WEBVTT - Bank Deregulation, Tariff Rulings Among 2H Catalysts 0:00:15.320 --> 0:00:19.000 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:19.040 --> 0:00:22.560 by the Litigation and Policy team at Bloomberg Intelligence, the 0:00:22.640 --> 0:00:26.160 investment research platform of Bloomberg LP on the Bloomberg Terminal. 0:00:26.520 --> 0:00:30.520 Bloomberg Intelligence has five hundred analysts and strategists working across 0:00:30.560 --> 0:00:33.519 the globe and focused on all major markets. Our coverage 0:00:33.520 --> 0:00:36.159 includes over two thousand equities and credits, and we have 0:00:36.280 --> 0:00:39.919 outlooks on more than ninety industries and one hundred market industries, 0:00:39.960 --> 0:00:44.800 currencies and commodities. This podcast series examines the intersection of 0:00:44.840 --> 0:00:48.840 business policy and law, and today we're doing our mid 0:00:48.880 --> 0:00:52.320 year outlook on the litigation and policy catalysts that we're 0:00:52.320 --> 0:00:54.960 watching in the second half of twenty twenty five and 0:00:54.960 --> 0:00:57.960 that we think will impact companies across a number of 0:00:58.080 --> 0:01:01.920 different sectors. My name is Elliott Stein. I'm an analyst 0:01:01.960 --> 0:01:06.080 with Bloomberg Intelligence covering litigation in the financials sector, and 0:01:06.120 --> 0:01:08.960 I'm delighted as always today to be joined by several 0:01:09.040 --> 0:01:12.400 of my BI colleagues. As always, you can find all 0:01:12.440 --> 0:01:15.520 of our research on the Bloomberg terminal at BI go, 0:01:16.400 --> 0:01:19.720 and you can find the majority of our litigation and 0:01:19.800 --> 0:01:25.479 policy research on our dashboard at BI laws go. We're 0:01:25.480 --> 0:01:31.640 recording this over two days July ninth and tenth, which 0:01:31.640 --> 0:01:34.760 we always we always like to timestamp these episodes because 0:01:35.160 --> 0:01:37.399 things move quickly and sometimes some of the things we 0:01:37.440 --> 0:01:39.959 say maybe out of date by the time the episode 0:01:40.000 --> 0:01:43.720 is published. But with that, let's get started with the content. 0:01:44.840 --> 0:01:50.040 Let's bring in Nathan Dean, who covers financials policy and 0:01:50.080 --> 0:01:55.120 also some other policy issues across other sectors down in DC. Nathan, 0:01:56.000 --> 0:01:58.040 I feel like the first half of the year was 0:01:58.040 --> 0:02:02.280 focused on tariffs and the One Big Beautiful Bill. The 0:02:02.320 --> 0:02:04.760 One Big Beautiful Bill, of course, is pretty much is 0:02:04.800 --> 0:02:07.680 done at this point. Tariffs is sort of still an 0:02:07.680 --> 0:02:11.120 evolving story. But the second half of the year looks 0:02:11.120 --> 0:02:15.480 like it's going to be largely focused on deregulation for 0:02:15.560 --> 0:02:19.320 big banks, at least in your coverage area. And I 0:02:19.360 --> 0:02:21.799 know you've written a lot about that. So what specifically 0:02:21.840 --> 0:02:22.840 are you watching for. 0:02:23.639 --> 0:02:25.360 Yeah, you know, you hit it right on the head 0:02:25.440 --> 0:02:28.120 with you know when you said deregulation, Because if you 0:02:28.120 --> 0:02:31.360 go back to Treasury Secretary Scott Besson's three pillars for 0:02:31.440 --> 0:02:33.880 economic growth, the first one was taxes, Well, the One 0:02:33.880 --> 0:02:37.120 Big Beautiful Bill is complete. The second is tariffs and 0:02:37.120 --> 0:02:40.120 that's ongoing in the thirties deregulation. Now, we've always said 0:02:40.120 --> 0:02:42.359 the President Trump just doesn't have a magic one where 0:02:42.360 --> 0:02:45.079 he can wave and say go forth and deregulate. There's 0:02:45.120 --> 0:02:48.600 a process and that process takes time. Now, you needed 0:02:48.600 --> 0:02:51.639 agency leaders to come into place, and that largely happened 0:02:51.639 --> 0:02:53.960 in the first half of this year. So now if 0:02:54.000 --> 0:02:56.240 you look at like agency leaders like FED Vice Chair 0:02:56.360 --> 0:02:59.880 Michelle Bowman or you know, Jonathan gold Over the contro 0:03:00.120 --> 0:03:03.799 the currency was just confirmed about thirty minutes ago here 