APC 2013 Annual Report Download - page 46

1OVERVIEW OF THE GROUP'S STRATEGY, MARKETS AND BUSINESSES
RISK FACTORS
Legal risks
Our products are subject to varying national and The development and success of the
international standards and regulations Group’sproducts depends on its ability
toprotect its intellectual property rights
Our products, which are sold in national markets worldwide, are
subject to regulations in each of those markets, as well as to
Future success depends to a significant extent on the development,
various supranational regulations (sales restrictions, tariffs, tax
protection and maintenance of its intellectual property rights. Third
laws, security standards,etc.). Changes to any of these regulations
parties may also infringe its intellectual property rights, and the
or standards or their applicability to the Group's business could
Group may have to expend significant resources monitoring,
lead to lower sales or increased operating costs, which would
protecting and enforcing its rights. If we fail to protect or enforce our
result in lower earnings and profitability.
intellectual property rights, our competitive position could suffer,
which could have a material adverse effect on our business.
Our products are also subject to multiple quality and safety
controls and regulations, and are governed by both national and
To mitigate this risk, the patents developed or purchased by the
supranational standards. The majority of our products comply with
Group are tracked by the Industrial Property team within the
world-recognized International Electrotechnical Commission (IEC)
FinanceandControl – Legal Affairs Department. All intellectual
standards. Any necessary capital investments or costs of specific
property queries are centralized and managed by this team for the
measures for compliance with new or more stringent standards
whole Group and, in coordination with the other FinanceandControl
and regulations could have a negative impact on Group
– Legal Affairs Departments, it ensures the Group’s interests are
operations.
defended throughout the world. The same approach and
organization applies for the Group’s brands portfolio.
Disputes
Following public offers launched in1993 by SPEP (the holding Schneider Electric, in addition to other sector companies, has
company of the Group at the time) for its Belgian subsidiaries been involved in legal proceedings with regard to an alleged
Cofibel and Cofimines, proceedings were initiated against former agreement initiated by the European Commission concerning
Schneider Electric executives in connection with the former gas insulated switchgears (GIS), and this was because of two
Empain-Schneider Group’s management of its Belgian former subsidiaries operating in the high voltage segment that
subsidiaries, notably the Tramico sub-group. At the end of were sold in 2001. Schneider Electric did not appeal the decision
March2006, a criminal court in Brussels, Belgium, ruled that made by the Commission with regard to this matter on
some of the defendants were responsible for certain of the January24, 2007 and was fined EUR8.1million, for which
alleged offenses and that some of the plaintiffs’ claims were two-thirds reimbursement from its two former subsidiaries was
admissible. The plaintiffs claimed damages representing losses recovered in2012 after multiple legal actions in application of the
of EUR5.3million stemming from alleged management decisions decision by the Commercial Court of Grenoble. However, this
that reduced the value of or undervalued assets presented in the decision, although provisionally executed, is subject to an appeal
prospectus used in conjunction with the offering, as well as to the Court of Appeals of Grenoble, and is itself awaiting a
losses of EUR4.9million in relation to transactions carried out by decision by the Court of Justice of the European Union (CJEU) to
PB Finance, a company in which Cofibel and Cofimines held reconsider the entire GIS dossier. This decision by the CJEU is
minority interests. In its ruling, the court also appointed an expert expected in the first half of 2014.
to assess the loss suffered by those plaintiffs whose claims were In relation to the GIS disputes, on May21, 2010, British
ruled admissible. The expert’s report was submitted in 2008. The company Power networks (formerly EDF EnergyUK) launched a
defendants and the companies held civilly liable contest the claim against the same companies, including Schneider Electric,
amounts provided by the legal expert in their entirety on the for damages of GBP15million in the High Court in London,
basis of such reports drawn up by Deloitte. Schneider Electric England. This claim is currently being investigated and there
and its Belgian subsidiaries Cofibel and Cofimines were held were no significant developments in2013.
civilly liable for the actions of their senior executives who were In addition, some Group entities worldwide, including Brazil and
found liable. Schneider Electric is paying the legal expenses not Pakistan, are directly or indirectly cited in anti-trust proceedings
covered by insurance of the former executives involved. After a without, however, the proven or serious risk of conviction in this
settlement agreement was signed with a group of plaintiffs, the regard having been identified to date.
case remains pending before the Brussels Appeals Court, due to Schneider Electric was also among 2,000 companies worldwide
appeals against parts of the March2006 ruling as well as a ruling that were mentioned in the Volcker report on the Oil for Food
made in2011 by the Court of First Instance regarding the program published by the UN in October2005. Schneider
admissibility of the plaintiffs’ claims. Electric Industries SAS was investigated by the French judiciary
In connection with the disposal of Spie Batignolles, Schneider in 2010 in relation to this report, which stated that the Group had
Electric booked provisions to cover the risks associated with entered into agreements with the Iraqi government between
certain major contracts and projects. Most of the risks were 2000 and 2004 under which surcharge payments totaling
closed during 1997. Provisions were booked for the remaining approximately USD450,000 are alleged to have been made to
risks, based on management’s best estimate of the expected the Iraqi government, thus violating the provisions of the
financial impact. Nevertheless, certain new files implicating the embargo in force at that time. In May2013, in accordance with
Group for Spie Batignolles’ past activities could still arise and the indictment of the public prosecutor’s department, the judge
result in costs.
44 2013 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC