Uber is 'excessively bumptious', according to Boris

London’s Mayor, Boris Johnson, has criticised San-Francisco based transport network company, Uber, for being 'excessively bumptious'. On LBC radio today, the Mayor stated that he disliked the manner in which Uber is ‘moving into London and claiming they could take all the business away from black cabs’. According to the Mayor, the main problem with Uber is that it is ‘using mobile phones as what is effectively a taxi metre’.

The Mayor's comments came as he answered a question regarding a letter sent to him on 4 August by Barking and Dagenham MP, Margaret Hodge, alleging that Uber is 'competing unfairly' with London's black cabs. In the letter, Ms Hodge wrote, 'I am particularly concerned about the tax structure that Uber and others have apparently constructed, and the impact this has both on the public purse and on the livelihoods of London cabbies and private hire drivers'.

In response to the listener's query, the Mayor said that he believed Uber had satisfactorily dealt with issues surrounding their tax status, saying, 'as far as I know they've sorted that out'. However, Mr Johnson added, 'If I may say respectfully...and to all the taxi drivers who rage against Uber, you have my sympathy, but in the end there has been no more brilliant advocate of the services of Uber, no more powerful advertisers of that particular brand than the black cab trade'.

Uber is one of a number of apps people can use to book and pay for taxi journeys. Launched in 2009 and currently in operation in more than 70 cities, the app 'seamlessly' connects riders to drivers, according to the company's website.

Protests against Uber have taken place in cities across Europe, including in Paris this January and London in June. Following the London protest, Uber reported a colossal 850% rise in the number of people who had downloaded the company's app compared to the previous week.

Court orders Russia to pay $50 billion to Yukos shareholders

The Hague’s Court of Arbitration (the ‘Court’) has ruled that Russia must pay former shareholders of the now defunct Russian oil company, Yukos, $50 billion (£25.9 billion). The $50 billion award is the largest ever handed down by any arbitration court.

The Court found that Russian officials, under Vladimir Putin, had manipulated the legal system in order to force Yukos into bankruptcy and imprison its boss, Mikhail Khodorkovsky.

Created by the Russian Federation in 1993 as part of a large-scale re-organization of the Soviet oil production and processing industry, Yukos was once one of the largest and most successful oil companies in the world. In May 2002, Yukos was the only Russian company to be ranked among the top 10 largest oil and gas companies by market capitalisation worldwide.

In 2003, however, Russian authorities began the process of breaking up and selling off Yukos.On 11 July 2003, the first of a series of large-scale raids was carried out by Russian authorities on Yukos. Bruce Misamore, Yukos’ then Chief Financial Officer, described the raid as ‘an incredible scene full of armed, masked officers – during which they trawled through our computer records for approximately 17 hours. This was to begin a wave of raids on Yukos’ Moscow headquarters…by investigative officers…sometimes accompanied by heavily armed police officers’.

Subsequently, on 25 July 2003, Mr Khodorkovsky, Yukos’ owner and Russia’s richest man at the time, was arrested at gunpoint by an armed special forces unit in a Siberian airport, and was taken to Moscow where he was charged and sentenced for a number of economic crimes, including fraud, tax evasion and embezzlement. President Putin justified the move by saying, ‘A thief must be in jail’.

In December 2003, following a tax re-audit conducted by Russian tax authorities, Yukos was issued with tax claims that exceeded its revenues for 2002 and 2003. At the same time that tax re-assessments were being filed against Yukos and its subsidiaries, Russian authorities also began freezing shares and other assets belonging to Yukos and related entities. 

Eventually, in March 2006 bankruptcy proceedings were commenced against Yukos, placing it under external supervision, and on 4 August 2006, the company was declared bankrupt. 

After being imprisoned for 10 years, Mr Khodorkovsky received a pardon from President Putin and was released from jail on 20 December 2013. Responding to the Court’s final award, Mr Khordorkovsky said it was ‘fantastic’ that shareholders were ‘being given [the] chance to recover assets’.

The arbitral dispute between former Yukos shareholders and Russian authorities has rumbled on for over a decade, but the Court’s ruling appears unlikely to mark the end of the matter. Russia’s Foreign Minister, Sergei Lavrov, has suggested that Russia could appeal against the decision. Mr Lavrov said, ‘The Russian side, those agencies which represent Russia in this process, will no doubt use all available legal possibilities to defend its position’.

However, one of Yukos’ lawyers, Professor Emmanuel Gaillard, said there would be no opportunity for Russia to contest the decision. Professor Gaillard stated, ‘As to appeal, there is no appeal…The tribunal has listened to both parties…the Russian Federation had ample opportunity to be heard in this case, the judgement is there. After 10 years of battle, the tribunal says they violated international law’.

The compensation awarded to Yukos' former shareholders is half of the original $103 billion claim by subsidiaries of Gibraltar-based Group Menatep, which previously controlled Yukos. Group Menatep now exists as holding company, GML. GML director, Tim Osborne, said, 'We couldn't be happier with this result'. 