0:03:03.880 --> 0:03:06.960 on July tenth. You know, those agency leaders are now 0:03:06.960 --> 0:03:09.040 in place, and so they are going to move forward 0:03:09.120 --> 0:03:13.440 with proposals to deregulate these sectors. Now, let's talk about 0:03:13.440 --> 0:03:16.880 financials in particular. You know, there's about three areas of 0:03:16.919 --> 0:03:19.440 focus that the financial industry is going to see in 0:03:19.639 --> 0:03:23.240 two age. Most of the benefiting the jesips, so like 0:03:23.280 --> 0:03:28.080 the Bank of Americas, the JP, Morgan's City Groups, Goldman, Sachs, 0:03:28.080 --> 0:03:31.160 et cetera. A little bit more less of an impact 0:03:31.200 --> 0:03:34.200 on the regionals. But some of the proposals that you're 0:03:34.200 --> 0:03:36.560 going to see, well, one is one call that's impacting 0:03:36.600 --> 0:03:40.800 the supplemental leverage ratio. This is also the Enhanced Supplemental 0:03:40.840 --> 0:03:44.600 Leverage Ratio also known as the ESLR for a reserve 0:03:44.640 --> 0:03:48.720 release to proposal last week essentially taking the ratio from 0:03:48.720 --> 0:03:51.960 five percent down to three percent plus a fifty percent 0:03:52.040 --> 0:03:54.840 JESIP surcharge. So for the big banks you're looking at 0:03:54.880 --> 0:03:56.320 somewhere around three and a half to four and a 0:03:56.320 --> 0:03:59.680 half percent, depending on the bank, so there's definitely leverage relief. 0:04:00.720 --> 0:04:02.880 You're also going to potentially see a new Buzzle three 0:04:03.000 --> 0:04:05.040 endgame proposal. We think this is going to come out 0:04:05.160 --> 0:04:08.480 after around September October timeframe. You know when it was 0:04:08.480 --> 0:04:11.520 proposed under the Biden administration to increase capital requirements in 0:04:11.560 --> 0:04:14.360 nineteen percent. We think this is most likely at a 0:04:14.400 --> 0:04:17.120 starting point, going to be capital neutral. And then third, 0:04:17.160 --> 0:04:19.839 you've got proposals altering the stress testing process. There was 0:04:19.839 --> 0:04:21.960 one from April that already came out. It's not that 0:04:22.040 --> 0:04:23.839 big of a deal. It just really is more of 0:04:23.880 --> 0:04:28.520 a technical proposal. But a more substantial proposal is going 0:04:28.560 --> 0:04:31.520 to come out probably by September that will make it 0:04:31.560 --> 0:04:33.640 a little bit more transparent for these banks to go 0:04:33.720 --> 0:04:36.560 through the stress testing process and make it easier for 0:04:36.600 --> 0:04:38.960 these banks to go through the process. So a lot 0:04:38.960 --> 0:04:40.479 of this work is going to kick off in two 0:04:40.640 --> 0:04:42.960 h It's going to be proposal work. You're not going 0:04:43.000 --> 0:04:47.400 to see finalizations until twenty twenty six. But keep that 0:04:47.520 --> 0:04:50.000 in mind that these process is going to take place 0:04:50.040 --> 0:04:51.919 and there's not much here the Democrats could do to 0:04:51.920 --> 0:04:52.320 block it. 0:04:52.640 --> 0:04:55.440 The regulators should just move ahead, gotcha. 0:04:55.720 --> 0:04:58.560 So we'll be talking about this again for our twenty 0:04:58.600 --> 0:05:01.320 twenty six outlook then, and hopefully by then you'll have 0:05:01.880 --> 0:05:05.039 the rule the proposals at least, and you can talk 0:05:05.040 --> 0:05:09.599 about you know what the timing is for finalization. Okay, 0:05:09.600 --> 0:05:12.080 what about crypto? I know you've also written a bunch 0:05:12.120 --> 0:05:14.320 about crypto. I feel like here it's sort of like 0:05:14.360 --> 0:05:20.160 the inverse of deregulation because there's actually legislation and potentially, 0:05:20.200 --> 0:05:23.520 you know, more clarity around laws. 0:05:24.200 --> 0:05:27.240 Yeah, so let's move away from regulation to move to legislation. 