2020-07-07
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Guilherme Machado Dray

Published on ECO News.

The State of California is known for its gorgeous landscapes, the Golden State Warriors and its entrepreneurial, innovative and progressive spirit. Silicon Valley is the heart of the largest technology companies and several startups. And it is in California that we may find some of the best American universities, like Stanford or Berkeley.

The Golden State is an incubator of dreams and good ideas, which tend to make a difference.

The recent approval in this State of the Bill AB5 is also a milestone in the configuration of employment. The AB5 has the potential to mark the future on a global scale.

The qualification as an employee is one of the most striking topics today. Worldwide, labor laws use to guarantee workers a floor of rights that protect them – minimum wages, limitation of working hours, right to paid holidays, parental leave, protection against accidents at work, prohibition against unfair dismissals arbitrary, as well as sickness assistance.

The protection given to the employee is significant, leading to the inherent operating costs for companies.

For this reason, the 21st century has been marked by an attempt to escape the employment contract by several companies, which choose to hire independent contractors instead. This option, which provides less protection for those who work, affects the sustainability of Social Security and is also questionable in terms of concurrence, as it puts companies that offer good working conditions side by side with others that escape this regime in search of lower costs and competitive unfair advantages.

The issue is particularly impressive regarding the use of collaborative platforms and in the so-called gig economy, in which companies position themselves as mere technological intermediaries between the end customer and the independent contractor, who is no longer qualified as a worker.

Bill AB5 aims to combat this phenomenon.

Based on the case of Dynamex Inc., vs. Charles Lee, the law defined what the employer has to prove in order to dismiss a presumption of employment contract and demonstrate that the provider is really independent. What matters, is to consider the substance of things and the way work is actually done.

To do this, the company will have to comply with the “ABC” test, that is, prove that: (A) The provider is free from the control and direction of the hiring entity in connection with the performance of the work; (B) The person performs work that is outside the usual course of the hiring entity´s business; (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

If the company fails to prove these three points, it does not pass the test and the provider will be qualified as an employee and not as a service an independent contractor, even if there is a written contract saying the contrary.

That was the solution reached in that case, in which the transport company Dynamex had chosen to stop having workers and to hire only “independent” drivers. As the company was unable to pass that test, the drivers were qualified as employees, despite the contracts saying they were independent.

Thus, Bill AB5 threatens the business models of companies such as Uber, Cabify and others, which center their activity based on independent contractors.

The “ABC” test promises to revolutionize worldwide the way courts come to recognize the existence of employment contracts. In addition to the legal tests that are already been used by the Department of Labor and the National Labor Relations Board, this test becomes the new gauge for the courts to decide.

The idea is clear: entrepreneurship is good and makes the world move, but the defense of employment is also an investment in quality, in the future of the community and in the people who work.

The Californian dream is a possible dream: it combines modernity and innovation along with the protection of employment and the community.

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2020-06-30
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André Feiteiro

The mainstream interest in the topic grew with popularity of blockchain technology and cryptocurrencies. Interest, however, often leads to misconceptions and, as regards to smart contracts, it contributed to make a sweeping assumption that smart contracts are more than code that reads and writes on a blockchain.

The mainstream interest in the topic grew with popularity of blockchain technology and cryptocurrencies. Interest, however, often leads to misconceptions and, as regards to smart contracts, it contributed to make a sweeping assumption that smart contracts are more than code that reads and writes on a blockchain.

Distributed ledger technologies, and blockchain specifically, are as worthy to the provision of a service as the efficiencies – in number or quality – they offer to the provision of such service. Smart contracts are as useful as the simplicity that they bring to the table.

Opposing a sizeable optimism on the applicability of smart contracts blindly to all industries and services, the relevance of the vulnerabilities of smart contracts is of greater importance than its potential use cases.

Language and trust are two major issues: on the one hand, the language (or semantics) of code is formal and is therefore unable to replicate the flexibility of natural language; on the other, for certain transactions, the use of smart contracts must necessarily trust external sources, which poisons their decentralized and trustless character.

The rigidity of code language is a limitation, as binary code is unable to make a fair judgement on ambiguous terms, those to which one cannot regress into binary code, 0s and 1s, or logic gates, ifs and thens. If we take a contract for a repair service, for example, the performance of the service consists of the repair against a payment agreed between the parties. While the performance or non-performance of the payment obligation is ascertained in a logic gate of yes or no and then, the good performance of the repair requires social ontology elements that code cannot reach.

In general, smart contracts and blockchain technology enable a trustless environment. It is not that trust is missing, it is just that trusting a third party is not necessary, which is very relevant in the case where one eliminates intermediaries. This is true for on-chain transactions, such as a Bitcoin transfer of funds, because data on the Bitcoin price, account addresses, signatures, etc. is already on-chain. This is not the case, however, with off-chain transactions, because regardless of the security, immutability and disintermediation that the smart contract and blockchain technology provide, the data is provided from outside of such a trustless environment.

An optimist will find infinite use cases for smart contracts because he finds them alternative to traditional contracts. A realist understands that the utility of smart contracts lies where (i) transactions are on-chain and they do not require the flexibility of natural language, and (ii) transactions are off-chain, they do not require the flexibility of natural language, and, in addition, they trust – or they do not need to trust – external sources.

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2020-06-24
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Guilherme Machado Dray

Published on ECO News.
The Supreme Court of the U.S. reaffirmed the civil rights doctrine.

