The New Commercial Court

Healthy Tax Competition or Tax Harmonisation?

Arbitration and International Commercial Contracts

The ODCE and Corporate Compliance

Collaborative Law - Divorce Without Litigation

Introducing New Shareholders into a Company

Ban on Smoking in the Workplace

On the 12th January 2004 the Commercial Division of the High Court came into effect. Although the Commercial Court will be operating as a division of the High Court, it will have a separate identity and use different procedures. The Commercial Court was primarily established in response to the lengthy delays which were being experienced in commercial litigation. Its principal objectives will be to encourage more effective case management and to facilitate the speedy resolution of commercial litigation.

The Commercial Court will have its own list based on a general value threshold of €1 million. The scope of the Commercial List will include business transactions of a very wide variety where the value of the claim is €1million or more. The list will also deal with intellectual property cases (patents, trademarks, copyright and designs) and commercial "passing off" claims. Also included are judicial review cases which relate to major commercial matters.

Proceedings which may be entered in the Commercial List

Only certain proceedings can be entered into the Commercial List. These proceedings are defined as "Commercial Proceedings" and are set out in Rule 1 Order 63A of the Rules of the Superior Courts. In summary, they include:

1. claims in contract or tort, arising out of certain business transactions, where the value of the claim is not less than €1 million. Such claims include proceedings in relation to a business document, export or import of goods, insurance or reinsurance and business agency;
2. intellectual property cases (including passing off);
3. certain types of arbitration claims where the value of the claim is not less than €1 million, and
4. appeals from, or judicial review applications in respect of, any statutory body.

The entry of a case into the Commercial Court is at the sole discretion of the Commercial Court Judge to whom application is made.

Even if a case does not fall within the above categories it can still be admitted into the Commercial Court . Rule 1 section (b) Order 63a provides that even if the value of the claim is less than €1 million the Judge has the discretion to enter it into the Commercial List. When exercising this discretion, as to whether the action should be transferred into the Commercial List, the Judge will look to see if there is a commercial aspect to the transaction.

The only cases specifically excluded from the Commercial List are claims or counterclaims involving damages for personal injuries.

Procedures which must be followed in order to enter proceedings
to the Commercial List

Applications for transfer to the Commercial List may be made in respect of proceedings instituted on or after 12th January 2004 where those cases fall within the categories of proceedings listed in Rule 1 Order 63A.

Rule 4 (2) Order 63A provides that applications for the entry to the Commercial List, of proceedings falling within any of the categories, may be made by a party to the proceedings to the Judge in charge of the list by notice of motion to the other party at any time before:

1. the close of pleadings, in the case of plenary proceedings, or
2. completion of the filing of affidavits, in the case of summary proceedings or proceedings triable on affidavit without pleadings.

The application must be accompanied by a certificate from the applicant's solicitor to the effect that the proceedings are appropriate to be treated as commercial proceedings. The certificate must state the category in which the solicitor believes the case falls within.

Conduct of proceedings entered in the Commercial List

The objective of the Commercial Court is that issues of law and fact shall as far as possible be narrowed down in advance of the trial and that cases should be progressed "in a manner which is just, expeditious and likely to minimise the costs of the proceedings" (Rule 5 Order 63A). Case preparation in the Commercial Court can be divided into three stages:

1. An initial directions hearing at or following the hearing at which a case is entered in the Commercial List.
2. A case management conference for cases which are considered by the Court to require case management.
3. A pre-trial conference for all cases whether subject to case management or not.

The object of these three different stages is to ensure early identification of the matters that are at issue between the parties. It is believed, and indeed experienced in those jurisdictions where Commercial Courts have already been established, that once these issues are identified there will be a very high settlement rate with only a small proportion of cases going to trial. Although there will be a greater expenditure of legal and other costs at the preliminary stages of the litigation there will, in respect of cases which are settled before trial be major savings at the much more expensive trial stage.