0:05:27.360 --> 0:05:29.400 And there's two bills that are worth talking about. The 0:05:29.400 --> 0:05:31.240 first is called the Genius Act. Now, this is a 0:05:31.279 --> 0:05:34.240 stable cooin bill, and as a reminder, recording this on 0:05:34.320 --> 0:05:36.200 July tenth, and the reason why I bring that up 0:05:36.320 --> 0:05:39.320 is this bill has already passed the Senate sixty eight 0:05:39.360 --> 0:05:42.279 to thirty and could pass the House of Representatives as 0:05:42.320 --> 0:05:46.240 soon as Tuesday of next week, so so the week 0:05:46.279 --> 0:05:48.480 of July fourteenth is when this bill will most likely 0:05:48.520 --> 0:05:52.960 become law. Now, this bill would require stable coin issuers 0:05:53.000 --> 0:05:55.920 like Circle to be backed up by one hundred percent 0:05:55.960 --> 0:05:59.560 high quality liquid assets, and would also allow bank issuers 0:05:59.560 --> 0:06:02.039 a way to register with the Futteral Reserve and non 0:06:02.080 --> 0:06:04.279 bank issuers a way to register with the Office of 0:06:04.320 --> 0:06:06.920 the Control or the Currency. And if you're a smaller 0:06:06.960 --> 0:06:08.920 issuer and you have less than a ten billion dollar 0:06:09.040 --> 0:06:13.159 market cap, you have to issue with your state regulator. Now, 0:06:13.440 --> 0:06:16.240 obviously this is going to increase compliance costs. You know, 0:06:16.480 --> 0:06:19.200 you're going to need compliance spend, technology spend and so forth. 0:06:19.680 --> 0:06:22.000 But the amount of regulatory clarity you get with this, 0:06:22.200 --> 0:06:24.880 you can now move forward with a new regulatory framework 0:06:25.240 --> 0:06:27.040 and there's not gonna be much of the way of 0:06:27.120 --> 0:06:31.400 enforcement risk for these stablequin issuers. So for somebody like Circle, yeah, 0:06:31.400 --> 0:06:33.360 you're gonna have to pony up more, but they'll gladly 0:06:33.480 --> 0:06:36.080 do it to get that clarity that they need. But 0:06:36.120 --> 0:06:37.800 then for the rest of the crypto industry, it's a 0:06:37.839 --> 0:06:41.000 little bit more murkier because there is a bill called 0:06:41.000 --> 0:06:43.800 the Clarity Act, and this act would define what is 0:06:43.839 --> 0:06:46.240 a security, what is a commodity. It just gives it 0:06:46.320 --> 0:06:53.440 the CFTC authority over spot markets. This bill, you know, 0:06:53.480 --> 0:06:55.640 the House is trying to pass it as well the 0:06:55.640 --> 0:06:59.600 week of July fourteenth, and they may, but there's gonna 0:06:59.600 --> 0:07:01.560 be a little bit more difficulty getting some of these 0:07:01.600 --> 0:07:04.360 Democratic senators on board like they did the Stable Cooin Bill, 0:07:04.560 --> 0:07:06.960 because even though it passed sixty eight to thirty, I'm 0:07:07.000 --> 0:07:09.560 nowhere anywhere close to getting the sixty votes in my 0:07:09.640 --> 0:07:12.960 vote counts right now, just because of our additional concerns 0:07:13.040 --> 0:07:17.960 with the crypto industry at a large or broader perspective. Now, 0:07:18.000 --> 0:07:19.760 we know that the Senate does not want to take 0:07:19.800 --> 0:07:22.000 up this bill until September at the earliest. They're going 0:07:22.000 --> 0:07:24.600 to wait until after the August recess, so we have time. 0:07:25.160 --> 0:07:26.880 But I'm telling my clients, and I may be a 0:07:26.920 --> 0:07:29.000 little bit out of consensus here, but I'm telling my clients, 0:07:29.000 --> 0:07:30.520 I think this can get done in the first half 0:07:30.520 --> 0:07:31.080 of next year. 0:07:32.000 --> 0:07:34.400 How do you, I mean, what are sort of the 0:07:34.520 --> 0:07:37.559 some of the issues that are giving Democrats. 0:07:37.240 --> 0:07:40.440 Pause, but that they'll be able to come around on 0:07:40.680 --> 0:07:42.240 to get to the sixty vote threshold. 0:07:42.600 --> 0:07:44.360 Well, a lot of it is on bank secrecy and 0:07:44.400 --> 0:07:47.400 anti money laundering and risk perspective, and for you know, 0:07:47.720 --> 0:07:50.960 just taking a very simplistic view on it, anything like that, 0:07:51.080 --> 0:07:54.040 I think you get negotiated. I mean, it's not usually 0:07:54.080 --> 0:07:56.600 something that really derails these bills. And it's the same 0:07:56.600 --> 0:07:58.480 thing we saw in the Stable Cooin Bill. There was 0:07:58.480 --> 0:08:02.120 a hiccups over Stable Secrecy Act to AML. They work 0:08:02.160 --> 0:08:04.840 through it, they got it done. You know, some of 0:08:04.840 --> 