Last week, on the leftover of the George Floyd crisis, in the case of Bostock v. Clayton County, the Supreme Court ruled that when Title VII of the Civil Rights Act of 1964 outlaws discrimination based on “sex” it also covers sexual orientation and transgender status.

In other words, it is clear from now on that no one can be discriminated at the employment based on their sexual orientation or because they are transgender. An employer who fires an individual merely for being homosexual or transgender violates Title VII of the Civil Rights Act.

The decision in question had been embraced by two out of the three circuit courts below, so the result should not have been a surprise. In this case, however, the amazement exists because the most conservative judges – notably, the newly appointed Brett Kavanaugh –voted in favor of the civil rights of LGTB workers and jobseekers.

Despite the racial crisis that erupted about two weeks ago with the murder of George Floyd, and which exposed racial tensions existing in the US, the truth is that both academic society and American jurisprudence have been particularly vibrant and progressive in affirming civil rights, enacting precedents which have been judicially influencing other countries, particularly in Europe.

The idea of tolerance, multiculturalism and pluralism, whether related to racial origin, gender, sexual orientation, or religion, has been defended since the last quarter of the 20th century as a necessary instrument for United States development, a country strongly characterized by demographic and ethnic diversity, and immigration.

We owe the Americans, after the Civil Rights Act of 1964, the concepts of disparate impact, affirmative actions, as well as the application of anti-discriminatory rules, not only in the performance of work, but also in the access to employment.

The latest decision comes to reinforce the progressive path of this high court, since the leadership of Chief Justice, Earl Warren (1953 – 1969).

Earl Warren was responsible for the commonly known “New Deal Court“, which boost several civil rights, repealing the doctrine “separate but equal”, grounded on the famous judgment Brown vs. Board of Education (1954), which was a landmark on the fight against segregation. Under the leadership of Earl Warren, the Supreme Court also spread the idea that the American Constitution is a living text that and must be constantly adapted to the changes that happen in society, to foster citizenship.

The recent decision of the Supreme Court reinforces something that is not always recalled: the role played by the United States of America institutions and liberal democracies in affirming the principle of equality.

It may seem paradoxical, but it is not: it is precisely in societies with larger racial problems, in historical terms, but with strong institutions with technically well-qualified professionals, where one can find scientific advances and winds of change in the affirmation of equality and non-discrimination.

The struggle for equal rights is part of the United States’ history. From the 1776 Declaration of Independence to the 1964 Civil Rights Act, the path taken was always progressive and evolutionary, so much so that it can be said that equality and non-discrimination, on one hand, and social mobility, on the other hand, are part of the American Way of Life and the American Dream.

This is the legacy of, among others, Abraham Lincoln, Franklin D. Roosevelt, Martin Luther King and John F Kennedy, for whom freedom, equality, pioneering, free development of personality, diversity and multiculturalism were – and are – the key to progress and the consolidation of democracies.

At the very moment when American society was heavily shaken by the violence associated with the murder of George Floyd, the Supreme Court indorsed the superior quality of its doctrine and its judges, echoing that all people shall be free and treated with respect and dignity, and without violence, so they can pursue their happiness.

It is time to recall it.

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2020-06-02
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Frederico Vidigal

The global economic crisis, spurred by the coronavirus, has caused carbon dioxide emissions to fall this year for the first time since the 2009 financial crisis, with the world emitting less than one million tons of carbon dioxide a day.

The decrease in the demand for oil, has led to falling prices and a decrease in production, with the demand in April estimated to have drop down to a level last recorded in 1995. In addition, Europe is facing a record in electricity prices, with power prices turning negative in many European countries (MIBEL faced a 32% reduction in the wholesale electricity market price compared to the beginning of the year). Together with the current lack of liquidity in the market, these two factors may seriously jeopardize the investment in green energy and the development of renewable electricity projects in pipeline.

In Portugal, one of the main measures adopted to reduce the impact caused by Covid-19 in the ongoing projects, was Portuguese energy authority’s (DGEG) Order no. 27/2020, subsequently amended by Order no. 33/2020, (The “Order”) providing for the suspension of all administrative deadlines in the electricity sector from 16 March to 1 June, and the extension of such deadlines while the suspension is in force.

This measure comprises all deadlines for the performance of all actions and formalities by the promoters awarded on the first Portuguese solar auction in June 2019 for the attribution of injection capacity, as well as the relevant deadlines regarding to the allocation of reserve power injection capacity.

In addition, the Order has also provided for the suspension of the submission on new applications, from 21 March to the end of May, for the award of:

  1. Reserve Capacity Titles;
  2. Agreements for the awarding of reception capacity in the Public Service Electricity Grid;
  3. Registrations for small production units or production units for self-consumption;
  4. Energy production licenses under the ordinary scheme, cogeneration and special scheme;

Establishment licenses for grid infrastructures (lines and branches, transformer stations and substations, except for those of public or private interest covered by situations considered as emergencies by DGEG, under grounds of public health or other similar reasons).

The  Portuguese Government has also allowed the issuance of provisional certificates instead of the operation certificates for small production units during the state of emergency. This decision applied to a total of 220 projects for small renewable production units, for total of 30 MW.

All ongoing projects implementation was based on the assumption of an economic, social and financial stability context. Thus, projects that are already at a more advanced stage of development, namely with the construction and financing agreements already closed and signed, are more likely to succeed. In turn, projects where this is not the case, are likely to face serious difficulties, as the liquidity shortage in the financial market will probably cause an impact in relation thereto.

In spite of the negative views for renewables caused by Covid-19 pandemic outbreak, the investment in green energy may become an opportunity and a solution for affected countries to recover from the current crisis. In this regard, the Portuguese Government has committed to reduce the greenhouse gas emissions by 45% to 55% in 2030 and to reach a goal of a net zero carbon footprint by 2050.

The National Energy and Climate Plan for the period 2021-2030 (PNEC 2030), recently approved by the Portuguese Council of Ministers, sets high investment targets in renewable energy:

(i)             Plus 15GW in the next decade. Solar capacity will double, promoted through capacity auctions (with the next auction scheduled for August with 700 MW of capacity to be allocated) and the investment in the production; and

(ii)            The incorporation of renewable gases, such as hydrogen, as one of the main driving forces for the country to achieve the above green benchmarks. In particular with regard to hydrogen, Portugal intends to position itself as a pioneer in the development of this technology, aiming to establish support measures for hydrogen production projects and subsequently achieve a quota of 5% in the road transport consumption and between 50 to 100 supply stations in 2030.

The Portuguese Government intends to mobilize 4.5 billion euros on the above and in other green sustainability projects through strong public investment, but also with the engagement of the private sector. This "public investment shock", as called by the Portuguese Government, will be made through tax reforms, subsidies, transfers and increased public investment in sectors or strategic projects. Over the next years, Portugal may also benefit from an amount of circa 80 million euros under the Fair Transition Fund established by the European Commission  to support the decommissioning of polluting industries and the decarbonization of regions dependent on fossil fuels.

The impact of Covid-19 in the energy sector is difficult to predict, but it is clear that the demand for energy resources has decreased, prices have fallen and the market is struggling to obtain liquidity. Portugal is engaged in fighting back, investing in green energy and establishing conditions to attract investment We believe that this may be the right way to economic recovery we need to put behind the economic effects of Covid-19.

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2020-05-28
   |   
Guilherme Machado Dray

Published on ECO News.

The American have re-innovated again, now during the pandemic crisis.

Since the enactment of the Civil Rights Act of 1964, proposed by President J.F. Kennedy and signed by President Lyndon Johnson, Americans have been innovators in terms of equality and non-discrimination. Europe owes them the concept of disparate impact, as well as criteria for verifying whether a distinctive practice can be fully accepted without being discriminatory. In this field, the use of good faith is highlighted, through the BFOQ – Bona fide occupational qualification criterion. That is to say: if the difference in treatment is made in good faith and grounded on the type of activity to be carried out and the characteristics of the job to be filled, it can be accepted. Not going through this sieve, it is intolerable.

The Americans have re-innovated again, now during the pandemic crisis.

On February 6, 2020, the U.S. Court of Appeals for the Third Circuit reversed a district court’s preliminary injunction that prohibited the City of Philadelphia from enforcing its ban on employers asking for job applicants’ salary history. The goal of the Philadelphia Wage Equity Ordinance is to tackle the wage gap for women and people of color. The Court stated that the prohibition of employers from asking about the job seekers´ wage history and setting salaries based on this history is constitutional.

In the Greater Philadelphia Chamber of Commerce v. City of Philadelphia case, the Court found that the Wage Equity Ordinance does not violate the freedom of expression provided for in the 1st Constitutional Amendment, and that the ordinance is an important mechanism to combat wage discrimination.

Both the lawmaker and the Court concluded that the chance given to the employer to raise questions about the wage past of job seekers was a mechanism to perpetuate wage differences that affect mainly women, particularly Afro-Americans and Latinos. By asking to candidates about their wage history and relying on that history to set a starting salary, employers felt legitimized to maintain such a status quo.

By banning such questions, the law puts an end to this practice.

According to the Court, wage growth and wage decisions should only be based on qualifications and job requirements, thus the importance of this law.

This law follows a long tradition against gender pay gap.

In the United States of America (US), the data points that for every $1 received by men, women who do the same job receive only 80 cents. The gap tends to worsen over the years, as percentage increases are made based on unequal starting salaries.

The first law aiming at tackle the gender pay gap was the Equal Pay Act (EPA) of 1963, which prohibits any form of wage discrimination. The EPA, however, acknowledges wage differences whenever the employer requests an objective reason. And that was the problem, since the wage past had been presented as an “objective reason” to justify different salaries between men and women.

That’s why the State of Philadelphia enacted that ordinance in 2017, which now was deemed constitutional.

In Portugal, the principle of equal salary for equal work is enshrined in article 59 of the Portuguese Constitution and articles 31st and 270th of the Labor Code. But here too, the problem persists, with a gap around 14.4% between what men and women receive for the same type of work.

That is why other legislative solutions have also been tried in Portugal to combat this problem.

In 2018, Law No 60/2018 was adopted, according to which companies must ensure that there is a transparent remuneration policy, and one may predict the enactment of new laws for this purpose.

But this question of the salary past has never been raised.

Philadelphia law and the U.S. court’s recent decision can therefore bring new winds of change in this area.

In any case, it is important not to forget the essentials: more than a legal obligation, retributive equality is an ethical and social justice imperative.

The impulse must therefore go above all from companies in the name of their social responsibility.

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2020-05-13
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Guilherme Machado Dray

Published on ECO News

The protection of public health requires increased care on resume to work that may limit the right to privacy.

The pandemic crisis and the return to work confront the right to privacy and the protection of public health.

The right to privacy means that there is an inviolable sphere of its own, which must be protected from the curiosity of another. Everything that concerns our family life, sexual, affective and state of health, must be preserved. No one can access such information, and no one should disclose it. This rule is enshrined at the Portuguese legal framework – articles 26 of the Constitution; 80 of the Civil Code; and 16, 17 and 19 of the Labor Code.

The protection of public health, however, requires increased care on resume to work that may limit the right to privacy.

Worldwide, special rules have been created to prepare workers and employers for the COVID-19 virus.

In the United States of America, for example, in addition to the Occupational Safety and Health Act, which states that employers must ensure work in safe and healthy conditions, new guidelines on COVID-19 have been published by state agencies, such as, the following:  Department of Labor (DOL), Center for Disease Control and Prevention (CDC) and Equal Opportunity Employment Commission  (EEOC). Basically, telework, the use of protective equipment, the distance between workers, and the refusal of working from those who show signs of contagion are recommended.

The same happens in Portugal.

In addition to the Legal Regime for Safety and Health at Work, which says that workers have the right to work in safe and healthy conditions, specific rules have been created on COVID-19.

The Decree-Law No. 20/2020, of May 1st, imposed the drafting of contingency plans and allowed body temperature control. The  ACT, in turn, has approved  new recommendations based on the use of protective equipment, the distancing of workers, and outdated working hours.

Article 13 C states that, in the current context and solely for reasons of protection of the health of the employee and third parties, body temperature measurements may be performed on workers for the purpose of access and permanence in the workplace. It is also said that this measurement does not prejudice the right to data protection, and it is forbidden to register it, unless the worker consents. If the temperature is higher than “normal”, the employee can be prevented from accessing to the workplace.

Essentially, this provision strikes a fair balance between the right to privacy and the safeguarding of public health. Public health justifies temperature measurement. The right to privacy and the fact that health data are sensitive, are protected by the prohibition of recording measurements.

But there are matters that have become ill-defined.

First, the law does not guarantee (as it should) the intermediation of a health professional. Obviously, we should have a doctor at the entrance of each undertaking to measure the workers ‘temperature, but the responsibility for the system should have been given to an occupational physician and the measurement performed only by a  professional subject to the obligation of professional secrecy. Let security contractors in outsourcing doing it, does not seem a good solution.

Secondly, the temperature from which the worker is prevented from working is not defined.

Thirdly, it is not clear whether the worker prevented from working continues (or does not) receiving his salary and who pays him.

Finally, we may have (unfortunately) constitutional problems.

On the one hand, because fundamental rights cannot be compressed without the Parliament authorization. (article165, 1, b), Portuguese Constitution). So, we may be facing an institutional unconstitutionality. On the other hand because the absence of a doctor’s intermediation can generate material unconstitutionality. In  the Judgment of the Constitutional Court n.º 306/2003, the Court declared the unconstitutionality of a rule of the Labor Code, precisely because it did not include the intermediation of a doctor. At the time, the Court held that the employer’s direct access to information relating to workers’ health violates the principle of banning excess restrictions on the fundamental right to reserve privacy.

In a nutshell: being understandable and justifiable, the body temperature measurement provided at the new article 13 C fails in the details.

The law fulfilled the hardest part, which was the justification for body measurement.

But failed in the details.

And the problem, as the people commonly says, is that “the devil is in the details.”

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2020-04-28
   |   
Guilherme Machado Dray

Published on ECO News.

Telework is of great importance to tackle outbreaks, which is why the Portuguese Government has decreed the obligation to adopt remote working during the covid-19 disease pandemic.

Finally, the telework.

Conceived in the 1970s by Jack Nilles to minimize the commuting in the United States of America, telework took a long time to spread.

In Portugal, it came up with the Labor Code of 2003.

At the time, I had the privilege of being part of the drafting committee of the Code and to drafting the provisions relating to teleworking. Alongside personality rights, telework was at the time innovative and not always well understood. It was even a laughingstock.

The strength of its advantages and the pandemic crisis we are experiencing ultimately, imposed it.

Teleworking brings several advantages.

For the worker, ensures the reduction of commuting, transportation and food expenses; better reconciliation of work and family life; easier demand for employment; and strengthens freedom of work.

As for the employer, it guarantees the reduction of operating costs in facilities and energy; the optimization of available spaces; the increase in the universe of staff recruitment; and greater resistance to external factors, such as strikes, acts of terrorism or natural calamities.

As far the whole communities, the advantages are even more clear: reduction in air pollution levels; decongestion in city centers; reducing disparities between urban and rural centres; and the creation of new jobs, particularly for people with physical disabilities.

Telework is also of great importance to tackle outbreaks, which is why the Portuguese Government, through Decree n.º 2-A/2020 of 20 March, has decreed the obligation to adopt remote working during the covid-19 disease pandemic, whenever the functions in question allow it.

Teleworking may, however, put in risk the privacy of the teleworker.

For this reason, the Portuguese Labor Code contains rules aimed at preventing this risk.

In the light of the Code, the employer must respect the worker’s privacy and the rest times of his family (art. 170). Where the telework is carried out at the worker’s home, any visits to the workplace should only be allowed to control of the work activity and can only be carried out between 9am and 7pm, with the assistance of the worker or the person indicated by him.

As a result of the massification of telework during the current pandemic, the National Data Protection Commission (“CNPD”) also clarified that the rule prohibiting the use of means of remote surveillance, in order to control worker performance, is fully applicable to telework. For this reason, technological solutions for remote control of worker performance are not allowed. For example,  software that logs the visited web pages, the location of the terminal in real time, captures the desktop image, observes and records when access to an application is initiated, controls the document you are working on, and records the time spent on each task, are prohibited. According to the CNPD, these tools collect excess personal data from workers. The work provided from home does not justify a greater compression of personality rights.

On the contrary, the CNPD considers it legitimate to record working time using technological solutions. Such solutions should, however, be limited to recording the start and end of work and the lunch break. Not having such tools, it is legitimate for the employer to fix the obligation to send e-mail, messaging or any other way that allows him to control working times.

The telework came, at last, to stay.

The last quarter of the 20th century announced it.

The current pandemic crisis has imposed it.

Society and the Law must now pay more attention to it to prevent this brave new world from becoming a violation of our privacy.

PS: it is true because I saw it. The Portuguese Employment State Agency (“ACT”) has asked a company to learn of the documentation regarding its Lay Off within 2(two!) days, with the warning that, not doing so, incurs in administrative offense and “in the crime of qualified disobedience”. The state of emergency justifies several things, but it cannot be an open door to the arrogance and arbitrariness of state inspectors. We must avoid Hayek’s “road to serfdom”.

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2020-04-22
   |   
Pedro Ramalho de Almeida

During the second half of the 1900’s, several generations followed the entertaining holiday adventures of Enid Blyton’s Famous Five through the English and Welsh countryside. In each of the twenty-one novels, turned TV shows, the intrepid Julian, Dick, Anne and Georgina (George) – and their dog Timmy, get caught up in an adventure involving villains and lost treasures.

In the late 2010’s, for those following the Portuguese communications market it seemed that another novel of a famous five was unfolding. This novel involved a cast of five – the four mobile service providers with 98% of market share[1] and their watchdog[2] - and evolved around another five, the 5G, whose full name is the dry IMT-2020 standard.

This market novel, began with a public consultation held in March 2018, regarding the implementation of 5G and became the fighting ground of an unusually bitter dispute between the Regulator and key market players, with the latter accusing the first of failing to create adequate regulatory conditions for its roll out and the ANACOM claiming that it was following the schedule agreed at EU level.

This dispute eventually subsided when, in February 2020, ANACOM published a consultation on a draft regulation to a 5G spectrum auction[3].

 

The long story of a closed market

It may be said that this is the latest of a three-decade long string of spectrum licensing procedures in which the Regulator attempted to reshape the market by bringing new players. 

Throughout the 1990’s, the award of spectrum licences for mobile services, either mobile telephony, paging or trunking systems[4] even for fixed wireless services[5] became a key instrument to gradually open the market communications to new services and players.

These award procedures were essentially beauty contests that awarded fixed price licenses based on mostly qualitative criteria.

With the full liberalization of fixed services, fixed spectrum licenses became redundant and, in the mobile segments, the supremacy of GSM, fuelled by pre-paid services and market consolidation, led to the gradual phase out of less versatile technologies.

By the end of the decade, with the award of a third mobile spectrum licence, three large communications conglomerates emerged and solidified their position.

With the market still expanding, in the early 2000, ANACOM attempted to use the introduction of 3G to bring a new player by awarding a fourth licence, again using the traditional beauty contest system. This time however conditions had shifted and in the adverse international context of the burst of the telecom bubble, lack of technology availability and a far more belligerent market highlighted the frailties of both the Regulator and the regulatory framework and the Portuguese new entrant suffered the same fate as most its 3G European new ventures – was shut down without a single customer.

The aftermath of this process virtually dictated the end of ANACOM’s attempts to reshape the market via the award of spectrum for nearly two decades.

In 2011, with the country in the middle of the sovereign debt crisis and in a recession-stricken market, a 4G auction was held. This time, it was meant to serve as little more than a way for an income starved State to increase fiscal revenues and alleviate the enormous financial burden it was facing: the auction started and ended without virtually no bids made above the reserve price.

We would have to wait for the second half of the decade for the Portuguese market to settle and show signs of change.

The Portuguese mobile markets share most of the characteristics of its European counterparts: there are decreasing growth rates as they reach near saturation in most segments, there is erosion of the traditional revenue streams caused by OTT providers, while, at the same time, there are particularities that should be noted, particularly for newcomers.

In the second half of the 2010 decade, two key events reshaped the market, the first was the takeover by Altice of the former incumbent PT Group, who was dragged into near bankruptcy by the collapse of its major shareholders, and the second, the merger between Optimus/ZON merger (i.e., the merger of the third mobile operator and the largest cable operator, who also had a small MVNO operation), creating the NOS group.

While battling a long recession throughout most of the decade, Portuguese operators were forced to look for innovative ways to counter the erosion of their traditional revenue base and the saturation of the market. In order to do so, they used a particular feature of the Portuguese market: the fact that all key players are horizontally integrated, i.e., they all own fixed and mobile networks, thus allowing them to bundle services and capturing revenue by diversifying their offer across market segments.

