WWW.VANTAGEASIA.COM NOVEMBER – DECEMBER 2016 VOLUME 1 | ISSUE 3 ASIA BUSINESS LAW JOURNAL ASIA BUSINESS LAW JOURNAL
LEGAL INTELLIGENCE FOR IN-HOUSE COUNSEL
ExclusiveABLJ
A GC to bank on AIIB’s legal architect shares his plans
NOVEMBER – DECEMBER 2016 Infrastructure in Asia: what’s hot and why Focus on Singapore’s best laid legal plans Tobacco packaging: to ban or not to ban? Vantage Asia Tired of Brexit? Get prepared while you wait
CONTENTS
CONTENTS
3 LEADER Building ties: Projects keep the region’s lifeblood flowing
4 NEWS • B&M’s new ‘agile’ approach • Merits of micro-credit IPO • PSBC breakthrough saves deal
17 BUSINESS LAW DIGEST • Australia broadens KYC methods • Defamatory internet publications • Indonesia’s circular No. 31
24 IN-HOUSE AGENDA Korean workshop with a twist Singapore’s Black Tie Gala Indian escape for GC reforms
27 DISPUTE DIGEST • Court rules on BIT treaty claim • Asian Arbitration in focus
31 COVER STORY In-house architect: 31 An exclusive interview with the AIIB’s general counsel
43 ASIA-SPECIFIC On track: Infrastructure in Asia 41 69
53 COUNTRY FOCUS Singapore legal sector lopes forward despite some sizeable setbacks
63 COUNTERPOINT Tobacco brand bans: Where do you stand in this IP debate?
69 INTELLIGENCE REPORT What to do while waiting for a clearer picture of Brexit
75 CORRESPONDENTS
Expert advice from Asia Business Law Journal’s correspondent law firms
75 CHINA – CORPORATE & COMMERCIAL 79 INDONESIA – CORPORATE & COMMERCIAL 83 SINGAPORE – CORPORATE & COMMERCIAL Allbright Law Offices Lubis Ganie Surowidjojo Central Chambers Law Corporation 76 CHINA – DISPUTE RESOLUTION 80 OFFSHORE FINANCE 84 THAILAND – CORPORATE & COMMERCIAL Boss & Young Maples and Calder Silk Legal 77 INDIA – CORPORATE & COMMERCIAL 81 ONE BELT ONE ROAD Khaitan & Co Zhong Lun Law Firm 78 INDIA – INTELLECTUAL PROPERTY 82 PHILIPPINES – CORPORATE & COMMERCIAL Anand & Anand ACCRA Law Offices
1 ABLJ ⁄ NOVEMBER – DECEMBER 2016 ASIA BUSINESS EDITORIAL BOARD LAW JOURNAL November-December 2016 Volume 1 / Issue 3 ISSN: 2518-3141
EDITORIAL Himavat Chaudhuri Gavin Denton Deepak Dhawan Andrew Godwin Will Herbert Gigi-Anne Hoh Email: [email protected] Chief Legal and Head of Chambers, Executive Director, Author, Associate Director, President, Japan Regional Legal Counsel, Telephone: +852 3622 2673 Regulatory Affairs Officer, Arbitration Chambers Corporate Affairs & Law, Asian Law Centre, In-house Counsel Syngenta Asia-Pacific Tata Sky Hong Kong Indian Oil Corporation Melbourne Law School Network SUBSCRIPTIONS Email: [email protected] Telephone: +852 3622 2623 www.vantageasia.com
EDITOR John Church Tanya Khan Akhil Prasad João Ribeiro Yudhistira Setiawan Ashok Sharma Lin Shi CONTRIBUTORS Vice President/Managing Country Counsel, Head, Regional Centre President, Founder & President, President, Director, Australia & Boeing International for Asia-Pacific, Indonesian Corporate Indian Corporate Hong Kong Corporate Vandana Chatlani, Penelope MacRae, Asia-Pacific,Association Corporation India UNCITRAL Counsel Association Counsel Association Counsel Association Idil Yasa, Sarah Byrne of Corporate Counsel CREATIVE CONSULTANT Shaun Horrocks – Apostrophe Design HEAD OF MARKETING Anita Fung BUSINESS DEVELOPMENT MANAGER Thom Andrews ASSOCIATE PUBLISHERS Huen Wong Dharmendra Yadav Steven Yeo Professor Yeo Peter Zhang Shawn Zhao Xiaoxue Kim Cheung, Tina Tucker Honorary Chairman, Vice President, Senior Vice President & Tiong-min General Counsel and Vice President and Hong Kong International Singapore Corporate General Counsel, Dean, Singapore Board Secretary, General Counsel, PUBLISHERS Arbitration Centre Counsel Association Asia Manulife Management University Greater China Greater China, James Burden, Kelley Fong School of Law Sony Mobile Hewlett Packard
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Printed in Hong Kong © Vantage Asia Publishing Ltd, 2016 2 ABLJ ⁄ NOVEMBER – DECEMBER 2016 LEADER OPINION
WWW.VANTAGEASIA.COM NOVEMBER – DECEMBER 2016 VOLUME 1 | ISSUE 3 ASIA BUSINESS LAW JOURNAL ASIA BUSINESS LAW JOURNAL
LEGAL INTELLIGENCE FOR IN-HOUSE COUNSEL
ExclusiveABLJ
A GC to Building ties bank on AIIB’s legal architect shares his plans
Projects keep the region’s NOVEMBER – DECEMBER 2016 Infrastructure in Asia: what’s hot and why Focus on Singapore’s best laid legal plans Tobacco packaging: to ban or not to ban? Vantage Asia Tired of Brexit? Get prepared while you wait lifeblood flowing
elcome to the third interest is his advice for counsel working resulted in big plans for Fintech, restructur- issue of Asia Business for government departments, multination- ing and insolvency, and other areas to Law Journal and first als or other project masters who might be keep Singapore leading the region despite of all may I wish looking to approach the AIIB for project a tepid economy. you all the best for funding in future. We also take a look at Brexit and the pos- theW festive season! The year has passed Coupled with this exclusive interview is sible impacts for this region. The twists and quickly, it seems, and since our launch in an overview of infrastructure activity in the turns in the political plot for Britain’s exit July we have been working hard to pro- region. On track looks at which countries from the EU read like Machiavellian theatre, vide you with the best legal intelligence are busiest with projects right now and why. but Brakes on Brexit? gives some clarity to in the region. We also explore regulatory developments what counsel should be preparing for while In keeping with this philosophy, our in these jurisdictions that are helping or waiting for a clearer picture to emerge. Cover Story is one that I’m sure will be hindering legal teams as they deal with Finally, with the World Health most enlightening for in-house counsel, often complex frameworks in individual Organization’s November anti-tobacco con- and also for law firms and others with countries. At times when economies are ference as a backdrop, we look at the two an interest in the region’s continuing not firing on all cylinders, infrastructure is opposing forces. A recent article written for development. We spoke exclusively with a buzzword and that time is now in many our sister publication, India Business Law Gerard Sanders, the general counsel for the parts of the region. Journal, Japan Tobacco International’s Idil newly formed and fully operational Asian In our Country Focus for this issue, we Yasa provides some compelling arguments Infrastructure Investment Bank (AIIB). look at Singapore and why this tiny city- for brand protection. In our Counterpoint, Sanders gives some wonderful insights into state manages to punch above its weight former GC for the Australian Medical building his own legal team for Asia’s new- in just about every area of endeavour, the Association, Sarah Byrne, tells us why plain est financial institution and also on helping legal fraternity included. Total control talks packaging laws are effective and innovative. to develop the wider strategies of the bank to a wide cross-section of big and boutique, Which side of the debate convinces you? as it pursues its developmental goals within domestic and international law firms, as Merry Christmas to all our readers and the region. The views and opinions of one well as leading in-house counsel, about here’s hoping your yuletide contractual of the top corporate counsel in this sector how aggressive policymaking and staunch arrangements include a Santa clause – and make fascinating reading. Of particular support from the legal community have a Happy New Year!
Best wishes,
John Church Editor, Asia Business Law Journal Editor-in-chief, Vantage Asia
3 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS THE WRAP
BAKER ADOPTS ‘AGILE’ APPROACH ACROSS THE BOARD
n a world where law firm resources are formalized our policies and developed one “In terms of how this impacts on increasingly stretched to the limit, Baker holistic approach to be rolled out globally current work practice – implementing an I& McKenzie has led the way with an to all employees.” agile working policy will increase and im- alternative work strategy it hopes will keep Prado said the new programme had prove productivity and efficiency from the staff happier, more productive and less four dimensions: remote working; reduced workforce, reduce absenteeism, improve inclined to go elsewhere. working hours; alternative hours; and the health and wellbeing of our people, The firm has adopted what it refers to time out of office. reduce turnover, and improve morale – the as “agile working” across its global net- benefits are long lasting,” she said. work, which means flexible work hours for In September 2015, the firm ran an in- Peter May, Baker & McKenzie's chief talent officer its employees. ternal engagement survey, called BakerYou. The change affects the firm’s 77 offices, Results showed that lawyers and other with 4,607 lawyers including 1,580 partners staff regarded flexible working arrange- as well as other staff, and includes alterna- ments as a key priority. tive working hours, remote working, and “We wanted to act fast, innovate and regular working time outside of the office. demonstrate to our people that their The new regime is the brainchild of opinions and needs matter to the firm and Peter May, chief talent officer at the firm, we will continuously strive to make sure and global executive committee member working at Baker & McKenzie is a fulfilling Claudia Prado. and enjoyable experience,” said Prado. Prado told Asia Business Law Journal The policy is in place now and will be that agile or flexible working at Baker & fully implemented over the next 18 months McKenzie had informally been around for across all of the firm’s offices, and be avail- a while in many of the firm’s offices. able to all staff. “After conducting an engagement “We want to take a holistic approach to satisfaction survey, flexible working came our flexible working policy; our region- out as something our people felt strong- al offices will work with HR and talent ly about,” she said. “As a result we have teams to find solutions that work best for
4 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS THE WRAP
Restructuring expert launches firm for distressed companies
new consultancy for the region “The rise in distressed activity across focused on leadership for dis- the Asia-Pacific has increased the need Atressed or restructured companies for specialized director positions within was launched recently led by the former companies being restructured,” said senior restructuring partner for Asia at Doyle, rated as a leading restructuring Reed Smith. lawyer in the region in Chambers Asia-Pa- The independent advisory firm, cific, Legal 500 and International Financial Catalyst Advisory, will focus on director Law Review 1000. appointments to companies that are being “Our platform provides the comfort restructured or are in turnaround situa- to such professionals to undertake these tions across the Asia-Pacific region. The roles, knowing they are fully supported firm will be headquartered in Singapore. throughout the duration of the posting The launch of Catalyst Advisory by a focused team employing market “After conducting an comes at a time of rising distressed leading risk mitigation strategies, and activity in the Asia-Pacific region and products designed by experienced engagement satisfac- increasing demand for experienced restructuring professionals with local directors to guide an outcome. The firm knowledge, to minimise their exposure. tion survey, flexible will work with restructuring advisory “Equally, the firm ensures that its ap- firms, financial institutions and funds in pointees have the competencies required, working came out as need of a high calibre director appoint- both from an experience and sector ment during a turnaround project, or to expertise perspective to be transforma- something our people monitor an investment that has evolved tional in an organization.” into a distressed situation. felt strongly about” Catalyst will be led by a veteran in the legal restructuring industry, Troy Doyle, Claudia Prado, Baker & McKenzie's who has led global and Asia-wide re- global executive committee member structuring practices in magic circle and top US law firms. During his 18 years of individuals while also attending to the advising across the Asia-Pacific region, he needs of our clients and our business,” has been involved in most of the major said Prado. restructurings in the region. She said the new plan had been well All appointments will have the req- received by employees. “This is a policy for uisite technical experience and sector everyone, no matter who you are or where expertise to ensure they are transforma- you live – it is all inclusive and fully in line tive during their tenure. Catalyst will with our Diversity & Inclusion strategy. also provide such professionals direct to This is one more innovative initiative that companies across the Asia-Pacific region, the firm has launched on a global basis including Indonesia, China, Singapore Troy Doyle, heads Catalyst Advisory, an with an unprecedented reach.” and Australia. Asia-wide restructuring practice
THAILAND APPROVES DRAFT BILL ON COMPETITION After years of debate, Thailand’s cabinet has approved the criminal penalty. It is hoped the spin-off will eliminate past draft Trade Competition bill to overhaul the existing Trade enforcement issues attributed to political influence, and provide Competition Act enacted in 1999. more management flexibility. Major changes include the spin-off of the Office of the Trade Mergers and acquisitions that fall within the criteria set out Competition Commission (OTCC) from a division under the by the Trade Competition Commission must be reported to the Department of Internal Trade, the Ministry of Commerce, into OTCC within seven days post-completion of the transaction an independent state organization, and the inclusion of a fine (instead of pre-merger clearance). The draft bill will have to be of 10% of the total income of the fiscal year before the year an approved by the National Legislative Assembly before it can be offence is committed for cartel cases, in addition to the existing passed into law.
5 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
Micro-credit IPO ‘has its benefits’
espite being unpopular with au- companies is the limitation of their Shyu points to research by the firm thorities, there were advantages to geographical coverage, so risks for such finding that through IPOs micro-credit Dlistings of micro-credit companies, companies are not as high as people may companies can not only obtain funds said a lawyer who worked on Quanzhou think,” said Shyu. but also broaden the channels of capital Huixin Micro-credit’s IPO on the main “Within a certain region, every com- markets. When necessary, micro-credit board of the Hong Kong Stock Exchange pany and individual is familiar with each companies can also conduct multiple (HKEx), only the second such listing. other – for example, Huixin is located rounds of financing. “Micro-credit companies are neither in Quanzhou city and Zuoli in Deqing Compared with bank financing, the cost the mainstream for listing in Hong Kong county – therefore micro-credit companies of financing by issuing shares or bonds nor welcomed by HKEx and the Securities have some ability to control the risk when is lower. Therefore, with an expanding and Futures Commission,” Allen Shyu, a offering loans.” capital base, micro-credit companies can Beijing-based partner at Troutman Sanders Shyu said risks such as bad debt were offer sufficient loans to attract more clients and a lead partner in the listing, told Asia common in the finance industry, but that while providing itself with more stable Business Law Journal. the bad debt rates of Zuoli and Huixin income and cash flow. “In fact, micro-credit companies are were actually very low. “Besides, according Huixin Micro-credit, the largest li- relatively popular among investors, as their to China’s law, the upper limit for micro- censed micro-credit company in business model is quite simple – that is, credit companies’ annual loan interest is Fujian province, is primarily dedicated to making profit by loans,” said Shyu. 24%, by which investors can still achieve a providing local entrepreneurial individu- At present, only two micro-credit com- respectable income.” als, small and medium-sized enterprises, panies have listed in Hong Kong, namely In order to expand their business, and micro-enterprises, with practical and Zuoli Kechuang Micro-finance and Huixin micro-credit companies must have enough flexible short-term financing solutions, Micro-credit. Huixin globally offered 180 capital available for lending, and that accounting for about 7.2% of Quanzhou million H-shares in the IPO, which is capital comes mainly from shareholders City’s micro-finance market. expected to raise between HK$279 million and financial institutions. If listed in Hong Legal counsel: Troutman Sanders advised (US$36 million) and HK$315 million. Kong, micro-credit companies can raise Huixin, with its team led by Allen Shyu “One unique feature of micro-credit more capital through public offerings. and Hong Kong partner Rossana Chu.
6 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
COMPLEX CFD FINANCES HINKLEY POINT C
ome of the most complex financing currently underway, and the challenging innovative and creative solutions to facili- structures in the world were currently piece of work involves the development of tate CGN’s invest into HPC.” Sbeing put in place to pave the way for innovative financing structures. The con- For example, Doughty said the financing the development of Hinkley Point C (HPC), tract-for-differences will last for 35 years. structure included a complex multi-billion- a headline-making Chinese-funded nuclear HPC, being built by France with major pound structured credit instrument “which power investment project in the UK, said a Chinese investment, will be constructed is both unique and innovative”. lawyer involved in the project. near the existing Hinkley Point B station, in “CDB will be continuing its support of “The financial viability of HPC is under- Somerset, and is scheduled for completion in CGN during the ongoing implementation pinned by a contract-for-differences [CFD] 2023. It is expected to provide 7% of the UK’s of HPC and its financing structure,” he said. structure, pursuant to which the UK gov- electricity needs and operate for 60 years. “As the first new nuclear power plant being ernment has agreed on a minimum price “The CFD mechanism required a ‘state implemented in the UK, HPC is currently for the power that HPC generates so that aid’ clearance from the EU Competition one of the largest and most complex proj- if prices fall below that level, the project Department,” said Doughty. “With the en- ects being implemented in Europe.” company will receive a top up, which will in try of China General Nuclear Corporation Legal counsel: Eversheds advised a consor- effect be funded by all UK users of electricity,” [CGN] into HPC as a strategic long-term tium of Chinese banks, led by CDB, on key Alex Doughty, a partner at Eversheds in investor, China Development Bank [CDB] aspects of the financing of the £16 billion London and one of the team leaders in the mobilized its team to support its longstand- (US$20 billion) HPC project. The Eversheds project, told Asia Business Law Journal. ing client CGN … As the overall funding team was led by partners Alex Doughty in Doughty said HPC was one of the structure for HPC was further developed, London, Jay Ze in Beijing, and Samuel Chau world’s most complex project financings CDB’s team was able to provide CGN with in Hong Kong.
7 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
ASHURST LEADS ON MYANMAR-FOCUSED PRIVATE EQUITY FUND
Ashurst represented Delta Capital Myanmar (formerly known as PMM Partners) as lead fund counsel on the establishment of their second Myanmar-focused private equity (PE) fund, which successfully closed on a seed round of US$30 million capital commitments on 1 November 2016. The fund is sponsored by Hong Kong-based asset manager Simon Murray & Company, and one of Myanmar's leading business conglomerates, Serge Pun & Associates (Myanmar). It aims to raise US$100 million for direct investments in companies principally based or incorporated in Myanmar and with primary business PSBC’s IPO breakthrough operations in Myanmar. The second fund comes at a time when real political saves the deal change, recent years of reforms and a peaceful transition to the new NLD- he Postal Savings Bank of China’s branches, and has a relatively low non-per- controlled government is (PSBC) US$7.4 billion initial public forming loan ratio. expected to lead to long- Toffering on the Hong Kong Stock Ex- The PSBC’s Hong Kong listing marks the term high economic growth change (HKEX) made a crucial breakthrough world’s largest IPO this year. It’s also the and an improving invest- on the listing rules, according to a legal world’s largest new listing since Alibaba’s ment environment. expert involved. US listing in 2014, and Hong Kong’s largest Legal counsel: The Ashurst Tim Wang, China co-managing partner IPO since 2010. team was led by counsel of Clifford Chance, told Asia Business Law Established in 2007, the PSBC is the Dean Moroz (Hong Kong), Journal that more than 50% of the PSBC’s youngest large commercial bank in China. with support from Ashurst’s securities in public hands at the time of As of 31 March 2016, the PSBC’s total assets, global network including: listing were beneficially owned by the three total deposits and total loans ranked fifth, partner James Comber, senior largest public shareholders, which violated fifth and seventh, respectively, among PRC associate Emily Austin, senior the listing rules of the HKEX. But the commercial banks. According to The Bank- associate Derek Leung, PSBC successfully got an exemption er’s list of the “Top 1,000 World Banks”, the trainee Victoria Yeh, partner from the exchange. PSBC ranked 22nd in the world in terms of Ben Hammond and associate “The size of its issuance is really huge,” total assets as of 31 December 2015. Colin Hung, all of Hong said Wang. “Even if its three largest pub- Legal counsel: Clifford Chance and King & Kong; partner Jake Green lic shareholders own approximately 53% Wood Mallesons acted for the underwrit- and associate Emily Torrens of securities in public hands, its public ers. The Clifford Chance team was led by in London; partner David float was not seriously affected, as well partners Tim Wang, Amy Lo and Fang Liu, Nirenberg and counsel Sharon as its liquidity.” while the KWM team was led by partners Kim in New York, partner Wang said it was not surprising that the Zhou Ning, Liu Sijia and Su Zheng. Davis Margaret Sheehan and partner PSBC raised so much money, as the bank Polk & Wardwell, and Haiwen & Partners, Tae Jeon in Washington DC. covers a wide range of clients, has a lot of acted for the PSBC.
8 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
EMERALD MEDIA BUYS INTO YUPPTV
merald Media, a pan-Asian platform catch-up TV and films on demand in 14 lan- minority positions in growing public and established by private equity firm guages. KKR has committed US$300 million private media companies. It plans to spend E Kohlberg Kravis Roberts (KKR) to invest to Emerald Media, which is headed by Rajesh US$15-75 million on each investment. in the media and entertainment industries Kamat and Paul Aiello. Legal counsel: Nishith Desai Associates across Asia, has acquired a minority stake in Emerald Media is primarily focused on advised Emerald Media on Indian aspects of YuppTV for US$50 million. providing growth capital to media, enter- the investment. O’Melveny & Myers was Em- YuppTV is an over-the-top video platform tainment and digital media companies, erald Media’s international counsel. Gibson for South Asian content offering live TV, and seeks to acquire control or significant Dunn & Crutcher represented YuppTV.
EVERSTONE, SUNRISE BPO ACQUIRE OUTSOURCER C3
Everstone Capital Partners monitoring, technical support estate investment firm with Matthew Shearman and III and Sunrise BPO have and customer acquisition. assets of US$3.3 billion under James Clayton-Payne. both agreed to acquire C3/ The Everstone Group is an management. It has about The team also included CustomerContactChannels India and Southeast Asia- 200 employees across offices partners Ken Laverriere, Holdings, a company that focused private equity and real in Mumbai, Delhi, Bengaluru, Larry Crouch, Richard Hsu, offers business process Singapore and Mauritius. Michael Dorf and Jessica outsourcing for customer The transaction is expected Delbaum, counsel Eileen management solutions. to close by the end of the year, O’Pray, Kelly Karapetyan and Based in the US and with subject to customary closing Sharon Lippett, and associates operations in the Philippines conditions. Francisco Cebada, Benjamin and Guatemala, C3 serves Legal counsel: Shearman & Petersen, Marc Elzweig and industries such as travel Sterling advised Everstone and Emalie Sundale. and hospitality, healthcare Sunrise BPO. The team was Kramer Levin Naftalis & and financial services. Its led by partner Sidharth Bhasin Frankel, a firm with offices in services include performance with support from associates New York, Silicon Valley and optimization, social media Gordon Palmquist, Paul Jun, Paris, advised C3.
9 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
Edelweiss blooms with masala bonds
ECL Finance has completed its debut overseas issue of `5.02 billion (US$75 million) in 9.05% rupee-denominated US dollar- settled senior secured notes, known as masala bonds. The unrated bonds are proposed to be dual listed on the Singapore Exchange and the Stock Exchange of Mauritius. ECL Finance is a subsidiary Hospitality platform created of Edelweiss Financial Services, a diversified financial services for Southeast Asia company in India providing a broad range of financial products and services. ECL arburg Pincus, a leading global best-in-class hospitality assets including a Finance provides credit services private equity firm focused on 100% stake of Serenity Holding, as well as se- and is registered as a non- W growth investing, and VinaCap- lect resort and city hotels in Vietnam. Serenity banking financial company. ital, the largest private equity firm in Viet- is a leading domestic hotel management com- Legal counsel: A team nam, have announced that affiliates of the pany focusing on developing and operating from Baker & McKenzie in two firms and VinaCapital founder Don Lam specialized boutique resorts and upscale city Singapore, led by debt capital have closed a partnership to create a fully hotels in Vietnam under its Fusion brands. markets principal Pallavi integrated hospitality platform spanning Legal counsel: Latham & Watkins repre- Gopinath Aney with assistance development, acquisitions and operations sented Warburg Pincus in the transaction from senior associate Jitesh across Southeast Asia. with a Hong Kong-based deal team led by Shahani, advised the joint The joint venture aims to become the partner Amy Beckingham and associates lead managers. Khaitan & Co pre-eminent hotel platform in Vietnam and Douglas Abernethy and Edward Tang. represented ECL Finance as expand into other hospitality markets in Singapore-based associate Marcus Lee counsel on Indian law. The Southeast Asia. The long-term goal is captur- provided Singapore law support. Advice team comprised partners ing growth in tourist arrivals, especially from was also provided on finance matters by Sudhir Bassi, Nikhilesh Panchal China, to the region in the next five to 10 years. Hong Kong-based partner Gary Hamp and and Manisha Shroff, principal It will be seeded initially with about associate Trinh Hoang and on tax matters associate Vaibhav Mittal and US$300 million of capital commitments from by London-based partner Sean Finn and associate Hemant Kothari. Warburg Pincus and VinaCapital and associate Robert Thomas.
CHINESE COMPANIES BUY ACR CAPITAL
Two Chinese state-owned ACR’s owners include was the lead counsel on the & Partners was Malaysian investment companies – London-based private equity deal, led by Singapore partner counsel on the deal, ASAR Shenzhen Qianhai Financial firm 3i Group, the Malaysian Chris Moore. Trilegal advised Legal handled Bahrain law Holdings and Shenzhen state investor Khazanah ACR on the Indian aspects of issues, Kim & Chang was the Investment Holdings – Nasional, the Singapore state the US$1 billion transaction. Korean counsel, and Lee & have acquired ACR Capital investor Temasek Holdings The team comprised partner Li advised on Taiwanese law. Holdings, the owner and the Japanese trading Yogesh Singh, senior associate Clyde & Co, led by partner of Singapore’s largest house Marubeni Corp. Ramya Suresh and associate Ian Stewart, advised the two reinsurance company. Legal counsel: Allen & Overy Nimisha Mund. Kadir Andri Chinese companies.
10 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
REDBACK SPINS ENERGY TECH DEAL
edback Technologies, an Austra- users. Its cloud-based system offers the how well Redback and EnergyAustralia lian cloud-based alternative ener- ability to analyze and control energy bridged that divide, Redback embrac- R gy company, has sold off a stake to generation and consumption in real ing the process to become investment major energy provider EnergyAustralia, time, affording consumers the ability ready and EnergyAustralia being flexible which is owned by CLP. to reduce energy costs. The technology enough to accommodate a dynamic The deal, valued at A$9.3 million makes rooftop solar and battery storage technology company. I think that bodes (US$6.9 million), will enable Energy- more economic and more attractive to well for the future of their partnership,” Australia to offer customers access to new electricity customers. said Bilardi. Redback’s smart solar inverter with its Redback legal adviser Norton Rose Legal counsel: Norton Rose Fulbright cloud-based software that enables smart Fulbright’s team leader and corporate advised Redback Technologies on the energy usage. The investment will sup- partner, Shane Bilardi, said that while sale. The firm drafted the share sub- port Redback’s development and release large corporates have a strong interest in scription and distribution agreements of new products. the emerging disrupters in their indus- and was involved in negotiations with Redback is focused on the devel- try, the cultural differences often make EnergyAustralia. Shane Bilardi led the opment of advanced, low-cost solar transactions between the two difficult deal and was assisted by senior associate solutions for residential and commercial to complete. “It was exciting to see Amelia Clarke.
11 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS DEAL DIGEST
BANPU Nitto enters licence IPO THE agreement with BIGGEST IN THAILAND Bristol-Myers THIS YEAR apanese industrial and technology Nitto. Nitto will also be eligible to re- conglomerate Nitto Denko Corporation ceive subsequent clinical and regulatory Banpu Power Public Company Jand Bristol-Myers Squibb (BMS) have milestone payments, royalties, sales- completed its initial public entered into an agreement granting the based milestone payments, as well as offering of ordinary shares latter exclusive worldwide rights for the option exercise payments. on The Stock Exchange of development and commercialization of Established in 1918, Nitto is expanding its Thailand (SET) setting the Nitto technological research. businesses as a global market leader across bar as the biggest offering Nitto’s investigational siRNA molecules several industries including electronics, for the country this year, and target heat shock protein 47 (HSP47) in automotive, housing, infrastructure, envi- one of the few sizable IPOs in vitamin A containing formulations, which ronmental and medical sectors, operating Southeast Asia. includes Nitto’s lead asset, ND-L02-s0201, through more than 100 companies world- The IPO included a public currently being studied for the treatment of wide with over 30,000 employees. offering in Thailand, a advanced liver fibrosis. Legal counsel: The Orrick team advising rule 144A/regulation S The agreement grants BMS the option Nitto was led by M&A and private equity international offering, an to receive exclusive licences to Nitto’s partner Hiroshi Sarumida and IP partner offering to cornerstone siRNA therapy for the treatment of lung Antony Pfeffer, and included assistance by investors and an entitlement fibrosis and other organ fibrosis. The Richard DeLucia and King Milling. In Octo- shares offering to agreement is subject to clearance under ber, an Orrick team led by Hiroshi advised shareholders of Banpu the Hart-Scott-Rodino Antitrust Im- Nitto on its acquisition of two US biophar- Power’s parent company, provements Act. As part of the arrange- maceutical companies, Irvine Pharmaceuti- Banpu Public Company. ment, BMS will pay US$100 million to cal Services and Avrio Biopharmaceuticals. Priced at 21 Thai baht (59 US cents) per share, the offering raised THB13.6 billion. Banpu Power is one of Asia’s leading energy companies and operates conventional and renewable power businesses across Asia including Thailand, Laos, China and Japan. Legal counsel: Latham & Watkins represented Banpu Power Public Company. The Latham & Watkins capital markets team was co-led by Hong Kong partner Posit Laohaphan and Singapore partner Michael Sturrock, with Hong Kong associates Eric Yiu and Diana Dizon. Credit Suisse, CIMB and The Quant Group acted as international lead managers, and Bualuang Securities, Thanachart Securities and Kasikorn Securities acted as domestic lead managers.