Initial Directions Hearing

The initial directions hearing takes place either at or following the hearing at which a case is entered in the Commercial List.

At the initial directions hearing the Judge may, at his own discretion, make a number of directions. These directions may include the following:

1. whether formal pleadings should be used;
2. fix issues of law or fact to be determined in the proceedings;
3. adjourn the proceedings for a period of time, not exceeding 28 days, so as to allow the dispute to be referred to a process of mediation, conciliation or arbitration;
4. require delivery of interrogatories, or discovery or inspection of documents;
5. direct the parties' expert witnesses to consult with each other;
6. direct the examination upon oath before a Judge of any witness, and/or
7. direct as to whether or not the proceedings should be subject to case management.

Case Management Conference

Not all cases will be subject to a case management conference. It will be solely for the discretion of the Judge whether a case management conference is to be held. In deciding whether such a conference is necessary the Judge will look at such things as the complexity of the case, the number of issues or parties, the volume of evidence.

When case management is directed it takes the form of a conference chaired by the Judge. The purpose of the conference is to ensure that the proceedings are prepared for trial in a manner that is "just and expeditious and likely to minimise the costs of the proceedings".

The principal objective of the case management conference is to ensure that, in advance of the trial, the following issues are dealt with:

1. that all issues, whether as to law or fact, are defined as clearly, as precisely and as concisely as possible;
2. that all pleadings, affidavits and statements of issues are served;
3. that any applications by letter for particulars or replies thereto, any admissions, or requests for admissions, notice to admit documents or facts or replies thereto, and any affidavits made in pursuance of any notices to admit facts or documents are served or delivered;
4. that all applications for relief of an interlocutory nature intended to be made by any of the parties are made, and
5. that any directions given or orders made at the initial directions hearing or in the course of a case management conference have been complied with.

At the case management conference the Judge can make the following orders:

1. fix a timetable for the completion of preparation of the case for the trial;
2. make any order which he may make at the initial directions hearing, and
3. if he considers that there is undue delay, or if he is dissatisfied with the conduct of the proceedings, he may require the party who appears to be responsible for such misconduct or delay to attend before him to explain same. The Judge may give such ruling or a direction as he considers appropriate for the purposes of expediting the proceedings or the conduct thereof. It remains to be seen whether such an order or ruling may seek to make one party liable for the costs of the other.

Pre Trial Conference

All cases for trial in the Commercial List are subject to a pre-trial conference which, again, is held before the Judge. If the case is subject to case management the pre-trial conference occurs once all case management directions have been complied with. If the case is not subject to case management, the case conference occurs once pleadings are closed or statement of issues exchanged.

"Although the Commercial Court will be operating as a division of the High Court, it will have a separate identity and use different procedures."

The purpose of the pre-trial conference is to address any steps remaining to be taken prior to the trial, to quantify the likely length of the trial and to identify any special arrangements required to be made in relation to such things as the giving of evidence, provision of information and communication technology facilities. Not later than four clear days before the pre-trial conference each party is obliged to complete and lodge a prescribed pre-trial questionnaire. This is a checklist of the actions which are required to be completed at the pre-trial stage and of arrangements to be made including the witnesses for the trial itself. Where the Judge chairing the pre-trial conference is satisfied that the proceedings are ready to proceed to trial he ought fix a date for the trial of the action.

Evidence

A number of important changes have been introduced in relation to the presentation of evidence for Commercial Court cases.

Rule 22 (1) Order 63A provides that where, at the trial, a party intends to rely on the oral evidence of a witness as to fact or of an expert then, unless the Court otherwise directs, they must in the case of the Plaintiff, not later than one month prior to the trial date and in the case of the Defendant not later than seven days prior to the trial date, serve on the other party a written statement outlining the essential elements of that evidence. The Court may in exceptional circumstances direct that such statement be treated as a witness's evidence in chief and be verified on oath.

The effect of this is that each party will know, not only the identity of its opponent's witnesses and experts, it will also know all the important aspects of the evidence that is going to be relied upon by its opponent. Trial by ambush shall not be a feature of cases before the Commercial Court.