This strategy proved successful as, according to ANACOM, in 4Q2019, virtually all households (98,8%) subscribed to a multiple play bundle (double play or higher), more significant still is the fact that quadruple or quintuple play (i.e. an integrated offer of fixed telephony, fixed internet, television, mobile telephony and mobile internet services) account for nearly half of these bundles (48,8%).

In such a scenario, there aren’t many incentives for new entrants, which explains why MVNO’s account for only 1,8% of mobile voice traffic, and why, of the two major MVNO’s, only one is a stand-alone operation while the other is essential mobile arm of a triple play fixed operator.

Current 4G (and 4G+, or LTE) networks represent a considerable upgrade, after all, they are roughly 500 times faster than 3G, and are able to support high-definition mobile video streaming, video conferencing and much more. When a device is moving, as when one is walking with one’s phone or is in a car, the top speed can be 10s of mbps, and when the device is stationary, it can be 100s of mbps.

In Portugal, given both the market characteristics and the economic context mentioned above, 4G rollout became virtually unnoticed and ended up having only a marginal impact in the whole market structure.

The excessive market concentration has been voiced by several entities. As far back as 2012, the Competition Authority wrote that in comparison with its previous reports, the Portuguese mobile communications market “maintained the level of concentration as measured by the market share of the two major providers (…), who recorded a combined market share of 83%, close to the highest of the EU and far above its average. (…) This high concentration level is fostered by the marginal impact of MVNO, who have a market share of only 1,4%, by a low level of consumer mobility between operators and increased network effects”.[6]

Although this assessment was written almost a decade ago it could have been written today.

 

New winds…

Over the last two years, however, in an unprecedented change of mood, ANACOM not only voiced its displeasure with the status quo but also signalled its intention of actively intervening in the market in order to change its structure. As expected, these assertions were met with fierce resistance and disbelief by operators and was followed by an unprecedented vocal dispute between operators and the Regulator.

Considering that the technical features of 5G make it much more than a simple evolution of existing standards, it is not surprising that ANACOM is once again trying to use the spectrum award procedure for the new technology as a catalyst to foster a change in the market structure.

This explains the reason why for the first time in 20 years, ANACOM is actively pursuing the appearance of new players by providing clear incentives for new entrants. If in the 3G spectrum award procedure the sole incentive was a fourth license, in the current 5G auction draft regulation these incentives for new entrants only range from (i) direct discounts and deferred spectrum payments, to (ii) creating for incumbents the obligation to negotiate fair MVNO and national roaming and, (iii) in an attempt to prevent incumbents from buying off new competitors, a two year waiting period for spectrum resale.

In addition to the favourable spectrum award conditions of the 5G proposed regulation, new entrants will also be able from the externalities of the Government’s digital transition policies, a complete set of plans put forward to accelerate the use of electronic platforms throughout society as a whole.

As mentioned above, Portugal’s electronic communications networks are on par with the country’s EU partners, e.g., in 2019, more than 4/5 households had broadband access, while mobile broadband penetration rose to 84,1%, which compares reasonably well with the EU average.

From 2010 to 2019, the year-on-year growth rate of broadband penetration as a whole averaged 5,1% and currently nearly 99,6% of students and people who have completed secondary and tertiary education are internet users (96,9% and 98,7% respectively).[7]

Nevertheless, the availability of a good infrastructure evidenced by the investment made through the last decades hide a less favourable picture. In fact, at the same time as penetration rates grow steadily toward saturation only 76.2% of the whole resident population aged 16 to 74 (roughly the country’s active population) was an internet user and, more worryingly, only 38,7% used e-commerce.

Interestingly, almost half of the users limited their Internet activities, such as the purchase of products or services, internet banking or the ones implying the provision of personal data, due to security concerns. We mention this point because, considering that Portuguese Internet is not particularly more dangerous than anywhere else in Europe[8], security concerns do not justify per se why such high percentage of users refrain from making a wider use of digital services.

At the same time, we do not consider also that these concerns are mere wrong perception of reality either, these worries are real. However, we consider them as the consequence, rather than the cause, of the phenomenon: this is, arguably, a simple case of distrust of the unknown.

In fact, there is an ample perception that the Achilles heel of “digital Portugal” is a mix of digital illiteracy and resistance to change, worsened by an ageing and less educated population and a general lack of actual incentives to use electronic services.

For these reasons, over the last years of the 2010/2019 decade, successive Governments insisted on a series of initiatives to enhance the country’s digitalization. These initiatives targeted not only public administration, but also the private sector, both for individuals and businesses.

The latest example occurred, on March 5th, 2020, the Government proposed an “Action Plan for Digital Transition”, which, according to its promoters is a cross-sector, multi-channel, ambitious, pragmatic, comprehensive and quantifiable plan to make Portugal as an international reference using the benchmark of the world’s best practices.

Therefore, with a Regulator keen on welcoming new players, a technology available to cater for new services and a Government willing to expand the usage of digital services to the whole population, 5G would be certainly be a natural and critical part of these plans.

It seemed that like the in Blyton’s famous five adventure, this “famous 5G” headed for a happy ending.

 

Until, suddenly, in the ides of March…

Unfortunately, less than a week after the presentation of this plan and while the consultation for the 5G auction was undergoing, the COVID19 pandemic made a dramatic appearance.

