not there yet.

 

5) Can you give us a practical example of how you have helped a client to add value to their business?
Tough question. We like to say that if we deliver a good service, we have added value to the client’s business. 
Many times, it’s in the small stuff that you add real value. Picking up the phone and answering a question can lift a weight from the client’s shoulders and that is what we are here for. 
We are not stars doing miracles, but ordinary people who can do their job well.

Sometimes, doing your job well can have an outstanding result. For instance, on one occasion we were working on a financing and we were able to negotiate two comfort letters that made the difference in the pricing of the loan facility to fall to less than 20% of the initially agreed price. Because of that the entire structure of the transaction changed, new lenders were brought into the deal and the clients and the borrower were very happy with the result.

But we still say that our job is that attention to the detail and not trying to reinvent the wheel. Small things may make a big difference. We add value if the client tells us that we did our job well no matter how small or how important that particular assignment was.

 

6) Are clients looking for stability and strategic direction from their law firms - where do you see the firm in three years’ time?
In many instances the lawyer’s role is more that of a counsel. Clients want lawyers’ reassurance that the desired actions are suitable from a legal stand point, giving them a stable base for conducting business. 
Clients also seek advice or even the validation of strategic decisions. 
Counseling is at the root of a lawyer’s traditional role and it seems increasingly important as the forms of delivery of legal services become more commoditized and are taken over by legal processors and the legal arms of accounting firms. 
We expect to continue the same path we have to date but also to bring more disruptive solutions to the market. We will continue investing in people, processes, technology and our clients.

 

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2019-07-24

Macedo Vitorino & Associados launched a new edition of its «Why Portugal» report today. 

«Why Portugal 2019 - Doing Business in Portugal» contains the main information needed for anyone who wants to invest in Portugal: the creation and organization of companies, partnership contracts, labour law, tax law, intellectual property, real estate and litigation. 

Together with the investor's guide we publish the «Why Portugal 2019 – How does Portugal compare?» report, which shows the situation of Portugal in comparison to other countries according to information from international sources such as the World Bank and the Economic Forum Comparative tables on the most important aspects to be taken into account by investors when choosing the best places to invest. 

"We are delighted to have been able to review and update the information provided by our investor guide. These reports represent the effort of many people and demonstrates a remarkable organization capacity that shows the way we work," says António Vitorino, the partner in charge of the" WhyPortugal "project since it started off in 2013. 

"After several years of crisis, during which it was difficult to explain the advantages of Portugal both to foreigners and to Portuguese, today it even seems easy to praise Portugal," added António Vitorino. "But we must always try to improve. The competitiveness of an economy always depends on its ability to innovate, to correct the worst and to improve the best. Competitiveness is a race: we cannot stop." 

This guide reviews the main aspects to be considered by foreign investors looking at Portugal as a place to invest, such as how to set up of a businessgovernment incentivesemployment rulestax systemintellectual property protectioninvesting in real estate and judicial system. 

Learn more at «Why Portugal 2019 - Doing Business in Portugal» and «Why Portugal 2019 – How does Portugal compare?» 

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2019-07-23

MV Conversation with António de Macedo Vitorino

In the latest version of their investment Guide ‘Why Portugal’, Macedo Vitorino gives an insight into the realities and legalities of investing in Portugal, answering the key questions any potential investors need to know.

Since the 90s, Macedo Vitorino has made it a priority to impart pertinent information to potential investors in Portugal. Initially this began as a paper covering business forms, employment and tax issues, but since 2013 this has morphed into the ‘Why Portugal’ Guide. This go-to online platform for foreign investors into Portugal answers key questions and addresses fundamental issues investors need to take next steps in their decision-making process.

What started as an informative paper sowed the seeds for an idea that came into fruition in 2013, explains António Vitorino. “There were a myriad of investment guides out there, usually compiled by investment agencies and law firms, but we wanted to create something that took this to the next step, not just information on the law or stereotypical ‘attractive qualities’ of Portugal itself, but something practical and objective that investors could act on.”