Electronic Service, Exchange and Lodgement of Documents

In the courtroom occupied by cases in the Commercial Court list an electronic distribution system has been installed with touch screen monitors on which parties will be able to present the contents of the trial booklet electronically. There will also be digital audio recording enabling evidence to be recorded and logged on diskette. The courtroom is also capable for video conferencing and the new rules provide for the giving of evidence by live video link or other means.

Conclusion

It is clear that one of the major differences between the new Commercial Court list and the existing lists in the High Court will be the extent of case management before a case comes to trial. To date, the culture of pleadings has had the effect of concealing the real issue to be determined at trial by either pleading everything (if a plaintiff) or denying everything (if a defendant). However, in the new Commercial Court, parties will be submitted to rigorous case management. The parties will be given deadlines and directions designed to narrow and identify the issues and making the trial as expeditious as possible. Penalties may well be imposed upon parties to litigation (or their lawyers) where the Judge decides they are guilty of foot dragging.

The costs of such actions will certainly be borne more in the early stages of the litigation than is currently the case. Additional costs may also be incurred if the Judge orders some method of alternative dispute resolution. In the final analysis however this ought assist in the earlier resolution of cases that should be settled and the more efficient running of cases which proceed to trial.

For further information please contact Jill Callanan.

The recent enlargement of the European Union ("EU"), and the referral last month of a potentially ground breaking test case to the European Court of Justice, has given new impetus to the debate concerning tax harmonisation across the EU.

It is well established that all EU countries have a sovereign right to determine domestic tax policy. The right to tax independence is sustained by the fact that, at EU level, taxation continues to be a matter that requires unanimity, effectively giving any one Member State the ability to veto EU-wide tax harmonisation. However, in adopting domestic tax policy each Member must also accord with existing EU rules, which is one of the central issues in the European Court of Justice referral.

The backbone of Irish economic success in recent years can be attributed, at least in part, to healthy tax competition and a low corporate tax rate. Until enlargement, Ireland was the only Member State that enjoyed a distinct corporate tax advantage over other EU Member States. As a consequence, Ireland often attracted criticism, largely, from high tax Member States who claimed that tax rates should be harmonised across the whole of the EU to eliminate unfair competition.

Since enlargement, there has been increasing unease among some established Member States, particularly France and Germany, at the downward trend in corporate tax rates throughout the enlarged Union. In addition to Ireland's corporate tax rate of 12%, the rates for the new accession states include 0% in Estonia, 15% in Latvia and Lithuania, 18% in Hungary and 19% in the Slovak Republic and Poland.

Both France and Germany have recently pushed the issue of tax harmonisation to the forefront by strongly advocating the introduction of corporate tax harmony in the new EU constitution. In so doing, it was their hope to introduce majority voting on EU tax issues to overcome the restrictions of unanimous voting. Such a move may have ultimately opened the way for an EU corporate tax rate but was strongly resisted by Britain, Ireland and EU newcomers Poland and the Baltic States.

France and Germany also proposed a harmonisation of the way companies calculate corporate taxes, including a minimum tax rate, which the European Commission rejected although it did confirm that it favoured harmonising the way companies calculate tax bills.

While Chancellor Gordon Brown in United Kingdom ("UK") only last month vowed to resist any move towards EU tax harmonisation, that is not to say that the UK is not focused on protecting its own corporate tax base.

Since enlargement, there has been increasing unease among some established Member States. Like other many countries with high corporate tax rates, the UK operates controlled foreign company ("CFC") rules to stop companies from avoiding tax by diverting profits to subsidiaries in low tax countries. These CFC rules are an important part of the UK's anti-avoidance legislation and in recent years have been tightened to combat the threat of corporate tax havens such as Ireland.