With the country in virtually complete lockdown, with operators trying to cope with the limitation on movements and, on the other hand, the additional strain on their networks caused by millions being suddenly forced to use their home communications for virtually every aspect of their lives, ANACOM, regrettably but understandably, decided to suspend the auction consultation until the end of the State of Emergency.

It is obvious that the short and midterm effects of the pandemic in the Portuguese economy (and in the worlds for that matter[9]) are as unknown as they are expected to be dire.

In Portugal, in the weeks from 6 to 10 April 2020[10], i.e., three weeks into the lockdown, a survey by Statistics Portugal confirms that nearly 69,3% of companies in the information and communications sectors expect a severe reduction in company turnover.

This percentage is naturally higher in other sectors that are currently suffering the greatest impacts, such as the accommodation and food services, as well as non-essential retail.

Nonetheless, when looking at the whole universe of businesses, only 2% of the companies declared they were definitively closed, i.e., the vast majority of businesses 98% remain in full or partial operation. More importantly, only 26% of the companies reported a reduction of more than 50% in the number of persons employed effectively working.

It is natural that the number of bankruptcies and liquidations will increase in the short term, as well as the unemployment rate, however, considering the severity of the lockdown measures it is a significant sign of hope that so many remain in operation.

Regarding the communications market, however, in the same period, ANACOM[11] reported an average growth of 1,5% in relation to the previous week, with the decrease of mobile voice and data (of respectively -1% and -7%) compensated by an increase in fixed voice and data traffic (respectively 3% and 7%).

While the impact of the crisis is unknown and volatility is expected in the coming quarters, one trend is emerging when discussing the post lockdown stage[12]: remote work in all roles that do not require physical presence and the usage of webinars and remote training (e.g., for schools and universities but also for in company training) will be greatly encouraged.

Moreover, the forced shutdown of most services open to the public have forced a significant number of persons to use overnight digital services, which they probably would never do otherwise, thus expanding the usage of digital platforms to unprecedented levels.

It may be possible that remote work, remote teaching and a population suddenly familiar with digital services, may provide in the near future the increased demand for electronic communications networks that the market will have to cater. How and when they will do it remains to be seen.

 

For more about the incoming Portuguese 5G auction read our paper on it here.



[1] Altice, Vodafone, NOS and Nowo (the latter operating solely as an MVNO).

[2] ANACOM.

[3] The consultation may be found here.

[4] Along with licenses awarded to the incumbent (TMN and Telemensagem), a 2G licence was awarded to Telecel, (now Vodafone), with licenses for paging (awarded to Telechamada and Contactel) and trunking (Radiomovel – it should be noted that these frequencies are still licensed to Dense Air).

[5] The award procedure, with the frequencies to be licensed may be found here (in Portuguese only).

[6] AdC – Competition Authority, Electronic Communications and Media Report, 2012 (our translation, the whole document may be retrieved here).

[7] See Statistics Portugal, Information and knowledge society – household survey, 2019 (you may find the full document here).

[8] Over the last decade, there were on average 611 reported cases of computer crime. It should be noted that this definition is very broad as it includes all cybercrime but also unlawful interception of communications and even copyright infringement (such as illegal copy of protected material). See the Homeland Security Annual Report, 2018 (the full report in Portuguese only may be found here).

[9] See, e.g., the IMF webpage here or the OECD perspective here.

[10] Statistics Portugal and Bank of Portugal Fast and Exceptional Enterprise Survey (COVID-IREE), a monitoring survey on the impact of the pandemic on enterprises (see full document here).

[11] See ANACOM data here  (in Portuguese).

[12] See, e.g., the Mckinsey featured report Europe needs to prepare now to get back to work—safely (full report here).

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2020-03-05
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Guilherme Machado Dray

The last century brought collective bargaining as an instrument of social peace and dignification of work. The 21st century  can establish it as a mechanism of social responsibility for companies.

Since the middle of the last century, Western countries assumed  that  collective bargaining promotes the improvement of working conditions and is a factor of economic competitiveness.

The United States of America (US) played a pioneering role in this area, from the moment when they realized that without collective bargaining the labor riots would paralyze the economy. It was in this context that in 1935 the  National Labor Relations Act  (NLRA) was approved, which enshrined the right to collective bargaining  (Sec. 7. [§ 157.]). The countries of continental Europe followed. In Portugal, the State expressly assumes its intention to promote collective bargaining  and the Labor Code  (LC) states that it collective contracts should apply to as many workers and employers as possible  (art. 485).

In both cases, collective bargaining, more than a right to bargain, came to be seen as a duty to do it. In the US,  the NLRA  establishes the obligation to bargain collectively; in Portugal, the LC determines that the recipient of a collective  agreement proposal has a duty to respond with a view to initiating negotiations. In both countries, the law  does not impose as a final result the conclusion of a collective agreement, but requires the parties  to negotiate it and to do so in good faith.

In the light of these rules, collective bargaining has enhanced over the years the  self-regulation of interests in various matters – organization of working time, retributive policies, job positions and career promotions, right to rest, or the exercise of trade union activities within the corporations.

The second decade of 21st century seems to bring a new dynamic and a new challenge to collective bargaining: to contribute to the promotion of the common good.

Once again, it is a movement that started in the US.

In the context of corporate social responsibility, civil society and trade unions have joined forces and created a new movement concept that has been imposing: the  BCG  -  Bargaining  for  the  Common  Good.

