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ARD Times - Review of Employment Issues in
Outsourcing in Key European Countries
Outsourcing Law Group17 June 2013
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One of the largest law firms in the world, with a unique technology focus
Full, first-tier service on sourcing projects in the United States, Europe and Asia
Using a collaborative style to create enduring outsourcing relationships
Client-focused ethos and global geographic reach
• With over 1,000 lawyers in 16 global offices, MoFo is one of the top 25 global law firms
• MoFo has a clear focus on technology law, the technology sector and complex services-based projects
• 60 specialist technology and outsourcing lawyers offer flexible, scalable resource on all types of technology and outsourcing projects
• Projects include outsourcings for large government agencies (H.M. Revenue & Customs (U.K.), State of Georgia), banks (Lloyds Banking Group, Bank of America), manufacturers (Novartis), technology businesses (McKesson, Amadeus)
Key contact:
Alistair Maughan
T: (+44) 20 7920 4066
Morrison & Foerster ‐ UK
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The Outsourcing Law Group (OLG) is a group of like-minded law firms, each with asubstantial outsourcing practice and a recognised market leader in the sector
On outsourcing projects, the OLG works as a single law firm, taking a unifiedapproach under the leadership of one firm, and providing one set of rates, one billand one currency
OLG leverages the joint resources of all OLG firms and staffs projects with theresources that have the most relevant competencies for each aspect of a project
OLG currently consists of:
Morrison & Foerster: USA, UK and Asia
Noerr: Germany, Central and Eastern Europe
Gorrissen Federspiel: Denmark
Kennedy van der Laan: Netherlands
Courtois Lebel: France
Orsingher Ortu – Avvocati Associati: Italy
What is the Outsourcing Law Group?
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Worldwide coverageLocal knowledge
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Europe-wide Themes
Rules for determining whether ARD applies to outsourcing
Selection of in‐scope staff and the problem of cherry‐picking
Pre‐ARD consultation required: timeframes and penalties
Employees’ rights to object to transfer
Post‐ARD changes to terms of employment
Data transfer in “second generation” outsourcing
Local law exceptions exist to the general ARD principles
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Question 1
Are there separate rules for determining whether ARD applies to outsourcing, or do general principles of business transfers apply?
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One of the largest law firms in the world, with a unique technology focus
Full, first-tier service on sourcing projects in the United States, Europe and Asia
Using a collaborative style to create enduring outsourcing relationships
Client-focused ethos and global geographic reach
• Ann Bevitt heads our UK Employment Law Group. Ann’s practice covers all aspects of employment law, with a focus on outsourcing, international re-organisations and corporate transactions.
• Ann’s experience includes: advising HMRC on the employment and human resources issues arising out of its technology outsourcing and re-procurement project, involving the TUPE transfer of 3,000 staff; advising Phoenix Group on the employment and human resources aspects of the outsourcing of its life insurance and pensions administration services; and advising Johnson & Johnson on the employment and privacy law aspects of its HR outsourcing).
Morrison & Foerster - UK
Key contact:
Ann Bevitt
T: (+44) 20 7920 4041
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Service provision change: where contract to provide client with business service is:
Question 1 – United Kingdom
or or
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Recognized expertise in particular on collective employment issues and company restructuring
Enabling clients to implement successful strategic projects
Advice in all the main areas of business law affecting outsourcing projects
Providing assistance with high added value, focused on the needs of our clients
• For over 40 years, Courtois Lebel offers its national and international clients a wide range of legal services in the key areas of business law.
• Courtois Lebel has expanded its areas of expertise in order to offer its clients comprehensive pragmatic solutions, both in legal advice and litigation.
• Courtois Lebel has strong links and shared background with major European consultancies.