Significantly, the CFC rules have been now called into question on referral of an appeal by the UK Special Commissioners to the European Court of Justice. The case centres on a tax assessment by the UK Inland Revenue (the "Revenue") in respect of two Irish IFSC-based subsidiaries of Cadbury Schweppes, in which the Revenue sought to apply the CFC rules to these subsidiaries in order to tax the UK parent company for the profits of the subsidiaries.

On appeal to the Special Commissioners, Cadbury argued that the application of CFC legislation was incompatible with freedom of establishment, freedom to provide services and freedom of movement of capital under the Treaty of Rome. Due to a number of uncertainties as to whether the establishment of subsidiaries was the exercise of a fundamental freedom or abusing such a freedom under EU law, the Special Commissioners referred the matter to the European Court of Justice.

Although the case is unlikely to be heard in the near future, the outcome is likely to have a significant impact on Ireland's status as a low corporate tax regime. If the CFC regime is found to restrict or discriminate against fundamental freedoms then a number of EU countries, such as Denmark, Finland, France, Germany and the UK, may be subject to scrutiny for operating illegal CFC regimes.

A ruling against the Revenue may have a positive spin-off for Ireland, in that it might open the floodgates and allow UK companies to utilise Ireland's low tax corporate environment for subsidiary companies. However, such an event depends entirely on the acceptance of a UK tax policy that allows flexibility and tax competition. It may also be just as likely that the UK will, in these circumstances, reconsider its tax relationship with Ireland and other tax havens, which might result in the replacement of the current regime with something equally or more inflexible.

If the CFC regime is found to be compatible with EU law then the status quo would apply, and may give a greater claim for some Member States to join the drive towards tax harmony throughout the EU.

Whatever the result of the Cadbury case, the decision is likely to present the enlarged EU with a difficult choice between a corporate taxation system that enhances healthy tax competition or a harmonised regime designed to eliminate unfair tax advantage.

For further information please contact Emmet Scully.

Imagine yourself abroad in a dispute with a foreign party facing proceedings in a foreign court using a different language, and without your usual legal team. Not a nice thought! Even if you are successful, will you be able to enforce your award in the foreign courts jurisdiction or elsewhere in the world where assets may be found? Maybe you should have considered arbitration, more and more business people do.

With the enormous increase in trade between Ireland and abroad, commercial disputes are often international. Commercial clients are opting for the insertion of an arbitration clause into their commercial contracts in order to govern the contingency of a future international dispute and minimise the nightmare scenario above.

The Law

International arbitration in Ireland is governed by the Arbitration (International Commercial) 1998 Act, ("the 1998 Act"). The 1998 Act implements the UNICTRAL Model Law on International Commercial Arbitration in full, with some additional measures designed to increase the autonomy of the arbitration process. This equipped Ireland with a more modern, flexible, recognisable international arbitration tool. It provided a detailed framework from which to work, and minimised wrangling between the parties on procedural matters.

Arbitration Organisations

Alternatively, the parties to an International commercial contract may agree to use the rules of one of the international arbitration institutions, which may be preferable where one of the parties to the agreement is not comfortable with Ireland being the place where the arbitration is to occur. This involves the parties referring future disputes to arbitration under the supervision and administration of one of the arbitration institutions which possess an existing set of procedural and administrative rules and the parties thereby agree to be bound by those rules and conduct the arbitration accordingly. The principal international commercial arbitration institutions are the International Chamber of Commerce ("ICC"), the American Arbitration Association ("AAA") and the London Chamber of Arbitration ("LCIA"). These institutions have been established nationally and internationally to promote arbitration.

Location

The place of arbitration has a major bearing on the conduct of the case and the enforcement of an award. One should be careful to choose a place of arbitration, which is a signatory to the New York Convention 1958 as in Ireland, as this convention provides a means of enforcing an international arbitral award. The place of arbitration is usually selected with a view to convenience or neutrality. However it is also important to choose a place where the domestic courts will not interfere readily in the arbitration process. In this regard, Geneva and Zurich in Switzerland are amongst the best places to have the seat of arbitration. The Swiss courts have a deep-rooted tradition of supporting international commercial arbitration and have a hands- off approach.