0:08:07.080 the Democratic senators are going to be an absolute no. 0:08:07.200 --> 0:08:09.760 They still believe that nineteen thirty zero securities law should 0:08:09.800 --> 0:08:12.720 still apply and that a lot of these tokens should 0:08:12.760 --> 0:08:16.120 be you know, adhering to that type of securities law. 0:08:16.120 --> 0:08:18.440 There shouldn't be a specific carve out. But I go 0:08:18.560 --> 0:08:21.720 back to the idea that Chairman Gary Gensler tried this 0:08:21.800 --> 0:08:25.280 under the Biden administration and the courts overwhelmingly, as you've 0:08:25.320 --> 0:08:29.080 written many times, Elliott, the Court's overwhelmingly ruled against the 0:08:29.120 --> 0:08:32.720 administration on this and as a result, it was courts, 0:08:32.760 --> 0:08:35.960 not Congress that was dictating what crypto policy looked like. 0:08:36.480 --> 0:08:39.240 And if I'm a Democratic Senator, do I I do 0:08:39.400 --> 0:08:42.200 nothing and allow the crypto industry to continue to operate 0:08:42.240 --> 0:08:45.560 for four to five years with piecemeal regulations, or do 0:08:45.640 --> 0:08:48.000 I try and get myself involved to actually take control 0:08:48.000 --> 0:08:50.960 of the narrative. And I think that's what's significant. Number 0:08:50.960 --> 0:08:53.400 of Democrats are at least enough number of Democrats. So 0:08:53.480 --> 0:08:56.880 think of Senators like Mark Warner, Reuben Gallaghos from Arizona. 0:08:57.280 --> 0:08:59.520 They voted for these stable coin bills to probably vote 0:08:59.559 --> 0:09:02.040 for the crypto bill. Senator Christin Jillobrand as well from 0:09:02.040 --> 0:09:04.840 New York. They're there, it's just they need a little 0:09:04.840 --> 0:09:06.480 bit more time and a little bit work to get through. 0:09:07.040 --> 0:09:09.920 Yeah, And I mean, one of the ironies I feel 0:09:09.960 --> 0:09:12.600 like with this law is that you're potentially giving the 0:09:12.640 --> 0:09:16.080 CFTC in particular much more authority than it has now, 0:09:16.120 --> 0:09:19.840 which is sort of ironic to see that happen in 0:09:19.880 --> 0:09:24.439 a Republican Congress, but you know, pretty unique to see 0:09:24.480 --> 0:09:28.000 Congress getting much done at all. So it's always always 0:09:28.040 --> 0:09:31.400 interesting to see what gets past and what doesn't. All. Right, 0:09:31.440 --> 0:09:35.000 good stuff, Thanks Nathan. We are going to stick with 0:09:35.240 --> 0:09:38.000 financials the financial sector here. I'm going to just talk 0:09:38.000 --> 0:09:40.720 about three cases I'm watching. This is a little more 0:09:40.760 --> 0:09:45.680 company specific and actually involves mostly non US banks. The 0:09:45.720 --> 0:09:50.360 first involves French bank BNP Pariba, which is scheduled to 0:09:50.400 --> 0:09:53.199 go to trial September eighth in the class action case 0:09:53.679 --> 0:09:56.800 by suiting these refugees, accusing the bank of aiding and 0:09:56.840 --> 0:10:00.640 abetting genocide and Sudan. We expect the bank to settle 0:10:00.840 --> 0:10:04.480 ahead of the trial, and that's based on a June 0:10:04.480 --> 0:10:07.439 thirtieth letter from the parties asking the court to push 0:10:07.720 --> 0:10:10.679 the September eighth trial date back a month to give 0:10:10.679 --> 0:10:14.640 the parties more time to formalize basically a process for 0:10:14.800 --> 0:10:18.360 resolving the case through mediation. The court denied the request 0:10:18.360 --> 0:10:21.080 to push back trial date, so for now trial is 0:10:21.160 --> 0:10:24.200 on for September eighth, unless the parties reach a settlement 0:10:25.040 --> 0:10:27.360 or at least some sort of settlement than principle. But 0:10:27.559 --> 0:10:29.640 we expect them to be able to do that because 0:10:29.640 --> 0:10:31.680 I don't think either side really wants to go through 0:10:31.679 --> 0:10:34.199 with the trial and the risks that come with it. 0:10:34.880 --> 0:10:38.199 As far as how much a settlement might be, our 0:10:38.240 --> 0:10:42.199 best comparable is probably one point twenty five billion dollar 0:10:42.240 --> 0:10:45.240 Holocaust settlement by two Swiss banks in nineteen ninety eight. 