Macedo Vitorino took the initiative to create something that looks at things from the investor’s point of view, tackling the actual realities of setting up or investing in Portugal, what investors can and can’t do, and their options and limitations. “For example, if you’re looking to start a business here you need to know how long it takes to create a company, how rigid the employment rules are, what your tax obligations will be and what are the practical steps to buying real estate in Portugal. These are just the basics.”

But when the «Why Portugal Guide» began in 2013, it was a time when all bets were on as to whether Portugal would remain a part of the Eurozone or even in the EU, says António Vitorino, and people said it was one of the worst places to invest in Europe. “So, it was logical for us to also touch on the actualities behind the country’s legal, political, social and economic systems as well as how Portugal compares against the rest of the EU. Investors need a full informed picture to be able to make their investment strategy.”

This comparison is a key part of the decision-making process for investors and it’s important to have this information from the start. Aside from the legalities, you need to know the type of country you are looking to invest in, he explains, especially if you are looking for the best route into the EU or you are coming in from a country outside the EU and maybe not familiar with the landscape and legal system.

“How does the judicial system actually work? How does Portugal compare to the rest of the EU for red tape and bureaucracy? These are crucial questions that need substantiated answers,” says António Vitorino. “That’s why we looked for credible international sources, such as the World Bank’ Doing Business Report, the World Economic Forum's Global Competitiveness Report and relevant EU rankings, so investors can see Portugal’s historic position from objective sources with the statistics to match.”

They also help the investor by interpreting that data into practical points that they can use to build a realistic picture of where Portugal stands. For example, in 2012 Portugal was number one in Europe for starting a business and a pioneer in the world for online incorporation of companies. “Of course, some 10 or more countries have now caught up, and now we’re not number one but still high in the rankings. But what the investor really needs to take from this is that it’s quick and easy to incorporate in Portugal,” says António Vitorino. Another example relates to resolving disputes. “We alert investors that realistically it can take up to two years to resolve a dispute in the judicial courts, which puts Portugal somewhere in the middle of the EU ranking tables, lower than the benchmark countries. While this is not ideal, it is something we’re working to improve, and investors just need to be aware to avoid any surprises.”

The key takeaway to highlight for any investor, however, is the openness of the Portuguese economy to foreign investment, with the country ranked in the top three in Europe according to a study published by the European Central Bank, which states that Portugal has “virtually” no barriers to foreign investment. “We don't have barriers to foreign investors as other countries, political or economic, and no barriers derived from nationality or any policy of protecting or favouring local companies,” says António Vitorino. “This is key, because it distinguishes Portugal from the rest of the EU in what is otherwise a pretty level playing field for investors.”

‘Why Portugal 2019’ is available in PDF and online at https://www.macedovitorino.com/why-portugal and has dedicated sections covering investment incentivesresidence permitsstarting a businesstaxreal estate and disputes, as well as a lot more information on corporate law, additional answers to employment questions and diving deeper into questions of IP.

If you need further clarification or help with any of the issues involved, please do get in touch at https://www.macedovitorino.com/contactos/.

 

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2019-06-25
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João de Macedo Vitorino

MVConversations with João Macedo Vitorino

Recent changes to the law and an upcoming auction hope to take Portugal from Europe’s lowest solar user to a being considerable presence in the market.

The future may be getting brighter for Portugal’s solar industry. The country’s as yet unexploited sunny climate is being put to market next month with its first ever solar auction for 1.4 GW in four key regions - Portugal’s largest ever solar energy auction. The auction comes on the back of recent reforms to the Energy Law addressing setting up the way forwards for increasing the energy grid capacity.

There has, however, been criticism and a worry that the longer-term costs are being compromise for hitting short-term goals, says João Macedo Vitorino. “While the auction system itself has been discussed at government level, it has never been discussed with the market itself. Certain issues such as the impact of reducing the return on investment in a very competitive European market, long-term costs to consumers and clarity on the actual capacity available on the grid remain unclear.”      

Until recently, solar project licences were sought directly from DGEG, the Portuguese Energy Authority. Without a clear view of the actual capacity available on the grid, investors would go down the road of working on obtaining the production licence, getting environmental and geology reports, etc, but in the end there was either no capacity or the authorities simply said ‘no’, he explains. “This risk just wasn’t attractive for investors.”