• Courtois Lebel has an significant experience of the execution of major outsourcing projects for clients, in France and internationally,
Courtois Lebel - France
Key contact:
Kim Campion – Partner
Employment
T: (+33) 1 58 44 92 70
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Question 1 – France
Standard ARD provisions apply to outsourcing
Notion of autonomous economic entity
Any asset deal that triggers a business transfer
Specific Collective Bargaining Agreement provisions in certain industries (e.g. cleaning industry)
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Focused on technology outsourcing as a core market
Significant international capacity: with 60% of clients from outside Italy
Accessible, available, responsive and reliable: offices in Rome and Milan
Rated top tier on major directories in Intellectual Property, Information Technology, Telecommunications and Media
• Italian leader in Telecoms, Media and Sourcing
• Focused Technology sector group with significant experience of outsourcing and access to a wider full-service practice familiar with issues affecting the Technology sector
• A young and dynamic team
Orsingher Ortu - Avvocati Associati - Italy
Key contact:
Marco Consonni
T: (+39) 02 89075071
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Question 1 – Italy
Italian case law has pointed out that there is a transfer of business (or branch of businesses) only when there the transferred “functions” / “services” where pre‐existing to the transfer and when they were functionally autonomous within the transferor before the transaction.
If this pre‐existing element does not exist, it is more likely than transferor and transferee have executed a mere service contract which doesn’t legitimate the transfer of employees with the mechanism of the ARD (i.e. automatically)
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Question 2
We often see disagreements about which employees ought to transfer (especially in 2nd generation projects). How does the scope of ARD implementing legislation affect who transfers, or the ability to cherry‐pick good staff/dump bad staff?
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One firm, multiple perspectives
Consistent dedication to quality and understanding of our clients' needs
An integrated firm with more than 220 lawyers
Covering all branches of Danish and EU commercial law
• Gorrissen Federspiel is based in Copenhagen and Aarhus, has 226 lawyers, 44 partners and is one of the leading corporate law firms in the Nordics
• Broad experience of employment issues related to IT and business process outsourcing in Denmark and abroad
• Has advised on many of Denmark and the other Nordic region’s largest and most complex outsourcing transactions involving employees
Gorrisen Federspiel - Denmark
Key contact:
Jacob Sand
T: (+45) 86 20 74 04
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Question 2 – Denmark
All employees who are predominantly engaged in the outsourced business on the transfer date will transfer
No ARD legislation preventing cherry picking
The current provider may (within the right of management) transfer good staff/ bad staff to/from the outsourced business before the transfer date
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Question 2 – Denmark
Contractual obligations to avoid cherry picking:
No changes to the work force within a reasonable time before the transfer date
Requirement to provide a list of the employees in scope at certain intervals before the transfer date
Definition of transferring employees, e.g. employees who have been actively working for the current provider within the last three months before the transfer date (to avoid the transfer of employees on long‐term sick leave, maternity leave etc.)
A pre‐determined list of retained/transferring employees
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Question 2 – Denmark
Terminations as a way to affect the in‐scope employees
The employees who are dismissed and released from all duties before the effective transfer date will not transfer
How to avoid the risk of rightful claims for unfair termination?
Contractual obligation to terminate/release re‐transferring employees within a certain period of time before the end date
Who should defray the costs of the terminations and who should bear the risk of claims for unfair termination?
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One of the top 20 independent law firms in the Netherlands
More than half of the firm’s work is for international clients
Top tier in many practice areas with a strong focus on technology and employment law
Innovative, open, friendly, informal and totally engaged with clients
• The leading IT firm in the Netherlands
• Innovative out-of-the-box thinking and entrepreneurial savvy
• Broad experience in IT and business process outsourcing
• Our outsourcing team supports in all aspects of outsourcing: drafting, negotiating of the agreement(s) and all HR-related aspects.
Kennedy Van der Laan – The Netherlands
Key contact:
Soo-ja Schijf
T: (+31) 20 5506 832
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Question 2 – Netherlands
Who transfers and who does not?
Agency workers: do not transfer
Suspended employees: under certain circumstances, do not transfer
Ill employees: in principle, do transfer
Redundant employees: in principle, do not transfer
Managing Directors: only transfer as an employee (but directorship does not transfer)
Employees working for more than 1 BU: only if employee can be ‘allocated’ to transferring BU
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Question 2 – Netherlands
Permanently seconded employees (Heineken vs. Albron)
Supreme Court (5 April 2013): permanently seconded employees within Heineken‐Group transfer by operation of law to Albron.