Conclusion

In conclusion, for the resolution of international disputes and for the enforcement of awards, arbitration is preferred by business people to conventional litigation. Value can be added to commercial arrangements by careful selection of an appropriate law, jurisdiction and a set of rules contracting into arbitration as the chosen means of dispute resolution and thereby avoiding difficulties in the dispute resolution process.

For further information please contact Edmund Butler or Philip Daly.

The Director of Corporate Enforcement, Mr. Paul Appleby, published his Annual Report for 2003 on the 1st June 2004. The report highlighted the direct and indirect successes which the Office of Director of Corporate Enforcement (ODCE) achieved last year on the enforcement front.

Some key figures published in the report show that:

• 43 convictions were served by the Director against 26 companies and individuals. ·
• 150 directors were restricted by the High Court.
• 14 orders were made in the High Court compliance proceedings against nine liquidators.
• One director has been disqualified.

During 2003, the Director directly secured more than 100 favourable Court decisions. Aside from enforcement proceedings, the successful Court decision included the acquisition and execution of ten search warrants and thirteen orders for the production of banker's books pursuant to the ODCE investigations of suspected breaches of the Companies Acts.

Mandatory reports in 2003, many by auditors of companies, increased more than three times from 385 report being made in 2002 to 1488 reports being made in 2003. The majority of mandatory reports made to the ODCE are non-compliance matters such as non filing of annual returns on a time basis, director's loan infringements, non holding of Section 40 EGMs, failure to keep proper books of accounts and a company not having a resident Irish director.

The volume of reports made by public complainants also rose significantly from 201 in 2002 to 307 in 2003.

There were a total of 269 new cases for possible enforcement proceedings at the end of 2003. The areas these cases are to be brought in are as follows - failure to produce company registers, failure to keep proper books of accounts, fraudulent trading, excessive director loans, to name but a few.

The Director may also impose High Court Orders against liquidators and in 2003, nine liquidators were on the receiving end of a High Court Order to this effect.

One of the sub goals of the ODCE is the publishing of easy to read accessible company compliance information.

In late 2002, and early 2003, the ODCE ran a campaign of publishing guidance booklets for company stakeholders which highlighted the relevant compliance areas of each stakeholder regarding officer, member, auditor, creditor, liquidators and the company itself. The response to these initiatives were extremely positive and booklets were sent to each of the 150,000 companies on the register and the office received many favourable comments regarding the content and presentation of the booklets.

A further measure of the book's popularity was that over 10,000 copies were downloaded from the ODCE website during 2003. As part of the ODCE policy on making company law available to everyone, all the guidance booklets and relevant publications are available on their website www.odce.ie.

During 2003, the ODCE teamed up with the CRO to issue a quarterly newsletter called "Corporate Compliance Matters" and this newsletter was distributed to all registered company directors, and is still being issued on a quarterly basis.

It is also worth noting that the Director is a member of the Board of two statutory committees established in recent years i.e. the Irish Auditing and Accountancy Supervisory Authority ("IAASA") (established under 2003 Act) and the Company Law Review Group ("CLRG") (established under 2001 Act). These groups were established in the case of CLRG to further the development of company law and to IAASA monitor and supervise the accountancy bodies of Ireland.

During 2003, the ODCE briefed visitors from Poland, Lithuania, Russia and Uganda on its role in seeing greater compliance with the Companies Act and thereby improving the risk environment for companies operating in Ireland.

It is clear from the figures published by the ODCE report that the corporate compliance environment of Ireland is becoming far more stringent and that the days of avoiding enforcement proceedings for non compliance ever more unlikely.

For further information please contact Alan Browning.

All divorces involve decisions and choices such as which financial/legal and/or medical professionals to use and how to utilise their help. These decisions can powerfully affect whether a divorce moves forward smoothly or not. Some couples resolve all their divorce issues without any professional assistance whatsoever. More frequently, some couples engage in drawn out courtroom battles, which drains the family's emotional and financial resources, are destructive to relationships and can take considerable time to complete. Most people find that their needs fall between these two extremes.