Up until recently the costs of implementation were high and wouldn’t be feasible at market prices. “To sell energy at that price on the market wouldn’t get a return on an investment,” says João Macedo Vitorino, “but over the past two years, prices of solar panels has gone down, projects at market value are viable and the political will is there to get things moving with a new regime.”

From now on, to apply for a licence you first need a grid connection reservation title. This can be done in one of three ways. First, enter into a direct contract with a grid operator where there is available capacity in the grid; second, where there’s no such capacity, a direct contract with a grid operator but with the producer assuming the costs of connection to the grid; and finally through a Government auction, such as the one next month.

These positive changes to the regime have had a knock-on effect for current projects with licences or in the process obtaining them. “The Government has effectively cancelled these projects and they need to resubmit to the auction,” explains João Macedo Vitorino, “which means running the risk of refusal, so we are likely to see some court cases cropping up in the future”.

While next months’ auction has the potential to increase the number of projects to be connected to the grid, one concern is that successful bids are to be awarded on the basis of the lowest tariffs. While an aggressive  fixed tariff (starting at 20% below the market price as of today) means short-term savings for consumers, should energy prices go down the fixed tariffs granted in the auction will remain the same, adding a substantial advantage for the producers but imposing high invoices for the consumer.

Comparison can be drawn with what happened with the Portugal’s  small hydroelectric projects auction for capacity back in 2010. Bidders made offers for tariffs that couldn’t sustain the investments that the projects needed, projects didn’t go ahead, and no further auctions took place, he explains. “To hit the new 5GW to 6GW solar targets set by the Government, we would need at least 3 or 4 auctions to take place, which may not be feasible if conditions remain as they are as they may not be enough to attract investors.”

An alternative to this auction system would be a free market approach where all stakeholders have clarity on the grid capacity available today and in the near future. This would mean they could plan in advance where to invest, with a grid connection being granted on a simple principle of first-come first-served. While there are numerous viable locations for solar projects, such as in the Alentejo region, many do not have grid capacity access in their vicinity. To cover the distance needed to put these locations on the grid requires substantial investment, driving up the costs of the project itself, adds João Macedo Vitorino. “This is something that could deter investors when coupled with auction conditions designed to reduce project profitability. Although encouraging costs sharing between grid operators and developers could be one way to bridge this gap, as laid out in the revised Energy Law, investors will not be attracted to auctions in areas of low grid density.”

Ultimately, while elements of the new legislation and auction system do address difficulties brought up by market players, the overall solution and architecture has never been validated by those same market players. “While the potential is there to put Portugal on the solar map, the Government is trying to force the market players to share profit margins with consumers, which will most likely result in delaying the deployment of solar energy output in Portugal,” explains João Macedo Vitorino. Unless these conditions change for future auctions, we run the risk of history repeating itself and either failing to get the investors needed to increase grid capacity or see consumers bearing the costs in the long-term.

For anyone interested, the tender documents and maps of grid availability can be accessed online at https://leiloes-renovaveis.gov.pt/ and bidders registration is open until 7th July.

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Last 14 June of 2019, the European Parliament published new regulations aligned with the long term goals for full integration of the EU energy market.

Regulation (Eu) 2019/941 Of The European Parliament And Of The Council, of 5 June 2019 on risk-preparedness in the electricity sector, repeals the Directive  2005/89/EC and establishes new rules concerning the storage of energy to guarantee its in case of a crisis. This Regulation also uniformizes the obligations of the grid operators on this regard, specially, with the need of making plans for contingency periods and new forms of cooperation among the State Members.

Regulation (Eu) 2019/942 Of The European Parliament And Of The Council, of 5 June 2019, redefines the legal framework of the European Union Agency for the Cooperation of Energy Regulators (“EUACET”). EUACET will issue opinions and recommendations to the players and national agencies and submit guidelines on energy policy to the European Commission agency aiming to further involve all Member States regarding in energy cooperation within the EU.

Regulation (EU) 2019/943 Of The European Parliament And Of The Council, of 5 June 2019 addresses the two main goals for the decade: decarbonize the sector and generate cleaner energy. It includes thresholds for CO2 emissions of each electric facility that generates power using fossil sources.