12 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS MARKET PULSE
FTZ TIE-UP FOR FIDELITY, HOGAN LOVELLS
fter more than a year of weighing commitment that Fidelity has put into the litigation, securitization, anti-monopoly up a possible relationship, Hogan association throughout the process and that law, insolvency and regulatory advice,” said A Lovells lawyers say, the firm has was a key factor in allowing us to get one Feng. “Expansion to other areas will follow finally tied the knot and launched an asso- of the first few approvals for an association based on client needs, for example; we are ciation with Fujian Fidelity Law Firm in the since the rules allowing the creation of seeing some demand on the banking and Shanghai Free Trade Zone (FTZ). associations between qualifying Chinese insurance side at present.” “Various factors have been considered and foreign law firms were issued at the end Hogan Lovells is the third international law in the decision, including level of commit- of 2014,” he said. firm to enter into an association in the Shang- ment, the likelihood of being able to obtain McGinty and Katie Feng, another hai FTZ following tie-ups between Baker & partner buy-in for the association within Shanghai partner of Hogan Lovells, will McKenzie and FenXun Partners, as well as a reasonable timetable, potential conflicts lead the relationship with Fidelity. Fidelity Holman Fenwick Willan and Wintell & Co. of interest and business conflict issues, the has a good track record in corporate and “In general terms, and as provided under quality of legal services provided, reputation M&A, insolvency and liquidation, financial the relevant rules governing associations in in the market, recognition of firm values, securities, real estate and construction, and the Shanghai FTZ, the association will op- management structure, and the outcome arbitration and litigation work. erate with Chinese lawyers that the Fidelity of financial due diligence and management “Based on the development plan for the FTZ office has assigned to it, plus foreign interactions,” Andrew McGinty, a partner association, the scope of matters which lawyers Hogan Lovells has assigned to it,” of Hogan Lovells in Shanghai, told Asia will be worked on by the association will said Feng. Business Law Journal. essentially be client-driven and hence will “It has started operations with an initial McGinty acclaimed Fidelity as a focus initially on China matters which fall staff of two intellectual property lawyers high-quality and innovative law firm, and within the expertise of Fidelity generally and two members of support staff. We ex- an excellent match for Hogan Lovells. “We and the lawyers assigned by Fidelity to the pect an additional four Chinese lawyers to have been delighted with the energy and association, such as intellectual property join the association by the end of 2016.”
13 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS MARKET PULSE
AnJie recruits 3 partners for Beijing office
nJie Law Firm recently appointed counsel and Asia-Pacific general coun- Zhan Hao, managing partner of AnJie, three new partners to join its Bei- sel of multiple multinationals. She has said Beijing, Shanghai and Shenzhen were Ajing office, including an intellectual handled major contract negotiations China’s most economically developed property (IP) veteran and two private equity throughout China, Southeast Asia, cities and their demands for legal services and venture capital (PE/VC) experts. Australia and New Zealand. were also the strongest. So it was a natural James Ma is experienced in patents, trade A senior executive of Beijing-headquar- choice to open AnJie’s third office in Shen- secrets, trademarks and unfair competi- tered AnJie recently told Asia Business Law zhen, following the Beijing and Shanghai tion disputes and other IP issues, as well as Journal that the firm’s newly launched Shen- offices. The launch of the Shenzhen office complicated commercial disputes in China. zhen office begins an expansion that may continues AnJie’s strategy to develop into He has worked for many multinationals and see the firm target western China next. a national law firm. domestic companies in protecting their IP rights and handling disputes. Xie Yongtao focuses on PE/VC, initial public offerings (IPOs), competition law, outbound investment and corporate mat- ters. He has advised clients on offshore and onshore IPO transactions. Echo Zhao is experienced in PE/VC, cross-border M&A and private wealth management, and served as both general James Ma Xie Yongtao Echo Zhao
LEGAL NEWS IN BRIEF
KWM EXPANDS a partner based in Hong woman in the state of Papua New Guinea to vice president Gregory HONG KONG Kong. Sanger has nearly Queensland to take silk in service a broad range Vijayendran to take over IPO TEAM 15 years’ experience of 1987. She was appointed of growing sectors and as president, replacing King & Wood Mallesons’ arbitration and litigation to the Queensland industries as part of senior counsel Thio (KWM) Hong Kong office proceedings in Asia, Supreme Court in 1993 an expanded Asia- Shen Yi. Vijayendran, 48, has hired John Baptist particular in financial and the Federal Court of Pacific network. is the first non-senior Chan as a partner in its services, energy and Australia in 1994, and has Located in Port counsel to be elected corporate and securities China-related matters. served a tenure as presi- Moresby, the new office president in more than practice. Chan special- Sanger will be HSF’s 13th dent of the Queensland will advise client on a decade. A part- izes in corporate finance, dedicated arbitration Bar Association. deals and disputes relat- ner at Rajah & Tann, capital markets and partner in Asia as part of ing to energy, mining, Vijayendran earned the mergers and acquisi- the region’s largest dis- NORTON OPENS infrastructure and tele- Law Society’s inaugural tions law, and his clients putes practice, with 20 PNG OFFICE communications. It will Pro Bono Ambassador include Hong Kong, partners and 80 lawyers. Norton Rose Fulbright also advice local govern- award in 2009 and was mainland Chinese and has opened an office in ment on the develop- chosen as the recip- multinational companies, AUSTRALIA'S ment of legislation, as ient of Washington- investment banks and FIRST WOMAN well as on power, ports, based Advocates financial institutions. CHIEF JUSTICE roads, oil and gas and International’s Good Prior to joining KWM, Susan Mary Kiefel has financial services. The Samaritan award Chan worked for other been appointed to lead- firm has hired former in 2008. leading international law ership of the High Court Kumul Minerals general firms including Clifford of Australia, taking over counsel Karol Lelai to A&O HIRES BANK Chance and Linklaters. from Robert French as run the new office as its GC IN THAILAND Chief Justice when he local principal for Papua Standard Chartered ARBITRATION retires from the bench New Guinea. Bank Thailand’s former EXPERT JOINS HSF in January. head of legal and com- Arbitration expert Kiefel will be the SGP LAW SOCIETY pliance Nithi Laophulsuk Kathryn Sanger has first woman in the ELECTS NEW is joining Allen & Overy joined Herbert Smith court’s 113-year history PRESIDENT as a partner. Laophulsuk Freehills’ (HSF) interna- to hold the position. The Law Society of was with Standard tional arbitration team as Kiefel became the first Karol Lelai Singapore has chosen Chartered Bank Thailand
14 ABLJ ⁄ NOVEMBER – DECEMBER 2016 NEWS MARKET PULSE
CAREY OLSEN OPENS DOORS IN HONG KONG
arey Olsen has opened for busi- The new office in Hong Kong will ness in Hong Kong as part of its advise on the full spectrum of conten- C network expansion in Asia. The tious, semi-contentious and offshore Hong Kong practice has a dispute reso- advisory work, which will include lution and insolvency focus, with partner domestic and international restructuring Michael Makridakis having relocated to and insolvency, corporate and com- Hong Kong from the firm’s Cayman Is- mercial disputes, banking and financial lands office, where he established and led services litigation, and trusts litigation, its dispute resolution and insolvency team. as well as fraud, asset tracking and The opening of the Hong Kong office in regulatory disputes. November follows the successful launch “The growth in demand for offshore of the firm’s Singapore office by lead Asia legal services in Asia has created a parallel partner Linda Lee in October last year. demand for offshore litigation services Carey Olsen recently expanded its corpo- and we have an increasing number of rate legal practice in Singapore with the clients requiring advice in relation to relocation of partner Anthony McKenzie disputes and insolvency matters in the from the firm’s Cayman office. region,” said Makridakis. Michael Makridakis
for nearly seven years SAL CONTINUES FORMER JUDGE AT Law Corporation is the said: “The combination in-house. At A&O he INSEAD COURSE DLA IN TOKYO constituent Singapore of more cross-border will focus on transac- The Singapore Academy DLA Piper has hired law practice of Simmons disputes and height- tions, contentious and of Law (SAL) and Takahiro Nonaka to the & Simmons JWS. ened regulatory scrutiny non-contentious work in INSEAD business firm’s Tokyo office as a The establishment has increased demand regulated markets. Prior school are organizing member of the litigation of the JLV responds to among our regionally to joining StanChart, a second run of the and regulatory practice the growing financial based and multinational Nithi was in private SAL-INSEAD Law Firm group. Nonaka formerly services industry in clients for lawyers practice with Hunton & Leadership Programme served as a judge in Singapore and means the who are well-versed in Williams in Thailand. (SILLP) following the both district and family firm can offer an inte- international arbitration, success of last year’s courts in different cities grated service to clients cross-border litigation ENTERTAINMENT inaugural course. The in Japan for almost 10 across key areas, particu- and regulatory and LAWYER JOINS SILLP is a three-day years. He also served as a larly asset management enforcement matters.” LATHAM & WATKINS intensive management diplomat at the Embassy & investment funds, and Experienced private prac- programme designed for of Japan in Washington financial institutions. IDR EXPERT AT tice and studio lawyer Lex law firm partners. The DC, where he advised on SQUIRE TOKYO Kuo has joined Latham & programme applies busi- issues relating to export ASIA DISPUTES Squire Patton Boggs has Watkins’ entertainment, ness school methodolo- controls, FCPA enforce- TEAM JOINS appointed international sports and media practice gies to address business ment and competition SIDLEY IN HK arbitration counsel Haig to serve the Greater challenges faced by law laws affecting companies Sidley Austin has added Oghigian to lead its China region. He advises firm partners includ- in Japan. a team of arbitration, international arbitration clients on cross-border ing strategic planning, litigation and regula- practice. He will be financing, development, improving organi- SINGAPORE JLV tory lawyers in Hong based in Tokyo. production, and distri- zational alignment, COMES ONLINE Kong led by prominent Oghigian was pre- bution of media and managing growth and Simmons & Simmons partner Friven Yeoh, viously Tokyo head of entertainment projects. change, and motivating has launched a joint law with Desmond Ang commercial disputes Kuo joined the firm in people and teams. The venture (JLV), Simmons and Yan Zhang joining at K&L Gates, and prior Hong Kong but expects to course is scheduled & Simmons JWS, the firm as counsel. to that was co-chairman return to Beijing to for 23-25 March 2017 at offering clients both Thomas Albrecht, of Baker & McKenzie’s join Latham’s office INSEAD’s Asia campus foreign and Singapore managing partner for litigation and dispute there in 2017. in Singapore. law advice. JWS Asia Sidley, Asia Pacific, resolution practice.
15 ABLJ ⁄ NOVEMBER – DECEMBER 2016
BUSINESS LAW DIGEST
AUSTRALIAN GOVERNMENT BROADENS KYC METHODS
n 11 September 2016, the Austra- The amendment: requirement to verify name, address lian government introduced 1. Allows reporting entities to now collect and date of birth (or transaction histo- O the Anti-Money Laundering know your customer (KYC) information ry) against two separate data sources. and Counter-Terrorism Financing Rules “about” a customer, rather than requir- Amendment Instrument 2016 (No. 1), ing KYC information to be collected Broadening ID verification which makes important changes to “from” a customer; and The rules set out the minimum require- chapter 4 of the Anti-Money Laundering 2. Eases the KYC headaches many have ments in relation to customer identifica- and Counter-Terrorism Financing Rules been facing in relation to electronic- tion and verification. Historically, chapter Instrument 2007 (No. 1). based safe harbour provisions and the 4 of the rules required reporting entities to
17 ABLJ ⁄ NOVEMBER – DECEMBER 2016 BUSINESS LAW DIGEST
collect KYC information directly “from” a that they still adhere with the remainder Safe harbour provisions customer. The amendment means that the of the chapter 4 requirements and privacy Following the amendment, electronic- rules now permit reporting entities to col- law requirements. based safe harbour provisions for the lect KYC information “about” a customer The government noted that financial verification of individual customers require rather than “from” a customer. This word- institutions estimate this change will reporting entities to verify: ing change has been applied universally reduce manual data entry time by about across chapter 4 (meaning you can collect four minutes per customer and will reduce • The customer’s name against two sepa- information “about” each customer type). the time it takes the average new customer rate data sources; and From a practical perspective, this to complete an application form by about • Either the customer’s residential change means that reporting entities can 12.5 minutes (representing an estimat- address, or date of birth, or that the choose whether to collect information ed annual saving of US$7.2 million to customer has a transaction history for “from” a customer or “about” a custom- financial institutions and US$7.9 million to at least the past three years against two er (i.e., from a source other than the individual customers). separate data sources. customer). Reporting entities have greater This change will also prove a relief for flexibility and discretion as a result. KYC headaches associated with having The change is a relief for those in the industry Reporting entities must ensure that they information about a customer that is who constantly come up against reliable data still apply a risk-based approach to the reliable, but that did not come “from” sources that only verify against name and development of any new procedures, and the customer. date of birth (but not address) or vice-versa.
18 ABLJ ⁄ NOVEMBER – DECEMBER 2016 BUSINESS LAW DIGEST
its staff can interview and observe the customer’s behaviour on a real-time basis. Currently, only video-conference systems are specified as a permissible method/technology. Electronic document and electronic signa- ture. Financial institutions can accept KYC documents in the form of electronic data under the law on electronic transactions. Electronic signatures under the law on electronic transactions are also acceptable as customers’ signatures. Verification of customer information and identification documents. For account opening via financial institutions’ electron- ic devices, the verification must be done by using either: (1) a smart-card reader (with supplemental verification through the system of relevant government authority that verifies information and ID cards, or a system that verifies fingerprints); or (2) the system of relevant government authority that verifies information and ID cards along with the system that verifies fingerprints. Where customers’ electronic devices and financial institutions’ appli- cations are used, the verification must be THAI LEGISLATION done by approach (2) above. Other methods/technologies used for TO ASSIST E-KYC verification require specific BOT approval on a case-by-case basis. Record keeping. Financial institutions he Bank of Thailand (BOT) has usually conducted where the relationship is must keep information and KYC docu- introduced a new regulation to established face-to-face. Account opening ments or their copies, as well as images, T facilitate the know your custom- for deposit acceptance or fund acceptance sound recordings and transaction logs, in er (KYC) process by using an electronic from the public via electronic means can accordance with the record keeping period means (e-KYC) for account opening for only be available for “individual customers”. under the AML law. deposit acceptance or fund acceptance Electronic means include: (1) financial from the public. KYC is one of the required institutions’ electronic devices; and (2) KYC/CDD processes imposed on financial institutions customers’ electronic devices installed with Reporting entities including financial in- and certain types of reporting entities un- the financial institution’s application. stitutions must also comply with KYC and der the anti-money laundering law (AML Since account opening for deposit customer due diligence (CDD) require- law). Financial institutions need to comply acceptance or fund acceptance from the ments under the AML law. Regardless of with both the KYC process under AML law public via an electronic means is consid- whether or not transactions are related to and the criteria issued by the BOT as the ered to be a use of new technologies in account opening for deposit acceptance supervising regulator. the provision of banking services, financial or fund acceptance from the public, for The BOT issued notification No. institutions must obtain a prior approval any transactions or relationships that are 7/2559 re Criteria in Taking Deposits or from the BOT. initiated via electronic means, financial Taking Money from the Public, which Permissible method/technology. For institutions must also comply with certain became effective on 3 August 2016. Key account opening via electronic means, requirements applicable to non-face-to- requirements are summarized below. financial institutions must use the method face KYC processes and other require- Concept. e-KYC procedures must have that can replace face-to-face interaction. ments generally applicable for KYC/CDD the same standards as the KYC procedures The financial institution must ensure that processes under AML law.
19 ABLJ ⁄ NOVEMBER – DECEMBER 2016 BUSINESS LAW DIGEST
DEFAMATORY INTERNET PUBLICATIONS AND THE NEED FOR EVIDENCE
n a recent Singapore High Court case, conspiracy. The plaintiffs claimed that tendered the following evidence as proof Qingdao Bohai Construction Group and the two defendants – directors of HuanYu of such publication: video and audio I others v Goh Teck Beng and another (Qingdao) Development, which was then recordings as evidence of the second (2016), the plaintiffs failed to prove defa- involved in multiple legal disputes with the defendant’s alleged admission to the pub- mation mainly because they could not es- Qingjian Group’s construction projects in lication; circumstantial evidence including tablish that the defendants had published China – had a motive to take revenge on the sign-off containing the second defen- allegedly defamatory online articles. the Qingjian Group of companies. dant’s name on the online articles; and the While restating the trite legal princi- The relevant publications involved 12 defendants’ filing of a report to the Central ples of defamation in Singapore, this case online articles on various websites based Commission for Discipline Inspection highlights the importance of obtaining in mainland China, Hong Kong and the (CCDI) of the Communist Party of the electronic evidence to identify defen- US, and two newspaper articles that the People’s Republic of China. dants, and to show that third parties have plaintiffs claimed contained untrue and However, the plaintiffs did not adduce downloaded and read such defamatory defamatory statements about them, and any electronic evidence to prove that online publications. that this resulted in damage to the the defendants had published the online The five plaintiffs, three companies and plaintiffs’ reputation. articles. In contrast, the defendants denied two senior executives, sued two Singa- The plaintiffs claimed that the de- that they had published the online articles, porean defendants for defamation and fendants published these articles, and that publication occurred in Singapore,
20 ABLJ ⁄ NOVEMBER – DECEMBER 2016 BUSINESS LAW DIGEST
and alternatively that the meanings of the a trading or business reputation. The court Internet users are often protected by online articles pleaded by the plaintiffs held that the mere fact that the first plaintiff a wall of anonymity and the burden of were true in substance and in fact. had a wholly owned Singaporean subsidiary proof of publication is therefore particu- was insufficient to prove the first plaintiff’s larly challenging with online publications. The law on defamation trading or business reputation in Singapore. Where a party claiming defamation fails The court reiterated the three legal re- To satisfy the publication requirement to take decisive steps to show the elec- quirements for defamation: in the context of internet defamation, a tronic trail, or adduce other objective plaintiff must generally establish, on the electronic proof to identify the publisher 1. The defendants must publish material balance of probabilities, that the defend- of the allegedly defamatory content, the to a third party; ant as the internet user had uploaded circumstantial evidence tendered needs to 2. The material must make reference or posted the material on the internet. be very strong. to the plaintiffs; and The plaintiff also needs to prove, on the It is clear that with our digital environ- 3. The material must be defamatory to balance of probabilities, that at least one ment, even a person’s sign-off or personal the plaintiffs. third-party reader has downloaded the details on an article may be insufficient material in Singapore. to show that the person has written and To prove defamation, a corporate plain- Merely uploading or posting the material published that article. Overall, electronic tiff must also prove it has a reputation in on the internet does not satisfy the publi- evidence is objective and remains the the jurisdiction at the time of publication cation requirement, even if the defendant “most obvious way” to prove publication as a prerequisite for pursuing defamation. makes the offending material available to a by defendants. As such, any person initiat- Here, the court held that the first plaintiff, third party. The plaintiffs failed to prove that ing a defamation suit should be taking pro- a China-incorporated company, had no such the defendants were responsible for the pub- active steps to ensure that such evidence is international reputation and failed to show lication of the online articles in Singapore. quickly and efficiently gathered.
21 ABLJ ⁄ NOVEMBER – DECEMBER 2016 BUSINESS LAW DIGEST
HOW CIRCULAR 31 TEST RULES AFFECT INSURERS
n 30 August 2016, Indonesia’s Noteworthy provisions Circular No. 31 also defines a controlling Financial Services Authority Circular No. 31 now clarifies that a con- shareholder as an individual, legal entity O (OJK) issued circular No. 31 troller of an insurance company means: and/or group of companies that: on Fit and Proper Test (FPT) for Finan- cial Services Institutions (FSI) Primary 1. An individual and/or legal entity that 1. Owns 25% or more of the issued Parties, which took effect on the same holds shares in an insurance company shares with voting rights; or date. Circular No. 31 further implements and meets the criteria of a controlling 2. Owns less than 25% of the issued OJK regulation No. 27 on FPT for FSI shareholder; shares with voting rights, but has Primary Parties. 2. An individual and/or legal entity that direct or indirect control. All FPT applications for insurance pri- does not hold shares in an insur- This means that circular No. 31 mary parties must be made in accordance ance company, but is assigned as a now clarifies that a controlling share- with circular No. 31. As circular No. 31 controller by the insurance company; holder (as controller) is also subject requires a substantially different set of and/or to an FPT. application forms and supporting docu- 3. An individual and/or legal entity that ments, insurance companies that are in does not hold shares in an insurance FPT procedures the midst of preparing FPT applications company, but is assigned as a control- The following parties must submit an will need to restart them. ler by the OJK. application, with the required forms
22 ABLJ ⁄ NOVEMBER – DECEMBER 2016 BUSINESS LAW DIGEST
and supporting documents stipulated in company; and/or (iii) the candidate 3. The proposed other primary party is circular No. 31, to the OJK: has previously failed an FPT. prohibited from being appointed to hold the intended position. 1. The prospective owner, founder or The FPT written decision will be issued board of directors (BOD) members to the insurance company within 30 If the FPT decision is negative, and the of the insurance company, if the working days after the OJK receives a controlling shareholder already holds the application is submitted in relation complete application. If the FPT decision insurance company’s shares, then: to obtaining an insurance business is affirmative, then: licence on establishment; or 1. It must transfer its shares in the 2. The BOD members of the insurance 1. The controlling shareholder or the insurance company within one year company, if the application is sub- controller is permitted to acquire after the FPT decision date, such mitted after obtaining an insurance the insurance company’s shares; and that it will no longer be a con- business licence. 2. The other primary party is permitted trolling shareholder. However, it is to assume the intended position and prohibited to transfer shares to its The nomination and remuneration his/her effective date of appointment affiliated parties; and committee of an insurance company must be no later than three months 2. It will not be able to exercise its must first conduct a self-assessment on after the FPT decision date. shareholder rights over the newly the other primary parties using a specific acquired insurance company’s shares. form stipulated under circular No. 31. If the FPT decision is negative, then: The completed self-assessment form Failure to transfer the insurance compa- then must be submitted together with 1. The proposed controlling sharehold- ny’s shares will mean that the controlling the FPT application to the OJK. er is prohibited from acquiring the shareholder will not be able to exercise A self-assessment does not need to be insurance company’s shares; its shareholder rights over all of its carried out for a controlling shareholder 2. The proposed controller is prohib- shares in the insurance company. or for a controller. ited from taking control over the If the FPT decision is negative and the insurance company (i.e., it must not controlling shareholder already controls FPT assessment directly or indirectly influence the the insurance company, then it must The controlling shareholder or the management and/or the policy of release its control. controller must undergo the following the insurance company); and If the FPT decision is negative and assessments as part of the FPT: the other primary party has already been appointed to the intended position, then 1. An administrative assessment (to as- his/her appointment must be cancelled sess integrity requirements, financial no later than three months from the FPT reputation requirements or financial decision date. soundness requirements and/or com- petency requirements); and 2. A presentation by the controlling shareholder or the controller, if deemed necessary by the OJK, on: (i) a proposed development plan for the insurance company for the next three years; and (ii) a proposed strategy if the insurance company is encountering financial difficulties.
The other primary party must undergo the following assessments as part of the FPT:
1. An administrative assessment; and 2. Provide clarifications if: (i) the OJK has negative information about the candidate; (ii) the candidate does not have any experience related to his/ her intended position in an insurance
23 ABLJ ⁄ NOVEMBER – DECEMBER 2016 IN-HOUSE AGENDA
SOUTH KOREA
KICA WORKSHOP WITH TRADITIONAL TWIST
The Korea In-house Business Law Journal. This Counsel Association professional association (KICA) organized a represents South Korean two-day annual work- bar licensed attorneys who shop for its members at are working as in-house Kyoungwonjae, a Korean counsel at various com- traditional house-style panies and private/public KICA workshops are increasingly popular with members. hotel in Songdo interna- institutions in South Korea. founded by merging with committees: academic, and interactive learning tional business district The KICA currently two other in-house coun- culture, compliance, public programmes for in-house from 26-27 November. has about 1,600 members sel groups, the Gangnam interest committee and counsel. A regular group Highlights of the and is a fast growing and Gangbuk In-house alternative dispute resolu- workshop has been devel- workshop include a special organization due to the Counsel Associations. tion (ADR). oped uniquely for Korean traditional music rapidly increasing number KICA members invar- It also has five industry the employers of the performance by the of in-house counsel in iably belong to different communities working KICA’s members. National Gukak Centre, a South Korea. organizations but work to in the fields of finance, By addressing the legal, special lecture by a famous The KICA started off as share values, vision, know- construction and heavy governance and risk issues scholar on Confucianism, informal lunch gather- ledge and human resources industry, IT and services, of importance in today’s panel discussions from suc- ings of in-house counsel by enhancing professional manufacturing, and public global economy, the cessful in-house lawyers working around the and networking powers and associations. workshop arms partici- and, the association hopes, Yeouido area in Seoul in through academic and The KICA’s in-house pants with the knowledge a lot of fun. 2006, and evolved into the cultural events. counsel academy, which is needed to respond to The KICA is the latest Yeouido In-house Counsel In addition to the held every year, provides questions from leading corporate counsel group Association (YICA) in 2009. steering committee, the the educational courses, in-house lawyers and to partner with Asia In 2011, the KICA was association has five other skill-building seminars experts in other areas.
HONG KONG NEW MEMBERSHIP YEAR HAS HKCCA HARD AT WORK
The Hong Kong Corporate Counsel on 7 December, with Miao & Co and Association kicked off a new member- Han Kun Law Offices. ship year commencing 1 September with an array of hot-topic seminars, with The HKCCA will be offering members more similar events in the pipeline to new seminars and roundtables as soon see out the year. as 11 January, 2017, with an overview of Here’s a glimpse of the HKCCA’s final the General Data Protection in Europe seminars, social events, industry round- and its impact for Hong Kong organiza- tables and conferences for 2016: tions, by Lewis Silkin. In mid-October, Troutman Sanders • Big Data and Internet of Things, on 8 hosted two well-attended sessions of November, commissioned by Norton their presentation on Cross-Border Rose Fulbright; Trade Litigation. Ronald Sum, a partner • The Hong Kong Fintech Landscape, of Troutman Sanders specializing in on 17 November, sponsored by dispute resolution, delivered an Hogan Lovells; engaging presentation. • FATCA, Asset Tracing and On newsworthy topics, Freshfields Shareholder Protection in the BVI, Bruckhaus Deringer’s Robert Ashworth, Bermuda and Cayman Courts, on Richard Bird, John Choong, and Robert 24 November, presented by Harneys; Kirkness held a panel discussion on the • An update on the Hong Kong – controversial Trans-Pacific Partnership Shenzhen Connect, on 30 November, Agreement (TPPA), including key sponsored and presented by developments. Of particular interest Charltons Solicitors and Hong Kong were the political implications and Exchange and Clearings Limited; and forces behind the rise of the competing • The New Draft Foreign Investment Regional Comprehensive Economic Law of China – How it Revolutionizes Partnership (RCEP) and its differences Members at October’s session on cross-border trade litigation. China’s Foreign Investment Regime, with the TPPA.
24 ABLJ ⁄ NOVEMBER – DECEMBER 2016 IN-HOUSE AGENDA
SINGAPORE
BLACK TIE GALA DRAWS OUT SINGAPORE’S FINEST
Hundreds of Singapore’s in-house counsel three levels of seniority – individual contribu- to introduce these courses from Q1 of 2017.” donned their finery to attend the Singapore tor, head of department, and general counsel Wong also announced that the SCCA had Corporate Counsel Association’s (SCCA) of an entire organization. This can be used entered into an MOU with Nanyang Business Black Tie Gala at The Capella Sentosa on a reference point for hiring, training and School to develop a bespoke business leader- 4 November to celebrate the association’s career development. ship course for mid to senior in-house counsel. 14th anniversary. “Work on the framework continues. We The six-day course will prepare participants The event featured special guests including have received very positive feedback from to be effective at senior management levels. Singapore’s Senior Minister of State for Law selected senior in-house counsel in hiring “We are looking at the government to provide and Finance, Indranee Rajah. positions, human resource practitioners and training subsidies. We aim to open this course SCCA president, Wong Taur-Jiun, spoke members of the labour movement,” Wong told for enrolment some time in 2017.” on the night about the changes occurring more than 260 gathered guests. The SCCA is also working with TMS in the legal profession, including those with He said the SCCA was developing and Academy, the training arm for Temasek Group technology, and how the SCCA had revisited curating relevant courses within the frame- of companies, to adapt its Global Leaders its raison d’être and decided “to be more than work. On the legal front, several professors course for the SCCA’s most senior members. what we had been since our humble begin- from the Law Faculty of the Singapore “Strategic vision will be the prime objective,” nings in 2002”. Management University have agreed to help said Wong. “We hope to make the first run, As part of this philosophy, Wong said develop full or half-day courses, in collabora- also in 2017, subject to availability of training the SCCA had developed a “Competency tion with law firms and senior in-house coun- subsidies. So this is the SCCA vision of becom- Framework” for in-house counsel. The frame- sel. “These courses will be rigorous academ- ing a Centre of Competence for the practice work describes three categories of compe- ically, realistic commercially, and relevant to of law in-house. Not only for Singapore, but tency – legal, managerial and conduct – across the in-house community,” he said. “We hope over time, for the whole of Asia.”
Singapore’s Senior Minister of State for Law and Finance, Indranee Rajah (centre), is flanked by SCCA president Wong Taur-Jiun (left), vice president Dharmendra Yadav, and other guests.
25 ABLJ ⁄ NOVEMBER – DECEMBER 2016 IN-HOUSE AGENDA
INDONESIA
HOT LINE-UP OF EVENTS FOR ICCA
The Indonesian Corporate Counsel Association’s (ICCA) frenetic pace of events contin- ued into the last part of the year with successful workshops offer- ing ICCA members and other participants a practical guide to specific legal topics, with insight from multiple perspectives. To that end, a workshop on fraud investigation techniques, held in association with Dewi Negara Fachri & Partners (DNFP), attracted a high degree of interest on 25 October. AUSTRALIA The ICCA also sponsored the Indonesia & Southeast Asia 4th Annual International COUNSEL DESCEND ON CANBERRA Arbitration Summit, held on 29 September 2016, and the Asian FOR ACC NATIONAL CONFERENCE Legal Business In-House Summit 2016, held on 5 October 2016. The Australian in-house counsel sector CSIRO, Macquarie Bank, McDonalds Australia, Both events were held at Raffles converged on the nation’s capital, Canberra, Novomodus, Peerpoint, Staples Australia, Hotel Jakarta. in November for ACC Australia’s National Thomson Reuters, Treasury Wine Estates, The association plans to Conference & In-House Lawyer Awards. Westpac Group, and Xero. continue on a theme of inter- Attracting more than 300 in-house Delegates created personalized pro- esting events this year and into professionals, the specialized conference, grammes from over 25 tailored sessions from the next. On 15 September 2016, which ran from 16-18 November, featured a range of keynotes, panel sessions and mas- in response to member requests a programme covering a range of topics terclasses, and gained new perspectives and for a discussion on financial including cyber risks, legal leadership and valuable sector insights, along with a range technology, the ICCA and KNK global insights. of networking opportunities across the three Advocates held a “Financial The programme was designed by in-house days. A highlight of the event was the annual Technology 101” workshop. lawyers for in-house lawyers, and featured a in-house lawyer awards dinner. This event And on 30 August 2016, the number of the Asia-Pacific region’s top legal celebrated the best of the Australian in-house topic of logic for lawyers was up experts from leading organizations includ- legal profession and was the culmination of for debate at a workshop with ing AHPRA, AIA Australia, AMP Limited, an annual awards programme that featured a one of Jakarta’s leading indep- Anheuser-Busch InBev, Australian Cyber number of categories including Government endent law firms, Adnan Security Research Institute, Bauer Media, Lawyer of the Year, Corporate Lawyer of the Kelana Haryanto & Hermanto Brookfield, Coca-Cola, Carnival Australia, Year, and Small Legal Team of the Year. (AKHH Lawyers).
INDIA
THREE-DAY ESCAPE LOOKS AT CC REFORMS
The Indian Corporate Counsel The ICCA noted that India’s participate in well moderated, Association (ICCA) hosted legal industry is maturing at a structured panel discussions its Sixth Annual International steady pace, and that it is in on relevant issues. There Summit – ICCA Congress 2016 its best interests to observe, was also plenty of time for from 25-27 August at the Taj assimilate and absorb the personal interaction on the Mahal Hotel in New Delhi. know-how and best practices conference sidelines. With a theme of that have evolved across the Invited dignitaries included Globalization of Legal Services, world over the years. Suresh Chandra, the Indian the summit was happy to have The summit’s objective government’s law secretary, India’s Ministry of Commerce, was to create opportunities Sudhagshu Pandey, joint the Services Export Promotion for international law firm secretary at the Department of Council and the Ministry professionals and in-house Commerce, and Lalit Bhasin, of Law and Justice as counsel to interact over the the president of the Society of supporting partners. course of three days, and Indian law Firms.
26 ABLJ ⁄ NOVEMBER – DECEMBER 2016 DISPUTE DIGEST
SINGAPORE COURT RULES ON BILATERAL TREATY CLAIM
n its highly anticipated first decision expropriation claims, Laos filed an appeal the tribunal had subject-matter jurisdic- concerning an investor-state arbitration, to the Singapore High Court and produced tion over Sanum’s expropriation claims on Ithe Singapore Court of Appeal has held notes verbales exchanged in 2014 (after a purposive interpretation of article 8(3) of in Sanum Investments v Government of the the tribunal’s ruling) between the Laotian the PRC-Laos BIT. Lao People’s Democratic Republic (2016) Ministry of Foreign Affairs and the PRC that a 1993 bilateral investment treaty Embassy in the Laotian capital, Vientiane, MOVING TREATY FRONTIERS RULE (BIT) between the People’s Republic of which stated that the PRC-Laos BIT was The court’s decision essentially turned on China (PRC) and Laos applies to Macau in not applicable to Macau. Accepting the the moving treaty frontiers rule in cus- the wake of the former Portuguese territo- notes verbales into evidence, the High tomary international law, codified in the ry’s handover to the PRC in 1999. Court concluded that the tribunal lacked Vienna Convention on the Law of Treaties In 2012, a Macau-based investor, jurisdiction over Sanum’s claims. When and the Vienna Convention on the Succes- Sanum Investments, commenced United Sanum appealed, Laos produced further sion of States in respect of Treaties. The Nations Commission on International notes verbales sent in 2015, by which the rule provides presumptively that a treaty is Trade Law (UNCITRAL) arbitration pro- PRC Ministry of Foreign Affairs confirmed binding in respect of the entire territory of ceedings against Laos, bringing claims for the authenticity of the note verbale from a state, extending by default to any territo- expropriation of gaming investments under the PRC Embassy. ry when it becomes part of that state. the PRC-Laos BIT. Following consultation In September 2016, the Court of Appeal – Thus, the PRC-Laos BIT would auto- with the parties, the tribunal designated sitting as a five-judge bench – restored the matically apply to Macau upon restoration Singapore as the place of arbitration. tribunal’s ruling, holding that the PRC- of Chinese sovereignty in 1999, unless After the tribunal ruled that it had Laos BIT did apply to Macau under the Laos could prove that it was not intended jurisdiction to determine Sanum’s rules of state succession and, further, that to apply to Macau. The court found that
27 ABLJ ⁄ NOVEMBER – DECEMBER 2016 DISPUTE DIGEST
no such intention appeared from the CRITICAL DATE an expropriation claim to arbitration once PRC-Laos BIT, since the PRC and Laos Of particular interest is the court’s deci- the claim was referred to the national court. did not exclude Macau from its scope sion not to place any evidentiary weight on In that context, the court rejected Laos’ at the time it was concluded in 1993, the 2014 and 2015 notes verbales produced interpretation that article 8(3) permitted even though the handover of Macau was by Laos, which stated the position that recourse to arbitration where compen- foreshadowed by the 1987 PRC-Portugal the PRC-Laos BIT did not apply to Macau. sation was the only issue in dispute. The Joint Declaration. As the PRC and Laos Referring to the “critical date” doctrine court was mindful that cases of direct must be taken to have been aware of the in international law, the court held that expropriation, with only the issue of moving treaty frontiers rule, their silence a party could not rely on self-serving evi- compensation in dispute, were becoming favoured the presumption that the PRC- dence procured after the commencement increasingly rare, and host states could Laos BIT would apply to Macau. of the arbitration to improve its position in simply deny that they had engaged in The court went on to consider whether the arbitration. expropriatory acts. it was “otherwise established” that the Despite Laos’ contention that the As a result, such a narrow interpreta- PRC-Laos BIT did not apply to Macau by notes verbales merely “confirmed” the tion of article 8(3) would mean that the turning to the evidence raised by Laos, parties’ intention to exclude Macau from investor could never actually have access including the 1987 PRC-Portugal Joint the PRC-Laos BIT all along, the court to arbitration, offending the effet utile Declaration, the purported analogy with found that the notes verbales were being (effective interpretation) principle. Consis- Hong Kong, publications by the UN Secre- adduced to contradict the pre-critical tent with the PRC-Laos BIT’s objective of tariat and the World Trade Organization date position (i.e., the PRC-Laos BIT protecting investments, the court pre- (which the court declined to rely on), and applied to Macau by operation of the ferred to interpret article 8(3) purposively, the notes verbales. moving treaty frontiers rule). such that any claim including a dispute While the court recognised that on over the amount of compensation – as in ONE COUNTRY, TWO SYSTEMS the face of the notes verbales, the position Sanum’s case – could be arbitrated. Although Laos pointed to the 1987 taken was that the PRC-Laos BIT was not Given the prominence generally accord- PRC-Portugal Joint Declaration, which applicable to Macau, it rejected any sug- ed to Singapore jurisprudence on interna- established a “one country, two systems” gestion that the notes verbales evidenced tional arbitration, and the novelty of the
The court rejected Laos’ interpretation that article 8(3) permitted recourse to arbitration where compensation was the only issue in dispute. The court was mindful that ... host states could simply deny that they had engaged in expropriatory acts
regime over Macau, the court highlighted a “subsequent agreement” or “subsequent issues involved in this case, one can expect that the Joint Declaration was a bilat- practice” between the PRC and Laos. the Court of Appeal’s decision to be cited eral arrangement that could not give Highlighting concerns of fairness and due and relied upon in future cases engaging non-contracting states, such as Laos, any process, the court held that it would be similar issues. rights or obligations under international “impermissible” to give effect to the notes In-house counsel advising on inves- law. Moreover, the Joint Declaration only verbales, thereby granting a retroactive tor rights in situations where the host concerned the PRC’s constitutional ar- amendment of the PRC-Laos BIT to the or home state has undergone a change rangements with regard to Macau. Given detriment of a third party investor who has of territory should be familiar with the the principle that states may not rely on already brought his claim in arbitration. operation of the moving treaty frontiers their internal laws to escape their treaty rule. For example, Macanese and possibly obligations, it would not have been open EFFECTIVE INTERPRETATION Hong Kong investors may potentially be to the PRC – let alone Laos – to rely on To address the question of whether able to enjoy the benefits and protec- the PRC’s domestic legal framework to Sanum’s expropriation claims were cov- tions accorded under the PRC’s extensive avoid arbitration with an investor. ered by article 8(3) of the PRC-Laos BIT, BIT network. The court also noted that there was which permitted arbitration of disputes a dearth of evidence as to whether PRC “involving the amount of compensation treaties became applicable to Hong Kong for expropriation”, the court observed that ALVIN YEO is chairman and senior partner after the handover from the UK in 1997. In the PRC-Laos BIT contained a “fork- at WongPartnership in Singapore. Co-author any event, the court doubted if Hong Kong in-the-road” clause that precluded an KOH SWEE YEN is a partner at the firm. could be a “true analogue” for Macau. investor from bringing any aspect of
28 ABLJ ⁄ NOVEMBER – DECEMBER 2016 DISPUTE DIGEST
ARBITRATION IN ASIA: THE PRESENT AND FUTURE
rbitration has gained a higher level factor. The more international transac- have become key users of ICC arbitration of acceptance and greater enforce- tions, the more disputes to arise, and the in the region. A ability across Asia than we have more demands for the enforcement of China will use ICC arbitration even ever seen before. It is very much a result arbitral awards. more frequently in the near future, because of the trend that countries in the region In light of the visible shift of economies its One Belt, One Road (OBOR) initiative are increasingly involved in international from the West to Asia, Asian countries ac- is bringing more business opportunities business and playing more important roles knowledge the importance of enforcement for China and the countries along OBOR in various economic sectors. of decisions over the disputes that they are routes, which will inevitably see more arbi- Universally accepted standards, or in- involved in, and recognize the advantage tration. The PRC Supreme People’s Court ternational standards, usually help to im- of international arbitration in this regard. (SPC) has also become friendlier towards prove the efficiency of business. Increasing Thanks to the economic achievements arbitration, which will encourage Chinese cross-border business inevitably requires made by Asian countries in past years, parties to choose this method of resolving an increase in the demand for dispute res- the need for international arbitration has disputes in their transactions. olution to meet international standards. grown dramatically. Emerging markets in Asia are growing International arbitral tribunals are In this region, markets that tradition- more in favour of arbitration because they apparently better venues for such inter- ally favour arbitration have contributed are increasingly involving themselves in national standards to be applied than to a steady growth in cases. international business and playing more the local courts because of the lack of Furthermore, China, India, Indone- important roles in a variety of economic international exposure of the latter. The sia, Singapore, Australia and some other sectors. India recently amended its Arbi- New York Convention is also an important economies, especially developing ones, tration Act to bring it on a par with other
29 ABLJ ⁄ NOVEMBER – DECEMBER 2016 DISPUTE DIGEST
developed national legislation. Singapore tribunal – in deciding the case on the basis For Asian parties involved in conduct- emerged as the fourth-most-often-used of an issue that the defendant had not ad- ing arbitration proceedings, it is important seat for ICC arbitration in the world, while vanced – had failed to grant the claimant to learn the international standards, not retaining its position as the top seat for ICC a fair hearing. This ruling is a testament to only in the field of business but also in arbitration in Asia for a fifth consecutive the endorsement of the basic principles of legal practice. Due to the lack of inter- year. ICC arbitration disputes in Australia natural justice by a sophisticated arbitra- national exposure and legal traditions of also saw a steady increase in numbers. tion jurisdiction such as Singapore. arbitration, some Asian countries may have Another important factor that contrib- The well-known satellite arbitration, legal practitioners with limited training in utes to the growth of arbitration in Asian Devas v Antrix, saw two rounds of arbitra- international arbitration to meet inter- markets is the international investment tion followed by Indian court litigation. national standards, which in individual made to improve infrastructure, which has Antrix, a commercial arm of the Indian cases will probably lead to unsatisfactory created a lot of demand for dispute resolu- Space Research Organization, first lost outcomes of the arbitration advocacy. tion that meets international standards. before an ICC tribunal on the ground that Asia needs a pool of arbitrators and its repudiation of the contract with Devas lawyers, a better legal education, a drive HIGH-PROFILE CASES was unlawful. to attend arbitration training and cours- The Longlide case ruling by the SPC has In investor-state arbitration, Devas lost es, and a committed interest in the field been very much discussed in the past again before a tribunal of the UN Commis- of arbitration. This is important for a couple of years. It confirmed that an ICC sion on International Trade Law (UNCI- sustainable development of international arbitration agreement with a seat in main- TRAL). This case provides a holistic view of arbitration in the region. land China is valid, which demonstrated the possibilities in a high-stakes arbitration, the friendly attitude of the SPC towards where the parties have resorted to com- FAN MINGCHAO is the North Asia director international arbitration. mercial arbitration, bilateral investment of ICC Arbitration and ADR, and ABHINAV The Singapore High Court, in JVL v treaty arbitration, local litigation, and now BHUSHAN is the South Asia director of Agritrade International, set aside an arbitral criminal proceedings have been initiated ICC Arbitration and ADR. award on the grounds that the arbitral against the then management of Antrix.
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IN-HOUSE
ARCHITECT
THE ASIAN INFRASTRUCTURE INVESTMENT BANK’S GENERAL JOHN CHURCH ABOUT COUNSEL, GERARD SANDERS, TALKS TO
HIS UNIQUE ROLE IN BUILDING A LEGAL DIVISION AND HELPING TO CHART THE BANK’S COURSE FROM THE GROUND UP
uilding a major bank from scratch is a monumental exercise. Fundamen- tal to construction, and more important than bricks and mortar, are the le- gal platforms and parameters that form the institution’s charter and instruct its day-to-day financial operation. Throw in the fact that the bank is dealing with multiple jurisdictions, and on projects with the potential to change the lives of millions, and you have a glimpse of the weight attached to the work of one of the region’s busiest general counsel. Gerard Sanders took on the job as general counsel with Asian Infrastructure Investment Bank (AIIB), and a change of scenery from Europe to Beijing, where he is now based, in August. BThe quietly spoken New Zealander saw the move as somewhat of a natural 31 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COVER STORY
progression – a new challenge, and perhaps even the pinnacle of For the institution as a whole, Sanders says there will probably a career that has stretched both his legal and leadership potential. be about 80 staff members by the end of this year. He says the or- A younger Sanders gained early and broad-based commercial ganization began by trying to staff senior people first, who then experience in a private-sector law firm, Simpson Grierson, in New shouldered the responsibility for putting together their different Zealand. That was followed by litigation experience and work ad- departments and divisions. “That’s now happened not only with vising governments in Washington DC with Arnold & Porter, and the appointment of the president and the vice presidents, but also then a stint with British petro giant BP for two years. those at the D-G [director-general] level as well, apart from two or This private-sector and in-house experience laid the platform three open positions.” for a move to the European Bank for Reconstruction and Develop- ment (EBRD), followed by two years with the UN’s International FAST TRACKING Fund for Agricultural Development (IFAD). The bank has not bided its time and, considering an enormous “By the time I came to the AIIB I had this experience I could amount of media scrutiny, has moved quickly to nail down its ini- draw on, including many years in the field of financing develop- tial projects. “In June, at a board meeting, we approved the first four ment, and experience as a GC for an international organization,” he projects. Three of them are being co-financed with other institu- says. “That’s given me the confidence to be able to work in this in- tions – one with the EBRD, one with the World Bank, one with the stitution, and it helps that the charter is familiar. The AIIB’s articles ADB, and one is being prepared by the AIIB itself. of agreements are modelled to a significant extent on the charters “That’s important, first because co-financing sends a signal that of the ADB and the EBRD.” we are collaborating with other institutions, which is something The big attraction of the job is that it is a start-up. “Here, every- we are required to do in our charter, and it’s a little bit of a re- thing is new, even the strategic direction over the next three or four sponse to some of the critics who were concerned that we would years is something that has to be nailed down a bit more. So it’s fun be crowding out the field a bit. But, in fact, the infrastructure needs to be part of an institution where you get to help shape policies, to are so enormous that there’s plenty of space for everybody. That’s staff the legal function the way you want, and you are able to try part of the reason. and determine the legal culture, the degree of legal risk taking you “The other reason for co-financing with other multilaterals is want to take, and so forth. That’s all part of the daily job.” that it was good to be able to benefit from all the preparatory work Sanders’ insights into this massive undertaking provide an illu- that these institutions had done. Obviously we still had to do our minating picture of the internal machinations of a major lending due diligence, but to be able to draw on the phenomenal amount of institution in Asia from the point of view of a talented in-house work that these institutions had done to bring in these projects to a counsel building a legal team from scratch. “Christmas day was the particular point did help a lot, especially in expediting processing.” day the articles of agreement became effective, and in mid-January So, the big features of this institution in the early days have in- it became operational,” he says. “At that point there was a cadre of volved putting in place key officials and building up staff. Second has people associated with the secretariat who continued on to provide been ensuring that operations are being prepared both in terms of some short-term consultancy services, and some became staff. having real projects to present to the board, and also putting in place “That was not the case in the legal division. I’m the first regular the different processes, structures and rules so that his team can pre- employee, and there are three other regular staff who have since pare and complete projects. “That’s actually something the legal di- joined, a German –a Briton and a Chinese national. So we have a vision has been quite involved in, as you can imagine,” says Sanders. good balance of people within and outside the region – remember- And one more thing. “Maybe third, just trying to position the ing that New Zealand, where I am from, is part of what is under- bank a bit and to respond to others with understandable queries stood as the Asian region at the bank.” about what the perspectives and visions and ambitions of the in- Sanders says the division was assisted through support from stitution are, and also to be candid and comfortable ourselves on secondees, some lent to him by the World Bank, the Asian Devel- what those are. Right now we don’t have a formal strategy and it is opment Bank (ADB), the European Bank for Reconstruction and likely to be a while before one is adopted. So some of the meetings Development (EBRD) and others. “Of huge help was the work that still have a slight existential feel as we grapple with how best we was done by the lawyer Natalie Lichtenstein, who did a tremen- should fulfil our mandate.” dous job in helping to craft the charter and steering it through Under the charter, Sanders says the AIIB has a great deal of successive negotiations,” he says. “So that’s the legal division; we’re flexibility, and of course a great deal of capital. “So the question currently putting together our budget for next year. Obviously we’ll is not what can we and can’t we do, we have huge flexibility there; grow quite a lot, but the idea is to have planned growth.” the question is what ought we to do, what is it we can do that is
32 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COVER STORY
The question is not what can we and can’t we do ... the question is what ought we to do, what is it we can do that is especially needed, how we can make our impact greatest, and especially how can we most support those countries which most need the support
33 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COVER STORY
especially needed, how can we make our impact So how does Sanders plan to mesh external and inter- greatest, and especially how can we most support nal teams? “My vision for the legal department lawyers is those countries which most need the support.” that they are key drivers in the shaping of the legal struc- turing of the projects, and they will be shepherding this GOING FORWARD through the internal processes of the institution; and As 2016 draws to a close, and with it the AIIB’s when it comes to documenting our rights and obliga- first “baby” steps, Sanders and his legal team are tions, I want them very much to have control of the not slowing down into 2017. core financing documents,” he says. “For the remainder of this year we are set- “But we will rely very much upon external coun- tling in staff, and developing a staff plan for sel for security, work for the local due diligence, next year,” he says. “We’re probably looking for documentation management, and as I said for to double the staffing next year. Although some areas of infrastructural expertise that we we will continue to draw on consultants and have not yet built up ourselves.” secondees for a while, they will fall away pro- So for the remainder of this year and next year gressively.” Another thing he’ll be spending a as well, work for Sanders’ team will involve de- lot of time on, especially in relation to private- veloping a model for doing this kind of work, and sector operations, is a how best to use external finding a way in which law firms can register their lawyers. And apparently many of the big firms interest with the AIIB in a coherent way, enabling his have already left calling cards. team to create a database that they can go to for identi- “We’re trying to find the most rational way to interact with fying firms interested in various projects. them,” says Sanders. “In terms of the operation’s investment ac- tivity, there will not be very much in China in the short term, as a TIME FOR TEMPLATES result of the government indicating that for the next year or two Another important element moving forward is ensuring consisten- they will not be looking to the bank to support projects in their cy of approach, and that will involve setting minimum and high own country. But all other developing countries in Asia could well standards for the kind of legal agreements and legal processing that host projects that the AIIB might finance. AIIB will do. “We will need external lawyers to advise on private-sector trans- “We are preparing various template agreements and drafting actions. We need lawyers to advise on local law when we are look- and negotiating guidance notes; one would expect to see that, ing at the companies to which we will be lending, or the security structurally, our private-sector loan agreements will all look broad- that we might need to have. ly similar,” he says. “There will be variations of course, for example “We will also need to rely on international firms, those who where the loans are syndicated. We’ll also be providing equity and know more about different elements of infrastructure than we investing in funds and so forth, and here there may be greater scope might, with our relatively small legal department for now. For ex- for different treatment as far as the documentation is concerned. ample, when faced with financing a concession to build and oper- But by and large for private-sector loans, the agreements should all ate a port, there is a certain amount of expertise that the market look broadly similar even if there is a lot of variation in the terms will have that we will not have internally for now, so we will be “These templates and notes are being progressively developed, reliant on others. And there’s a certain amount of transactional there are potentially an innumerable number, but there are cer- support that would be needed as well given the sheer volume of tain core agreements that we need to see quickly. We already have activity and the intensity of project financings.” in place general conditions for sovereign-backed operations, we
34 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COVER STORY
We will need external lawyers to advise on private-sector transactions. We need lawyers to advise on local law when we are looking at the companies to which we will be lending, or the security that we might need to have. We will also need to rely on international firms ... with our relatively small legal department, for now
do have a template legal agreement for those kinds of operations, is included, encouraging critical thinking about what interests and in a way the sovereign ones are easier because it is easier to counsel are trying to protect. achieve a greater consistency – there’s really only the govern- “One thing all the templates need to look at, for example, is even ments as counterparties, there’s no security, it’s all public inter- though when projects are put together, and there’s a lot of good- national law, etc. will and high expectation, the reality is that projects often run into “It’s critical that we finance sovereign-backed operations given problems, and if they do, and disputes arise, how are they resolved? the nature of so many infrastructure projects but, from a legal And how do you enforce your rights, particularly in environments drafting perspective, they are the low hanging fruit. The more dif- where the legal system is not well developed? And also how does ficult ones are the private-sector projects because of the infinite the institution ensure that it remains accountable as well, with all permutations in design, funding modalities and client needs. But the contracts it freely enters into? there again I think it’s important to have some consistency in “All these things need to be regulated contractually, and what approach, and here we are trying to develop a consistently coher- you don’t want to do is have a completely bespoke arrangement so ent approach to term sheets, mandate letters, core loan agree- that on every single contract one ends up negotiating everything ments and so forth. from first principles. So when developing an AIIB practice, if we “Over time we will also prepare templates for other kinds of in- look at, say, finance agreements for making loans, we want to have vestments as well; we are able to make equity investments, we are a uniform or at least limited number of governing laws that could able to participate in funds, however we don’t yet have the tem- be applied. Equally, if disputes have to be resolved, we need a con- plate agreements, but we will develop them and hopefully they will sistent way of doing that. be in place before they are needed.” “For enforcement we will also want to have a consistent ap- Templates are important for consistency and efficiency. “If there proach, and the likelihood is that the AIIB will place a lot of re- are two similarly situated projects being loan financed by the AIIB, liance on arbitration, although we ought to have the ability to go one ought to see legal documentation that looks broadly compara- to court where needed. The templates force you to take some de- ble. The efficiency element is that if one prepares a second project cisions of principle on these kinds of questions, so that then these it shouldn’t take as much time as the first one,” says Sanders. can be rolled out in projects across all the countries.” “You don’t just use the latest precedent but I think you need to add templates that reflect best practice, that reflect the needs of the insti- tution, and that are responsive to the concerns of the country. There are times when you follow the market and others when you lead. “So if you look at all that, the work we are doing and what has been done, a lot of it really turns on juggling the need to be respon- sive to the project demands – in particular those four projects that were approved in June and two further ones approved in Septem- ber, including the first investment in the private sector – in Myan- mar. Plus we have to be ready, for the great slew of projects that we expect in the future.” Sanders says thinking about a consistent and predictable ap- proach is a good exercise, because legal teams want templates that are easily accessible and understandable, and that are relatively easy to negotiate. So it forces counsel to be principled about what
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AIIB QUICK SIX Below are the bank’s first six projects approved in 2016
Approved by the the board Pakistan: National Motorway M-4 Project (Shorkot-Khanewal section; co-financed with the ADB) of directors (BoD) on The objective of this project is a better and safer corridor between Islamabad, Faisalabad and Multan, to 24 June 2016 ensure enhanced connectivity between the various parts of Pakistan. The project will construct 64km of four-lane, access controlled national motorway M-4 connecting Shorkot and Khanewal, in Punjab province. The total project cost is estimated at US$273 million. The AIIB will provide US$100 million of debt financing for the project.
Approved by the BoD on Tajikistan: Dushanbe-Uzbekistan Border Road Improvement Project (co-financed with the EBRD) 24 June 2016 The project will increase the connectivity and mobility along the Tajikistan section of the Central Asia Regional Economic Co-operation Corridor 3 by rehabilitating the 5km section of the road connecting Dushanbe to the border with Uzbekistan, from the Avicenna monument to the West Gate in Dushanbe. The project cost is estimated at US$105.9 million. The AIIB will provide US$27.5 million of debt financing for the project.
Approved by the BoD on Bangladesh: Distribution System Upgrade and Expansion Project 24 June 2016 The objectives of this project are to enhance distribution capacity and increase the number of rural and urban electricity consumers in Bangladesh. The project has two components: (1) provision of about 2.5 million service connections to rural consumers; and (2) upgrade of two grid substations and conversion of 85km of overhead distribution lines into underground cables in north Dhaka. The project is estimated to cost US$262.3 million inclusive of taxes, duties, interest and other charges on the loan during construction. The AIIB will provide US$165 million of debt financing for the project.
Approved by the BoD on Indonesia: National Slum Upgrading Project (co-financed with the World Bank) 24 June, 2016 The objective of this co-financed project is to improve access to urban infrastructure and services in targeted slums in Indonesia. The AIIB’s co-financing would support the government’s programme of urban slum infrastructure investments for 154 cities in the central and eastern parts of Indonesia. The total project cost is estimated at US$1.743 billion. The AIIB will provide US$216.5 million of debt financing for the project.
Approved by the BoD on Pakistan: Tarbela 5 Hydropower Extension Project (co-financed with the World Bank) 27-28 September 2016 This project will develop the existing Tunnel 5 at Tarbela Dam into a power generation source. The AIIB Loan will be used to jointly co-finance the components of (1) construction of a power house and modification to the existing Tunnel 5; and (2) supply and installation of power units and ancillary equipment for the power house on Tunnel 5 to generate power. The project is estimated to cost US$823.5 million including taxes, duties and financing charges during implementation. The AIIB will provide US$300 million of debt financing for the project.
Approved by BoD on Myanmar: Myingyan 225MW Combined Cycle Gas Turbine Power Plant Project 27-28 September, 2016 The AIIB will provide US$20 million of debt financing for the development, construction, and operation of a greenfield 225MW combined cycle gas turbine (CCGT) power plant in the Mandalay region of Myanmar. The AIIB financing will be in parallel with other lenders including the International Finance Corporation, the ADB and certain commercial lenders.
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What about arbitration? What will be the bank’s direction? “The first question is whether we have arbitration as the exclusive means, or whether there is a possibility to go to courts in certain circumstanc- es, for example where there is no dispute but just a payment failure,” he says. “The second question is do you have arbitration ad hoc, or do you have reliance on an institution. These are primary questions that have to be answered and issues on which we are now reflecting. There is no shortage of arbitral institutions ready to offer views.”
OBOR AND NATURAL SELECTION An obvious question surrounds the temptation to align the AIIB with the One Belt, One Road (OBOR) initiative. That would be
The establishment of AIIB was very much an initiative of China, and of course [OBOR] is Chinese as well. But the institution is a multilateral one with many shareholders, and China is a minority one – the largest minority shareholder, but a minority shareholder nonetheless
misleading, says Sanders. “The establishment of the AIIB was very By its nature, the AIIB will be getting involved with some coun- much an initiative of China, and of course [OBOR] is Chinese as tries that have little infrastructure in place, and possibly even less well,” he says. “But the institution is a multilateral one with many of a legal framework to support meaningful development. How shareholders, and China is a minority one – the largest minority does he see the bank’s role – and that of his legal team – in dealing shareholder, but a minority shareholder nonetheless. with these developing nations? “What I think will happen is that there will be projects that we “I think as a minimum the [AIIB] needs to do due diligence with finance that will be consistent with the national strategies of the respect to project proposals to ensure that loans or other invest- host countries and which will also be complimentary to the OBOR ments can be made in a way that there is a high degree of confi- initiative. So in some instances there could be a significant degree dence that we can achieve the purposes for which the loan is made, of complementarity, but the purpose of the institution is not to and that the capital of the institution can be protected,” he says. deliver on the national priority of any given country, but rather to “Venturing further ahead, what could be done is to pro- pursue the collective goals of the membership as a whole.” vide some level of support to countries in improving their legal
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the private sector. We will have the tools and the ability and the risk appetite to do that.” Sanders says the AIIB is not likely to have an overemphasis on country orientation. There are no country offices, although region- al hubs could be developed at some point given the vastness of the area covered by the bank. In the headquarters, he says the bank is focused on sectoral rather than country lines, so the position of having firm investment targets for each country, as with some oth- er institutions, is unlikely. “We want to take a more holistic approach and identify bankable projects that make a real difference in terms of improving inter- environment, either by providing advice, sharing with them the in- connectivity in the region, enhancing the quality of infrastructure, stitution’s experience, maybe drawing together the experience of which has an impact on people’s lives, and helps generate wealth, other institutions and other investors, and sharing that with the with an inclusive element to that wealth creation as well,” he says. country so they can learn and benefit from the advice. “That will be the prime driver, but an open question is whether “The institution could potentially go a step further and provide we opportunistically finance projects that come along or do we try some technical assistance, for example providing help with im- to develop projects? proving laws that are designed to attract, say, both domestic and “Opportunistically, we’re not likely to say no early on to good foreign investment into the infrastructure field and to support oth- projects that are well prepared. But equally, there’s probably going er productive sectors. to be an element of calculation as well. We have a special fund, with “One thing I think we will look at is whether we do these things an initial contribution of US$50 million in it, which will enable us at all, or a little bit, or a lot, or selectively, or when asked, or in to support the poorest countries in preparing projects through relation to particular sectors, or particular countries. All this is AIIB grant financing. That implies we will have a view on what is something that is exercising the institution now, and we will see. actually needed in some countries. Will we become more demand Personally, as a lawyer and as one whose career has been in devel- or supply driven? We don’t have an answer for that yet.” opment, I would say it’s important to help countries that ask for help to improve their laws so that the legal institutions, the legal ADVICE FOR CORPORATE COUNSEL culture, is of a kind that is attractive to investors. There are dif- Sanders has advice worth heeding for corporate counsel in the re- ferent ways of doing that, of course, and the AIIB wouldn’t have a gion who may be doing business with the AIIB in the future. monopoly in this area.” “In the short term, the preference for the AIIB will be to finance projects that are at a high level of readiness,” he says. “What would CREATING A NICHE assist a lot is to have projects presented to us for financing where An important aspect of this bank’s creation is its place in the mar- it’s clear that the legal work has already been done to a very high ket, where it stands in respect to what it will finance and how it ma- standard, where all the legal areas have been identified and ad- noeuvres into position with big regional players like the ADB and dressed in a transparent way, where the legal risks are known and the World Bank. Sanders sees these relationships as collaborative. can be quantified for the institution. We can then price those risks. “I don’t really see competition here,” he says. “We all ultimately We also value a high degree of openness about the challenges that have more or less the same shareholders, so it wouldn’t be a good clients have had to face in preparing their projects, especially in service to the institutions, and ultimately the taxpayers, if there were addressing environmental and social issues given the importance harmful competition, particularly given that none should be crowd- the AIIB attaches to these matters. ing out financing that comes from other sources. Also, given that the “There are plenty of in-house counsel who can do a wonderful job needs of the region are so great, there really is plenty to go around. preparing projects, and there are other instances where the in-house “I think it’s more of a question of developing a niche, where counsel will be managing external firms, and I think what is key is that we feel that we can have a big impact, and where there is space in both instances the quality of the legal services should be very high. that has been created by the other institutions. The World Bank, “Where agreements are presented to the AIIB in support of a and to a large extent the ADB, have focused very heavily on sover- project, it makes it easier for the bank to provide finance if they are eign-backed operations, and many infrastructure projects are sov- of a high legal standard. Project agreements need to address issues ereign backed. But I think the ability the AIIB has, and that could of concern not only to the parties but also the lender.” be deployed to good use for everybody, would be to focus also on Sanders gives the example of the AIIB being asked to finance
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a concession project. When evaluating the concession agreement, of directors or, exceptionally, at the board of governors, is needed to it’s important to his team that not only does the agreement ad- support the proposal. dress all the issues important to the concessionaire, but that it also “For example, we can invest in projects outside of Asia if there’s anticipates the needs of the financier in circumstances where the a sufficient connection to pursuing the purposes of the institu- concessionaire is no longer able to meet its obligations under the tion. So if there’s a port project outside the region, where this will concession. For example, if there are step-in rights that are needed directly enhance interconnectivity within Asia, this is something for a lender, the concession should anticipate and provide for that. we can look at. Another example would be with a concession or a licence or right “Another innovation is the voting structure. We have a number to build or develop. It is important that it be clearly demonstrated of shares given to the founding shareholders, to encourage countries how that right was acquired. Sanders says the AIIB wants to be sure that came in early, but then uniquely we have something called basic it is financing projects that meet high standards, and one way is en- shares, a concept which somewhat follows the UN principle whereby suring that there is a transparent process that leads to the issuance irrespective of the size of an economy of a country, every member of a concession, or a licence, or a right to develop. will receive the same number of basic shares. So it’s a way of ensuring “In-house lawyers or law firms assisting clients can be very useful that voice is given to countries with small economies or which oth- for the AIIB in this. Anything that makes our legal due diligence eas- erwise wouldn’t be able to have their views known. The rest of the ier means a faster time to process projects, and also gives [the bank] shares are based on the size of the economy, an important principle more confidence about the quality of its counterparty.” for the institution where good governance is highly prized.
Anything that makes our legal due diligence easier means a faster time to process projects, and also gives [the bank] more confidence about the quality of its counterparty
INNOVATIVE STRUCTURE “Also, we have open procurement built into the Sanders points to two areas of note where the AIIB has been inno- charter. We can hire people from anywhere irrespec- vative in structure: tive of whether they are nationals of member states. A 1. A non-resident board. The AIIB is the first of the multilateral further innovation is that if we find there is an element development banks to do this. It keeps overheads down and that hasn’t been captured by the articles then we don’t can be achieved because the technology has reached a point need to go back to the members [the parliaments] to where it is feasible; amend the agreement. “We can go back just to the 2. The ability of the board to delegate to the president the board of governors. Ordinarily there is a high major- power to approve projects. Normally projects are approved by ity that is needed to make an amendment and in a a board of directors. But once the AIIB has concluded a num- few instances unanimity. ber of projects successfully, it will look to ask the board to give “All these innovations collectively enable us to be the president the power to approve projects that fall within a modern and nimble institution, accountable to our certain defined parameters. members for the use of our capital and responsive “These innovations should have a beneficial impact on cost, to clients who seek support for their projects. They which can then be passed on to the clients, and on the agility of mean that, together with the kind of culture we are the institution,” says Sanders. “Another innovation is that where- trying to create, we can do more, be more effective as a lot of GCs will be agonizing over whether the institution is and deliver value for our members. Critically, if we can permitted to do something or not, that’s much less of a concern build on these good foundations and manage things at the AIIB because the charter is expressed very expansively. well, we will have the best chance of helping to realize “Most of the time when cases present themselves on the mar- the economic aspirations of people in the region for gin, the key question will be what kind of majority at the board whom ultimately the institution was established.”
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©2016 Morrison & Foerster LLP ASIA–SPECIFIC
ON TRACK WITH THE ONE BELT ONE ROAD INITIATIVE AS AN IGNITION POINT, INFRASTRUCTURE INVESTMENT IS ON THE UPTICK AROUND THE REGION, AND WITH IT THE LEGAL CHALLENGES THAT ACCOMPANY THESE BIG PROJECTS. PENELOPE MACRAE INVESTIGATES
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he Asian Development Bank calculates Asia needs US$750 billion a year to fund infrastructure capital through to 2020. The region has drawn strong interest from yield-hungry investors but stumbling blocks abound, from land acquisition and environmental hurdles to opaque regulation and corruption. “Key challenges remain a lack of familiarity with the local political and commercial scene – and identifying the right local partners can be a challenge,” notes Matthew Bubb, a partner at Ashurst in Tokyo. “For greenfield projects, structures and documentation, a high degree of patience, flexibility, cultural sensitivity and adaptability is important.” Without a considerable investment step-up, the ADB estimates to reshape the global economy”, says David Olsson, China prac- Asia’s infrastructure gap could hit US$8 trillion by 2020, crimping tice consultant for King & Wood Mallesons (KWM), based in Mel- economicT growth and demand. bourne. Building the infrastructure will create a long list of work On the upside, across Asia and around the world, law firms are possibilities for law firms, from advising on legal, tax, commercial eyeing rich opportunities from China’s ambitious One Belt, One and cross-border issues, to dispute-resolution, project finance and Road (OBOR) initiative to boost trade with ASEAN, Central Asia and the formation of joint ventures. And “it is not a one-year initiative, Europe through ports, railways, pipelines, power grids and highways. it will run for decades”, says Olsson. Heralded by Beijing as the new Silk Road, the financial architecture But there are questions about how long it will take for Beijing’s is underpinned by a US$50 billion Chinese state fund to finance proj- bold development strategy to get into full swing, whether there will ects and the US$100 billion capitalization of Asian Infrastructure In- be a sufficient and credible pipeline of productive, bankable, invest- vestment Bank (AIIB). ment-ready projects offering acceptable risk-adjusted returns, and China Development Bank has also promised to plough about crucially, whether longstanding political or commercial tensions US$890 billion into more than 900 projects across 60-plus countries, could up-end some plans. although it has given no timeframe. Still, OBOR offers multiple opportunities for law firms, says OBOR “is potentially the most significant foreign-policy initia- Shivanshu Thaplyal, a principal associate at Mumbai-based law tive of China since its entry into the WTO in 2001 ... and likely firm Khaitan & Co. “The practice areas focusing on infrastructure
[OBOR] is potentially the most significant foreign-policy initiative of China since its entry into the WTO in 2001 ... and likely to reshape the global economy
David Olsson China Practice Consultant King & Wood Mallesons
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will primarily benefit from OBOR,” he says. “However, as the scope of work will be broad, we also expect other areas such as corpo- rate/M&A, banking and finance, and dispute resolution to draw significant opportunities from OBOR.” Pinsent Masons has already served as adviser on one of the first projects to be financed under OBOR, the Thar Block II coal mine in Pakistan, and two associated 330-megawatt power plants. The firm worked with the two project companies, the mine company (a joint venture of the Government of Sindh, Engro Corp, various Pakistan and Chinese investors, and China Machinery Engineering Corp) and the power company (a joint venture of Engro, CMEC and a Pakistan investor). The deal represented CMEC’s first major overseas investment project. The two financings comprised a mix of Chinese credit from Sinosure with additional conventional and Islamic Pakistan rupee tranches. Pinsent Masons was led by a cross-border team working from Beijing, Hong Kong, Singapore and Dubai. “This is genuinely a trailblazing project for China’s energy and infrastructure indus- tries,” says David Platt, a lead partner advising on the deal. As might be expected, outbound investment from China “has significantly increased in OBOR-related countries”, adds Lin Zhong, a partner at Shanghai-based EY Chen & Co. Law firm, and director of its international practice. Specific details are still emerging on projects that will be includ- Matthew Bubb ed in the initiative in countries China has identified as partners, Partner but a significant number are already under way or in development, Ashurst says Sam Boyling, a Beijing-based infrastructure specialist and partner at Pinsent Masons. “This approach may well be by design, For greenfield projects, in order to allow flexibility in implementation across the very dif- structures and documentation, ferent economic and political landscapes along its routes.” Singapore, with its well established logistics and infrastructure a high degree of patience, sectors, is well positioned to reap benefits from OBOR. “The prog- flexibility, cultural sensitivity ress of Singapore’s infrastructure and logistics capabilities posi- tions it to partner with Chinese investors in tackling the broader and adaptability is important region’s infrastructure deficit,” say Singapore-based Huang Xuhua and Guangzhou-based Mo Haibo, both partners at KWM. Australia is also teeing up to tap opportunities, setting up the Australia China OBOR Initiative – known as ACOBORI – a non-profit NGO to serve as “a vital link” in helping Australian and US$22 billion in sectors including telecoms, steel and solar energy Chinese industry leaders realize OBOR opportunities. In October, “that would certainly enable companies to build new client bases Australia mounted its biggest Chinese trade mission to promote around OBOR infrastructure initiatives”. commercial ties. OBOR will be “important to MinterEllison, given From a geographical perspective, Indonesia stands to be the our infrastructure credentials and presence in China”, says Andrew biggest beneficiary among ASEAN economies, with about US$87 Rentoul, a partner at the firm’s Brisbane office. billion identified in OBOR-related infrastructure projects, roughly India holds huge potential. In May 2015, Thaplyal notes, China double the US$42 billion each that the Philippines and Vietnam committed to making investments in India worth more than may host, according to a survey conducted by the Economist
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In the future, we see a clear trend towards infrastructure projects emphasizing municipal works, transport and environmental protection
Monica Sun Partner Herbert Smith Freehills
Corporate Network on behalf of Baker & McKenzie. But for all the before any investment decision is made, and before contracts are lucrative possibilities, there are problems that pose potential legal, negotiated, that you identify the risks and work out how to address regulatory and sovereign risks – all of which require careful exam- them,” says Ma. ination by investors and legal advisers. Vital to more private involvement in public-sector infrastruc- “Dispute resolution can be a concern as each region prefers its ture is a need for a credible pipeline of productive, bankable, invest- own arbitration, sitting along with the domestic law,” says Sujeet ment-ready projects, says Olsson from KWM, adding that while Karkala, an associate based in Phnom Penh at SokSiphana and As- OBOR represents clear opportunities, “the road ahead will require sociates, a member of ZICOlaw. “OBOR, in order to be implement- smart thinking around collaborations and partnerships”. ed, needs to keep this in consideration. It may not be easy, as the Olsson notes that OBOR crosses more than 50 separate bilat- practice of law changes drastically over various regions.” eral investment treaties (BITs) and several multinational invest- Thaplyal observes: “It is important for the private investor to ment treaties (MITs) that provide a “robust source of potential evaluate the risk and opportunities available under the bilateral investor protections”. investment treaties and several multilateral investment treaties With the inclusion of Investor State Dispute Settlement (ISDS) covering the OBOR.” mechanisms in these investment treaties, corporate and indi- Many countries are still developing so their legal and regulatory vidual investors may be able to bring claims against OBOR gov- systems may not be sophisticated, may be incomplete and may not ernments for breaches of substantive investor rights contained have been tested for large foreign investments, notes Vicky Ma, a in these treaties without recourse to the host state’s domestic senior associate at Clifford Chance in Hong Kong. “It’s crucial that legal system.
[A lack of co-ordination among PPP regulators is] resulting in complications in the implementation of PPP projects and also causing problems for regulators in the course of the operation and oversight of PPP projects
Sun Hui Partner Zhong Lun Law Firm
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What may be the greatest challenges in getting private inves- tors to become involved in OBOR and finding bankable, invest- ment-ready projects with risk adjusted returns “are essentially much the same issues that confront investors in the infrastructure These types of projects hold sector elsewhere, potentially compounded by scale, lead times and great significance for resolving cross-border issues,” says Rentoul. Apart from the enormity of the OBOR initiative, Monica Sun, urban development difficulties a partner of Herbert Smith Freehills (HSF) in Beijing, says China and realizing sustainable has recently seen significant interest from private investors in two major areas – municipal works and energy infrastructure. “In the urban development energy sector, LNG [liquefied natural gas] and gas projects in par- ticular have garnered a lot of attention,” says Sun. “In the future, we see a clear trend towards infrastructure proj- ects emphasizing municipal works, transport and environmental Jiang Wei protection,” she says. “Waste-water treatment and waste-to-ener- Partner gy plants, utilities for water, gas and heating supply, urban rail and Guantao Law Firm metro projects are clear ‘hot’ sectors to look out for.” Jiang Wei, a partner in the Beijing office of Guantao Law Firm, adds that in the past few years, the government has been pushing the public-private partnership (PPP) model for public infrastruc- ture. The past two years have seen the emergence of investment in infrastructure in such sectors as smart cities, urban pipe gallery projects, urban flood prevention and drainage facilities.
To ensure the success of the PPP model, relevant laws and regulations need “These types of projects hold great significance for resolving ur- ban development difficulties and realizing sustainable urban devel- to be improved as soon as opment,” he says. possible, so as to provide Of some urgency though, lawyers say, is the unification and im- provement of current legal systems. Sun Hui, a partner at Zhong legal support Lun Law Firm in Beijing, says there is a lack of co-ordination among some of the PPP regulations issued by various authorities, “resulting in complications in the implementation of PPP projects and also causing problems for regulators in the course of the oper- ation and oversight of PPP projects”. Huang Zaizai, a partner at the Beijing office of Tian Yuan Law Firm, adds: “To ensure the success of the PPP model, relevant laws and regulations need to be improved as soon as possible, so as to provide legal support. Additionally, a sound PPP-related fiscal ex- penditure restraint mechanism needs to be established.” The wider region is buzzing with infrastructure initiatives as governments turn to improvement projects to bolster economies and spur much needed growth. Bubb, from Ashurst in Tokyo, says power infrastructure remains active, with a substantial increase in activity in renewable energy projects in the past 12 months. Huang Zaizai “Outside of power projects, there is a lot of activity in trans- Partner port-related infrastructure – ports, airports, rail, road,” he notes. Tian Yuan Law Firm “We are starting to see a substantial number of international rail
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Dispute resolution can be a concern as each region prefers its own arbitration, sitting along with the domestic law
Sujeet Karkala Associate SokSiphana and Associates
and high-speed rail (HSR) infrastructure projects being proposed, for foreign investors, home-market demographics, a need for business example, the Singapore-Kuala Lumpur and Thailand-China HSRs.” diversification out of natural resources and increased availability of Challenges for the development of cross-border infrastructure credit is supporting foreign investment.” include “mismatches in legal and regulatory frameworks, differ- Indonesia’s President Joko Widodo has pledged to build ports, ences in creditworthiness of procuring parties either side of the power generation, roads and railways to industrial estates to border, and in a similar vein, differing political and macroeconomic bump up growth. Rahayu Hoed, managing partner at Makarim circumstances,” says Bubb. Japanese, Korean and Chinese investors & Taira S law firm in Jakarta, says the nation’s transport ministry remain particularly active on the international side, “but we also has set ambitious targets to improve the infrastructure by 2019, see domestic players being active in their home markets, for including, among other things: mass rapid transport example in the Philippines”. development in major cities; the development of “In selective sectors, primarily power, we are seeing ferry ports in 65 locations; building 3,258km Singaporean and Malaysian interest in investment. For of railway in Java, Sumatra, Sulawesi, Kali- mantan and Papua; the development of 100 non-commercial ports; and the construction of 15 new airports. Rahayu says that, according to the Indonesia Investment Co-ordinating Board (BKPM), China is “believed to be the biggest foreign investor in On the roads Indonesia, as Chinese investors often invest in countries through proxy compa- side, the highway nies based in [places] such as modernization Singapore or Hong Kong”. programme has been kick-started, which is being Rabindra spearheaded Jhunjhunwala by India’s most Partner ambitious Khaitan & Co infrastructure project, the Delhi-Mumbai Industrial Corridor
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Along with China, Japan is a key investor in Indonesia, drawn by Greenlee cautions on legal risks. “The legal environment con- the country’s huge development potential and massive consumer tinues to develop, however there are certain inconsistencies and market and resources, notes Afriyan Rachmad, a partner at Roosdiono bureaucratic challenges that result in certain legal risks.” He adds & Partners in Jakarta, which is part of the ZICOlaw network. Singa- that “proper engagement with the relevant Myanmar ministries pore is another important investor in Indonesia. and careful contracting ameliorates such legal risks”. “To international investors, Indonesia is known for its notori- India’s government is focused on overhauling creaky infra- ously lengthy land acquisition process, which causes construction structure to drive economic growth and create employment. The delays,” says Rahayu. “The BKPM has launched a single platform for transport ministry has set a target of `25 trillion (US$375 billion) of investors to apply for permits online, eliminating the past co-ordi- investment in infrastructure over three years for developing indus- nation problems between different ministries and institutions.” trial clusters, roads, railways, ports, urban infrastructure, airports The government has taken steps to clamp down on corrup- and other projects. tion and bribery, as well as red tape, updating legislation relating The government wants to develop “world-class infrastructure”, to PPPs to try to create a fair and transparent tender system. But says Rabindra Jhunjhunwala a partner at Khaitan & Co’s Mumbai while these efforts at streamlining rules are welcome, it’s still not office. “On the roads side, the highway modernization programme enough, says Karen Mills, an international legal consultant with has been kick-started, which is being spearheaded by India’s most KarimSyah Law Firm in Jakarta. ambitious infrastructure project, the Delhi-Mumbai Industrial “The disharmony between regulations is a key source of In- Corridor, that not only aims to build a roads network but also de- donesia’s bureaucracy issues that is still considered by many velop smart cities across the country,” says Jhunjhunwala.
The legal environment continues to develop, however there are certain inconsistencies and bureaucratic challenges that result in certain legal risks
William Greenlee Deputy Managing Director and Myanmar Head of China Desk DFDL
international investors as a barrier to investing in Indonesia,” she says. “There is considerable interest from all over the globe, as there Myanmar is booming after decades of inactivity and there is is huge potential in terms of development and modernization of strong demand for better roads, railways, ports and airport facil- infrastructure in India. This is due to India relaxing its foreign ex- ities, with regional integration urgently requiring more land con- change policies to make it more investment friendly, and to other in- nectivity. This means huge investment is required to improve in- vestment-friendly initiatives such as the ‘Make in India’ programme.” frastructure quality and capacity. But he says challenges remain, key among them: (a) a less devel- The UN’s Economic and Social Commission for Asia and the oped institutional framework for execution of infrastructure proj- Pacific (ESCAP) says lack of modern infrastructure is a major chal- ects; (b) land acquisition issues; (c) delays in obtaining permits and ap- lenge to economic development and an impediment to the coun- provals; (d) project documents being highly in favour of government try’s competitiveness. agencies; (e) lengthy dispute resolution mechanisms; and (f) public William Greenlee, deputy managing director and Myanmar protests and political instability which often leads to stalled projects. head of China desk for DFDL, which specializes in regional le- Rentoul, of MinterEllison in Brisbane, says high-quality assets gal, tax and investment advisory expertise focused on South and and low risk make Australia an attractive investment destination. Southeast Asia, says important projects include the Myingyan gas- “It is all about certainty. Infrastructure investment into the Austra- fired power project and the Hanthawaddy International Airport – lian market comes from a variety of international markets,” he says. both of which DFDL is working on. China’s proposed investments in Australia attract media attention,
47 ABLJ ⁄ NOVEMBER – DECEMBER 2016 TOP 20 INFRASTRUCTURE DEALS IN ASIA (1 OCTOBER 2015 TO 31 OCTOBER 2016) BIG BUILDERS COUNTRY SECTOR SUB- GRANTORS VENDORS DESCRIPTION TRANSACTION LEGAL ADVISERS SECTOR SIZE US$(MILLION) Korea National South Transport Rail The Ministry of Land, Infrastructure and Transport (MOLIT) issues a plan to attract KRW19.8 US$17,000 Rail Network 14 Korea trillion (US$17 billion) in private investment to the country’s national rail network over the next Projects 10 years for 14 priority projects. The plan will allow private investors to participate in operating rail projects outside of the Seoul metropolitan area as well as proposing new business models for privately-operated rail lines.
NSW Ausgrid Sale Australia Power Energy Government of A A$16 billion unsolicited bid submitted by an IFM Investors-AustralianSuper consortium for the US$12,356.97 Ashurst (Acquirer); IFM Investors- (New Transmission New South Wales 99-year lease of 50.4% of the Ausgrid electricity network. Herbert Smith Freehills AustraliaSuper South (HSF) (Acquirer); Allens Unsolicited Bid Wales) (Seller); Linklaters (Seller); Clayton Utz (Funders)
Melbourne Metro Australia Transport Rail The State The project involves the development of a metro rail system travelling north to south in US$8,411.46 Rail Project (Victoria) Government of Melbourne. Victoria
NSW TransGrid Australia Power Energy Government of TransGrid is the largest high-voltage electricity network in Australia by electricity transmitted, US$7,378.42 HSF (Acquirer); Allens Sale (New Transmission New South Wales spanning New South Wales and the Australian Capital Territory. (Seller); Gilbert and Tobin South (Funders) Wales) Hastings as manager, and Utilities of Australia P/L (UoA) as trustee for Utilities Trust of Australia, with its partners in the NSW Electricity Network consortium, will enter into a 99-year lease of TransGrid’s network infrastructure assets.
Port of Australia Transport Ports State of Victoria The Port of Melbourne is Australia’s largest container and multi-cargo port. The lease is only for the US$7,300 Minter Ellison (Seller); Melbourne (Victoria) port’s commercial operations with the state retaining safety, security and environmental functions. HSF (Acquirer); Privatization King & Wood Mallesons The Lonsdale Consortium will expand the existing capacity of the port to service the freight (KWM) (Funders) needs of the state for 50 years.
Asciano Australia Transport Ports Brookfield and Qube has teamed up to acquire Asciano and split up the port and rail division in a US$6,946.76 KWM (Seller); HSF Acquisition (2016) (Victoria) joint A$9.15 a share bid. (Acquirer); Clayton Utz (Funders); Freshfields The Pacific National Rail business will be acquired for A$5.06 billion by CPPIB, GIP, CIC Capital, Bruckhaus Deringer bcIMC and GIC. (Acquirer); Osler, Hoskin Patrick Ports will be acquired for A$2.92 billion by Qube and Brookfield alongside its co-investors. & Harcourt (Seller); Allens (Acquirer); Gilbert and Tobin (Acquirer); Torys (Acquirer)
Manila Bay Philippines Transport Roads Philippines The project involves the reclamation of a part of Manila Bay as well as the building of an US$7,073 Coastal Department of expressway, coastal sea barrier and flood control system. Expressway Public Works and Highways The sea barrier that will serve as an expressway will cut travel time between Bataan and Metro Manila.
Hang-Shao-Tai China Transport Rail Zhejiang Development of a US$6.9 billion high-speed rail in Zhejiang province. The 270.8km line will connect US$6,900 270.80KM High Communications provincial capital Hangzhou with Shaoxing and Taizhou in the Yangtze River Delta region Speed Rail Investment Group Co Ltd
Melbourne Australia Transport Roads Victorian The project is an unsolicited proposal from Transurban, a proposed 12km tunnel and elevated US$3,974.34 Western (Victoria) Government motorway that connects West Gate Freeway to CityLink. Distributor
WestConnex Australia Transport Roads Government of WestConnex Stage 2 involves the duplication of the existing M5 East motorway from Beverly US$3,832.44 Ashurst (Grantor); Stage 2 (New New South Wales Hills to St Peters.The entire project involves 19km of tunnels and 14km of surface roads KWM (Funders); Allens South (Grantor); Clayton Utz Wales) (Grantor); Minter Ellison (EPC Contractor)
Alinta Energy Sale Australia Power Energy TPG Capital TPG Capital is to launch a sale process for Alinta Energy. US$3,874.59 (2016 (New Transmission Alinta Energy has 800,000 gas and electricity customers mostly in Western Australia, electricity South and gas transmission lines and electricity generation assets. Wales)
Central Java Indonesia Power Energy PT PLN BOOT (build, own, operate, transfer) of a 2000MW coal-fired power plant in US$4,224 Shearman & Sterling 2000MW Coal Generation (Indonesia) Batang regency, central Java. (SPV); Norton Rose Fired Power Plant Fulbright (Grantor); Milbank (Funders); Ali Budiardjo, Nugroho, Reksodiputro (ABNR) (Funders); Mochtar Karuwin Komar (SPV)
Bangkok – Rayong Thailand Transport Rail Thailand Ministry Development of the US$4 billion Bangkok to Rayong high speed rail line. US$4,000 219km High of Transport PT Speed Rail Line PLN (Indonesia) The 219km route will link Bangkok’s airports and varoius stations. An extension line to Utapao International Airport is under consideration.
Tanjung Jati B Indonesia Power Energy PT PLN A second expansion of the Tanjung Jati B coal-fired power plant in central Java province, US$4,000 (Jawa 4) 2000MW Generation (Indonesia) Indonesia. The plant will be fired by two 1000MW ultra supercritical power generation units. Units 5&6 Coal Fired Power Plant
AdeLINK Light Australia Transport Light Rail Project involves the development of a 35km light rail network in Adelaide running north, south, US$3,055.6 Rail Network (South east and west. Australia)
Tangguh LNG Indonesia Power Energy PT PLN Expansion of the Tangguh LNG facility in Indonesia’s Papua Barat province with a third LNG US$3,745 Latham & Watkins Train 3 Project Transmission (Indonesia) train. The expansion includes two offshore platforms, 13 new production wells, an expanded LNG (Grantor); Linklaters loading facility, and supporting infrastructure. (SPV); Allen & Overy (A&O) (Funders)
Bangkok MRT Thailand Transport Light Rail Mass Rapid Development of the THB11.03 billion (US$3.36 billion) Bangkok MRT Orange line, a 39.5km US$3,362.6 Orange Line (East Transit Authority route with a 9km, seven-station elevated portion and a 30.6km, 23-station underground portion. Side) of Thailand The Orange East line runs from the Thailand Cultural Centre Station to Min Buri
Atimonan Philippines Power Energy Manila Electric Development of a 1200MW coal-fired power plant in Atimonan, Quezon province. US$3,000 1200MW Coal Generation Company The plant will be powered by two 600MW generators using supercritical technology. Fired Power Plant
New Zealand New Social Defence New Zealand The New Zeland Ministry of Defence’s US$2.9 billion Defence Estate Regeneration Plan to US$2,900 Defence Estate Zealand Ministry of update and rejuvenate 5,000 buildings on 810,000 hectares of land across New Zealand over Regeneration Defence a 15-year period. Plan The buildings include barracks, aircraft hangers, ship loading docks, workshops and medical centres.
Bangkok – Hua Thailand Transport Rail Thailand Ministry Development of the US$2.7 billion Bangkok to Hua Hin high speed rail line. The recommended US$2,700 Hin 209km High of Transport speed for the 209km route is 300km/h. Speed Rail Line COUNTRY SECTOR SUB- GRANTORS VENDORS DESCRIPTION TRANSACTION LEGAL ADVISERS SECTOR SIZE US$(MILLION) Korea National South Transport Rail The Ministry of Land, Infrastructure and Transport (MOLIT) issues a plan to attract KRW19.8 US$17,000 Rail Network 14 Korea trillion (US$17 billion) in private investment to the country’s national rail network over the next Projects 10 years for 14 priority projects. The plan will allow private investors to participate in operating rail projects outside of the Seoul metropolitan area as well as proposing new business models for privately-operated rail lines.
NSW Ausgrid Sale Australia Power Energy Government of A A$16 billion unsolicited bid submitted by an IFM Investors-AustralianSuper consortium for the US$12,356.97 Ashurst (Acquirer); IFM Investors- (New Transmission New South Wales 99-year lease of 50.4% of the Ausgrid electricity network. Herbert Smith Freehills AustraliaSuper South (HSF) (Acquirer); Allens Unsolicited Bid Wales) (Seller); Linklaters (Seller); Clayton Utz (Funders)
Melbourne Metro Australia Transport Rail The State The project involves the development of a metro rail system travelling north to south in US$8,411.46 Rail Project (Victoria) Government of Melbourne. Victoria
NSW TransGrid Australia Power Energy Government of TransGrid is the largest high-voltage electricity network in Australia by electricity transmitted, US$7,378.42 HSF (Acquirer); Allens Sale (New Transmission New South Wales spanning New South Wales and the Australian Capital Territory. (Seller); Gilbert and Tobin South (Funders) Wales) Hastings as manager, and Utilities of Australia P/L (UoA) as trustee for Utilities Trust of Australia, with its partners in the NSW Electricity Network consortium, will enter into a 99-year lease of TransGrid’s network infrastructure assets.
Port of Australia Transport Ports State of Victoria The Port of Melbourne is Australia’s largest container and multi-cargo port. The lease is only for the US$7,300 Minter Ellison (Seller); Melbourne (Victoria) port’s commercial operations with the state retaining safety, security and environmental functions. HSF (Acquirer); Privatization King & Wood Mallesons The Lonsdale Consortium will expand the existing capacity of the port to service the freight (KWM) (Funders) needs of the state for 50 years.
Asciano Australia Transport Ports Brookfield and Qube has teamed up to acquire Asciano and split up the port and rail division in a US$6,946.76 KWM (Seller); HSF Acquisition (2016) (Victoria) joint A$9.15 a share bid. (Acquirer); Clayton Utz (Funders); Freshfields The Pacific National Rail business will be acquired for A$5.06 billion by CPPIB, GIP, CIC Capital, Bruckhaus Deringer bcIMC and GIC. (Acquirer); Osler, Hoskin Patrick Ports will be acquired for A$2.92 billion by Qube and Brookfield alongside its co-investors. & Harcourt (Seller); Allens (Acquirer); Gilbert and Tobin (Acquirer); Torys (Acquirer)
Manila Bay Philippines Transport Roads Philippines The project involves the reclamation of a part of Manila Bay as well as the building of an US$7,073 Coastal Department of expressway, coastal sea barrier and flood control system. Expressway Public Works and Highways The sea barrier that will serve as an expressway will cut travel time between Bataan and Metro Manila.
Hang-Shao-Tai China Transport Rail Zhejiang Development of a US$6.9 billion high-speed rail in Zhejiang province. The 270.8km line will connect US$6,900 270.80KM High Communications provincial capital Hangzhou with Shaoxing and Taizhou in the Yangtze River Delta region Speed Rail Investment Group Co Ltd
Melbourne Australia Transport Roads Victorian The project is an unsolicited proposal from Transurban, a proposed 12km tunnel and elevated US$3,974.34 Western (Victoria) Government motorway that connects West Gate Freeway to CityLink. Distributor
WestConnex Australia Transport Roads Government of WestConnex Stage 2 involves the duplication of the existing M5 East motorway from Beverly US$3,832.44 Ashurst (Grantor); Stage 2 (New New South Wales Hills to St Peters.The entire project involves 19km of tunnels and 14km of surface roads KWM (Funders); Allens South (Grantor); Clayton Utz Wales) (Grantor); Minter Ellison (EPC Contractor)
Alinta Energy Sale Australia Power Energy TPG Capital TPG Capital is to launch a sale process for Alinta Energy. US$3,874.59 (2016 (New Transmission Alinta Energy has 800,000 gas and electricity customers mostly in Western Australia, electricity South and gas transmission lines and electricity generation assets. Wales)
Central Java Indonesia Power Energy PT PLN BOOT (build, own, operate, transfer) of a 2000MW coal-fired power plant in US$4,224 Shearman & Sterling 2000MW Coal Generation (Indonesia) Batang regency, central Java. (SPV); Norton Rose Fired Power Plant Fulbright (Grantor); Milbank (Funders); Ali Budiardjo, Nugroho, Reksodiputro (ABNR) (Funders); Mochtar Karuwin Komar (SPV)
Bangkok – Rayong Thailand Transport Rail Thailand Ministry Development of the US$4 billion Bangkok to Rayong high speed rail line. US$4,000 219km High of Transport PT Speed Rail Line PLN (Indonesia) The 219km route will link Bangkok’s airports and varoius stations. An extension line to Utapao International Airport is under consideration.
Tanjung Jati B Indonesia Power Energy PT PLN A second expansion of the Tanjung Jati B coal-fired power plant in central Java province, US$4,000 (Jawa 4) 2000MW Generation (Indonesia) Indonesia. The plant will be fired by two 1000MW ultra supercritical power generation units. Units 5&6 Coal Fired Power Plant
AdeLINK Light Australia Transport Light Rail Project involves the development of a 35km light rail network in Adelaide running north, south, US$3,055.6 Rail Network (South east and west. Australia)
Tangguh LNG Indonesia Power Energy PT PLN Expansion of the Tangguh LNG facility in Indonesia’s Papua Barat province with a third LNG US$3,745 Latham & Watkins Train 3 Project Transmission (Indonesia) train. The expansion includes two offshore platforms, 13 new production wells, an expanded LNG (Grantor); Linklaters loading facility, and supporting infrastructure. (SPV); Allen & Overy (A&O) (Funders)
Bangkok MRT Thailand Transport Light Rail Mass Rapid Development of the THB11.03 billion (US$3.36 billion) Bangkok MRT Orange line, a 39.5km US$3,362.6 Orange Line (East Transit Authority route with a 9km, seven-station elevated portion and a 30.6km, 23-station underground portion. Side) of Thailand The Orange East line runs from the Thailand Cultural Centre Station to Min Buri
Atimonan Philippines Power Energy Manila Electric Development of a 1200MW coal-fired power plant in Atimonan, Quezon province. US$3,000 1200MW Coal Generation Company The plant will be powered by two 600MW generators using supercritical technology. Fired Power Plant
New Zealand New Social Defence New Zealand The New Zeland Ministry of Defence’s US$2.9 billion Defence Estate Regeneration Plan to US$2,900 Defence Estate Zealand Ministry of update and rejuvenate 5,000 buildings on 810,000 hectares of land across New Zealand over Regeneration Defence a 15-year period. Plan The buildings include barracks, aircraft hangers, ship loading docks, workshops and medical centres.
Bangkok – Hua Thailand Transport Rail Thailand Ministry Development of the US$2.7 billion Bangkok to Hua Hin high speed rail line. The recommended US$2,700 Hin 209km High of Transport speed for the 209km route is 300km/h. Speed Rail Line ASIA–SPECIFIC www.zhonglun.com
中伦律师事务所拥有一支强劲的精于基础设施法律服务的专业律师团队，在基础设施项目领域拥有丰富的实操经验和雄厚的专业 实力。中伦的诸多合伙人不仅是业内知名法律专家，还同时兼任仲裁机构的仲裁员，财政部、发改委 PPP 项目法律专家，多次受邀 参与相关领域法律、法规的起草、修订工作。十多年来，中伦为中外客户投资的境内外基础设施项目提供的项目服务，涉及高速公路、 火电厂、核电站、水电站、河道治理、石化、石油管道、天然气、水厂、污水淤泥处理、围海造地、各种铁路、地铁、桥梁、机场、港口、码头、 河道流域治理、园林绿化、地下管廊、体育场馆、市政、学校、医院、危险废物处置、城镇化项目、各种开发区、园区项目、保障房、大 型综合娱乐设施等诸多领域，涉及中国境内数十个省市，境外涉及亚洲、欧洲、非洲、北美洲、南美洲等数十个国家，所涉投资额超 万亿。秉承中伦为客户提供量体裁衣式贴身法律服务的传统，中伦的服务涵盖项目的全程、全方位，从交易架构设计，到项目文件 的起草、谈判和融资方案的构思，中伦的服务伴随项目实施的全过程，直至客户安全退出或实现资产证券化。中伦多年来恒久的勤 勉工作态度、准确的法律判断能力，和务实的法律解决方案，深得客户认可；中伦的专业经验和服务品质也同时获得多个专业评级 机构连续多年的赞誉。
The Zhong Lun Law Firm infrastructure team possesses abundant practical knowledge. Many of our infrastructure partners are not only well-known legal experts but also act as arbitrators, advise the Ministry of Commerce and National Development and Reform Commission on PPP-related legal issues, and have been invited to participate in the drafting and amendment of related legislation. For over a decade, Zhong Lun has advised Chinese and foreign clients alike on a wide spectrum of infrastructure projects related to expressways, power plants (coal-fired, nuclear, hydropower, etc.), river training, petrochemicals, natural gas, water works, sewage treatment, land reclamation, landscaping, subterranean pipes, railroads and subways, bridges, airports, ports and docks, river basin management, stadiums, administrative buildings, schools, hospitals, hazardous waste disposal, urbanization projects, development zones, parks, affordable housing, recreational facilities and other types of infrastructure in countless Chinese cities as well as large-scale projects in Asia, Europe, Africa, North America and South America. Zhong Lun provides tailored and comprehensive legal services from transactional structure design to contract drafting and negotia- tion as well as financial planning, assisting throughout every stage of a project until a client either safely exits or assets are securitized. Clients have continuously given positive feedback on our unwavering and diligent work ethic, accurate assessments and practical legal solutions; Zhong Lun has also consistently received awards for many years from professional rating institutions due to its extensive experience and high quality services.
1100+ lawyers including 240+ partners in 14 offices
北京 Beijing • 上海 Shanghai • 深圳 Shenzhen • 广州 Guangzhou • 武汉 Wuhan • 成都 Chengdu • 重庆 Chongqing 青岛 Qingdao • 东京 Tokyo • 香港 Hong Kong • 50伦敦 ABLJLondon ⁄ NOVEMBER • 纽约 – DECEMBERNew York 2016 • 洛杉矶 Los Angeles • 旧金山 San Francisco ASIA–SPECIFIC
Rentoul adds: “The vast majority of foreign investment proposals are likely to be approved.” Su Yi-jiun, a partner at Lee and Li Attorneys at Law in Taipei, says renewable energy in the form of wind farms and solar power is a key infrastructure priority of the new Taiwanese government, which took office in May this year. The high importance attached to green projects is to “keep abreast of the trends of curbing global warming and to ensure the sufficiency of national reserved elec- tricity capacity”, she says. Su, who specializes in infrastructure, says restrictions on for- eign investment in Taiwan have been substantially relaxed since Su Yi-jiun the 1970s, though “as for investments from China, due to sensi- Partner tive political issues that exist between Taiwan and China, they are Lee and Li Attorneys subject to a more stringent approval process”. All foreign investors are required to obtain prior foreign investment approval (FIA) from the Investment Commission of the Ministry of Economic Affairs As for investments from before making any investments. China, due to sensitive “Before making investments in Taiwan, it is always advisable for investors to evaluate the feasibility of their projects by hav- political issues that exist ing a clear picture of the permits and/or licences that may be re- between Taiwan and China, quired for making the relevant investments, the legalities involved, and the local financial environment, so that they can establish a they are subject to a more comprehensive business model that would suit their proposed stringent approval process projects,” she says. The Philippines has been in the headlines over the antics of its president, Rodrigo Duterte, and Standard and Poor’s says the coun- try is unlikely to get a rating upgrade because of its leader’s unpre- but China is by no means the largest investor, with interest from dictability. Still, the government has been consistent in stressing the UK, the US, South Korea, Japan and Europe. its commitment towards developing the country’s infrastructure. Still, there are investor concerns that can create legal work, “We expect a positive environment for the development of in- Rentoul notes. Perceptions of restrictive and complex regulation frastructure projects,” says Eusebio Tan, a senior partner with Ac- relating to labour, tax and the environment, and protracted gov- cralaw in Manila. Among the projects in the works are: an upgrade ernment approval processes are often cited as the main concerns of Ninoy Aquino International Airport (NAIA), including addition- of foreign investors. al terminals and runways; the upgrade and expansion of the Metro Australia’s rules regulating foreign investment changed in Manila railway network; construction of expressway roads leading March 2016 to allow greater regulation of critical infrastructure to the NAIA; and deployment of a rapid bus transit system to facil- sales, and some transactions involving foreign government in- itate traffic decongestion in Metro Manila. vestors or sensitive/strategic assets will come under increased India and South Korea appear to have made headway in the Phil- scrutiny. Subsequent to the March rule change, the Australian ippines recently. In particular, the GMR Group of India partnered government blocked the foreign acquisition of Ausgrid, the New with Megawide Construction for development of the Mactan, Cebu, South Wales electricity infrastructure company. Having said that, International Airport, and Korea Water Resources of South Korea
We expect a positive environment for the development of infrastructure projects
Eusebio Tan Senior Partner Accralaw
51 ABLJ ⁄ NOVEMBER – DECEMBER 2016 ASIA–SPECIFIC
partnered with San Miguel in a successful bid for the Bulacan Bulk Water Supply Project, Tan notes. Ramon Esguerra, managing partner at Esguerra & Blanco Law Offices in Makati City, says German companies have been very -ac tive in the public bidding of renewable energy projects. For road and rail development projects, Japanese, Chinese and Indian companies have been the primary awardees of government projects, while Sin- gapore and Canadian companies have been active in public biddings. Esguerra notes that the Philippines still has “strong policies restricting foreign ownership of land and investments in public infrastructures and exploitation of natural resources”. As a result, foreign nationals or entities who wish to invest in the Philippines Salwah Abdul Shukor must forge a partnership or joint venture with Filipino nationals or Partner and entities to pursue an infrastructure project. Head of Corporate Salwah Abdul Shukor, partner and head of corporate at Zain & Co Zain & Co in Malaysia, says transport is a major area of infrastructure develop- ment in the country, including the Kuala Lumpur-Singapore HSR, a mass transit project around Kuala Lumpur and the west coast express- In recent years, liberalization way from Taiping to Banting, and the Damasara-Shah Alam highway. measures have been China has been the main investor in Malaysia, but faces com- petition from Japan, South Korea and France in efforts to secure progressively adopted the KL-Singapore rail project. “Doing business in Malaysia is rela- by the government to tively straightforward,” says Salwah. “In recent years, liberalization measures have been progressively adopted by the government to remove restrictions on remove restrictions on foreign direct investment.” foreign direct investment But there are caveats to this observation. Regulation of foreign investment in Malaysia is carried out both through legislation as well as government policies. “There is [also] a need to be aware of the specific licences and permits required for the conduct of certain stra- construction has been substantially decreased, and related procedures tegic activities, and equity participation requirements are sometimes have been simplified”, says Yessimkhanov. imposed by the Malaysian regulatory authorities in granting these While there’s a big focus on expanding mining in Mongolia, as- licences and permits,” says Salwah. “In regulated sectors such as tele- sociated infrastructure has not kept up – transportation infrastruc- coms and petroleum, local partners are required. The challenge then ture remains a bottleneck, such as lack of railways and roads or in- is to select the right local partners who subscribe to the same busi- sufficient energy supply to power the mines in remote parts of the ness principle and have a similar vision for the business as a whole.” country. Therefore, many investors, as well as the government of Kazakhstan watchers expect construction-sector growth to Mongolia, have been promoting associated infrastructure projects accelerate. Taking into consideration that the key industry for to make the natural resources industry competitive. Kazakhstan’s economy is the extraction of natural resources, con- But for investors, there are many obstacles, says Enkhbat Bat- struction of new infrastructural facilities is aimed at supporting sukh, managing partner at MDS Khanlex in Ulaanbaatar. “Since the the extraction, their transportation, and production of goods with break-up of the Soviet Union and the consequent end of the social- high added value, says Yerzhan Yessimkhanov, a partner and head ist system in Mongolia over 20 years ago, the Mongolian parliament of infrastructure at GRATA Law Firm in Almaty. and government has rapidly introduced laws,” he says. “The speed “It should be noted that implementation of a project by the Ka- with which legislation has been drafted has resulted in legislation zakhstani government does not mean that the government acts as that in many instances has left key issues unresolved. The absence a client in a construction contract, or as a financing party, says Yes- of definite interpretations of many of the provisions of these new simkhanov. The government normally delegates implementation of laws, and the absence of a tradition in Mongolia of an independent projects to so-called “national companies” owned by the government, judiciary makes application of laws sometimes uncertain.” which are working in various areas of the Kazakh economy,” he says. The commitment of government officials and agencies to com- There are difficulties investing in Kazakhstan that include the lim- ply with legal obligations and negotiated agreements “is sometimes itation of foreign presence in certain industries (such as telecommu- unproved and there is a tendency for the authorities to take arbi- nications), and the necessity for government approval for acquisition trary action”, adds Enkhbat. “Legal redress for breach and/or un- of projects in areas such as extraction of natural resources. On the up- lawful action may not be readily available, if at all, and/or may be side, “the number of permits and authorizations relating to design and subject to significant delays.”
52 ABLJ ⁄ NOVEMBER – DECEMBER 2016
SOURCE: MERGERMARKET COUNTRY FOCUS
TOTAL CONTROL
DESPITE ECONOMIC SETBACKS AND MORE LOCALIZED CHALLENGES SUCH AS AN OVERSUPPLY OF LOCAL LAWYERS AND AN INFLUX OF FOREIGN ONES, SINGAPORE INC IS VERY MUCH IN CONTROL, WITH AN EYE TO THE FUTURE AND ITS PRIDE OF PLACE IN THE REGION. JOHN CHURCH REPORTS
hat is it about Singapore? Even when the for decades has to some degree added to stability and fuelled the city state is not doing well it gives off the rapid pace of reform. Policies that elsewhere in Asia would take an impression that everything is just fine age are fast-tracked and realized in a political instant. Few, if any, in and every problem has been anticipated. the region can match Singapore’s ambition. As growth flounders in 2016, law firms Sriram Chakravarthi, the senior director and chief legal are signalling tougher times ahead, while counsel at the Singapore Academy of Law (SAL), sums up the manyW actively pursue opportunities in the wider ASEAN region. challenges ahead for the city state. “The present economic cli- As is always the case with legal work, when one part of the econ- mate has contributed to an increase in cross-border insolvency omy is suffering other practice areas are doing well. But in Singa- and debt restructuring work,” he says. “Singapore is well placed pore the feeling is different. The dominance of one party in power to capture a share of this work.”
53 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTRY FOCUS
When economies go off the boil, law firms tend to provide the rise because the economy looks rather tentative in 2017,” he says. best bellwethers as to which sectors are cold and which are hot. “Disputes is probably the safest practice area to be in. There’s a lot of Asia Business Law Journal asked a cross section of them how they competition in the corporate arena, not only from Singapore firms were faring. but also from international firms, which have been granted licences Chia Kim Huat, regional head of corporate and transactional to do work in Singapore. IP is still very strong.” practice at Rajah & Tann, says capital markets have picked up this According to Wiyatno Mursjid, a senior associate at Gateway year, when compared to last year. “Is it sustainable? For the rest of Law Corporation, a mid-sized firm with 10 lawyers, an office in the year a couple of listings are coming to market, but 2017 is a bit Malaysia, one about to open in the Philippines, and plans to expand uncertain,” he says. “In terms of sectors, those that are attractive to in Vietnam, “you can’t avoid the economic downturn”. overseas investors, one is logistics. Because of the OBOR [one belt, “Singapore has experienced the headwinds and if I’m not wrong one road] policy a lot of [these investors] are looking at setting up lo- we are technically in a recession,” he says. “This represents a good gistics chains across the region, so a logistics centre is very much in time to take stock and refocus. As an IP firm we have diversified play. The other is infrastructure.” into other work and now provide general corporate commercial Chia says Singapore is going through an economic restructur- and litigation. We have a wide network of associate firms in the ing. “Our government has come up with the CFE, the Committee region and because of that we have a lot of instructions from other for the Future Economy, trying to reposition,” he says. countries, more so than locally.” K Murali Pany is managing partner at JTJB, which has four key Stephanie Keen, managing partner at Hogan Lovells Lee & Lee, practice areas: disputes (arbitration/litigation), shipping work, real says most of the firm’s practices have had a solid year. “It’s been a diffi- estate and corporate. “The next 12 months is about battening down cult market. I think the M&A market has been quite soft this year, but the hatches and being prudent,” he says. “There is a lot of uncertain- we’ve had our fair share of the deals in the market,” she says. “From a ty in terms of oil and commodity prices as well as the availability of corporate perspective, we do a lot of work with PE; for internation- finance. For Singapore, much will depend on external drivers, China al firms it’s an easier target for us than trying to identify Singapore and India primarily, which are both having their own issues.” corporates who are doing transactions – many of them have rela- Lisa Theng, managing partner at Colin Ng & Partners, says the tionships with Singapore firms.” mid-sized full service firm covers litigation, arbitration disputes This factor tends to play to the strengths of the firm’s ASEAN and mediation, “and for these areas we have been very active, which hub. “For example, one deal we instructed on was a BVI company is a sign of the market”. with its headquarters in Macau and its businesses based in the US, “Our lit-arb team has been busy for most of this year and contin- Germany, China and Vietnam, and a sell-side adviser based in Sin- ues to be busy,” she says. “Singapore is building itself as an arbitra- gapore, and the sellers were German. That played to our strengths tion hub, so we have a fair bit of arbitration for foreign parties and because other than Macau and BVI, which no international law again the disputes are very commercial in nature. Insolvency works firm can cover, we could cover the rest of it completely in-house.” and disputes have picked up as well. On the banking side Keen says deals are being done in India and “Our M&A is still active, especially for private M&A and private Indonesia. “On the bond side, we’re seeing a lot of the work is in equity VCs. I suppose they are looking for interesting businesses distressed bonds, and we do a lot of work for the trustee, so that’s to invest in, and with Singapore emphasizing the areas of innova- been pretty busy,” she says. tion, tech, Fintech etc., we have quite a few VCs and funds coming Barry Stimpson, Singapore managing partner at ReedSmith in in, and we help them invest. Singapore is transparent so they have alliance with Singapore law practice ResourceLaw, says it’s well some confidence in investing here.” publicized that shipping has been in a downturn for a number of Edmund Kronenburg is managing partner at Braddell Brothers, years. “What tends to happen in the shipping and commodities a boutique litigation and arbitration outfit that picks up work that sphere is the type of work changes depending on what the market would otherwise go to big firms – referred work from international is doing,” he says. players as well as big Singapore firms. “I can’t say anything is on the “It’s not a case of being less busy, it’s just that the kind of work
The present economic climate has contributed to an increase in cross-border insolvency and debt restructuring work
Sriram Chakravarthi Senior Director and Chief Legal Counsel Singapore Academy of Law
54 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTRY FOCUS
you’re handling is different. When that market went into crisis in the wake of the challenging conditions faced following the finan- cial crisis, we saw major disputes and arbitrations. But over the past Singapore is building couple of years it’s evolved into slightly different types of disputes – a lot of restructuring work, a lot of defaults.” itself as an arbitration Stimpson says in commodities it’s been more volatile. “We’re hub, so we have a fair seeing a number of trade finance deals. There’s been a bit of a change of players in that sphere, where regulation has forced banks bit of arbitration for to scale back their activities, and other players, whether it’s private equity or the commodities houses themselves, have stepped into foreign parties and again that space.” the disputes are very Asset finance has been the most consistent performer of the past 12 months for Vitus Law, in partnership with Stephenson commercial in nature. Harwood (SH). “Despite the pretty bad shape of the shipping in- Insolvency works and dustry, there’s been a lot of restructuring and financing,” says man- aging partner Daryll Ng. “The corporate law side has been quite disputes have picked challenging. But fortunately we have wide expertise, and we work up as well together with the Hong Kong and Dubai offices of SH to give us a bit more leverage in the market. “So I think corporate is performing alright given the market, but it is a very challenging market, there are a lot of low rates out there; it’s high competition,” he says. “I know that very large Singaporean firms put very very low, some would say unrealistic, prices in or- der to get some work in. So there is effectively a price war when it comes to M&A and corporate work.” For Japanese firm Nagashima Ohno & Tsunematsu, a core portion of its niche work relates to manufacturing and trading houses. “In other Asian jurisdictions we are seeing interest in e-commerce companies in the region generally,” says Rashmi Grover, the firm’s attorney for India. “Some cases use Sin- gapore as a hub, for example if they want to invest in India, Sin- gapore is a better jurisdiction to invest through because of tax Lisa Theng considerations. Even in terms of disputes they find Singapore to be Managing Partner the most neutral jurisdiction. Japanese companies are very familiar Colin Ng & Partners with SIAC [Singapore International Arbitration Centre] rules and what that offers.” While the firms wrestle with economic malaise and adjust their practices accordingly to accommodate upticks in areas like re- structuring, insolvency and arbitration and litigation, the in-house community is focusing on other areas. “In-house counsel are one of the pillars of Singapore’s legal services,” says Singapore Corporate Counsel Association (SCCA) president Wong Taur-Jiun. “For Singapore to become a full legal services hub for the region, it has to have a large enough talent pool of in-house counsel – not only in-house counsel who bridge the commercial requirements to private legal practice, but in-house counsel who bridge any MNC based in Singapore into the region. “The Singapore Corporate Counsel Association aims to help de- velop such a talent pool. And we’ll do it for every lawyer who works in Singapore, regardless of nationality. We’re developing a national competency framework to help in-house lawyers think about why they need to train, what they need to train for, and how they can be trained.” Wong says Brexit is among the items at the top of the agen- da for many in-house counsel in Singapore. “How will Brex-
55 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTRY FOCUS
it change the way our businesses are set up, or do business? How initiate research projects and serve as a forum for collaboration be- will it affect our existing contracts? Insolvency will probably also tween judges, lawyers, businessmen, academics and policymakers remain on the agenda for next year,” he says. in the region.” Gladys Chun is head of legal and compliance for Lazada, which Just as the work of in-house counsel in Singapore is increasingly has a local presence in Indonesia, Malaysia, the Philippines, Thai- reaching across borders, so too have law firms seized on the trend land, Singapore, Vietnam and Hong Kong. “A technology business of regional expansion since the creation of the ASEAN Economic that is expanding as rapidly as Lazada Group is fraught with chal- Community at the end of 2015. After all, it’s only natural for this lenges that derive from the novelties of the business model, its pace city, which has served as a conduit for trade and business in the of growth and the regulatory complexities and risks of operating region for many centuries. in jurisdictions across a region as diverse and heterogeneous as “I think because of ASEAN, the forum set up last year for free Southeast Asia,” she says. trade within the region, a number of firms are saying Singapore “To name a few of the key challenges, local laws are unclear, has good access to ASEAN,” says Daniel Poh, a partner at Marks & business practices are not transparent, local cultural nuances play a Clerk. “Definitely, the government is encouraging people to branch big factor in the decision making process, awareness levels are low out in the region.” in a fast-paced environment, a lack of talent and resources includ- And firms are following the lead. “With our property experience ing technological support to scale legal and compliance initiatives this year with a JV in Laos, we have an opportunity with a client on a group-wide basis, and the list goes on. who has the concession right to an economic zone,” says Theng at “Singapore will play a critical role in this region, being at the Colin Ng & Partners. “The legal system in Laos is not so developed, forefront of the legislative changes and driving innovation in terms especially for foreign investors. So we have the opportunity to work of a legal framework including a dispute resolution forum,” says with business and with the relevant government agency to develop Chun. “For example, the launch of Singapore International Com- the law of the land, so our real estate has given us the opportunity mercial Court [SICC] positions Singapore as a leading city where to grow beyond Singapore to a foreign jurisdiction like Laos.” international commercial disputes can be heard in a court of law, It’s an interesting development, and one that in some ASEAN ju- where mediation has been exhausted or where arbitration is not risdictions would seem tailor-made for Singapore firms. “Cambodia preferred. Further, Singapore has been aggressively promoting the would be next,” says Theng. “We don’t have a presence there but we use of legal analytics as a form of dispute prevention mechanism by have started working with local Cambodian funds and bringing cli- leveraging on technology and big data – this will change the way ents in. So we see Indochina, although still emerging and new, with disputes are being managed and resolved moving forward.” a fair bit of uncertainty, but that seems to be the area of interest, and Regional desirability is a primary factor for Singapore law into that’s where growth is happening. And that’s where we are going.”
For Singapore to become a full legal services hub for the region, it has to have a large enough talent pool of in-house counsel
Wong Taur-Jiun President Singapore Corporate Counsel Association (SCCA) the future. “ASEAN is a significant market,” says Chakravarthi from Soh Kar Liang, managing director at Ella Cheong, says ASEAN the SAL. “It is projected to be among the largest economies in the is rising as an important commercial region. “The only challenge is world over the next few decades. With growth and greater eco- that much of ASEAN is third world,” he says. “Singapore has had nomic integration, there will be more opportunities for law firms the chance to take a position of leadership, especially in terms of operating in Singapore and the ASEAN region.” IP – Singapore was chairing a governmental group of ASEAN in Chakravarthi believes the setting up of both the Singapore In- the development of IP. An IP masterplan was created last year and ternational Commercial Court (SICC) and the Singapore Interna- looks at Southeast Asia for the next 10 years.” tional Mediation Centre (SIMC) to support cross-border business Abdul Jabbar bin Karam Din, head of Rajah & Tann’s corporate transactions add to Singapore’s growing capabilities as a legal hub and transactional practice, says the firm has seen a lot of foreign in the region. “In 2016, the SAL launched the Asian Business Law investment from investors using Singapore as a conduit to the re- Institute (ABLI), an initiative intended to be part of the solution to gion. “We finish our ASEAN footprint with addition of a Philippine the biggest challenge cited by business leaders in the region – lack office from 1 January. A good sized firm, C&G [Gatmaytan Yap- Pa of consistent legal standards within Asia,” he says. “The ABLI will tacsil Gutierrez & Protacio] is joining us,” he says.
56 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTRY FOCUS
With wider regional ambitions, dominant roles in growth areas such as restructuring and Fintech are essential, especially with futur- To name a few of the key istic Fintech, where the distant tremors from Brexit may well have a resounding impact on the future of Singapore’s industry. [regional] challenges, local laws “The way it looks, the UK will not get the benefit of mutual recog- are unclear, business practices nition and passporting in the EU, which is fundamental to the finan- cial services industry,” observes Jake Robson, a partner at Morrison are not transparent, local Foerster. “Without that, a lot of the pull factor for London as the cultural nuances play a big global centre for Fintech may disappear for some start-ups. If that happens, and [the UK] has a hard Brexit, I think we may find a signif- factor in the decision making icant portion of the industry, the very early stage start-ups, coming process, awareness levels are to Singapore and using this as an environment to flourish in.” Robson says regulation lags behind the UK, but policymakers low in a fast-paced environment, have said they are looking at the UK as a good guide for a regulatory regime for Fintech. “A lot of the ideas from the UK have been intro- a lack of talent and resources duced by the ‘regulatory sandbox’, which is a mini testing ground including technological support for these kinds of products. The MAS [Monetary Authority of Sin- gapore] has come out and said it will introduce a similar regulatory to scale legal and compliance sandbox, with new payment regulations that are fundamental to up- initiatives on a group-wide dating regulation to meet the requirements of the Fintech industry. “All of the steps are in the right direction. That combined with basis, and the list goes on Brexit will mean that in the next five years or so Singapore will go through the roof as far as Fintech’s concerned, with start-ups, and you may see the odd unicorn coming in as well.” Gladys Chun Nicholas Hanna, a partner at K&L Gates, says Fintech currently Head of Legal and Compliance consists of a segment of the technology start-up scene that is using Lazada software and technology to make the provision of financial services more efficient. “In the process, Fintech companies are disrupting incumbent financial systems and challenging traditional corpora- tions which can be less adaptable and/or reliant on software.” Some of the sectors already being impacted by Fintech include: payments (e.g., digital wallets and peer-to-peer payments); invest- ments/fundraising (equity crowdfunding and peer-to-peer lend- ing); financing (crowdfunding, micro-loans and credit facilities); insurance (risk management); advisory (big data analytics and pre- dictive modeling); and infrastructure (security). “Fintech start-ups will of course require different types of legal ad- vice depending on what stage of the Fintech lifecycle they are in,” says Hanna. The five stages of a typical Fintech lifecycle are structuring, regulatory, early fundraising, commercialization, and growth/exit. “The Fintech eco-system is rapidly growing in Singapore with the support of recent initiatives by the MAS and the deputy prime minister’s announcement to review the regulatory process for venture capital managers,” he says. “Singapore houses over 300 Fintech start-ups already and is known for being a hub to com- merce. The government and regulatory authorities have indicat- ed they will review and introduce further incentives for Fintech companies in 2017.” One thing that is clear about Singapore is that each initia- tive to improve or expand, be it in tech, e-commerce, restruc- turing, arbitration, the courts or elsewhere, is accompanied by a clear and aggressive policy direction stamped by government. Take Fintech, and e-commerce in general. “Incubators are be- ing set up and the government is encouraging this,” says Robson. “Singapore’s history of attracting business has been extremely good when it turns its mind politically to do something, wheth-
57 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTRY FOCUS
er it was shipping 30 years ago, aviation, infrastructure, now R&D.” “What has happened now, with international firms coming in, is With each policy directive there is a direct or indirect impact on that the nature and quality of business is very different from what we the legal profession. “Over the past 10-15 years, the Singapore gov- used to have. Previously it was all domestic, now most of our busi- ernment made a decision to promote Singapore as a service hub for ness is international. So we are one of the firms that have benefited Asia,” says Oon Thian Seng, founding partner at Oon & Bazul. “The from the government’s efforts.” profession has been opened up. The hope was that with the opening The evidence is everywhere. “As a firm we are looking at tech- up you would have more business and the pie would get bigger. nology, it’s an area that we cannot afford not to go into,” says SICC offers the way forward
Among the standout initiatives for this unless there is enforceability. Lawyers it can enforce Singapore judgments in city state, the Singapore International will support it, I suppose, if they get other jurisdictions,” he says. Commercial Court is a prime example business out of it. Having the ability “My guess is that within ASEAN, with of forward thinking. to admit foreign lawyers should also Singapore being Singapore and having “I believe the SICC as a concept has promote the SICC in theory. In practice, the seat at the table it’s got, it will not gained remarkable mindshare amongst it’s a question of whether the foreign do too badly in getting these reciprocal the legal community in the two years of lawyers are interested in appearing at enforcement agreements.” its existence,” says Sriram Chakravarthi, the SICC. If you ask a lawyer at a global There is a need for the SICC to the senior director and chief legal disputes practice or a Hong Kong or succeed. “Disputes are very busy, and counsel at the Singapore Academy of English lawyer or barrister, they will Singapore courts are rammed to the Law. “Almost every lawyer I speak to say ‘sure’. I can’t say the same for Indian point where getting court time is quite recognizes the possibility of using the lawyers. They sound interested, but difficult,” says Howes. “We had a matter SICC as an additional dispute resolution will they take it up? Or Malaysian, which was adjourned in March part option. The fact that there are more Indonesian or Philippine lawyers, or heard, and we had to wait until October than 70 foreign lawyers registered with Vietnamese lawyers? Is there a real to get the remaining three days. Which the SICC, and that the SICC has been incentive for them?” is quite something for Singapore, which busy issuing judgments this year, augurs Daryll Ng, managing partner at prides itself on a quick and efficient well for its reputation and gradual Vitus Law, says: “The question was court system. acceptance as a destination of choice always: is a decision of the SICC going “You’ve got this thing of Singapore for parties to resolve their cross-border to have enforcement possibilities in as a hub for arbitration, and we’ve commercial disputes.” other jurisdictions? Arbitration? We got disputes in places like Indonesia, Edmund Kronenburg, managing have the NYC, that’s easy. Courts, we Australia, Vietnam and Thailand using partner at Braddell Brothers, says: “The have the Reciprocal Enforcement of Singapore as the seat for arbitration. choice of court convention does help, Commonwealth Jurisdictions Act, which Basically Singapore throws out its own provided other players in the region allows us to enforce our judgments in fair share of disputes as well.” sign on to it. The EU is in, and now all commonwealth jurisdictions, and Singapore’s success in establishing Singapore, but not the rest of ASEAN. in Hong Kong. The ICC had specific itself as an arbitration hub is also In concept, having the choice of court reciprocity treaties with the EU and the aggravating the enforcement issue for convention means that if you make a US this year. So the concept of having the SICC. “Banks still like litigation,” choice to go to a convention country’s a court decision that is cross-applicable says Kronenburg. courts – like Singapore – and those through treaties is an exciting one which “The construction sector loves courts hand down a judgment, you can makes Singapore much more viable. arbitration. Infrastructure disputes, take that judgment and go to another “Regionally, it’s more a case of the oil and gas disputes, the big numbers convention country and enforce the internal court systems. Are they going are all in arbitration. And for another judgment as if it is a judgment of that to support your rights? And you never reason – enforceability. The banks second country’s courts. know. For some jurisdictions such tend to work within the jurisdiction. “Having the convention benefits the certainty may take years.” Infrastructure projects, many of the SICC. There were some thoughts of Jonathan Howes, joint head of office engineering companies are Japanese or getting ASEAN to enter the convention at Pinsent Masons MPillay, says he Korean or Chinese, and there you need en bloc, like the EU. That hasn’t believes the court will “take off” despite the ability to enforce, and as things happened yet. Uptake of the SICC will uncertainties over enforcement. “I think stand now you need an arbitration depend on support from clients and Singapore will rush out and do a lot of award to get enforcement in China or lawyers. Clients won’t support the SICC reciprocal agreements to make sure that Japan or Indonesia, etc.”
58 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTRY FOCUS
Theng. “So we have a technology practice, and we have developed a media and entertainment practice, and we are looking at sports, as Singapore attempts to become a sports and entertainment hub. In terms of our position as a Singapore law firm and Singapore law, In the process, Fintech the government is helping us to market Singapore law as the law of companies are disrupting choice in the region for foreign investors.” Soh, at Ella Cheong, points to IP securitization. “It’s always uncer- incumbent financial systems tain, especially with valuations, where there is no market precedent,” and challenging traditional he says. “The government here has created financial products with three banks, and these effectively lead to loan space on security of IP corporations, which can be rights, and with the government underwriting 50% of them. It’s quite less adaptable and/or reliant novel and shows the commitment of the Singapore government.” Stimpson observes: “The government does have a long-term on software plan, you just have to look at what they’re doing with development of the port at the moment, or the airport. It’s an incredibly busi- ness-friendly government, and when they need to pass a piece of legislation, or when they perceive there’s a problem, or they can improve something, they do it very quickly. Nicholas Hanna “The big talk for the past 12 months has been the TPP [Trans- Partner Pacific Partnership], the new trade deal. It’s not ratified, and I don’t K&L Gates think with Singapore it’s exclusive. The government has shown that it wants to include as many trade deals as it can – regionally and internationally. The talk these past 12 months has focused on the TPP. While not formally ratified the government and business community in Singapore has been completely supportive of the deal and is likely to continue to work to put into effect its terms. “Singapore has been extremely strategic over the past 10 years, building an extensive network of trade and tax agreements around Hoh says these plans also align with the Judicial Insolvency Net- the region and the world, which has made it a true business capi- work (JIN) initiative that Singapore is promoting. “The JIN is in- tal. Everything that Singapore is doing is really with that in mind, tended to promote sustained and continuous engagement between whether it be establishing itself as the dispute resolution centre of representative judges from the participating insolvency courts on Asia, through the SIAC and also more recently the SICC, or ratifica- issues concerning co-ordination and co-operation in cross-border tion of the Hague Convention to make Singapore judgments from insolvencies, and the recognition of insolvency judgments,” she says. that court easier to enforce globally. These decisions are taken to Chun, from Lazada, says in-house counsel will play an increas- strengthen Singapore’s offering.” ing role in shaping the legislative framework. “To come up with Policy direction is perhaps more visible form the point of view an effective piece of legislation, it needs to take into account all of corporate counsel dealing with impacts on business first-hand. perspectives including the businesses,” she says. “Hence, in-house “While our regional office is in Singapore and we have assets and counsel play an important role in providing constructive feedback facilities here, and generate our largest revenue here through an ar- in developing a legislative framework that works in the commercial rangement, most of the focus of our legal team’s activities is in the world, and is easy to implement. APAC markets (China, India, ASEAN, Australia, Japan and South “Also, as the Singapore economy transforms to become more Korea),” says Gigi-Anne Hoh, regional legal counsel with Syngenta innovation-driven and knowledge-based, the legal profession, in- Asia-Pacific. “Singapore has one of the most stable legal regimes cluding in-house counsel, will have to step up to increasingly ad- and the authorities have been very transparent and open in work- dress issues of legal and judicial innovation to push boundaries and ing with us to date, and we have no issues. to move up the legal value chain.” “I would consider the plans to strengthen Singapore’s position Wong, from the SCCA, agrees. “Singapore has embarked on as an international debt restructuring centre as pragmatic and several initiatives to position itself as the hub for legal services in far-sighted. These plans include: enhancing the legal framework the region,” he says. “The establishment of the [SICC] in January for restructurings by creating bespoke rules and procedures; deep- 2015, together with Singapore’s ratification in June 2016, coming ening the bench with specialist insolvency judges; increasing the into force in October 2016, of the Hague Convention on Choice of use of ADR processes; creating a restructuring friendly ecosystem Courts Agreements, marks Singapore’s ambition to be a truly in- through increased availability of rescue financing; strengthen- ternational dispute resolution centre. Recognizing the prevalence ing the insolvency profession in Singapore; raising international of cross-border insolvencies, the Singapore government also an- awareness of Singapore’s restructuring capabilities, with increased nounced measures to become a regional insolvency centre.” involvement in international insolvency organizations; and/or pro- In terms of human capital, Singapore’s legal community is also viding thought leadership through research.” undergoing reform. More law schools have led to an oversupply
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of new lawyers, the ASEAN Economic Community has lured lo- cal firms into merging or partnering to gain access to other mar- kets, while an influx of international firms has led to plummeting I’m skeptical of tie-ups fees and a great deal of merger activity to enable them to practise Singapore law via their local tie-up. Kim, from Raja & Tann, says in addition because they look nice to a huge oversupply of new lawyers due to two new law schools, there optically, but what does are a lot more people going overseas to study law, and coming home to practice. “From our point of view, the challenge is in the middle, we are that really mean for the using those numbers for in-house counsel, for alternative options like private banking. So, that part we are short of – people who will stay on Singapore firm in question? long enough after training.” Ng, from Vitus Law, sums up the situation. “The number of graduates doubled overnight about two years ago,” he says. “That’s compounded by the fact that the industry is going through quite a bit of difficulty. There’s not a lot of work out there; the general economy is bad. “Second is international firms coming in. If Singapore wants to at- tract major players in the finance market it needs to allow firms in that it is familiar with – the Clifford Chances, the American firms, it needs Edmund Kronenburg those names – otherwise foreign companies won’t do business here. Managing partner “And in many ways the Singapore legal market was a bit of an inces- Braddell Brothers tuous community. We didn’t get much competition from outside, and the idea was by bringing in international firms we would have to raise our standards. It’s difficult. Local lawyers don’t like it. International think what’s important in the Singapore market right now, the tie-ups players don’t like it because there is a rates war out there, and for all as- and alliances that we have, are the way forward because it gives local pects of the industry. I think it is something all of us have to adapt to. I firms the ability to have an international audience. That international exposure in the Singapore market will make the difference.” Some disagree. “I’m skeptical of tie-ups because they look nice op- tically, but what does that really mean for the Singapore firm in ques- tion?” asks Kronenburg from Braddell Brothers. “Is there a real bene- fit? Perhaps there’s a temporary benefit, but does the tie-up actually Singapore has one of the promote that Singapore firm or does it just kill the firm in the long most stable legal regimes term and expand the international reach of a foreign practice instead? “Rajah & Tann has gone a different way and set up its own net- and the authorities have work in the region. That is a model to be explored and a model that we are interested in looking at. The bottom line is that Singapore been very transparent and firms have to adapt to the situation and find which model suits open in working with us to them best in terms of survival in times of change.” Keen, from Hogan Lovells Lee & Lee, the oldest joint legal ven- date, and we have no issues ture in Singapore, points out that in Singapore one can only practise Singapore law if one has a Qualified Foreign Law Practice licence. “There are seven of them. They are hard to get but they require you to hit a number of quotas and if you don’t they will take the licence away,” she says. “For us, that’s important. Increasingly, more and more of the law being practised in this region is governed by Singa- pore law, which again is a change from the past when it would have been English or New York law. I think it also shows some stability.” Theng also points to a decision earlier this year to allow non-lawyers to have an equity stake in a law firm. “Unlike Australia, where they do full service with accounting firms and legal services, Gigi-Anne Hoh, in Singapore this was not allowed until recently, when it went up to Regional Legal Counsel 25%. Prior to that law firms needed to be 100% owned by lawyers. Syngenta Asia-Pacific. So this is a change to the legal landscape and we have not yet seen the legal firms doing that. But accounting firms have started their own practice law firms.”
61 ABLJ ⁄ NOVEMBER – DECEMBER 2016 PRACTITIONER’S PERSPECTIVE
FINTECH WAVE: WHY SINGAPORE IS LEADING CHANGE Jake Robson Nicholas Davies
The Fintech wave may have started in the the need for multi-jurisdictional expansion and served. A focused due diligence exer- US and been refined in Europe, but it is in comes quickly on the heels of a successful cise performed by an experienced team can Asia where its true potential is becoming proof of concept. A competitive advantage go a long way to de-risking an investment evident. The authors see the next wave of will only be retained as long as there is a or partnership. IP and IT matters including growth in the Fintech space being driven by rapid launch across multiple jurisdictions. data privacy and ownership of customer Asia – both in existing financial centres in This may involve a combination of venture data will also require review and evaluation. the region, which have increasing levels of capital, strategic partnerships, licensing deals, Experienced advisers in new Fintech tech- sophistication, and in countries across the or even a franchise-style model. nologies and financial services are invaluable region with low levels of financial inclusion Singapore’s strong and transparent finan- in matching these technical drivers for but high growth prospects. cial services sector, a buoyant venture capital valuation of a target with the underlying industry and a forward looking regulator regulatory and licensing regime in countries CHALLENGES IN PARTNERSHIPS help to make Singapore a destination in its where the target operates. In more developed markets or market seg- own right on a regional and global level. For ments, Fintech technology is a substitute to Fintech growth companies, rapid expansion INVESTOR-SIDE CONSIDERATIONS existing financial services or products. Here, coupled with the need for regulatory com- Acquiring a controlling stake or a minority Fintech has a transformative effect on the pliance requires both expertise and capital. equity investment in a Fintech company way that financial services are delivered to Fintech companies will gravitate to the key must be approached with care. Investing in a consumers and on a business-to-business financial centres in the region in order to target that already has some level of venture basis. However, due primarily to fragmented source their funding, as well as to seek talent capital funding must be done in a way that regulation and the resulting challenges of to execute their expansion plans. seeks to enhance working relationships running financial services businesses in each Singapore stands out as being strate- between the investor and the target com- jurisdiction, scaling these products to serve gically placed to serve these needs in the pany. Similarly, investing into a target with customers in multiple Asian jurisdictions – a region, and increasingly as a destination for financial services licences requires analysis in prerequisite for the profitability of many European and US capital. respect of regulatory change of control issues Fintech solutions – remains difficult. with these licences. The authors believe that due to particular TOOLS FOR DEAL MAKERS Shareholder agreements must be negoti- challenges in Asia, the main developments in Regional expansion and capital needs, plus ated with skill, as the challenge is to protect the Fintech market segment are likely to take high-growth potential of Fintech companies the investor’s investment over a long the form of strategic commercial partner- in Asia, provide a key opportunity for invest- growth period for a FinTech target, while ships between financial services providers ment by existing financial services providers, giving the target the flexibility it needs and Fintech innovators. and also for other strategic players and to grow, and also being mindful of the venture capital investors. strategic aims of other shareholders. In the FINTECH GROWTH COMPANIES Successful deal making in this specialist area, next five years, the FinTech wave is likely to The lack of financial inclusion in developing whether through commercial partnerships or touch, directly or indirectly, on nearly every countries across Asia leaves room for signifi- direct investment, needs specialist guidance aspect of business in Asia. An experienced cant innovation, which would not find success from lawyers with experience in venture capital law firm can assist its clients to navigate in over-banked and heavily entrenched investments, and M&A and regulation. this highly complex and regulated area, economies such as Europe and the US. The Alongside corporate due diligence, legal maximizing commercial potential. combination of sizeable populations and due diligence on a Fintech deal normally growing GDP levels, together with Fintech requires an emphasis on regulatory matters, JAKE ROBSON is a partner at Morrison & innovation, means the conditions are right especially: systems and controls relating to Foerster in Singapore. NICHOLAS DAVIES for widespread disruption from new Fintech financial services licensing; anti-money laun- is a senior associate at the firm. players. For emerging Fintech companies, dering; and the way customers are acquired
62 ABLJ ⁄ NOVEMBER – DECEMBER 2016 COUNTERPOINT
WHERE THERE’S SMOKE
AGAINST THE BACKDROP OF THE WORLD HEALTH ORGANIZATION’S ANTI-TOBACCO CONFERENCE IN NOVEMBER, WE SHOWCASE THE VIEWS OF TWO OPPOSING FORCES. IN AN ARTICLE ORIGINALLY WRITTEN FOR OUR SISTER PUBLICATION INDIA BUSINESS LAW JOURNAL, JAPAN TOBACCO INTERNATIONAL’S IDIL YASA ADVOCATES STRONGER IP PROTECTION FOR BRANDS. AS A COUNTERPOINT, A FORMER GC TO THE AUSTRALIAN MEDICAL ASSOCIATION, SARAH BYRNE, OUTLINES WHY SHE BELIEVES HER COUNTRY’S TOBACCO PLAIN PACKAGING LAWS ARE NOT ONLY RIGHT, BUT ALSO INNOVATIVE AND EFFECTIVE.
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AT THE END OF 2012, market dynamics in Australia. Australia introduced one of the In an environment where all most restrictive and extreme tobacco packs look the same, regulations ever proposed price has become the main for fast-moving consumer driver of choice and smokers goods: plain packaging for are increasingly opting for tobacco products. cheaper cigarettes. Accompa- Trademarks, logos, non-pre- nying this “down trading” we scribed colours and graphics have seen an increase in illegal have been banned with only sales as consumers look for the the use of the brand name per- cheapest products – even if mitted in a standard font and this means turning to the black size. Graphic health warnings market. Illegal cigarette sales now cover 90% of the back of impact government revenue packs and 75% of the front. and are an important source Put simply, the measure is a of funding for terrorist and branding ban; manufacturers criminal organizations around of a legal product are no longer the world. allowed to use branding on the IDIL YASA The attack on branding is a packaging of their products. direct attack on the principle Trademarks represent a JAPAN TOBACCO of quality. With key quality bond of trust between manu- INTERNATIONAL signals removed from tobac- facturer and consumer; a co packs, there has been a reassurance of quality. They corresponding impact on the ensure consumers can make margins that premium price informed choices and buy with tobacco products deliver for confidence. Understandably, people to start smoking. Years manufacturers, wholesalers following many years of invest- of research into the causes of and retailers. Furthermore, in a ment, tobacco trademarks are smoking uptake support this. heavily commoditized environ- extremely valuable, running Australia’s branding ban has ment, smaller share products into billions of dollars. been a complete failure. After are being withdrawn from the Protection of intellectual more than three years, we have market, resulting in a loss of property (IP) is an essential seen no change in the rate of choice for consumers. element of an open, free and decline in smoking. An increasing number of dynamic economy. Investors, Before the branding ban countries around the world are both domestic and interna- was introduced, supporters of opposed to branding bans, of- tional, can only commit to the measure claimed it would ten citing the lack of evidence projects with confidence if have an instant effect but, and the worrying impact on IP they can be sure that their IP is after this failed to materialize, rights. Indonesia, the Domini- protected. Strong IP protection policymakers shifted the goal can Republic, Honduras and makes it clear that a country is posts. It was later claimed that Cuba are challenging Austra- open for business. This is sup- the branding ban was never lia’s branding ban at the World ported by a number of studies meant to prevent current Trade Organization (WTO), that have shown a clear link smokers from smoking, but and a WTO panel ruling is ex- between a country’s economic would instead have an effect in pected to be published in 2017. performance and its level of the long-term. The Australian The four countries, and IP protection. government has been despera- others supporting them, claim It was with a complete tely trying to present the policy that the branding ban is a misunderstanding of the role as a success out of fear of violation of two agreements and value of brands and trade- international embarrassment administered by the WTO, marks that Australia decided over its failure. namely, the Agreement on to introduce its branding ban. IDIL YASA Although the branding Trade-Related Aspects of Quite simply, packaging is is the branding ban ban has not accelerated the Intellectual Property Rights, not advertising and cigarette vice-president at Japan decline in smoking levels, it and the Agreement on Tech- packaging does not prompt Tobacco International. has had a dramatic impact on nical Barriers to Trade. They Continued on P66
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IT WAS WITH a profound of plant breeders’ rights. This and somewhat depressing is not news to most lawyers. sense of deja vu that I perused Tobacco manufacturers the defence of the tobacco often make much of the claim industry in the article unsur- that their product is a “legal” prisingly written by a tobacco one. This status ought to be industry in-house counsel. examined in context, howev- Here are some of the state- er. Lawyers and policymakers ments made, and just some of trained in other countries what is wrong with them: often do not have a full “It was with a complete appreciation of the nature of misunderstanding of the role Australia’s federated govern- and value of brands and trade- ment. I have heard smokers marks that Australia decided say that tobacco can’t be that to introduce its branding dangerous, or our govern- ban.” On the contrary, it ment would have banned it. was with a sophisticated Unfortunately, that is not the understanding, both of the case, and Australian govern- true nature of intellectual ments of various ideologies property (IP) rights, and of SARAH BYRNE have long been concerned the likely impact of branding FORMER GENERAL COUNSEL with ways of minimizing the restrictions, that Australia TO THE AUSTRALIAN significant harm the use of introduced the Tobacco Plain tobacco causes. Packaging (TPP) Act 2011. MEDICAL ASSOCIATION Australia is made up of a First there is no “ban” on federation of states, and our branding. Companies can still constitution provides that the use their brand name, and such an effective and innova- commonwealth (federal) gov- identify the tobacco variant tive approach to the wicked ernment can make legislation on a cigarette pack, as per problem of tobacco control. under certain specific heads paragraph 20(3)(a) of the TPP The way in which tobacco of power, and only in relation Act. The use of logos, colours companies brand their prod- to those heads of power, some and “embellishments” is re- ucts is a huge part of their of which are shared with the stricted, but brand names are marketing and recruitment of states, and some of which are expressly allowed. As for an new smokers, which is exactly exclusive to the common- understanding of the impact why tobacco companies are wealth. As nothing has yet been of the restrictions, research whinging so loudly about found in those heads of power from the University of Bath these restrictions. that would give the common- shows that 78% of public Third, Australia under- wealth the direct ability to ban communications and 88% of stands that IP rights are neg- the sale or manufacture of research opposing the UK’s ative rights. Ownership of a tobacco, it has approached the proposals for plain packaging SARAH BYRNE is an trademark does not automat- problem laterally. come from tobacco-affiliated Australian lawyer, ically confer upon the owner The commonwealth has sources, suggesting that there formerly in such the right to use the trade- used its taxation and excise is little concern outside of positions as general mark; it only confers a right power to make tobacco ex- “Big Tobacco” about loss of counsel to the to prevent someone else from pensive. It has used its power trademark protection. Indus- Australian Medical using it (and sometimes not over broadcasting to regulate try in general fully appreciates Association, executive even that). Censorship and tobacco advertising. It has that plain packaging is not director at the National defamation laws are not an in- used its corporations power an “attack on branding” but a Health and Medical Re- fringement of copyright; laws to require consumer warnings public health measure, and no search Council, and also restricting the sale of weapons on cigarette boxes. It has also threat to ordinary commerce. former in-house coun- or the import of pharmaceu- used its social security power Second, of course Austra- sel at the Australian ticals do not infringe upon to increase subsidies for ther- lia understands the role and Department of Health patents, and the imposition apeutic aids to quit smoking. value of brands – this is pre- with primary carriage of of “single-desk” government So it makes perfect sense that cisely why this legislation is tobacco litigation. grain brokers is not a breach it would use the power over Continued on P67
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branding bans this year or to retaliate against Australia branding ban could resurface the next. The governments with plain packaging for wine. at the next FCTC COP. There of some Asian countries have So what is the main driver could be efforts to establish also shown an interest in con- of this extreme regulation? work streams aimed at em- sidering the policy, including Calls for branding bans are bedding branding bans within Singapore, which recently being spearheaded by the World the FCTC, for example via IDIL YASA held a consultation. Health Organization (WHO), amendments to the guidelines The WTO could potentially which is putting increasing or the treaty itself. rule that brand owners have a pressure on governments Any efforts to do this argue that the legislation right to use their trademarks, around the world to ignore the would show a complete lack of violates the rights of trade- and that Australia’s branding failure of the policy in Australia respect for the WTO dispute mark owners and unjustifiably ban is illegal. However, if Aus- and introduce copycat legisla- settlement process. Indeed, encumbers the use of trade- tralia’s legislation is upheld, a tion. One of the main ways it political pressure on countries marks in the course of trade, worrying precedent will be set does this is via its international to introduce branding bans be- and that the legislation is more for other industries. Already treaty on tobacco control. The fore the WTO gives a definitive trade restrictive than necessary we have seen a UK parliamen- WHO’s Framework Convention ruling undermine the spirit of to fulfil its purported objective. tary committee consider the on Tobacco Control (FCTC) co-operation that the COP has Still, some European coun- introduction of plain packa- provides a comprehensive itself called for. tries are following Australia’s ging for alcoholic beverages, policy framework on tobacco On top of its push for global example and will introduce and Indonesia has threatened control for its 180 parties. branding bans, the WHO is In 2008, the FCTC calling for “tobacco-style” conference of the parties regulations to be introduced for (COP) adopted two sets of alcohol, sugary drinks and fatty non-binding guidelines re- food. It is encouraging coun- commending that parties to tries to look at measures such the FCTC consider introdu- as taxes, labelling restrictions cing plain packaging. At the and advertising bans in an effort time of the adoption of to tackle non-communicable these guidelines, no country diseases – Illnesses linked to had implemented the lifestyle choices such as drink- measure. The guidelines ing, smoking, diet and lack were based neither on scien- of exercise. tific evidence nor on existing The push for a new best practices. global agreement to regulate Since 2008, several more unhealthy lifestyles has been sessions of the FCTC COP highlighted by the UN special have taken place, each rapporteur on the right to with an increasing lack of food, Olivier De Schutter, who transparency, integrity and said: “Unhealthy diets are now accountability. Exclusion a greater threat to global health of the public and media, a than tobacco. Just as the world selective approach to the came together to regulate the accreditation of observers, risks of tobacco, a bold frame- failure to engage in mea- work convention on adequate ningful consultations on the diets must now be agreed.” key substantive issues, and Many regulators have distortion of the COP’s rules argued that the health risks of mean increasing questions smoking make tobacco unique; are being raised about the all rules about the need for legitimacy of the decisions evidence, proportionality and taken at these events. justifiability can be thrown Even though Australia’s out of the regulator’s window. branding ban legislation is When concerns have been Australia was one of the first countries under challenge at the WTO, raised that a branding ban on to inroduce the branding ban there is a possibility that the tobacco could set a precedent Continued on P68
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SARAH BYRNE copyright, trademarks and patents to further enhance its tobacco control measures. “Packaging is not advertis- ing and packaging does not cause people to start smoking.” Packaging, like advertising, is a key aspect of marketing, and marketing is about selling. Having a product stand out on the shelf and attract the “Having a product stand out on the shelf and attract consumers’ attention is exactly why brands spend so much money on it.” consumer’s attention is exactly why brands spend so much money on it. If it is true that therefore, the article does not to existing smokers, without about the “quality” of the packaging does not cause refer to the drop in smoking, attempting to recruit new product. The only studies people to start smoking – if but to the “rate of decline in ones. In which case, consum- suggesting that there has been that’s true – packaging can still smoking”, which is misleading ers already have a preferred an increase in illegal tobacco catch the eye and trigger the in relation to the impact of brand, which they can still sales have been funded by the cravings of someone who is tobacco control measures. identify and purchase. tobacco industry. Organiza- trying to cut down or give up. The truth is that the use of If the consumer prefers to tions independent of tobacco That is, in fact, what it is de- tobacco continues to decline buy whichever brand offers hold equally vehemently that signed to do, as any dieter who in Australia at a steady rate. As the lowest price, then they will the rate of illegal tobacco sales has succumbed to the lure of the tobacco industry resorts to seek that out instead. Some remains constant at between confectionery in the checkout new and different strategies to people will buy what tastes 3% and 4%. Figures from the queue can attest. maintain and increase its sales, best, some will buy what’s Australian Institute of Health Enabling consumers to so does Australia employ new cheapest. Nothing about and Welfare show that a year choose among brands (via measures to counter them and plain packaging changes this. after the introduction of the packaging) has long been the further reduce the incidence Consumers of illicit tobacco TPP Act, significantly fewer tobacco industry’s conventional of smoking. That tobacco use buy it to avoid paying tax, not people than ever before were justification for advertising, and continues to decline consis- because they are confused using, or were even aware of numerous peer-reviewed stud- tently is an indication of the ies show that advertising does success of plain packaging, cause people (nine out of 10 combined with other control of whom are children) to start measures, which is why so smoking. Packaging and adver- many other countries are That tobacco use continues tising are inextricably linked. interested in following “After more than three years Australia’s lead. to decline consistently is an we have seen no change in the “Price has become the rate of decline in smoking.” main driver of choice and indication of the success of plain Since the introduction this has increased sales of packaging ... which is why so of plain packaging, the rate illegal tobacco…” of smoking in Australia has This argument makes many countries are interested dropped significantly, by an no logical sense. Price has in following Australia’s lead estimated 11.5% in less than always been a major driver of three years. In an effort to consumer choice. The tobacco represent this as a failure, industry argues that it markets Continued on P68
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for other goods, these have the existence of, unbranded consumption, this argu- been dismissed. However, (illegal) tobacco. So draw- ment is inherently flawed in similar concerns were made The slippery ing so much attention to it both theory and practice. If – and dismissed – about seems to be a bit of an own branding is an indication of health warnings, taxation slope of goal by the tobacco industry. quality, then McDonalds is and advertising bans. The tobacco “... are an important source the highest quality food on evidence, however, now tells of funding for terrorist and earth. And “quality” – what- a different story. The slippery regulation criminal organizations...” ever that might mean in the This claim has absolutely being used as no credible source. While a blueprint for there is evidence that some funds from illicit tobacco other goods sales in other countries has already may have been diverted to terrorist organizations, there IDIL YASA begun. In is nothing to show this is the SARAH BYRNE case in Australia, or indeed France we in the US, where a 2015 State slope of tobacco regulation have seen Department report found context of tobacco – has being used as a blueprint for that, “there is also no system- never been much of a feature other goods has already be- advertising atic evidence of sustained in tobacco marketing. gun. In France we have seen bans for links between the global illicit One brand is portrayed advertising bans for alcoholic tobacco trade and terrorism”. as rugged, another is beverages and sponsorship alcoholic “The attack on branding feminine, a third is cool, a bans for beer brands. beverages and is a direct attack on the prin- fourth sophisticated. More- In Ireland, the govern- ciple of quality.” over, there is apparently ment is considering plans sponsorship Leaving aside how ridicu- not even agreement within to introduce health labels, lous it is to discuss “quality” the industry, nor amongst minimum pricing and bans for beer in the context of a product users, as to what consti- advertising restrictions for brands that has no safe level of tutes “quality” tobacco. alcoholic drinks. Graphic and Even if there were ac- text warnings on alcohol are cepted indicators of quality, now mandatory in Turkey the claim remains a red and similar proposals have each other. All stakeholders herring because, as already been made in Thailand. Me- should have the chance to A colour or stated, the TPP Act allows xico has introduced taxes on share their views without logo provides tobacco manufacturers to sugary drinks while Hungary fear of exclusion and inti- put their brand name, and has brought in taxes on midation. Discussions with no new the product variant, on the foods with high fat, salt and such a wide-reaching impact packaging. A colour or logo sugar content. In India, the must be transparent, and the information provides no new informa- Kerala state government has public must be allowed to about the tion about the quality of proposed a 14.5% “fat tax” observe proceedings in New tobacco or anything other on burgers, pizzas and Delhi to ensure that decision quality of than the “image” smoking is other junk food served in makers are held to account tobacco or supposed to project. “branded” restaurants. for their policies. These are only some of the All eyes will be on India Knee-jerk measures such anything claims made in the article that as November’s FCTC COP as branding bans are not a other than cannot withstand scrutiny. It convenes. It is vital that there long-term, effective, sustaina- is a great shame that instead is an open and honest debate ble solution. Everyone who the ‘image’ of devoting so much time about what constitutes values brands, trademarks and money to defending the effective and proportionate and good governance, and smoking is indefensible, the tobacco regulation. The potential understands the implications supposed industry does not invest those benefits and consequences of misguided regulations, resources into researching and of any proposed regulation should make their voice to project developing products that must be weighed against heard against these proposals. do no harm.
68 ABLJ ⁄ NOVEMBER – DECEMBER 2016 INTELLIGENCE REPORT
BRAKES ON BREXIT?
BRITISH PRIME MINISTER THERESA MAY IS DETERMINED TO BEGIN THE PROCESS OF EXITING THE EU BY MARCH 2017, BUT A HIGH COURT RULING MAY DERAIL HER PLAN. WHAT SHOULD COMPANIES DO WHILE WAITING FOR A CLEAR PICTURE OF BREXIT TO EMERGE? VANDANA CHATLANI REPORTS
69 ABLJ ⁄ NOVEMBER – DECEMBER 2016 INTELLIGENCE REPORT
n 3 November, the London High Court issued a ruling that could foil Prime Minister Theresa May’s plans to trigger article 50 and kick-start the UK’s departure from the EU. The court ruled that a parliamentary nod was needed before the Brexit process could formally begin. The government promptly announced its intention to appeal this decision in the Supreme Court on 5 December.
Commenting on the High Court decision, Alasdair Steele, a part- EU would take a back seat for at least a year until Germany’s new ner at Nabarro in London, says: “My view is that the issue which was government is formed after elections in September 2017. “You can Oat stake was nothing to do with the Brexit vote but all about the pow- always start with more technical matters, but the hardcore … diffi- er of the executive [government] verses the legislative [parliament]. cult topics will be tackled after the constitution of a new German The UK constitutional piece is relatively clear – parliament makes government and that will be October/November [2017],” he said. He the law and only parliament can change a law which it has made. referred to Britain’s exit from the EU as a “political amputation of “The controversy here is politically driven and stems from the the first degree”, saying that the image of a “strong Europe” had “tar- ultimate problem underlying the entire Brexit issue – it was never nished a lot after Brexit”. supposed to happen,” he says. “Article 50 was written on the basis it European powers remain nervous following the UK’s vote to end would never be used [otherwise it would be much more extensive]. its membership of the EU in a referendum on 23 June. Many have Similarly the UK referendum legislation only deals with the ques- voiced concerns that the UK’s eventual exit could inspire other EU tion to be asked and the process for holding the referendum itself … members to follow. European Council President Donald Tusk urged [it] says nothing about the result and what it means. The argument EU member states to introspect during their meeting in Bratislava that the referendum result is a mandate for government to do that without the UK, to discuss the road ahead following Brexit. misses the point that the referendum legislation does not give that “We haven’t come to Bratislava to comfort each other, or even authority to government. worse, to deny the real challenges we face in this particular moment “As with article 50 itself, the position the government is in is in the history of our community after the vote in the UK,” said Tusk. a consequence of what was arguably deficient drafting in the ref- “We can’t start our discussion ... with this kind of blissful conviction erendum legislation. However, had parliament had to consider that nothing is wrong … we have to assure ... our citizens that we the ramifications of a “leave” vote and what government would have learned the lesson from Brexit and we are able to bring back be authorized to do in the circumstances, there would have been stability and a sense of security and effective protection.” considerably less chance of the referendum bill having been Tusk had previously warned that the UK’s decision to leave the passed in the first place. Arguably, having sacrificed the detailed EU should not be viewed in isolation. The concerns expressed in requirements in drafting the original legislation for political ex- Britain about immigration, security and cultural preservation, he pediency, government is now suffering the constitutional conse- said, were part of “a desperate attempt to answer the questions that quences of not having sought the necessary authority at the time.” millions of Europeans ask themselves daily”. Both European Com- In September, former European Council president Herman Van mission President Jean-Claude Juncker and German Chancellor Rompuy told the BBC that negotiations over Britain’s exit from the Angela Merkel have said that the EU is facing an “existential crisis”.
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Although May supported the campaign to remain within the Despite the uncertainty, Asian and other foreign companies EU, she has been firm about respecting the outcome of the referen- should have enough time to consider possible outcomes and ac- dum, stating “Brexit means Brexit”. Once article 50 is invoked, the tions before any Brexit agreements are struck. “It is more likely to UK will have two years to leave the EU. be a case of evolution over a number of years rather than a revo- “No one knows what will happen next, or what the future lution,” says Magnus Rodrigues, a partner at Chadbourne & Parke. holds,” says Steele. “Everything is conjecture, which is not helpful “Indeed, from a practical perspective there are major limits as to to businesses in the UK, Asia or elsewhere.” how much legislation the UK’s houses of parliament – or for that Steele also points out that “neither the so-called ‘Brexiteers’, nor matter any country’s legislative body – can pass in any year.” other European countries, know what they actually want from a In a sense, this means a longer drawn out period of uncertainty, Brexit. Indeed, no two Brexiteers I have heard speak at events have but equally, business as usual. “Given past history, the likelihood said the same thing about what Brexit means, or should look like.” is that any deal between the UK and EU will not be done until the
No two Brexiteers I have heard speak at events have said the same thing about what Brexit means or should look like
Alasdair Steele Partner Nabarro
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very last minute,” says Steele. “And early indica- tions are that non-EU countries do not want to enter into trade negotiations with the UK without knowing first what the UK’s relationship with the EU will be.” So against this backdrop of uncertainty, what should businesses be doing? Steele and his team have advised clients to perform an assessment exercise to establish the impact on their business if no deal between the UK and EU is struck at the point of Brexit, and to quantify the costs, impact and potential solutions to those consequences including the time required to implement solutions. “This will then mean that once the two-year no- tice period is triggered, businesses will know what they need to decide, and when in order to be ready for Brexit,” says Steele. “For those businesses looking to launch or expand in the UK and Europe, they can also factor these thoughts into their planning. The UK is a full member of the EU until the moment of Brexit, so it is very much business as usual. Howev- er, it would be foolish not to be thinking ahead as to possible consequences and solutions.” Steele says that if May is successful in invoking article 50 in March 2017, investors can expect the end of the two-year period – and likely uncertainty – during the first half of 2019. “The timing is calcu- lated to fall as much as possible between the various elections in Europe, particularly in France and Ger- many, but before the next European parliamentary elections and selection of the new EU Commission in 2019,” he says. “However, despite the outline timetable having been set, there is still no clarity on what sort of Brexit the UK will be looking for, with different ‘Leave’ campaigners suggesting different Brexit outcomes.” It is about understanding now what your expo- sure is, says Gavin Williams, a corporate partner and part of the Samantha Mobley Brexit team at Herbert Smith Freehills. “Companies need to do their Partner and Head of EU, Compe- homework, conduct detailed due diligence and identify the major tition and Trade Practice Group risks. They may find that Brexit only affects their businesses in a -mi Baker & McKenzie nor way. For companies that realize it’s a big concern, minimizing the impact depends on devising alternative structures – physical or legal
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– to minimize the impact of changes, and on making their businesses result in customs duties, tariffs and import requirements for goods more resilient and robust.” and services moving between the UK and EU,” says Mobley. “This Richard Cranfield, a partner at Allen & Overy, says Asian clients could result in higher costs and administrative requirements for who are the most engaged are those with the greatest investment Asia corporates using the UK as a gateway to the EU.” across the EU, and thus potentially the most at risk. “The most Some Asian companies could be hit by changes to the benefits of active sectors from our perspective are financial services such as EU licensing and authorizations that allowed them to register and banking, investment banking and asset management, insurance obtain licences or authorizations in the UK and then sell goods or and funds, automotive, life sciences, telecom media and technolo- provide services throughout the EU. “Going forward, these pass- gy, and general manufacturing,” he says. porting arrangements may no longer be available and so these Asia- Samantha Mobley, a partner and head of the EU, competition based companies are considering the possibility of needing to reg- and trade practice group at Baker & McKenzie, says the UK has been ister and obtain licences or authorizations in another EU country,”
Many of our Asia-based clients are actively looking at potential UK acquisition targets in light of Brexit –Samantha Mobley
an attractive jurisdiction for Asian businesses to establish their op- says Mobley, although she adds that most of her Asia-based clients erations and venture into the broader EU single market. In addition, believe it is too early to take specific action now. many of these businesses chose the UK as a hub to benefit from its While the UK may decide to forge bilateral trade relationships favourable tax regime and to rely on EU tax directives that exempt with Asian countries post Brexit, technical and legal barriers stand interest, royalties and dividends from withholding tax when paid by in the way of formal progress in this direction. For example, in 2013, companies in one EU country to companies in another. the EU and China announced the launch of negotiations for a com- “The UK has double tax treaties in place with all EU member prehensive EU-China Investment Agreement, which aims to achieve states under which the rate of withholding tax is reduced, in some progressive liberalization of investment and eliminate restrictions instances to zero,” says Mobley. “However, if the UK withdraws for investors to each other’s market. from this regime, UK companies receiving interest, royalties or “If such an agreement with the EU is finalized, post Brexit, the dividends from their group companies in certain EU countries are UK would no longer be party to it,” says Mobley. “The UK and China likely to suffer a withholding tax cost. We have advised our Asia- may, however, consider negotiating a separate free trade agreement based clients that this could make the UK a less attractive location and investment agreement.” for a European holding company.” But as Williams points out, while the UK remains a member The future of business ties between the UK and Asia will de- state of the EU, “the responsibility for negotiating free trade agree- pend on the shape of the trade deal the UK is able to negotiate ments lies not with the British government but with the European with the EU. Commission. So although preliminary discussions can be had, it’s “If the UK exits the EU single market, then depending on what not currently legal for the UK to negotiate free trade agreements trade agreement is reached between the UK and the EU, this could with foreign countries.”
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Gavin Williams Partner and Brexit Team Member Herbert Smith Freehills
One thing companies can try to do is influence the exit negoti- ation process, as the UK government tries to ascertain what path will gain the most support. Understandably, it is mainly large Asian companies that are major employers and profit generators in the UK that will be able to wield such influence. “It’s an inherently po- litical situation which means that jobs and taxes and livelihoods play into the debate,” says Williams. “If there are major employers out there who’ve identified really significant risks and they con- clude that they may need to relocate operations away from the UK to preserve the best interests of their business, then the govern- ment will want to know that. It’s hungry for that information.” Some companies may have enough clout to go directly to a rele- vant minister with their concerns, while others may be represented by industry bodies. Williams says law firms like his can help indi- vidual companies or those represented by their associations craft arguments “into a form politicians will recognize” and hopefully steer the government towards addressing thorny issues and com- promising on others. Among the thorniest issues, immigration was at the heart of the EU referendum in the UK. For now, Europe is sticking to its guns with a strict view that the UK cannot enjoy free market access in the EU without permitting the free movement of people across its borders. Mobley says some companies are concerned about the possi- bility of more stringent immigration requirements which would threaten their operations and their “flexibility in being able to mo- bilize and utilize their workforces across the UK and EU”. Asian companies should be prepared for disputes if Brexit re- sults in higher costs, alters regulatory requirements or has other adverse effects on businesses. “There is a possibility that counter- parties to contractual arrangements may try to rely on force majeure or material adverse change events to seek to modify or terminate If there are major contractual arrangements, leading to the possibility of increased disputes and potential litigation,” says Mobley. employers … [who] For some companies, particularly those with no exposure in the conclude that they UK, Brexit may be a blessing. The plummeting pound and lower valuations mean the time is right for bargain hunting. “Many of our may need to relocate Asia-based clients are actively looking at potential UK acquisition operations away from the targets in light of Brexit,” says Mobley. Steele says his firm is seeing a steady flow of investment – rather than a torrent – into the UK UK … the government from a range of different geographies. “Japan is tending to the more will want to know that. cautious end, while we are seeing Chinese investors coming back into the UK market, particularly in real estate,” he says. It’s hungry for that Companies may be exercising caution, but Williams says he an- ticipates the announcement of several deals in the coming months. information “Due diligence will be very high; acquirers want to understand where every last risk may lie,” he says. “But money is cheap. The flow of work has far from dried up.”
74 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
CHINA – CORPORATE & COMMERCIAL
By Yi Qian & For transition from the current law to the revised law, private schools established Dannie Xu pursuant to the current law may choose AllBright Law Offices to continue to be a non-profit school, or become a for-profit school once the revised law takes effect. If a school chooses to remain non-profit, it only needs to amend its articles of association and other registra- tion information accordingly. A private school may be re-registered as a for-profit school if it is applied for, provided that financial liquidation has been conducted to clarify the ownership of the Revised law ushers in new properties of the school, and the related taxes and fees have been paid. The detailed regulations in this regard will be formulated era for private education by local governments at provincial level. Private schools constitute an impor- tant component of the education sector in China. A report issued by Ministry of On 7 November 2016, the Standing cannot be distributed to sponsors, and Education in 2015 counts 163,000 private Committee of the National People’s must only be used for school operations. schools nationwide. In particular, private Congress passed a decision on the amend- • Registration of legal entity. A for-profit schools constitute up to 90% of the total ments to the Law on Promotion of Private school should be registered with the number of preschools. It could be reason- Schools, which will take effect on 1 Sep- Administration for Industry and Commerce, ably expected that implementation of the tember 2017. The revised law reflects a while a non-profit school should register revised law will have a profound impact major reform in the regulation of private with the Administration of Civil Affairs. on investment in the education industry schools in China; for the first time, it recog- • Tuitions and fees. A for-profit school in China. For-profit private schools will nizes the legality of for-profit private schools. may determine tuition and fees based become popular targets of capital invest- According to the current Law on Promotion on market conditions, while a non-profit ment, and will be put into the assets pool of of Private Schools, promulgated in 2013, school must follow fee scales set out by companies going for listing. sponsors of non-profit private schools are gen- the provincial-level government. The authors expect that the revised law erally allowed to demand “reasonable return” • Taxes. A for-profit school may enjoy some will also have a major impact on foreign from schools. However, as the current law preferential tax policies in accordance investment in the private education industry and its implementation rules did not specify with national regulations, while a non- in China. Foreign investors may have more a clear definition and criteria for “reasonable profit school can enjoy the same prefer- options in determining appropriate invest- return”, it is difficult for the sponsors to obtain ential tax treatments as public schools. ment structures, in addition to commonly “reasonable return” in practice. • Use of land. A non-profit school has the used contractual arrangements. However, In contrast, the revised law explicitly same preferential land policies as public the revised law does not lift restrictions on classifies private schools into non-profit and schools, i.e., allocated land can be used the holding of foreign capitals in private for-profit schools. Preschools, high schools, to establish a non-profit private school. schools, which means foreign investors still higher education schools and non-degree A for-profit school has to obtain land use have to set up private schools in the form of education schools can be established as rights according to national regulations. Sino-foreign co-operation, and are permit- for-profit schools, but schools of compulsory • Distribution of liquidating assets. In wind- ted to invest in a for-profit private school education (i.e., primary schools and junior ing up a for-profit school, assets must be and entitled to the profit distribution under high schools) must be non-profit. liquidated according to the Company Law. the revised law. The revised law elaborates on different With a non-profit school, the remaining The authors expect the release of more regulations and treatments applicable to the assets after liquidation can only be used detailed implementing rules in connection for-profit private schools and non-profit pri- for operation of a non-profit school. with the revised law, and believe that its vate schools in the following major aspects: • Government support. Government support implementation will help the private educa- for a for-profit private school includes gov- tion sector in China to enter a new era. • Distribution of surplus. Sponsors of a for- ernment procurement of services, student profit school are entitled to the distribu- loans, scholarships/financial aids, and lease tion of the surplus from school operations or transfer of idle state-owned assets. A YI QIAN is a partner at AllBright Law in accordance with the Company Law, non-profit school may also enjoy govern- offices in Shanghai, and DANNIE XU while for a non-profit school the surplus ment subsidies, fund awards and donations. is an associate at the firm.