Everyone is familiar with the usual process of obtaining a divorce through the Court system, using traditional litigation techniques such as tactical bargaining. However, a new concept recently introduced in Ireland, which is well established in America and recently established in Britain, is collaborative law; where the couple, with the assistance of their respective collaborative Solicitors, effect a divorce without involving litigation through the Courts.

Under this new dispute resolution model, both parties to the divorce retain separate specifically trained Solicitors whose only task is to help the parties settle the disagreements that they have. All negotiations take place in a number of four-way settlement meetings that are attended by both clients and Solicitors. The number of meetings required differs with each couple, depending on the complexity of the issues involved. The agenda for each meeting is agreed between the clients and Solicitors beforehand. The purpose of the four-way settlement meeting is to reach a settlement, which is negotiated by both clients directly, with legal advice provided by the Solicitors, if needed. Each Solicitor must guide their client towards a reasonable resolution. The legal advice provided by the Solicitor is an integral part of the process while the clients are the negotiators.

With negotiations only taking place in the four-way meetings, both parties insulate their children from their disputes and, should custody be an issue, they avoid the professional custody evaluation process. If a financial, medical or other expert is required, then one expert is retained to advise both spouses, as opposed to the traditional litigation approach of retaining separate experts to advise each client. Thus, the meeting can become a five-way meeting.

Once the issues have been settled and both clients have reached agreement as to the terms of the Divorce then the Solicitors prepare and process all the papers required to obtain the Court Order granting a Decree of Divorce on consent.

Each collaborative Solicitor's retainer is always on the basis that should the negotiations break down and it is not possible for the two clients to agree on settlement, then the two retainers are terminated and each client must instruct new Solicitors to proceed through litigation to achieve a divorce. Collaborative law is effective negotiation without the constant overhang of the adversity of litigation. The only time that a collaborative Solicitor involves him/herself with the Court system is when he/she processes the papers necessary to obtain a Decree of Divorce on consent. While this may appear unusual, having regard to the common perception that divorce has to be adversarial, this pre-condition is one of the foundations of collaborative law.

Collaborative law is not the same as mediation. With mediation, there is one neutral professional who helps the parties try to settle their disputes. Mediation can be challenging where the parties are not on a level playing field with one another, because the mediator could not give either party legal advice nor should he help either side advocate his/her position. For example, if one side becomes unreasonable or is emotionally distraught and the other side wants to agree just to appease him/her, then the mediation can become unbalanced. With collaborative law, each side has legal advice and advocacy at all times during the process. Even if one side lacks negotiating skill or financial understanding or is emotionally upset, the playing field is levelled by the direct participation of specifically trained Solicitors. It is the responsibility of each Solicitor to work with his/her own client if the client is being unreasonable, to make sure that the process stays positive and productive.

Collaborative law is different from the traditional adversarial divorce process in that all parties participate directly in an open, honest exchange of information. The traditional litigation approach is to obtain discovery of every scrap of information relating to each party's means. While discovery and the open exchange of information is an important foundation of collaborative negotiations, discovery is generally narrowed down to specific aspects of each party's finances that the other party is unclear about. Neither party takes advantage of the miscalculations or mistakes of the other; in fact he/she will be required to identify the error and correct it during the settlement meetings.

Obviously, collaborative law is not suited to all spouses who are contemplating obtaining a divorce. Generally, a degree of trust is necessary and the parties must have a reasonably amicable relationship.

Couples interested in exploring this means of dispute resolution should each instruct a suitably qualified Solicitor.

For further information please contact Rachel Murphy.