Directive (EU) 2019/944 Of The European Parliament And Of The Council, of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU aims to confront the new challenges to the energy market  posed by smart grids and the smart metering.

 

 

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2019-05-23
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Cláudia Fernandes Martins

We are still waiting…

Portugal has not yet approved a local law implementing the General Data Protection Regulation (GDPR).

On March 2018, the Portuguese Council of Ministers presented a bill to the Portuguese Parliament. The new law was supposed to come into force on the same application date of the GDPR, 25 May 2018. In May 2019, we are still waiting for the bill to be voted.

During the last year, the Portuguese GDPR bill was criticized by many, including the Portuguese supervisory authority, the Data Protection Authority (Comissão Nacional de Proteção de Dados - CNPD), which had no say on the drafting of the bill.

Among other issues, the Government’s proposal replicated several provisions of the GDPR and, in some cases, contravened the GDPR. For instance, the bill proposal stated that the local law would apply to “the processing of personal data of data subjects resident in Portugal”, instead of referring to the data subjects who are in Portugal, irrespectively whether they are (or not) resident in Portugal, which limits the scope of the law and leaves unprotected non-residents that happen to be in Portugal.

After the discussion period and a review by Portuguese Parliament members, the territorial scope provision was amended to comply with the GDPR. The current version also shows some effort in avoiding useless duplications of the GDPR text.

The exemption of fines to public entities was another provision receiving a strong disapproval by the Portuguese supervisory authority. In this regard, Article 83/7 of the GDPR states that “(…) each Member State may lay down the rules on whether and to what extent administrative fines may be imposed on public authorities and bodies established in that Member State.

In Portugal, there is no tradition of exempting public entities from fines. There is no material reason for a different treatment between public and private entities. In fact, the proposed exemption gave many public entities the idea that controls would not apply to them and that they would have more time to implement the GDPR. As a consequence, the public sector, along with the SMEs, have been delaying implementing the GDPR.

In the meantime, answering to the public criticism, the Portuguese Parliament proposed a compromise. In the current draft bill, the exemption will be applicable under justified grounds on a case by case basis by the Portuguese supervisory authority and for a maximum period of three years. All the other rules, including corrective GDPR measures, will apply to public entities.

However, this compromise solution is still considered a sensitive matter. If this provision was approved, it is very likely that the Portuguese supervisory authority will apply the exemption in very exceptional cases only.

The Portuguese bill also includes specific provisions on the Data Protection Officer (DPO), including secrecy and confidentiality duties, tasks, and which public entities are obliged to appoint a DPO.

In general terms, the GDPR establishes that public authorities are required to appoint a DPO. In order to determine which public entities have to fulfil this obligation, the Portuguese GDPR bill provides a list of public entities, including the Portuguese State, the Autonomous Region of Madeira, the Autonomous Region of Azores, municipalities, independent supervisory authorities, public institutes, public law schools, State, municipal business sectors and public associations.

Between the earlier version and the latest one, there are two major differences. Portuguese parish councils (juntas de freguesia) with more than 750 inhabitants are obliged to appoint a DPO. Earlier, the appointment of a DPO was decided by each parish on a case by case basis.

There is also another change, which may have a significant impact on the State business sector (sector empresarial do Estado «SEE»): while the first proposal provided that only the public undertakings (entidades públicas empresariais – «EPE») were obliged to appoint a DPO, the new version includes all public business entities of the SEE, all of them must have a DPO.

The Portuguese bill also provides the following:

(a) GPDR codes of conduct or certification mechanisms must be approved by a certification body recognized by Instituto Português de Acreditação (IPAC, I.P.) and in accordance with the requirements established by the Portuguese supervisory authority. As far as we know, no codes of conduct or certification mechanisms about GDPR are in place until now;

(b) In relation to the offer of information society services, the Portuguese bill establishes that data processing of a child above the age of 13 years will not require consent given by the parents. Although Portuguese law usually adopts a conservative approach on minors’ rights establishing the age of 16 years, as a reference age, the Portuguese bill opted to follow the majority of the Member States, which consider the age of 13 years old for information society services;

(c) The Portuguese bill provides for specific rules on the processing of employees' personal data in the employment context, in particular as regards the conditions under which employees’ personal data may be processed on the basis of the employee’s consent, as well on the use of video surveillance systems and employees’ biometric data. Generally, the employee’s consent is not a lawful basis for employees’ data processing if: (i) from the employee’s data processing results a legal or financial advantage for the employee; or (ii) the data processing is necessary for the performance of the employment contract. Video surveillance systems may only be used against employees in the scope of a criminal lawsuit. The use of employees’ biometric data is only lawful for purposes of employees’ attendance and access controls to the employer’s premises.