0:10:45.559 --> 0:10:48.880 That implies roughly a sixty five million dollar cord here 0:10:48.960 --> 0:10:52.040 based on the number of plaintiffs, but you know, we 0:10:52.160 --> 0:10:55.640 really can't rule out a settlement for more, potentially several 0:10:55.760 --> 0:10:59.240 hundred million dollars, So that's one thing we're watching. The 0:10:59.280 --> 0:11:01.920 second case we're watching in the second half of this year. 0:11:02.000 --> 0:11:06.720 This involves Swedish bank sweat Bank, which has been investigated 0:11:06.800 --> 0:11:10.760 for several years now by US authorities over possible money 0:11:10.800 --> 0:11:14.560 laundering violations. Again, we expect these probes to also wrap 0:11:14.679 --> 0:11:17.240 up by year end, given how long they've been going on, 0:11:17.360 --> 0:11:21.600 which is roughly about five years, and we think the 0:11:21.640 --> 0:11:25.720 fines in this case could be about approaching four hundred 0:11:25.760 --> 0:11:28.679 million dollars, which is close to the three hundred and 0:11:28.720 --> 0:11:31.800 eighty six million dollars a sweat Bank paid to Swedish 0:11:31.880 --> 0:11:35.000 authorities in twenty twenty. But again we can't rule out 0:11:35.000 --> 0:11:38.520 a higher amount, maybe even one approaching a billion dollars 0:11:38.559 --> 0:11:43.160 if it's structured similarly to penalties that Danish bank Donska 0:11:43.160 --> 0:11:46.600 Bank paid in twenty twenty two. And just lastly, the 0:11:46.640 --> 0:11:50.359 third case I want to talk about involves Turkish bank Hawkbank, 0:11:50.679 --> 0:11:55.160 which is fighting a Justice Department lawsuit, a criminal lawsuit 0:11:55.160 --> 0:11:59.520 accusing the bank of violating US sanctions on Iran. Hawk 0:11:59.600 --> 0:12:03.040 Banks principal defense so far is that it should be 0:12:03.080 --> 0:12:06.280 immune from prosecution in the US because the bank is 0:12:06.320 --> 0:12:10.360 owned primarily by the Turkish government, and the bank therefore 0:12:10.440 --> 0:12:13.360 argues that it should enjoy sovereign immunity in the US. 0:12:14.200 --> 0:12:18.800 So far, courts have rejected that defense. Indeed, even the 0:12:19.400 --> 0:12:23.240 US Supreme Court has rejected that defense at least based 0:12:23.320 --> 0:12:27.960 on the Foreign Sovereign Immunity Act Statute. But when the 0:12:28.000 --> 0:12:30.400 case went to the Supreme Court, the Supreme Court in 0:12:30.440 --> 0:12:34.840 twenty twenty three allowed the bank to pursue a related 0:12:35.000 --> 0:12:38.520 sovereign immunity defense, not based under statute, but based under 0:12:38.640 --> 0:12:43.000 the common law. So that's where we are now. The 0:12:43.040 --> 0:12:44.920 bank is trying to argue that it still has sovereign 0:12:44.960 --> 0:12:47.920 immunity under the common law, but again lower courts have 0:12:48.000 --> 0:12:51.720 rejected that defense so far, and now Hawkbank is back 0:12:51.720 --> 0:12:54.840 at the Supreme Court asking the High Court to review 0:12:55.480 --> 0:13:00.480 those decisions. I think we'll get a decision in October 0:13:00.559 --> 0:13:04.000 from the Supreme Court just on the petition the cert petition, 0:13:04.160 --> 0:13:06.920 meaning we'll know in October whether or not the Supreme 0:13:06.920 --> 0:13:10.720 Court will take up Hawkbank's case. We give the bank 0:13:10.760 --> 0:13:14.840 a sixty percent chance of actually getting their cert petition 0:13:14.920 --> 0:13:18.959 granted and getting Supreme Court to review the case. But 0:13:19.000 --> 0:13:20.920 at the end of the day, we think the Supreme 0:13:20.960 --> 0:13:24.160 Court will again rule against the bank on the merits 0:13:24.160 --> 0:13:27.480 like it did the first time, and we think the 0:13:27.559 --> 0:13:29.360 High Court will take up the case, but only to 0:13:29.400 --> 0:13:32.440 clarify sort of what the relevant immunity standard is under 0:13:32.440 --> 0:13:35.880 the common law. But ultimately it'll rule against the bank 0:13:35.920 --> 0:13:38.320 and say that the bank is not immune from prosecution, 0:13:38.840 --> 0:13:41.560 and that'll probably put the bank on a path to settlement. 0:13:42.760 --> 0:13:44.800 We've said all along that we think settlement could be 0:13:44.840 --> 0:13:48.160 about one billion to two billion dollars just based on 0:13:48.200 --> 0:13:51.400 the amount of money that allegedly went through the US 0:13:51.480 --> 0:13:55.880 financial system. But we think the bank and the Turkish 0:13:55.880 --> 0:13:58.840 government may be able to convince the Trump administration to 0:13:58.920 --> 0:14:01.520 sort of go a little soft in terms of a settlement, 0:14:01.559 --> 0:14:03.680 but that's still a ways away. For now, we're just 0:14:03.720 --> 0:14:05.840 waiting to see if the Supreme Court will take up 0:14:05.880 --> 0:14:09.800 Hawkbank's most recent cearch petition, So that's what I'm watching. 0:14:10.120 --> 0:14:14.960 Let's move on to tariffs, which we touched on just 0:14:15.040 --> 0:14:18.280 briefly earlier, but let's bring in Holly from who's been 0:14:18.320 --> 0:14:23.920 covering the many different lawsuits challenging the Trump administration's tariffs. 0:14:24.280 --> 0:14:27.920 We got some very big rulings at the end of 0:14:28.000 --> 0:14:30.800 May from the Court of International Trade. Those are on 0:14:30.920 --> 0:14:34.960 appeal now. I know, Holly, you're watching these intently. Why 0:14:34.960 --> 0:14:37.280 don't you come in and tell us exactly what you're 0:14:37.320 --> 0:14:38.560 watching for in the second half. 0:14:38.720 --> 0:14:41.880 Yeah, thanks, Elliott. So, yeah, we're watching the lawsuits that 0:14:42.400 --> 0:14:47.800 challenged reciprocal terraffts and so called ventanyl trafficking terrafts. Those 0:14:47.840 --> 0:14:50.720 reciprocal terroifs were announced in April. They were supposed to 0:14:50.760 --> 0:14:54.400 be imposed April ninth. That was subsequently extended to July nine, 0:14:55.280 --> 0:14:58.000 with a baseline tearff of ten percent imposed in their place. 0:14:58.480 --> 0:15:01.400 The July ninth deadline was just extended to August first, 0:15:01.440 --> 0:15:04.520 But in any event, the US International Trade Court, as 0:15:04.520 --> 0:15:07.280 you mentioned, held them unlawful in May. The court found 0:15:07.280 --> 0:15:09.920 that if the president is going to address trade deficits 0:15:10.000 --> 0:15:13.400 using tariffs, which the reciprocal tariffs are supposed to do, 0:15:13.720 --> 0:15:16.160 he must do that through Section one twenty two or 0:15:16.160 --> 0:15:19.600 the Trade Act. He cannot use the emergency statute called 0:15:19.600 --> 0:15:23.640 AIPA that he used. And another District Court in Washington, 0:15:23.760 --> 0:15:26.720 d C. Held that they were unlawful for different reasons. 0:15:27.040 --> 0:15:30.200 That court basically said APA doesn't allow tariffs at all. 0:15:30.520 --> 0:15:33.920 Both of those rulings are on appeal. The International Trade 0:15:33.960 --> 0:15:36.000 Court's ruling is on appeal to the Fed Circuit and 0:15:36.040 --> 0:15:40.040 the Washington d C. District Court's ruling is on appeal 0:15:40.040 --> 0:15:43.400 to the DC Circuit. And with regard to the Fed 0:15:43.440 --> 0:15:46.760 Circuit appeal, opening briefs have been filed, opposition briefs have 0:15:46.800 --> 0:15:48.640 been filed, and there was a hearing before the Fed 0:15:48.640 --> 0:15:51.800 Circuit on July thirty first. The full panel of the 0:15:51.840 --> 0:15:54.000 court will be hearing that appeal, so we should get 0:15:54.000 --> 0:15:56.720 a better idea of the course leadings after oral argument 0:15:56.760 --> 0:15:59.480 on July thirty first, and we think that decision could 0:15:59.480 --> 0:16:04.880 come retively quickly, perhaps in August. The DC Circuit hasn't 0:16:04.960 --> 0:16:06.920 scheduled a hearing yet, but we think that court will 0:16:06.960 --> 0:16:11.840 also rule relatively quickly, and whoever loses that appeal will 0:16:11.840 --> 0:16:14.480 probably appeal to the Supreme Court. And we think that 0:16:14.520 --> 0:16:17.800 the Supreme Court will take the case and it could 0:16:17.880 --> 0:16:20.960 rule as early as four Q on the merits. What 0:16:20.960 --> 0:16:24.160 we've said is we think reciprocal terroriffs will be deemed 0:16:24.200 --> 0:16:27.200 unlawful because the trade deficit cited as the basis is 0:16:27.240 --> 0:16:30.880 not an emergency that poses an unusual and extraordinary threat 0:16:31.240 --> 0:16:35.880 as required by a EPA. But fentanyl trafficking tariffs maybe 0:16:36.160 --> 0:16:39.160 deemed lawful because we think that the Supreme Court will 0:16:39.160 --> 0:16:42.760 disagree with the lower court that leverage on countries, which 0:16:42.800 --> 0:16:44.920 is what the terrorists are supposed to create, cannot address 0:16:44.960 --> 0:16:48.560 the emergency sited. And in other lawsuits that may inform 0:16:48.640 --> 0:16:51.280 the issue, there's a hearing on appeal a lower court 0:16:51.400 --> 0:16:54.800 order out of California dismissing a challenge to the tariffs. 0:16:55.160 --> 0:16:57.600 That court, it was a district court in California, said 0:16:57.680 --> 0:17:02.600 that it lacked jurisdiction. That's on appeal and there's a 0:17:02.680 --> 0:17:08.120 hearing on that appeal on September seventeenth. And in addition 0:17:08.200 --> 0:17:11.000 to that, today on July tenth, there is a hearing 0:17:11.000 --> 0:17:15.600 on a lawsuit challenging elimination of the dominimus exemption. And 0:17:15.720 --> 0:17:18.800 what that exemption is is it says that goods that 0:17:18.840 --> 0:17:21.359 are eight hundred dollars or less are exempt from tariffs. 0:17:21.680 --> 0:17:25.760 The Trump administration eliminated that exemption with regard to goods 0:17:25.760 --> 0:17:29.359 from China. So a lawsuit challenging that says Trump didn't 0:17:29.400 --> 0:17:31.880 have the power to do that under the statute. He 0:17:32.040 --> 0:17:36.960 used that there's a hearing on that. There's a most 0:17:37.119 --> 0:17:43.440 preliminary injunction trying to enjoin the administration's elimination of the exemption, 0:17:43.840 --> 0:17:46.720 and there is a hearing on that motion today July tenth, 0:17:47.080 --> 0:17:49.959 and I think that the court will again rule relatively quickly, 0:17:50.080 --> 0:17:54.639 possibly next month. And I think what we said about 0:17:54.640 --> 0:17:59.120 that is we think that the elimination of the dominimous 0:17:59.160 --> 0:18:03.800 exemption is probably on stronger footing than fentanyl trafficking tariffs 0:18:03.840 --> 0:18:09.159 because the court, the the International Trade Court found that 0:18:09.160 --> 0:18:12.160 the pentonal trafficking tariffs didn't deal with the emergency because 0:18:12.200 --> 0:18:14.960 it was a terriff. Tariffs on every good doesn't deal 0:18:15.000 --> 0:18:19.120 with the emergency, and UH leverage on countries created through 0:18:19.119 --> 0:18:21.359 the use of tariffs doesn't deal with the emergency. But 0:18:21.440 --> 0:18:24.480 here what the government has said is that shippers have 0:18:24.520 --> 0:18:27.840 been using deceptive means such as the diminishment mis exemption 0:18:28.040 --> 0:18:32.240 to import fentanyl. So I think there's a stronger connection 0:18:33.160 --> 0:18:35.800 to the emergence to the fentanyl crisis. So that that's 0:18:35.800 --> 0:18:39.040 why we think that these are on stronger legal uh footing, 0:18:39.520 --> 0:18:43.480 and but we expect a ruling probably in August. 0:18:43.800 --> 0:18:47.959 So the the elimination of the dominimus exemption that was 0:18:48.240 --> 0:18:52.920 also done under AEPA correct. So is there is there 0:18:52.920 --> 0:18:55.440 a chance that all these issues go up to the 0:18:55.480 --> 0:18:59.640 Supreme Court together, the deminimous the elimination of the dominimous 0:18:59.680 --> 0:19:04.640 execs I'm sharing, the reciprocal terriffs, and the and the. 0:19:04.359 --> 0:19:06.200 Trafficking the fentanyl trafficking teriffs. 0:19:07.280 --> 0:19:10.440 It's possible to the extent that it's it's the same 0:19:10.600 --> 0:19:14.359 basis for you know, finding them unlawful. Yes, but I 0:19:14.400 --> 0:19:18.440 think that there are other grounds to find the diministnce 0:19:18.920 --> 0:19:21.760 exemption lawful. So I don't think they necessarily have to 0:19:21.840 --> 0:19:24.439 be decided together. There are there is some overlap with 0:19:24.480 --> 0:19:26.639 regard to whether he has a power to impose terras 0:19:26.680 --> 0:19:29.840 at all through AIPA, and that's you know that that's 0:19:29.880 --> 0:19:32.080 a question that would probably be answered by the Supreme Court. 