The issue of succession planning is a perennial one for the owners of private companies (particularly those where a trade sale is unlikely due to the nature of the business carried on) whether the desire is to pass a significant interest or even control of the Company into the hands of family members or long time senior executives. The use of Revenue approved option or profit sharing schemes is not really appropriate for small to medium size private companies, due to the formality and cost involved in getting Revenue approval and the limitations of such schemes. Thus, while these schemes can provide some level of benefit on a tax relieved basis to employees, they are of little or limited use in succession planning.

Non-Revenue approved option schemes are also less than satisfactory in many regards. A company will usually grant options to individuals to subscribe for shares in the company at a price equal to the market value of the shares at the date of grant of the option, although for unapproved share option schemes it is possible for the options to be granted at less than market value at the date of grant. If at the date of exercise of the option the shares have increased in value, an income tax liability will arise as the individual will be deemed to have received a benefit in kind, equal to the difference between the market value of the shares and the price actually paid. Under the 2003 Finance Act any such income tax would be payable within 30 days of the issue of the shares.

Because of the onerous tax treatment of unapproved options, other methods are frequently sought in order to reduce the possibility of a significant tax liability arising. One such method is the issue of shares upfront to individuals, subject to certain clawback provisions applying to the shares, in particular buy-back arrangements in the event that the individual leaves the company before a certain date. These arrangements also provide a degree of flexibility in that the amount payable for the shares if the employee leaves can vary depending on the reason for the cessation of employment. Thus, an employee dismissed for cause might receive a nominal amount, whereas somebody leaving on good terms would receive full value.

Another alternative is to issue shares subject to certain restrictions (usually built in to the share rights). This is done by issuing shares to the new shareholders which at the date of issue would have certain restrictions (such as no voting or dividend rights and deferred capital rights) thereby depleting their value on issue and any resulting benefit in kind. Over time, the shares may become of greater value, either because of the rights attaching thereto are enhanced on the happening of certain events, or because they become the dominant shares by virtue of the redemption or purchase by the company of other shares.

It is important to consider carefully the tax treatment which will be applied in respect of any of these arrangements, as the intention will usually be to have any uplift in the value of the shares treated as a capital gain rather than as income. Indeed, tax issues will also be of relevance to the existing controlling shareholders if their intention is to pass control into the hands of incoming shareholders particularly if the shares held by them are to be redeemed by the company. In such a case, it will be necessary to consider whether the 'trade benefits' test can be satisfied so as to ensure that redemption proceeds are treated as capital gains rather than income.

For further information please contact Gerry Halpenny or Jennifer McGuire.

The introduction of a ban on smoking in the workplace was highly publicised and gave rise to extensive lobbying and concern on the part of certain interested sectors as to how the ban would operate in practice.

Non-smoking in the workplace

The Public Health (Tobacco) (Amendment) Act, 2004 (the "Act") prohibits smoking of tobacco products with effect from 29th March, 2004 in a place of work.

The ban on smoking in the workplace has been introduced as a health and safety measure and must be considered in the context of the general duties on employers and employees in the Safety, Health and Welfare at Work Act, 1989 (and the regulations made under that Act). Employers have an obligation to provide employees with a safe place of work, safe systems of work and to control or eliminate hazards in place of work.

Employers should be aware that non-compliance with the Act and permitting employees to smoke at work in breach of the ban may be regarded as exposing other employees to an unsafe working environment within the meaning of the Safety, Health and Welfare at Work Act, 1989.

Penalties

Any person found to be in contravention of the Act is guilty of an offence (which on conviction may lead to a fine of up to €3,000) and the employer in charge of the place of work will be held accountable. It should be noted that it is a defence for an employer against whom proceedings are brought to show that it made "all reasonable efforts" to ensure compliance with the Act.

Employers

Employers must as a priority draw up a smoke free at work policy which should be widely circulated - perhaps as part of an employee handbook. The employer should clearly also specify how any breach of this policy will be treated and ideally should refer to the Company's disciplinary procedure.

Employers must display signage in accordance with the Act. This will have the effect of publicly demonstrating compliance and should also assist in compliance.

For further information please contact Aoife Bradley.