(d) The processing of genetic data and data concerning health rules are subject to the principle of “need-to-know” the data. Data controllers are obliged to give notice to data subjects of  all accesses to their personal data concerning health. This means that data controllers will have then to implement such traceability mechanism;

(e) No data retention deadlines are applicable for data concerning Social Security contributions for retirement purposes;

(f) Except for willful cases, the starting of a misdemeanor proceeding by the Portuguese supervisory authority must be preceded by a warning for the remedy of the breach within a reasonable deadline. For very serious infringements, the fines thresholds are divided into three different recipients categories: (i) €5,000 to €20,000,000 or 4% of the annual turnover, for large companies; (ii) €2,000 to €2,000,000 or 4% of the annual turnover, for SMEs; and (iii) €1,000 to €500,000 for individuals. Half of these amounts are applicable in case of serious infringements.

In some matters, the Portuguese GDPR bill is silent. For instance, the bill does not establish specific rules applicable to private life data, including solvency and creditworthiness. This data was considered similar to sensitive data (now, special categories of data) under the former Portuguese data protection law.

The Portuguese GDPR bill also does not contain specific provisions about the relationship between the GDPR provisions and the access right to public documents, nor private enforcement rules in relation to the decisions taken by the supervisory authority.

Moreover, the Portuguese bill surprisingly establishes a «standstill» period for new consents, entitling data controllers, either private or public entities, to obtain new data subjects’ consents within an additional period of six months from the effective date of the local law. This provision, which remains unchanged in both versions of the bill, clearly contravenes the GDPR, which is directly applicable in all Member States, including Portugal. The GDPR does not include any special rules on consent matter, which allow Portugal to set a different deadline beyond 25 May 2018. Therefore, it is expected that this provision is not incorporated into the statutes of law.

Although some sensitive issues still remain, the final text should be voted and approved by the Portuguese Parliament’s members during next month.

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2019-05-07
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António de Macedo Vitorino

MVConversations with António Macedo de Vitorino

As Artificial Intelligence becomes less of a futuristic prediction and more of a realistic companion, one question keeps cropping up: Will the legal profession be taken over by machines?

With opinions on the subject ranging from alarmist to utter denial, a more realistic approach is finding the balance between embracing what Artificial Intelligence (AI) has to offer without jumping the gun, according to António Macedo de Vitorino. “I believe my generation is not in any danger, we’re talking about future-generation problems that are well beyond our current horizon.”

With every step we take, he explains, the landscape of course increases. But as AI systems relative to the legal market are still very much at their infancy, we are a very long way to achieving an AI that understands cultural, legal and linguistic nuances and achieving the same level of awareness and rationale as a human being.

We also need to be careful in how we define ‘AI’ itself, he says. “Are these new systems really AI or just algorithms? Yes, they facilitate research, collating and organising information, but do they learn and evolve yet? They are still heavily reliant on human input, so while they have the potential to streamline the provisions of legal services, the type of leaps forwards that many are talking about are still a long way off.”

 

So what does AI mean for lawyers, now and in the future?

AI is definitely making moves into taking away some of the routine ‘heavy lifting’ work, from due diligence to contract review, work that currently requires a large number of bodies and a great deal of time, says António Macedo de Vitorino. “In the systems I've looked at for law firms, they are not making near the same progress as you see in Google AI for example. It's still very mechanical key word search, key terms search, etc., and the end product is all about cutting down on admin, but nothing truly to do with legal work.”