Russia, which potentially faces tough new economic sanctions from Europe following the downing of Malaysian Airlines flight MH17, has until January 2015 to pay the compensation and will be charged interest on any late payments. 

RBS accused of being ‘wilfully obtuse’

Conservative MP, Andrew Tyrie, has criticised state-backed bank RBS for giving 'wilfully obtuse' evidence to the Treasury Select Committee earlier this year. The Treasury Select Committee is investigating whether RBS' corporate turnaround division, the Global Restructuring Group ('GRG'), put viable businesses into default in order to boost profits.

In June 2014, Chris Sullivan, deputy chief executive of RBS, and Derek Sach, head of the bank's GRG, denied claims made in a report (the 'RBS Independent Lending Review', 25 November 2013) by former deputy Bank of England governor, Sir Andrew Large, that GRG is a 'profit centre'. Sullivan repeatedly told the Treasury Select Committee in June that the description of GRG as a 'profit centre' was 'totally inappropriate'.

Now, however, in a letter to Tyrie dated 14 July 2014, Sullivan concedes that GRG is a profit centre, but says that in the June 2014 session, he was actually taking issue with the way some had used the term to suggest that GRG 'had a profit motive with a prejudice against our customers'. Sullivan also wrote, 'I need to correct the statement I made to the committee that I did not see a draft of the report, as on further checking with my office I can confirm I was in receipt of a copy during this period and made some comments of a typographical nature'. 

In response to the letter form Sullivan, Tyrie has said that he is going to write to RBS chairman, Sir Philip Hampton, to complain about the evidence given by Sullivan and Sach in June. The Treasury Select Committee will also write a report on its findings this summer. In a statement, Tyrie said that Sullivan's letter represented 'a belated U-turn. It's not as if the facts have changed'. Tyrie continued, 'If this is how RBS deals with a parliamentary Committee, how much can customers and regulators rely on it to be straightforward with them?'. 

RBS' Global Restructuring Group unit manages global corporate clients who find themselves in financial distress and have missed or are in danger of missing debt repayments. It is meant to work with companies to help them return to financial health.  

Amazon's corporate tax affairs in Luxembourg come under EU scrutiny

According to a report by the Financial Times published yesterday, the EU’s Competition Commission has asked Luxembourg to hand over documents relating to US online retailer Amazon’s corporate tax affairs in the country. The request for information will establish whether or not the company’s tax affairs through Luxembourg comply with applicable state aid regulations. The outcome of the fact-finding mission could ultimately lead to a full investigation being carried out.

An EU official told the Financial Times that, ‘We are looking into what kind of arrangement Luxembourg has with Amazon’. If the Competition Commission unearths evidence of unlawful operations between Luxembourg and Amazon, it will have the discretion to order the repayment of all tax revenues that have been lost as a result of the arrangement.

Within the UK, Amazon faced a torrent of criticism earlier this year when accounts revealed that in 2013 the company paid just £4.2 million in tax to the UK Treasury, despite achieving record sales of £4.3 billion.  At the time, a representative from Amazon stated, ‘The company pays all applicable taxes in every jurisdiction that it operates within’. Prior to this, in November 2012, Amazon, Google and Starbucks were quizzed by the UK Public Accounts Select Committee over their controversial tax arrangements and were branded ‘immoral’ by the MPs questioning them. In 2011, Amazon had made over £3.3 billion in sales across the UK, but paid no corporation tax and in over 14 years of trading in the UK, Starbucks had paid just £8.6 million in corporation tax.

The request for information marks another step in a broader EU crackdown against large multi-nationals channelling money via ‘tax-havens’ and concluding ‘sweetheart’ deals with certain countries. Last month, the EU launched investigations into Apple, Starbucks and Fiat to establish whether the deals they had struck with authorities in Ireland, the Netherlands and Luxembourg breach state aid rules. 

BNP Paribas fined £5.2 billion for breaching trade sanctions

France’s biggest bank, BNP Paribas, has been fined £5.2 billion ($8.97 billion) for breaching US trade sanctions against Cuba, Iran and Sudan between 2004 and 2012. It is also being prevented from clearing certain transactions in US dollars for one year from the beginning of 2015. BNP Paribas agreed to pay the fine to settle the charges against them after months of negotiations with US authorities. The fine is the largest for such a case in US history.

Previously, the largest fine levied against a bank by US regulators for sanctions violations was $1.9 billion paid by HSBC in 2012.

US Attorney-General, Eric Holder, stated at a press conference that BNP Paribas had gone to ‘elaborate lengths to conceal prohibited transactions, cover its tracks and deceive US authorities’. According to Mr Holder, the bank ‘deliberately and repeatedly violated longstanding US sanctions’.

Jean-Laurent Bonnafe, CEO of BNP Paribas, said, ‘We deeply regret the past misconduct that led to this settlement. The failures that have come to light in the course of this investigation run contrary to the principles on which BNP Paribas has always sought to operate. We have announced today a comprehensive plan to strengthen our internal controls and processes…Having this matter resolved is an important step forward for us. Apart from the impact of the fine, BNP Paribas will once again post solid results this quarter and we want to thank our clients, employees, shareholders and investors for their support throughout this difficult time’.