It is about assuming that more than benefiting workers with salaries and promotions, the collective labor agreement can bring benefits for other stakeholders, such as the  local community,  the most disadvantaged, and the environment. BCG bring a set of demands that benefit not just the bargaining unit, but also the wider community as a whole, expanding the scope of bargaining beyond wages and benefits. There are several examples of practices adopted by companies that have joined this movement: new equal pay policies;  scholarships for students; requalification  of  school centers; financing of municipal works; environmentally friendly practices; volunteering actions; real estate assets for rentals at social prices; support for ethnic minorities, among others.

The future of collective bargaining is here – to combine efforts between companies, unions and civil society, to seek benefits for the whole community and not just for unions and workers.

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2016-01-14
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António de Macedo Vitorino

The end of 2015 was difficult for the battered Portuguese banking sector. The Bank of Portugal and the European Central Bank wanted to clean up the house before the entry into force, on 1 January 2016, of the unified European bank resolution mechanism.

On 20 December, the Portuguese Government was forced to intervene in BANIF which was about to lose access to the ECB’s emergency liquidity funding. Although BANIF was a small bank it may end up costing Portuguese taxpayers over €3,000 million.

On 29 December, the Bank of Portugal adopted a second resolution in respect of BES ordering the "re-transfer" of certain Novo Banco senior notes worth approximately €2,000 million to BES, the bad bank that resulted from the collapse of the Espírito Santo Group.

As announced by the Bank of Portugal, this measure increased Novo Banco’s capital ratio to 13% making it more attractive to potential buyers.

In anticipation of the litigation that will certainly follow, the Bank of Portugal stated in its press release that its decision was due to the additional “losses arising from facts with their origin at Banco Espírito Santo, S.A. and prior to the date of the resolution [3 august 2014]"; in other words, the Bank of Portugal is arguing that the measure aims to solve a problem created before the incorporation of Novo Banco. The Bank of Portugal also states that the resolution was "necessary to ensure that, as set out in the resolution legal framework, the losses of Banco Espírito Santo, S.A. are absorbed, firstly, by the shareholders and creditors of this institution and not by the banking system or the taxpayers", which would justify the less favourable treatment given to the holders of the notes “re-transferred” to BES. Lastly, the Bank of Portugal concludes that this last decision "is the final and definitive change in the perimeter of assets, liabilities, off-balance sheet and assets under management transferred to Novo Banco" that was left open in the original resolution measure isnow “definitively closed" by this decision.

In contrast with the Bank of Portugal’s original resolution measure of 3 August 2014, which, we have always believed, would be hard to challenge in court, in this particular case investors have strong reasons to question the timing and the proportionality of the measure adopted.

As regards the timing, this last measure was taken one year and four months after the Bank of Portugal’s first intervention in BES, which took place on 3 August 2014. It is difficult to understand which facts occurred before August 2014 could justify such a serious measure. As is publicly known, since the adoption of the original resolution, Novo Banco approved its 2014 financial statements, which have been audited by its statutory auditors and reviewed by the Bank of Portugal in the exercise of their supervisory functions. Novo Banco also approved quarterly and semi-annual financial statements concerning the year 2015 and was subject to stress tests by the European Central Bank, which were announced by the Bank of Portugal on 14 November 2014.

The Bank of Portugal’s decision also breaches the principle of equal treatment of creditors within their respective rankings, as Novo Banco has repaid other notes with the same ranking in 2015 and assumed responsibility for other senior bonds issued by BES and/or vehicles of BES. Therefore, the decision favours other unsecured creditors of Novo Banco whose rights are not affected by the resolution now adopted in relation to the senior notes that were “re-transferred” to BES.

The banking resolution legal framework does not allow a differentiated treatment of creditors of the same ranking, with the exception of depositors that benefit from legal preference over other unsecured creditors and creditors essential to the continuation of the bank’s activities. It is therefore difficult to understand why this measure does not apply to the holders of other senior notes.

It is more than likely that harmed investors will take the matter to the courts and that they will have a strong case against the Bank of Portugal.

Significantly, the Bank of Portugal states in its press release that "it is the responsibility of the Resolution Fund to neutralize, by way of compensation to Novo Banco, the possible negative effects of future decisions, arising from the resolution procedure, which result in liabilities or contingencies"; in other words, the Bank of Portugal is impliedly accepting that some claimants may be successful in court and by this statement wants to assure potential buyers’ of Novo Banco that the bank will not be affected by litigation.

It is generally known that the ultimate responsibility that may arise from claims concerning the resolution of BES will have to be satisfied by the Resolution Fund. By stating it in its press release, the Bank of Portugal seems to indicate that the creditors affected by this latest measure have stronger chances of success when compared with the claims of subordinated creditors now in court.

The Bank of Portugal’s main goal with this measure was to improve Novo Banco’s financial ratios to facilitate its sale.

However, with this decision legal certainty is lost and investors may distrust the word given by the Bank of Portugal and the European Central Bank, which breach the laws that they should protect.

The question remains as to whether Novo Banco’s prospective buyers of should not be aware of a regulator that allowed (and required) a capital increase of a bank with serious internal problems that the same regulator would put into resolution only a few weeks after investors put their money into the bank and a regulator which reverted its own decision more than one year and four months later. Only time will tell.

 

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