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Question 2 – France
The transfer is automatic and by operation of law
No possibility to choose who will transfer or not
No right of option for employees either
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• A Europe-wide established employment law team with pre-eminent know-how and reputation
• Well-suited to handling highly sophisticated international transactions
• Close interaction with internal practice groups and industry teams, e.g. outsourcing
• Long track record of outsourcing projects in a wide range of sectors
Among Germany’s leading independent law firms with 450 lawyers
Experience of more than 100 often highly complex outsourcing projects
Excellent presence in CEE: offices in Warsaw, Prague, Moscow, Bucharest, Budapest and Bratislava
Most innovative German law firm - Financial TimesInnovative Lawyers
Noerr – Germany and CEE
Key contact:
Daniel Krannich
T: (+49) 69 971477331
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Question 2 – Germany
Basically all employees of the affected business unit will be transferred
No cherry‐picking possible
But: prior to the transfer, various possibilities to shape the unit that will be transferred
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Question 3
There is often confusion among outsourcing clients about the extent of pre-ARD consultation required: e.g., timeframes, with whom and penalties for failing to consult. How much variation is there across Europe? In which countries do Works Councils have particularly great influence?
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Question 3 – Germany
The German implementation of the ARD does not require consultation, just obligation to provide information to the employees
Information of the employees pursuant to Sect. 613a para. 5 German Civil Code
infringement does not inhibit transfer
Transfer of a part of the unit (Outsourcing): severe codetermination rights for the works council pursuant to Sect. 111 Works Constitution Act
applicable to companies with more than 20 employees
operational change
infringement may result in a fine (up to 10,000 €) and the transfer can be inhibited by the works council prohibitory injunction enforced by penalty (up to 250,000 €)
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Question 3 – Italy
Notice of the transfer of business must be given 25 days in advance by written communication to labour organizations
The duty of disclosure is imposed upon both the transferor and the transferee
Subjects legitimated to receive the information are the Company Union Representatives (Rappresentanze Sindacali Aziendali) of the legal entities involved and the respective Trade Associations (Associazioni di Categoria) of both companies (transferor and transferee)
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Question 3 – Italy
If there are no Company Union Representatives, the information has to be given to the Trade Associations joining the national trade Federations which are the “most representative”
Communications to Trade Associations may be sent through the trade union to which the Trade Associations are joined or to which they grant mandate
Communications are necessary only if the company has more than 15 employees. This number has to be calculated on the entire company, even though the transfer concerns only part of it
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Question 3 – Italy
With the communication, the parties must indicate:
a) the reasons of the programmed transfer of business;
b) the juridical, economical and social consequences for the employees (i.e. modification of the applicable collective labour agreement);
c) the eventual measures both the transferor and the transferee intend to take towards the employees (i.e. suspension of labour relations and recourse to the redundancy fund etc.
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Question 3 – Italy
If the communication is omitted, both parties may incur the sanction provided for an “anti union behaviour”(condotta antisindacale) which may led to criminal sanction if not cured
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Question 3 – NetherlandsConsultation: Works Council (right to advice)
Timing? When the advice can (still) have important influence on the decision‐process
Information? Reasons for proposed outsourcing, consequences for the employees and measures to be taken
Impact advice? If advice of WC is not followed (completely), a waiting period of 1 month applies during which WC can initiate a Court procedure
Court criterion? Balancing of interests: reasonable decision
Court measures? Withdrawal of decision / reversal of consequences or a prohibition to implement the decision
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Question 3 – France
Consultation required in presence of works council
No direct consultation of employees (information)
Consultation must be launched well in advance
The works council is supposed to give an opinion on the outsourcing project: this is not an agreement
The works council can delay the project
Failure to consult: fines of €3,750 and 1 year prison for individuals and €18,750 for companies
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Question 3 – Denmark
No fixed timeframes ‐ in reasonable time before the transfer date. In practice, just up to a couple of days before the transfer
Information and consultation must be made with the employee representatives (Works Council) or the employees if no representatives are elected
Penalties: subject to a fine under statutory law or applicable collective bargaining agreement
Contractual obligation on both parties to inform and consult
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Question 3 – United Kingdom
Information obligation:
When? ‐ long enough before a transfer to enable the transferor/transferee to consult the appropriate representatives of affected employees
What on? ‐ fact of transfer, approximately when transfer will take place, reasons for transfer, legal economic and social implications of transfer for affected employees, measures envisaged in connection with transfer (or if none, that fact)
Consultation obligation:
When? ‐ where transferor/transferee envisages that it will, in connection with the transfer, be taking measures in relation to affected employees
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Question 3 – United Kingdom
Consultation obligation (ctd):
What on? ‐measures to be taken in relation to affected employees
How? ‐ with a view to seeking agreement to measures to be taken
Penalties for failure to inform and consult employee representatives:
Protective awards of up to 13 weeks’ actual pay per employee
Transferor and transferee to be jointly and severally liable
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Question 4
What rights do employees have to object to transfer?