France’s banking supervisory authority, APCR, said in a statement that it had previously examined the liquidity and solvency of the bank and found it to be ‘quite solid’ and able to ‘absorb the anticipated consequences’.

Following the US authorities’ fine, Swiss regulator, FINMA, has announced that it has now closed its investigation into the activities of BNP Paribas. In a statement released in January 2014, FINMA said it believed that the bank had ‘persistently and seriously violated its duty to identify, limit and monitor the inherent risks, subsequently breaching supervisory provisions’.

Wonga to pay £2.6 million compensation for fake legal letters

The Financial Conduct Authority ('FCA') has ordered the UK’s biggest payday lending company, Wonga, to pay £2.6 million in compensation to consumers over misleading debt practices. Between October 2008 and November 2010, Wonga sent out letters to 44,556 customers claiming to be from law firms ‘Barker & Lowe’ and ‘Chainey, D’Amato & Shannon’. All the letters had in fact been sent by Wonga and the law firms named on the letterheads did not exist. The letters misled customers into thinking that their outstanding debts had been passed on to a law firm or other third party. In a statement from Wonga released yesterday, the company admits that the letters contained the ‘threat of adverse consequences if the debts were not repaid quickly. Charges were added to some customer accounts as a result of this practice’. The poor practice was initially uncovered by the former consumer credit regulator, the Office of Fair Trading and was picked up by the FCA in April this year after it become responsible for regulating the consumer credit industry.

The FCA’s director of supervision, Clive Adamson, said today, ‘Wonga’s misconduct was very serious because it had the effect of exacerbating an already difficult situation for circumstances in arrears. We are pleased that Wonga has been working with us to put matters right for its customers and to ensure that these historical practices are truly a thing of the past’.

Consumer group Which? has also responded to yesterday’s announcements. Richard Lloyd, Which? executive director stated, ‘It’s right the Financial Conduct Authority is taking a tougher line on irresponsible lending and it doesn’t get much more irresponsible than this. It’s a shocking new low for the payday industry that is already dogged by bad practice and Wonga deserves to have the book thrown at it. The FCA must now also clamp down on excessive fees and charges, starting with default fees charged by some payday lenders, to show it is serious about getting a fairer deal for borrowers’.

Tim Weller, Wonga’s interim boss, said, ‘We would like to apologise unreservedly to anyone affected by the historical debt collection activity and for any distress caused as a result. The practice was unacceptable and we voluntarily ceased it nearly four years ago’.

 

Wonga is due to start compensating customers from the end of July, including a flat rate £50 settlement to all who received the letters for the distress and inconvenience caused and a refund of charges associated with sending the letters.

Financial Conduct Authority to crack down on ‘logbook lenders’

 

The Financial Conduct Authority (‘FCA’) has called for ‘logbook lenders’ to ‘dramatically raise their standards’ if they want to continue trading. Logbook lenders supply loans that are secured against a borrower’s vehicle.

Stemming from research conducted between November and December 2013, the FCA has found evidence of ‘poor firm behaviour, including little or no affordability checks’, with some applicants even being encouraged to manipulate details of their income on application forms. The FCA also came across evidence indicating that consumers were being pressurised and put on the spot to take out a loan without being informed about the existence of the statutory cooling off period. In other cases, borrowers had not been made aware of the total costs involved and that missed repayments could lead to their vehicles eventually being repossessed.

 

The FCA also found that many consumers had little knowledge of the concept of a logbook loan and what it meant in terms of, for example, the ownership status of their vehicle. Being desperate for the loan, many consumers also failed to shop around and were found to focus more on weekly payment amounts than the total sum of what they had agreed to repay.

 

According to the FCA, logbook loans range in size from approximately £500 to £50,000 and are often used by vulnerable consumers in difficult circumstances who have exhausted other means of potential credit. The loans usually last for about six to 18 months, with a typical APR of 400% or higher.

 

Christopher Woolard, director of policy, risk and research at the FCA said, ‘People who use logbook loans are often in difficult circumstances with few other borrowing options. The last thing that should be happening is for them to be squeezed yet more or even threatened, but that is what our research has found’. Woolard continued, ‘Logbook lenders should consider this as fair notice to improve and put their customers first or we won’t hesitate to take action’.

 

Responding to the FCA’s statement and accompanying report, shadow minister for Competition and Consumer Affairs, Stella Creasy, said, ‘Time and again this government has been too slow in recognising and reacting to dangerous practices in the consumer credit market…This research makes a damning case to show that there’s more than one toxic type of company out there causing serious damage to the finances of families’.

The FCA took control of consumer credit matters from the Office of Fair Trading on 1 April 2014 and this week’s statement on logbook lenders forms part of a swathe of new rules and standards for the consumer credit industry to adhere to and signifies a new, firmer approach to regulating the sector.