One of the things that is having an effect on the way lawyers work is having systems that assist in bridging the language barrier and facilitating the internationalisation of transactions. “A great deal of work here at the firm is transnational, so we need documentation to be available in all the relevant languages,” he explains. “This is something that used to be an enormous undertaking for any law firm, due to the size of the documentation and the speed at which they are usually needed. You used to have huge teams working around the clock, but with the advent of automated translation systems, that work has been cut in half.”

While these automated systems are evolving at speed, and there is the potential in future for the end result to be near perfect, the AI is not yet so evolved as to be able to take into account the legal aspects of a translation, not just in terms of language but in understanding the legal systems and requirements of the respective country’s legal system. “This finite knowledge, interpretation and application is something that can only be provided by a human,” explains António Macedo de Vitorino. “Legal language is like mathematics, it is a language of precision, with fundamental differences in each country, as well as cultural considerations. Every word counts, and legally, an entire contract or transaction can be affected with the incorrect use of a word.”

So while these systems are a huge help in terms of cutting down some of the time-consuming work, they are far from having the necessary awareness to playing an interpretive or advisory role. “You need the involvement of lawyers at the end of the day, because human rationale is not something that can be based on algorithms. And we're only talking here about translating, a relatively simple concept, but even this shows how much margin there is for error.”

 

The business of ‘lawyering’

With the eventual evolution of AI systems, where we will see significant changes is in the actual role of the lawyer. “If we look at current due diligences, contract or evidence reviews, for example, we are talking large numbers of lawyers collating, reviewing and analysing huge amounts of documents,” says António Macedo de Vitorino. “What AI will eventually do is take care of all of that, so you will no longer need the same sort of lawyer that you need today.”

So what will be left for the lawyers? Ironically, as AI takes away much of the grunt and routine work, lawyers will be freed up to be able to concentrate again full-time on the business of ‘lawyering’, he explains. “We’ll see a return to the old days where lawyers truly acted as advisors and legal counsellors, solely helping clients in terms of interpretation, options, strategies and decision-making.”

As much routine work is usually carried out by very junior lawyers or paralegals, the way firms train their junior lawyers will also change, and we may even see the elimination of the role of paralegals. As a consequence we will see smaller teams, a concentration of talent and a streamlining of the legal process, says António Macedo de Vitorino. “It won’t be a question of getting as many lawyers involved as possible anymore, but a focus on concentrated teams of strategic advisors. That’s where AI will make the biggest impact.”

What may come as a surprise to law firms looking to invest in the AI systems of today is that they will have difficulty passing the costs of investment onto the client - the current AI offerings on the market come at a stiff price, he explains. “As with any new tech, when it comes out, people pay a fortune, but as it evolves it gets commoditised and the price drops.  We’re talking software licences, training, etc., of a very new technology. Clients know that five years down the line, as this technology becomes commoditised, it will also get much cheaper.”

So we are just entering the start of the AI evolution. There will come a time when AI will evolve in such a way as to be able to eliminate routine legal work, concludes António Macedo de Vitorino, and we will see lawyers return to a fulltime strategic and advisory role. “But until AI has achieved awareness and rationale at human level, you will always need the involvement of a human lawyer.”

 

Macedo Vitorino & Associados

 

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2019-04-29
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Cláudia Fernandes Martins

MVConversations with Cláudia Fernandes Martins

Collecting, reviewing and then acting up on it – what data actually means for businesses

The hot topic of data protection hit a high note in 2018 with countries and companies scrabbling to ensure proper implementation of the EU General Data Protection Regulation (GDPR). As EU and international businesses struggled to ensure they were in compliance, one big question emerged: how many businesses realised the power of what it was they were actually protecting? “For you to be able to realise the power of data,” says Cláudia Fernandes Martins, “you need to first realize what data actually means”.

Businesses know that data-driven decision-making can have multiple returns, including a better understanding of the circumstances at stake, assessment of alternative options, benchmarking, etc. But she points out that while businesses are very aware that they need to collect ‘data’ and understand it as a strategic asset, many struggle with how to process that into ‘insights’ or take the further step of using it to benefit their business. “This is likely explained by the fact that many do not have a solid governing structure enabling them to use/align data they collect along with their business requirements and goals.”