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Question 4 – Italy
In the event of a business transfer, Section 2112 of the Italian Civil Code provides that employment relationships pass on from the transferring party to the transferee party without possibility of choice
In the event of transfer of only a portion of the business (transfer of a branch of business), the determination of the employees to be transferred must be effected on the basis of assignability or less of their work activity to the branch the subject of assignment
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Question 4 – Italy
Employees may contest the business transfer if there was not a going concern having its own autonomy and proper functionality before the transfer. In which case, it is more frequent that the companies have entered into a simple service contract and not a business transfer. This may be assessed on a case‐by‐case basis.
In this case, the employees may oppose the transfer and remain with the transferor
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Question 4 – Germany
Sect. 613a para. 6 BGB
objecting without stating reason within one month
one‐month‐term starts when being informed completely and correctly
Legal requirements (Sect. 613a para. 5 BGB):
(estimated) date and the reason of the transfer
the legal, economic and social consequences of transfer
envisaged measures concerning the employees
Supplementary jurisdiction concerning the correct information
if not correctly informed: right to object is unlimited in time
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Question 4 – France
No right to object
Only solution for the employee is to resign
Right to challenge the transfer (and most probably the absence of transfer)
Employee can bring a claim at his/her choice against the transferor or the transferee, or even both of them in certain circumstances
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Question 4 – United Kingdom
Employees have right to object to transfer
If they do so, contracts of employment and rights, powers, duties and liabilities under or in connection with them will not transfer
Employment with transferor is treated as terminated by operation of law with effect from transfer date, but not deemed to be a dismissal
No entitlement to statutory or contractual compensation unless objection in response to employer's repudiatory breach or substantial change to working conditions to material detriment
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Question 5
To what extent are incoming employers allowed to make changes to, or harmonization of, employee terms of employment once an ARD transfer has occurred?
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Question 5 – Netherlands General principle: employment terms transfer automatically
and employee cannot waive his rights under ARD (ECJ 10 February 1988, Daddy’s Dance Hall)
Harmonization by mutual consent can be possible, if : ETO reasons
duty to inform employees about transfer and consequences
new employment offer of incoming employer must also contain the possibility to retain the employment conditions of former employer
risk of non‐compliance: employee remains entitled to former employment conditions (and risk of ‘cherry‐picking’)
Unilateral harmonization under general principles of Dutch law
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Question 5 – Denmark
The employment terms are automatically transferred to the incoming employer.
A material change is only possible under general principles of employment law – requires a notice corresponding to the notice of termination or agreement
The incoming employer is considered as having adopted any applicable collective bargaining agreements unless a notice on no‐adoption is given to the unions as a general rule within 3 weeks after the transfer date
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Question 5 – Germany
impossible if done unilaterally by the employer
can be done mutually with the respective contracting party (e.g., employees, union, works council)
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Question 5 – France
Incoming employer cannot harmonize Ts&Cs because of, or in connection with, an ARD transfer
Only minor harmonisations are permitted (e.g., those that do not affect the employment contract: small changes of working conditions)
Changes can be made with the employee’s approval only if these changes affect the employment contract
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Question 5 – United Kingdom
Changes to terms and conditions in connection with transfer automatically unfair/invalid if sole/principal reason for dismissal/change is: transfer; or
reason connected with transfer other than ETO reason entailing changes in workforce (number or functions)
ETO: no statutory definition, but likely to include:
reason relating to profitability or market performance of transferee’s business (economic reason)
reason relating to nature of equipment or production processes which transferee operates (technical reason)
reason relating to management or organisational structure of transferee’s business (organisational reason)
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Question 6
In practice, we often see more issues around “second generation” outsourcing e.g. new Service Provider getting HR information from old Service Provider, scope of employees transferring. How well are these issues dealt with under your law?