0:19:32.160 --> 0:19:35.439 But even if he answered they answered that question, there 0:19:35.480 --> 0:19:38.760 would still be a question of whether he can do 0:19:38.840 --> 0:19:42.159 what he did. Uh with regard to the elimination of 0:19:42.200 --> 0:19:45.520 the the minimus exemption, because it's a different statute that 0:19:45.560 --> 0:19:49.679 governs that so I don't think they necessarily have to 0:19:49.720 --> 0:19:54.640 be decided together, but they can be. 0:19:55.560 --> 0:19:55.919 Got it. 0:19:56.359 --> 0:19:58.680 I thought it was interesting that the extension of a 0:19:58.680 --> 0:20:01.480 lot of the reciprocal terraffs was pushed August first, which 0:20:01.520 --> 0:20:05.399 is the day after the FED Circuit hearing. 0:20:05.560 --> 0:20:08.000 But that may have just been a coincidence. I don't know. 0:20:09.240 --> 0:20:13.840 All Right, great, thanks, olly good stuff. All right, Tamlin's 0:20:13.960 --> 0:20:19.600 let's bring in Tamlin Basin to talk about copyright and 0:20:19.800 --> 0:20:23.520 artificial intelligence. I think it's one of the most interesting 0:20:24.359 --> 0:20:27.600 legal issues playing out right now. So, Tamlin, you've been 0:20:27.680 --> 0:20:32.040 following cases against companies like Anthropic and Meta alleging that, 0:20:32.680 --> 0:20:35.439 you know, the training of their large language models on 0:20:35.600 --> 0:20:41.199 copyright copyrighted content constitutes copyright infringement. What I know, you're 0:20:41.240 --> 0:20:43.040 tracking a bunch of these cases. What are you watching 0:20:43.040 --> 0:20:45.680 for in two h and in the cases that you're following? 0:20:46.040 --> 0:20:49.359 Yeah, surely there are lots of these cases. There's I 0:20:49.359 --> 0:20:52.919 think last count, close to fifty of these lawsuits in 0:20:52.960 --> 0:20:56.240 the US alone, and these have been brought by all 0:20:56.359 --> 0:21:00.399 manner of content owners, from sort of the print news 0:21:00.480 --> 0:21:05.119 media companies like The New York Times, through music publishers 0:21:05.119 --> 0:21:09.200 have filed a number of suits. Image creators Getty Images 0:21:09.240 --> 0:21:11.720 has filed suits and sort of one of the most 0:21:11.800 --> 0:21:14.480 recent ones, we saw Disney and Comcast team up to 0:21:14.480 --> 0:21:18.960 file play lawsuit, as well as a bunch of authors 0:21:19.240 --> 0:21:22.560 of both fiction and non fiction works. We have been 0:21:22.600 --> 0:21:24.879 tracking a lot of them and in late June, we 0:21:24.960 --> 0:21:29.400 actually had had two decisions and these are the decisions 0:21:29.440 --> 0:21:33.440 on fair use at the summary judgment stage. So essentially, 0:21:34.480 --> 0:21:38.520 the developers of large language models are arguing is is 0:21:38.800 --> 0:21:41.920 fair use under the Copyright Act for them to use 0:21:42.240 --> 0:21:46.840 this copyrighted content in order to train their large language models. 0:21:47.200 --> 0:21:51.320 These decisions came in cases they were asserted against Anthropic 0:21:52.119 --> 0:21:55.359 and in another case where the allegations were asserted against Meta. 0:21:55.880 --> 0:21:59.400 The plaintiffs in both of these cases were book authors, 0:21:59.640 --> 0:22:04.639 so and nonfiction. In both of those decisions, the judges 0:22:04.680 --> 0:22:07.359 and these are two separate judges sitting and both sitting 0:22:07.400 --> 0:22:10.840 in the Northern District of California, they did find in 0:22:10.960 --> 0:22:15.080 favor of the large language models on fair use. However, 0:22:15.119 --> 0:22:21.440 they took fairly divergent views. Starting first with the Anthropic judge, 0:22:21.520 --> 0:22:23.480 he looked at their use and fair use is sort 0:22:23.480 --> 0:22:27.639 of this fact sensitive four factor test which judges have 0:22:27.760 --> 0:22:31.040 to weigh up and decide whether or not the equities 0:22:31.119 --> 0:22:35.320 favor allowing what has happened with this copyrighted work, whether 0:22:35.400 --> 0:22:38.880 that was fair or whether that was infringement. The judge 0:22:38.880 --> 0:22:41.879