Younger generations are infinitely more prepared to ride this challenge. Businesses collect their data via a range of sources from mobile communications and smart phones, emails and IoT to YouTube videos, blogs and Skype. “These are tools that the younger generation has grown up with,” says Cláudia Fernandes Martins. “We definitely see a difference between the  understanding of Start Ups and young entrepreneurs versus traditional companies, for whom all this is still very new.”


Not just personal

Many see ‘data’ as just referencing ‘personal data’, but there is so much more, she says. “Business information is data, company secrets are data – businesses cannot lose focus of the wealth of data they have access to every day. While dominating the processing of personal data is an important starting point, businesses need to start investing in data and AI (artificial intelligence) tools to understand how to use all of the data they collect, interpret their insights and then act upon it. That’s where the true value of data is.”

The implementation of the GDPR has certainly brought to light the issue of ‘data protection’, but Cláudia Fernandes Martins finds that many Portuguese companies are still unclear on what actually constitutes ‘personal data’ and falling foul of compliance with the GDPR. “Large companies – retail, health, banks etc. – are in compliance, but there are many small to medium sized businesses that are not. They (or some of them) have implemented formal measures, but in practice there is still the risk that they are not applying them properly.”

In the summer of 2018, the Portuguese Data Protection Authority (CNPD) issued two fines totalling €400 million to the Hospital Barreiro following a data protection audit, for amongst others, failure to respect patient confidentiality and limit access to patient data. This raised fears among many public entities and businesses, she explains, as this will not be a unique case, with predictions for further fines in the near future, especially with new legislation coming into force in Portugal (probably in May 2019) implementing further parts of the GDPR.

Her main question from clients at present, is therefore how to implement the GDPR, which she tackles this with a three-step approach. First, reviewing the current status, then implementing measures, such as privacy policies, reviewing contracts etc, and finally, training, from the top-level down. The benefits of ensuring compliance are being able to make full use of any and all customer data collected, she adds. “This knowledge can enable businesses to better understand their customers, to satisfy their needs and to be able to provide the answers and solutions they require.”


The data evolution

From personal data to commercial and now through to AI, the evolution of data is constantly bringing new challenges. “Organizations will increasingly need to use a range of tools based on algorithms, data and AI – the so-called ADA-based technologies – to strengthen their business relationships with customers,” says Cláudia Fernandes Martins, “which brings with it new issues including about the level of transparency in the use of data algorithms and the responsibility for errors”.

Strategies need to be employed now to ensure not to get left behind. And there is no ‘one-size-fits-all’ approach she adds. “Using company-wide training is a starting point, as well as taking into account ethical core considerations, mainly focused on developing business culture and values and ingraining them through every level within the organization, from the most junior to Board level.”

Ethical core considerations were recently the subject of draft guidelines laid out by the EU High-Level Expert Group on AI - ‘Ethics Guidelines for Trustworthy AI’ – including transparency, non-discrimination and human agency and oversight. While there will be no obligations on companies to follow these, says Cláudia Fernandes Martins, these guidelines clearly show the key requirements that the EU will be monitoring going forwards.

The potential commercial value of data cannot, therefore, be underestimated and remaining in the dark is no longer an option. Data itself, regardless if personal or business, is just a collection of ‘facts’, she concludes. “Alone, they are worthless. To ensure that they take advantage of the data evolution, businesses need to understand that the power of data is only harnessed by reviewing and acting upon it.”

Macedo Vitorino & Associados

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2019-04-16
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João de Macedo Vitorino

MVConversations with João Macedo Vitorino 

Comparing Brexit to a corporate demerger highlights failings at both UK and EU level, and the consequences of delivering what the people ‘want’ rather than what they actually ‘need’. 

The first rule of a demerger is you do not enter into one without a demerger plan. This is your baseline and starting point. But it should also be the end point if no plan is submitted to the shareholders. If you compare Brexit to a corporate demerger, one of the major distinctions is how everything has been clouded by politics. The UK Government put their ‘demerger’ from the EU to a public vote without so much as a plan in place nor any kind of detailed informative packet circulated to give the people the facts upon which to base their decision. 

“This is where Brexit has inverted the entire logic of a demerger,” explains João Macedo Vitorino. “There was no plan, and no scenarios given that truly outlined the costs of a ‘demerger’. The shareholders of one side (the UK people) were asked ‘stay or leave’ but they weren’t told what either actually meant. It has only been after the vote that all this has come to light, the Irish backstop being a classic example.” If leaving is possible scenario for every EU country, he adds, then the EU regulators should have in place a demerger plan for those countries that choose to opt-out of the EU. The EU treaties should also have a full chapter dedicated to this, instead of taking for granted that being an EU member is such a privilege that no one will ever want to leave. 

 

Informative Voting 

In a demerger, the shareholders have a right to information, a right to understand what each scenario involves so as to be able to make an informed decision. The UK Government should have made all this information accessible, as should the EU. Without this, in the strict sense, they are in breach of the minimum requirements for a corporate resolution and so any resolution voted upon should be nullified, he explains. And this has been a failing of both parties involved. 

The UK is still an EU-member, but in the public eye the EU appears to be acting as if Brexit is solely a UK problem. “At EU level, the demerger has been discussed, but the shareholders haven’t been consulted,” says João Macedo Vitorino. “We have a ‘demerger’ where one side has put the decision to an (uninformed) public vote, while the older side’s shareholders (the rest of the EU citizens) haven’t had a say. EU citizens have not been asked what they think about the process nor the agreement put forward by the European Commission, something which should have been done as this decision affects us all as ‘shareholders’ in the EU.”  

 

All but rational thinking 

A second but fundamental issue when entering into a demerger process is you need to have reasons behind the demerger and explain ‘why’ you are considering it before it has happening at all. And this ‘why’ has to be for the good of both companies shareholders. Brexit has been sold’, but rather than being sold it is unfortunately based solely on UK internal political reasoning. “If you are motivated by issues such as immigration or internal security, then you forget about your own country's needs,” he explains. “In the UK, foreign labour continues grow and its economy over the past 40 years is based on an open market and its standing as the financial centre of the European Union.” Not discussing this beforehand was not ‘in the people’s interests’ but it was pure politics. Politics also took the lead on the EU sideEU representatives speak of the protection of EU citizens in the UK and of UK subjects in the EU, but the main concern is to set an example to other potential EU-leavers of the pain that leaving the EU can cause, says João Macedo Vitorino. We cannot forget that certain individual national interests enter into play with the UK leaving the EU, which explains the different views we have seen in relation to extending the article 50 deadline. 

 

A Lose-Lose Situation 

Another consequence of not having a well-formed demerger plan is the lack of method when it comes to compensation mechanisms or knowing the ratio exchange between both parties. “A demerger, when it happens, is always seen as a win-win situation for both parties, otherwise, parties do not follow through with it. When you compare it to Brexit, what’s so unique here is how there is a clear view assumed by all politicians and both sides that we’re in a lose-lose situation,” says João Macedo Vitorino. 

Therefore, what should obviously have been addressed from the start is how you mitigate those losses. In a demerger you make a simulation that takes into account the costs and ricks and adjusts accordingly, as well as establishing the allocation of assetsintercompany debt, tax positions, demerger expenses, consequences for employees, etc, he adds. There has been no mitigation of costs nor risks, and the ‘assets’ in this case are the advantages gained from forming part of the EU, and the losses that will be sustained upon leaving on both sides, neither of which were outlined prior to the definitive vote. 

 

Fated to fail 

Ultimately, while the comparison between Brexit and a demerger are structurally different, what we can say is that in Brexit everything is missing, says João Macedo Vitorino. “If this had been a demerger in the corporate world, it would have been doomed from the start. There was no demerger plan, no full disclosure of facts and information, and only the shareholders of one of the parties were consultedalthough blindly.” 

Many demergers measures fail precisely because the shareholders cannot agree on compensations, division of assets, etc, before taking the final decision to demerger. But they fail with the agreement of both parties, and before any form of decisive voting has taken place. “We’re discussing the first demerger between two EU countries and, without a precedent, we should be even more careful to ensure we get it right, proceeding only if it’s in the best interests of both parties,” he concludes. For Brexit, therefore, the logical conclusion would be to stop this now. But just like the lack of demerger plan, ‘logic’ is another thing that has been missing from the get-go. 

 

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