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Question 6 – United Kingdom At least two weeks before transfer, transferor must
provide transferee with “employee liability information”: identity
age
statutory employment particulars
information relating to collective agreements
instances of any disciplinary action and grievances in last two years covered by the statutory dispute resolution procedures
instances of legal action taken by employees against the customer or outgoing service provider in the last two years
instances of potential legal actions where the customer or outgoing service provider has reasonable grounds to believe such action might occur
Minimum sanction of £500 (no maximum) for each employee for whom information not provided
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Question 6 – Denmark
General principles of law requires the old service provider to act loyally in connection with end date
Contractual obligations are recommendable in connection with transfer of HR info:
Obligation for the old provider to provide HR info 3‐6 months before the end date and updated HR info at later intervals including on the end date
The HR info should minimum include: seniority, age, position, salary (incl. pension and benefits), notice of termination, special conditions and any collective agreement
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Question 6 – Denmark
HR info is subject to data protection requirements:
Non‐sensitive data can usually be disclosed to potential providers without consent if subject to confidentiality.
On the transfer date, all HR info can be transferred to the new provider based on a succession principle
Other recommended contractual obligations in relation to 2nd generation outsourcing:
No implementation of favourable terms of employment
No transfer or allocation of additional resources
No offerings and inducements to the re‐transferring employees
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Question 7
Do any local law exceptions exist to the general ARD principles e.g. minimum thresholds?
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Question 7 – France
In certain industries, specific Collective Bargaining Agreements exist, which would allow a transfer, even if the ARD conditions are not met
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Question 7 – Netherlands
Collective Bargaining Agreements in certain industries provide for ‘change of contract’ clause (e.g. cleaning industry)
Duty by new supplier to offer the cleaning employees an employment agreement
In case the major part of the cleaning staff accepts the employment proposal and cleaning is regarded as labour‐intensive work, this will trigger a transfer under the ARD‐principles.
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MoFo is one of the leading international law firms, with more than 1,000 lawyers in 16 offices in Europe, Asia and the United States. Our clients include some of the largest financial institutions, corporations and government agencies
We have had an office in London since 1980. Today, our London office includes 16 partners and 55 lawyers – and focuses on technology & outsourcing, corporate, litigation and finance projects
Technology and outsourcing are key MoFo strengths. We act for technology businesses such as Apple and Intel in their global operations, and for large organizations such as Lloyds Bank, Novartis and the UK government in their technology and outsourcing projects
Chambers has called MoFo “the premier IT firm in the World”
For more information, see http://www.mofo.com/outsourcing‐services/ or our tech blog http://www.mofotechblog.com/
Morrison & FoersterA leading international technology and outsourcing adviser
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Courtois Lebel is in the top 5 of the independent firms in the Technology field (Legal 500).
We act for both technology businesses such as Logica (CGI), Sopra Consulting and SAS Institute (the Business Intelligence leading company) and leading French companies such as Aviva, BNPP, Lafarge, Natixis, etc.
Courtois Lebel has more than twenty years of experience in this area. The firm has one of France’s largest technology and outsourcing teams with 10 lawyers, including 3 partners
The DNA of the IT & telecommunications department is in its capacity to understand and give a legal classification of a technical and operational situation that is often complex.
The team has developed dedicated tools and methodologies for use by and on behalf of its clients
Courtois LebelA leading French technology and outsourcing adviser
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Gorrissen Federspiel is based in Copenhagen, has 225 lawyers, 41 partners and is one of the leading corporate law firms in the Nordics
Gorrissen Federspiel has the only fully dedicated outsourcing team in the Nordic region and is generally recognised as the leading outsourcing practice. The team consists of 1 partner, 3 project lead attorneys, 1 attorney, and 2 junior associates. Most of the lawyers in the outsourcing team are ITIL v3 foundation certified
The practice is based on large‐scale international projects and deals primarily with cross‐border transactions, often with no domestic or Nordic tieTeam lead, Ole Horsfeldt, is author of IT Outsourcing, published by Thomson, the only legal and practical book on outsourcing published in the Nordics, and has for several years been chairman of ITechLaw’s outsourcing committee. Ole Horsfeldt is part of IAOP’s Nordic leadership
Gorrissen FederspielThe leading practice in the Nordics
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Kennedy Van der Laan is Dutch law firm with an international focus. The firm is based in Amsterdam, has 95 lawyers and civil notaries and 25 partners. Chambers Europe describes the firm as “Kennedy Van der Laan is one of the Netherlands top independent law firms, based in Amsterdam. The firm has excellent legal knowledge in all avenues of work, offers prompt and practical advice, deals with legal issues and creates the right solutions in an unconventional and socially responsible way.”
Kennedy Van der Laan is leading in technology and outsourcing in The Netherlands with more than twenty years of experience in this area. The firm has the largest technology and outsourcing team with 20 lawyers, including 6 partners.
The practice covers both IT outsourcing and BP outsourcing (incl. HR service, financial services and facilities). The majority of the clients are AEX listed multinationals in areas like banking, insurance, retail and industry. The firm also supports some selected providers of outsourcing services.
The lead partners of the outsourcing practice, Patrick Wit, Reinoud Westerdijk and Joost Linnemann, are all recognized as among the best technology and outsourcing lawyers in the country. Reinoud Westerdijk is a member of the board of ITechLaw. Patrick Wit is the legal member of the program committee of the Dutch Outsourcing Platform.
Kennedy Van der LaanThe leading technology and outsourcing practice in The Netherlands
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Noerr has grown to become Germany’s leading independent law firm with 15 offices across Germany and the CEE/CIS region, with additional locations in Alicante, London and New York City. Starting out in Munich in 1950, Noerr today is a full‐service law firm with its own distinctive style and culture, and widely recognized for providing interdisciplinary advice and quality services responsive to the needs of its national and international clients.
Noerr’s preeminent IT group has in‐depth knowledge and expertise in handling licensing, procurement, outsourcing, sales, auctions, and technology transfer transactions that involve computers, software, networks, telecommunications equipment, and other intellectual property. Noerr’s IT partners are acknowledged throughout Europe as leading minds in outsourcing, IT outsourcing and other IT projects. The firm also provides a dedicated Outsourcing & IT Outsourcing Group, combing the firm’s hybrid expertise in business, communications, technology law, and IP, which allows them to provide exceptional business‐focused legal advice in relation to demanding transactions.
Recognized as “an authority in IT” by Chambers Europe 2012, Noerr has a reputation as “one of the few [German firms] to focus clearly on this field” (German JUVE guide 2011)
For more information, see www.noerr.com or our Outsourcing & IT Outsourcing Group http://www.noerr.com/en/Desktopdefault.aspx/tabid-332
NoerrAn elite IT team
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Orsingher Ortu – Avvocati Associati is a TMT specialized Italian law firm that counts 15 lawyers and fee‐earners. Our partners are consistently rated top tier on major directories in Information Technology and Outsourcing, Media and Intellectual Property and have spent a significant number of years as head of practice at international firms such as Freshfields or Dewey LeBoeuf
Our outsourcing team has more than 15 years of experience in advising multinational corporations on complex transactions including ITO/Infrastructure, BPO, HR deals
This team is skilled to assist your company for any aspects of an outsourcing transaction including corporate, employment and regulatory matters
Technical excellence, business‐orientation, responsiveness and reliability are key values underlying the relationship with our clients
The Firm “advises clients from a plethora of industries, but particularly those in the media sector. Domenico Colella [handles] complex technology deals” // Chambers, 2012
Orsingher Ortu – Avvocati AssociatiItalian top player in the TMT sector
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Outsourcing Law Group
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