Allbright Law Offices Contact details: Tel: +86 21 2051 1000 11-12 Floor, Shanghai Tower, No. 501 Yincheng Middle Road, Fax: +86 21 2051 1999 Pudong New Area, Shanghai 200120, China Email: [email protected] www.allbrightlaw.com Email: [email protected]
75 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
CHINA – DISPUTE RESOLUTION
By Jeremy Zhou problem of dishonesty. By the end of August 2016, 1.55 million dishonest persons had Boss & Young been prohibited from taking trains, 4.7 million had been prohibited from taking airplanes, and 66,954 persons had been prohibited from registering as the legal representative, director, or supervisor of an organization. Large numbers of persons subject to enforcement have to perform their liabilities when facing these restrictions. With this improvement, the Opinions on Accelerating the Advancement of Enforcement and the need Establishing System of Supervision and Sanctions towards Dishonest Persons Subject to Enforcement were jointly issued to develop social honesty by the General Office of the Communist Party of China Central Committee and State Council in September. To date, this is the most comprehensive legal document Sometimes, winning a judgment means paying high insurance premiums; travelling towards the person subject to enforcement, nothing to the plaintiff, since enforcement and vacationing; or even enrolling his or her including 11 different types and 37 different has been a serious and difficult problem children in private schools with high fees. items of disciplinary actions. under China’s legal system in past decades. With these measures the situation of Dishonest persons subject to enforcement All a People’s Court can do is seize, freeze enforcement has improved, but not by much, are subject to restrictions on: joining the or sell the properties of, or impose a fine or since these methods only serve to restrict CPC; holding public office, industry-specific detention on, the person subject to enforce- high consumption. More comprehensive and eligibility; engaging in specific industries or ment according to the Civil Procedure Law. effective methods are badly needed. projects; government support or subsidies; However, those people subject to enforce- In July 2013, Several Provisions of the honour and credit; special market trading; ment either have little fear of no more than Supreme People’s Court on Announcement high consumption; and exits. Strengthened 15 days detention, or have already concealed of the List of Dishonest Persons subject to daily supervision and inspections, increased or transferred their properties long before Enforcement was issued. Any person subject criminal penalties and other encouraged the legal enforcement. to enforcement who has the ability but fails restrictions are also in place. It therefore seems necessary, and urgent, to perform obligations determined in an By establishing and developing social hon- for the Chinese government and the effective legal judgment, and falls under any esty, the person subject to enforcement not People’s Courts to improve the situation of the circumstances – such as obstructing or only faces the penalties implemented from with several provisions and opinions having resisting enforcement, evading enforcement judicial department, but from various other been issued in succession. by fraudulent litigation or false arbitration, aspects, from work to lifestyle. In July 2010, Several Provisions of the concealment or transfer of property, violating While having a better enforcement situ- Supreme People’s Court on Restricting High the property reporting system, etc. – must be ation, we acknowledge that this is just the Consumption of Judgment Debtors was included in a list of dishonest persons subject beginning of developing social honesty, and issued, in which the natural person, or the to enforcement and imposition of credit- it is a complicated and comprehensive sys- legal representative, or key person-in-charge related punishment. tem. To further improve, the situation needs of the person, of an organization subject to The List of Dishonest Persons Subject to the co-operation of all departments from the enforcement is subject to restriction of high Enforcement is circulated to relevant gov- courts, public security and the treasury to consumption, or big spending. ernment departments, financial regulators, education, human resources, transport, etc. Under the high consumption restriction, financial institutions, institutions that assume The author believes that with the better the person subject to enforcement is pro- administrative functions, trade associations co-operation of all departments, the devel- hibited from expenditures such as: taking an etc., and such relevant entities may impose opment of social honesty, and the balance airline or the soft berth of a train; conducting credit sanctions against the dishonest per- of benefit and cost of keeping faith, the any elaborate activities at luxury hotels, night sons in the aspect of government procure- difficulty of enforcement will be gradually clubs or golf courses; purchasing real estate ment, bidding, administrative examination improved and advanced in the future. and carrying out extravagant housing reno- and approval, government support, financing vation; leasing premises such as high-grade credit, market access, and accreditation. offices, hotels and apartments; purchasing This is the first time that failing to perform JEREMY ZHOU is a partner at vehicles not necessary for business operations; the obligations of a judgment becomes a Boss & Young in Shanghai.
Boss & Young Contact details: 12th-15th Floor, 100 Bund Square, 100 South Tel: +86 21 2316 9090 Zhongshan Road, Huangpu District, Shanghai Fax: +86 21 2316 9000 www.boss-young.com Email: [email protected]
76 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
INDIA – CORPORATE & COMMERCIAL
with the DIPP’s release of PN3. Some of the By Ketan Kothari & critical clarifications pursuant to PN3 are: Shweta Dwivedi (1) For the first time, the policy has been Khaitan & Co vocal about “market place model” and “inventory model”. PN3 reaffirmed that FDI is permitted in a market place model, while it is not permitted in the inventory based model. A foreign investor can invest in a market place model; (2) E-commerce has been defined to mean not just selling and buying of goods through an online platform, but also buying and selling of services, where such PN3 brings clarity, confidence sale of goods and services is facilitated through digital and electronic networks (i.e., through computers, televisions, to e-commerce investment mobiles, extranets, etc.); (3) It is clarified that an e-commerce entity can provide support services to the sellers, such as logistics, payment India is now a global destination for attract- now permitted to undertake e-commerce. collections and facilitation in conformity ing investment. The e-commerce sector has However, FDI in the business-to-consumer with Reserve Bank of India guidelines, become one of the most sought- after sectors (B2C) model for multi-brand retail was, and warehousing, order fulfilment, call centre for investment, for foreign and domestic remains still, not permitted. and other services; players. Framing the policy on foreign direct (4) The e-commerce entity will not permit investment (FDI) in various sectors falls within MUDDY WATERS more than 25% sales through the the realm of the Government of India. FDI The market witnessed several innovative platform from one vendor or its group is regulated by the Department of Industrial structures that were adopted for e-commerce. companies; Policy and Promotion (DIPP) and the Ministry Since the government permitted 100% FDI in (5) The sellers will at all times own the inven- of Commerce and Industry. wholesale trading/B2B e-commerce, FDI was tory. Further, after-sales service, delivery The extent and conditionalities for FDI routed into B2B entities, and the front-end of goods to the customer, customer across sectors in India is governed by the retail entities continued to be Indian owned satisfaction and warrantee/guarantee Consolidated Foreign Direct Investment and controlled, having separate operations of goods and services sold will be the Policy of India (FDI policy) and the Foreign and management from the B2B entities. seller’s responsibility. There appears to Exchange Management Act, 1999 (FEMA), Foreign investors explored various other alter- be a conflict between the conditions along with regulations framed under FEMA. nate structures, but these structures remained prescribed since support services also The government introduced a regulatory subject to the close watch of regulators. include logistics/delivery of goods by the framework regulating e-commerce in India In fact, a body of brick-and-mortar e-commerce entity; and for the first time in 2000. Press note 2 (2000 business supported by an industry associa- (6) E-commerce entity will not directly or series) inter alia permitted FDI up to 100% tion approached the Delhi High Court (All indirectly influence the sale price of for e-commerce activities, subject to certain India Footwear Manufacturers and Retailers goods or services, and shall maintain a conditions. Such companies were also allowed Association (AIFMRA) & Others v Union of level playing field. to engage only in business-to-business (B2B) India & Others) on the grounds that the online e-commerce, and not in retail trading. marketplace model is permitting compa- The recent move by the government has The government eventually introduced a nies with FDI to undertake retail sales to definitely led to increased investor confidence definition of “e-commerce” in the FDI policy, end-customers, and hence was violating the in the e-commerce sector, and in the govern- released in 2010, to mean inter alia the activity FDI policy. Consequently, with the release of ment’s vision for this sector. There are still of buying and selling by a company through clarifications by the DIPP, pursuant to Press questions to be answered. However, with the the e-commerce platform. Note 3 (2016 Series), or PN3, on 29 March sector, the policy will also evolve with time. In November 2015 via Press note 12 2016, the petitioners in the said litigation have (2015 series), among many FDI liberali- withdrawn the petition before the court by an zations, the government also permitted order dated 12 August 2016. KETAN KOTHARI is a director at Khaitan & single brand retail trading (SBRT) entities Co in Mumbai, while SHWETA DWIVEDI is to undertake e-commerce, which was not PN3 AND THE ROAD AHEAD a principal associate at the firm. previously permitted. SBRT entities oper- The major impetus and reaffirmation of the VINEET SHINGAL, an associate partner, ating through brick and mortar stores were policy on FDI in the e-commerce sector came also contributed to the article.
Khaitan & Co Contact details: One Indiabulls Centre, 13th Floor, Tower 1, Tel: +91 22 6636 5000 841 Senapati Bapat Marg, Fax: +91 22 6636 5050 Mumbai 400013 Email: [email protected]
77 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
INDIA – INTELLECTUAL PROPERTY
Lakshmi Kruttika Vijay endorsements and for passing off, violating popular Indian singer Daler Mehndi’s right & Rohan Sharma to publicity by having toys that were identi- Anand and Anand cal to his likeness. In Titan Industries v M/S Ramkumar Jewellers, the court observed: “When the identity of a famous personality is used in advertising without their permission, the complaint is not that no one should not commercialize their identity, but that the right to control when, where and how their identity is used should vest with the famous personality. The right to control Celebrities: Just what are commercial use of human identity is the right to publicity.” their personality rights? An example of the power of image or personality rights is the of appointment of Jose Mourinho as manager of England’s Manchester United, bringing two superpow- ers of the sport, Chelsea and Manchester Image/personality rights, also known as the In Europe, organizations have used play- United, to a halt over the issue of his image right to publicity, protects against the unau- er’s image and personality rights to generate or personality rights, as Chelsea held a thorised appropriation of an individual’s huge revenues. In September 2013, Real number of EU trademarks for his name, persona, which would result in an unearned Madrid bought Welsh footballer Gareth signature and various other goods, and also commercial gain to another. In the field of Bale for a world record transfer fee of £85.3 owned his image rights. Manchester United sports, the unauthorised use of the image/ million (US$105.3 million). Bale in return finally had to pay an undisclosed sum run- personality for a commercial purpose would assigned 50% of his image rights to Real ning into millions of pounds to obtain the result in infringement of the individual Madrid, which eventually helped the club to image rights. sportsperson’s image or personality rights. recover the massive investment by using his The protection offered to such image/ The right to publicity does not constitute image rights for the sale of merchandise and personality rights of sportspersons in India a statutory right in India. Indian courts (at other product endorsements. is still in a nascent stage. For instance, the the level of the High Court) have recog- This also effects the wage structure of Indian government had permitted the use nized the right to publicity and laid down a player with the club, where a figure is of a picture of John Terry, a world renowned essential components for its infringement. agreed on to split wages and payments footballer who was the captain of England’s The Supreme Court has not yet disposed of for image rights. Players such as David national team, on cigarette packets. a case pertaining to this right. Beckham and Wayne Rooney have even With Sachin Tendulkar assigning his found ways to be tax-efficient by incorpo- image rights for his biography, Playing It LEGAL SOURCES rating companies to hold their image rights. My Way, more and more celebrities and There is no specific legislation in India If the name, image or the likeness of a sportspersons are following the trend. to protect image or personality rights. person is registered or used as a trademark, There is a need for greater exposure, Through various judgments, especially or has been copyrighted, then the said which will lead to more commercial ICC Development (International) v Arvee trademark or copyright can be licensed. opportunities, which in turn leads to a Enterprises, the Indian courts have read the Some Indian sportspersons, especially host of legal issues. right to publicity into articles 19 and 21 of famous cricketers such as Sachin Tendulkar So a statutory codification of the the Indian constitution by calling it an inher- and Kapil Dev, have protected their image principles of passing off with reference ent part of the right to privacy, an estab- rights by trademarking their name or to personality or image rights may lead lished constitutional right. Further, image or domain names for their websites. to greater awareness and protection of personality rights are a form of intellectual the rights that are inherent in celebrities property (IP) rights, which can survive even JUDICIAL PRECEDENTS and sportspersons. after the death of the individual. In India, while no specific law has been Image or personality rights recognize the created in this respect, Indian courts have commercial value of the picture representa- acknowledged and enforced this right in LAKSHMI KRUTTIKA VIJAY is a manag- tion of a prominent person, performer or various cases. ing associate in the litigation department sportsperson, and protect their proprietary In DM Entertainment v Baby Gift House at Anand and Anand, while ROHAN interest in the profitability of their public and Others, the Delhi High Court held SHARMA is an associate in the IT and reputation or persona. that the defendants were liable for false e-commerce litigation team at the firm.
Anand and Anand Contact details: Noida office: First Channel Building, Plot No. 17A, Tel: +91 120 405 9300 Sector 16A, Film City, Noida 201301 (UP), India Fax: +91 120 424 3056-058 www.anandandanand.com Email: [email protected] Email: [email protected]
78 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
INDONESIA – CORPORATE & COMMERCIAL
by the guaranteed risk must have occurred. By Abdul Haris Rum The IIGF will pay to the project company the & Indra Pambudy sum payable by the contracting agency, and Lubis Ganie Surowidjojo will in turn recourse against the non-paying government contracting agency. As such, at least in theory, the project company would be shielded from contracting agency defaults. Viability gap funding is granted to enhance the financial feasibility of a project. It is granted by Indonesia’s Minister of Finance for the purpose of covering a certain portion of construction costs (e.g., materials, installa- tions, and construction loan interests). Enhancing projects’ bankability Only projects that are financially feasible but for the viability gap funding will be eligible. under Indonesia’s PPP regime In addition, the Ministry of Finance needs to be satisfied that the following criteria are met:
• The project applies the user-pays principle; • The investment value is at least 100 billion Indonesia is attracting private investment availability payment. Previous governments Indonesian rupiah (US$7.5 million); to deal with a chronic infrastructure short- had considered and debated the concept of • The project company is established by the age. The nation is estimated to need about availability payment – i.e., the payment for an winner of a competitive project tender; US$400 billion in infrastructure financing, for infrastructure facility to be at operational level, • The project scheme is BOT (build- which the government could only provide without necessarily delivering the goods or operate-transfer); 63%, leaving the private sector to fill the services contracted for – in PPP projects. The • The feasibility study demonstrates: gap. In recent years, Indonesia’s government enactment of regulation No. 38 formalizes (1) optimum risk allocation between the has made efforts to enhance the bankability availability payment, a step forward in the government contracting agency and the of public-private partnership (PPP) projects positivist legal system that is Indonesia. winning bidder; (2) economic feasibility of through fiscal and non-fiscal instruments. The government contracting agency can the project, covering technical, legal, PPP-based infrastructure projects in pay for availability payment for projects of environmental and social aspects; and Indonesia are unique in that the project com- high economic and social significance, and (3) the project becomes financially feasible pany is eligible for a number of government where the return of investment on which if the viability gap funding is granted. support initiatives otherwise unavailable to cannot be adequately obtained from tariff projects undertaken under other schemes. payment. Availability payment is payable only Notwithstanding all the above measures This article lists the tools and measures at the when the infrastructure is deemed opera- available for the government to enhance a government’s disposal to offer investors an tionally ready by the government contracting PPP project’s bankability, PPPs generally have enhancement of a PPP project’s bankability agency, based on the standards and specifica- not progressed as fast as those financed purely based on existing regulations. tions set in the PPP co-operation agreement. through the government budget. Reasons for Presidential regulation No. 38 (2015) allows Indonesia seeks to juggle between offering this include: there are additional feasibility payment mechanisms for PPP projects in adequate guarantee against sovereign and studies that need to be concluded regarding the form of: (1) tariff payment; (2) availability sub-sovereign risk, and minimizing direct lia- the contracting model; the amount of guar- payment; and (3) other legally compliant bility to the government. Consistent with this antee and funding that the government will mechanisms to enable returns on investment. approach, sovereign risk guarantee is primarily commit to; the financial and economic feasi- The base tariff rate is set based on an investor provided by Penjamin Infastruktur Indonesia bilities of the project; and the risk allocations. being able to obtain return on investment, (Persero, known in English as the IIGF), an The authors are encouraged to see that the taking into account capital expenditure, SOE established to provide guarantee against government has made available these regula- operational expenditure and profit margin. a contracting agency’s defaults. tory tools, an important step before it can make Where such base tariff is deemed too high for The IIGF guarantees the project company financial commitments to projects. Feasibility end users, the government contracting agency against a government contracting agency’s studies will soon be finalized and projects will may offer viability gap funding. non-payment caused by risk allocated to the then move on to the tender stage. However, viability gap funding is available contracting agency. Please note that the only for infrastructure deemed socially impor- scope and category of risks guaranteed by tant, covers only 50% of the infrastructure the IIGF refers to its risk allocation guideline, ABDUL HARIS RUM is a partner at Lubis construction costs, and a project receiving which is regularly updated. To put a guarantee Ganie Surowidjojo and INDRA PAMBUDY viability gap funding will not be eligible for payment into force, non-payment caused is an associate at the firm.
Lubis Ganie Surowidjojo Contact details: Menara Imperium, 30th Fl. Jl. H.R. Rasuna Said Tel: +62 21 831 5005 Kav. 1 Jakarta 12980, Indonesia Fax: +62 21 831 5015 www.lgsonline.com Email: [email protected] Email: [email protected]
79 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
OFFSHORE
surviving company may be in a foreign juris- By Michael Gagie diction, and a BVI company may migrate and Iain Anderson from the BVI to another jurisdiction. Maples and Calder ON THE GROUND IN INDONESIA While Indonesian companies can have different share classes, preference and other share class structures remain uncommon and somewhat untested in Indonesian courts. Local Indonesian law firms advise that “deal execution risk is significantly increased, from an Indonesian regulatory perspective, if a complex capital structure BVI companies well set involving multiple types of shares is used”. This risk can be mitigated if the complex capital structure is at the offshore holding to invest in Indonesia company level. The ability of a BVI company to create separate share classes is enshrined in BVI legislation. BVI companies can pro- vide a low-cost, minimal regulation, tried- The British Virgin Islands (BVI) company has are low, while high standards are maintained and-court-tested mechanism to incorporate long been a vehicle of choice for Indonesian as required by the International Organization a non-vanilla capital structure. corporate and finance deals. Foreign direct of Securities Commissions (IOSCO), of which Should an investor require collateral investment (FDI) into Indonesia structured the Financial Services Commission in the BVI for investment, enforcing security over through BVI entities totalled US$157.4 is a member. Indonesian assets can prove to be problem- million in Q1 of 2014 in respect of 70 pro- The BVI has established robust business- atic. Enforcement always requires registra- jects. This put the BVI ninth in terms of FDI friendly corporate jurisprudence with an tion and enforcement in Indonesia. One into Indonesia, behind only such financial ultimate appeal to the Privy Council in the solution is to have a BVI company act as heavyweights as the US and Hong Kong, UK. A large volume of international joint the holding company for Indonesian assets. and traditional trading partners such as the venture disputes pass through the courts The shares in a BVI company can easily be Netherlands. BVI companies are involved in in the BVI, with The Economist noting that mortgaged, such that upon enforcement large-scale, tangible and valuable projects “the courts in the British Virgin Islands hear the investor obtains control of the struc- in Indonesia across a spectrum of sectors a good share of all disputes involving inter- ture without requiring any action at the including mining, retail, and the food indus- national joint ventures”. Indonesian level. The security documenta- try, and bring the corresponding benefits of Additionally, structuring benefits of using tion can be governed by the same governing FDI injection into these areas. a BVI company include: law as the relevant transactional documen- Investors into Indonesia remain attracted tation (typically English or Singaporean law). to the BVI for its common-law legal princi- • BVI law no longer requires a company to Indonesian companies are subject to ples, administrative simplicity and ability to have a share capital, and the concept of various Indonesian regulatory authori- ring-fence liabilities. BVI as a jurisdiction is capital maintenance has been abolished; ties, including the Capital Investment recognized by regulators worldwide, enabling • Flexibility to upstream profits via divi- Co-ordinating Board and the Ministry of investors to exit through a private sale or a list- dend, subject to a simple solvency test; Law and Human Rights. While an invest- ing on a major stock exchange. BVI companies • A BVI company may acquire the shares ment into Indonesia will always involve can list their shares on major international of a member and there are no financial some Indonesian regulatory considerations, stock exchanges, including the London Stock assistance restrictions; having financing and joint venture arrange- Exchange, the New York Stock Exchange and • BVI law permits creation of the parties’ ments at the offshore BVI holding company the Hong Kong Stock Exchange. desired voting majorities for approving may provide a more efficient structure for The BVI does not impose a double layer of corporate matters, and is not restricted to international investors and cross-border tax or regulation. BVI companies are flexible prescribed statutory majorities; transactions. in their structure and handling, and there • A wide variety of transactions may be are few prescriptive statutory requirements. carried out by way of a court-approved Ultimately, a BVI business company will be scheme or plan of arrangement; MICHAEL GAGIE is managing partner of more flexible in operation, particularly if the • Shares in a BVI company can easily be Maples and Calder’s Singapore office and company needs to raise equity finance for granted as security; and global head of its British Virgin Islands law working capital purposes. The incorporation • BVI companies may merge with one or practice. IAIN ANDERSON is an associate and ongoing costs of using a BVI company more BVI or foreign companies, and the based in Singapore.
Maples and Calder | Singapore Contact details: 1 Raffles Place, 32-02A One raffles Place, Tel: +65 6922 8402 048616, Singapore Email: [email protected] www.maplesandcalder.com Tel: +65 6922 8407 Email: [email protected]
80 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
ONE BELT ONE ROAD
the contemplated oil pipeline would be on By Wang Jihong land, the prohibition on foreigners building & Liu Ying onshore oil pipelines had a tremendous Zhong Lun Law Firm impact on the client’s original plan to intro- duce a Chinese construction company, as well as wasted a substantial amount of time, energy and capital. Outbound projects abound in opportu- nities, obstacles, risks and profits, and pose numerous difficulties for traditional Chinese companies in how they operate, invest, and hire managers and other key staff (such as ensuring that related employees are appro- Chinese companies active priate for outbound investment projects). The need for improvement is particularly clear for state-owned companies investing in Asian infrastructure abroad, such as, for example, increasing the effectiveness of their internal investment approval procedures. As a legal services institution that assists The One Belt, One Road (OBOR) initiative process, companies should first perform companies going abroad, we also face similar accelerated during 2016. According to comprehensive due diligence of the eco- obstacles with law firms from other countries China’s Ministry of Commerce (MOFCOM) nomic and legal environment, and explore such as culture, fee structure (including statistics, from January to November different methods to communicate with the capped fees versus hourly rates, as well as Chinese companies participated in 53 related government administrations, such as related assumptions) and work methods, par- OBOR direct investment projects with a during negotiations. ticularly the disparity between legal service cumulative investment of US$13.35 billion, Looking back on many failed outbound quality, such as when comparing developed primarily investing in Singapore, Indonesia, projects, it is apparent that missing just a and undeveloped jurisdictions. India, Thailand, Malaysia, Vietnam, Laos, minor detail during due diligence for these These differences test Chinese law firms Iran and Russia. In the construction and projects may result in billions of dollars in and their management (which act as overall engineering industries, Chinese companies losses. For example, the authors provided legal service co-ordinators), such as how to signed 7,367 construction contracts relating legal services relating to an Indonesian oil communicate with local firms to provide to countries along OBOR with a cumulative pipeline project. During the initial stages of effective, unified and professional legal value of US$100.36 billion across many this project, the client engaged in several services. The authors and their legal team industries including roads, railways, oil rounds of negotiations with its Indonesian have participated in dozens of outbound pipelines, energy, ports, development zones, partner and other local parties. After these investment projects and for each project have business logistics centres, and economic negotiations the client believed that there selected and engaged local law firms to collab- and trade co-operation zones. were no major problems to its participation orate with to provide comprehensive legal One of the main restrictions on economic in the project, and planned to collaborate services including legal due diligence, deter- development in Asia is inadequate and dif- with an Indonesian partner to jointly act mining transactional structure design, drafting fering infrastructure, which causes disparate as the project owner, introduce a Chinese transactional documents, and accompanying market conditions. China’s OBOR initiative construction company to perform the clients during on-site visits to meet with the will greatly promote Asian infrastructure related EPC construction work for the local government and local partners. construction and energy collaboration to the pipeline, and then, after the pipeline had Through these experiences, abundant mutual benefit of countries along OBOR, been completed, rent the pipeline out to an practical knowledge can be accumulated, while at the same time promoting opportuni- Indonesian oil company. including how to supervise and collaborate ties for Chinese companies to go abroad. However, after the client engaged our with local legal counsel and, as Chinese Although the OBOR initiative is an firm, we promptly performed due diligence attorneys, how to incorporate the clients’ attractive opportunity, in practice Chinese on the required approvals and informed the goals and requirements into tailored legal companies participating in outbound client that, although Indonesia does not services, build extensive bridges with local infrastructure construction projects should restrict foreign operation of oil pipelines, attorneys, etc., with the overall purpose of understand the varying political, economic, it does have restrictions on foreigners assisting Chinese companies going abroad. local market and legal systems within Asia, performing construction work for pipelines. as well as the target country’s own politics, Specifically, Indonesia does not allow for- economy, law, culture, environment and eign entities to perform onshore oil pipeline WANG JIHONG is a partner and LIU YING work culture. During this familiarization construction work. Since the majority of is an associate at Zhong Lun Law Firm
Zhong Lun Law Firm Contact details: 33, 36, 37/F, SK Tower, 6A Jianguomenwai Avenue [email protected] Chaoyang district, Beijing 100022, China [email protected] www.zhonglun.com
81 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
PHILIPPINES – CORPORATE & COMMERCIAL
By John Paul Gaba 1. Sensitive personal information; or ACCRA Law offices 2. Any other information that may, under the circumstances, be used to enable identity fraud.
NOTIFICATION DELAYS Notification can be delayed only to the extent necessary to determine the scope of the breach, to prevent further disclosures, or to restore reasonable integrity to the information and communications system. Implementation of Data Failure to comply with this duty of providing data breach notification, if determined to be unjustified, may constitute concealment Privacy Act in full swing of security incident/data breach sanctioned under the act (subjected to mandatory fine and imprisonment). The IRR also regulates outsourcing Since 2012, the Philippines has had a sole basis of making decisions that would and subcontracting agreements between comprehensive law governing personal significantly affect the data subject. personal information controllers and per- data privacy – Republic Act No. 10173, or sonal information processors. It provides the Philippine Data Privacy Act of 2012. The Data Privacy Act and the IRR define for stipulations that must appear in any However, its full implementation was “sensitive personal information” as per- outsourcing and subcontracting agree- not realized until the National Privacy sonal information about: one’s race; marital ments that involve processing of personal Commission (NPC) was officially consti- status; age; colour; religious, philosophical data. The IRR also defines the term “data tuted in the early part of this year. The or political affiliations; health and educa- sharing” to mean any disclosure or transfer Implementing Rules & Regulations tion; any court proceedings; information to a third party of personal data under the (IRR) of the act was promulgated on issued by government agencies peculiar to custody of a personal information control- 24 August, 2016. an individual (e.g., social security numbers, ler or processor. This is the comprehensive law that health records, licences and tax returns); governs data privacy protection in the and those specifically declared as classified, CONSENT REQUIRED Philippines. With the release of the IRR by law or regulation. Generally, data sharing must require the and the creation of the NPC – the primary consent of the data subject, even if the agency tasked to oversee the administration EXTENSIONS POSSIBLE data is to be shared between related of the act – implementation of personal The period to comply with the above-men- companies, affiliates, and other similar data privacy protection in the Philippines is tioned may be extended by the NPC upon relationships. If data sharing will be coming into full swing. request, and with good cause shown. for commercial purposes (e.g., direct Additional registration requirements may marketing), it must be covered by a data REGISTRATION REQUIREMENTS be imposed by the NPC through issuances sharing agreement. Under the IRR, compliance with the fol- and circulars, including guidelines that will The NPC promises to be open to lowing registration requirements must be provide for procedures in complying with comments/suggestions from industry completed within a period of one year the current registration requirements stakeholders, and responsive to their needs from the date of effectivity of the IRR mentioned above. and concerns. Although the NPC will be (9 September, 2016): The IRR also fleshes out the act’s pro- releasing several official circulars, rules visions on data breach. It is required that and issuances that will serve as guidelines 1. Registration of personal data processing notification must be given by the personal for proper compliance, it is hoped that systems (whether automated or non- information controller to the NPC and the the initial stages of implementing the act automated) that involves accessing or affected data subjects within 72 hours, will be a learning experience, as well as requiring sensitive personal information upon knowledge of, or when there is an adjustment stage among the relevant of at least 1,000 individuals; and reasonable belief, that the following have sectors in the Philippines. been acquired by an unauthorized person, 2. Registration of automated processing and that such an unauthorized acquisition operations subject to notification, where is likely to give rise to a real risk of serious JOHN PAUL GABA is a partner at the automated processing becomes the harm to any affected data subject: ACCRA Law Offices in Manila.
ACCRA Law Offices Contact details: Manila office: ACCRALAW Tower, 2nd Avenue corner Tel: +632 830 8000; local 8036 30th Street, Crescent Park West, Bonifacio Global City Fax: +632 403 7007; +632 403 7009 0399, Taguig City, Metro Manila, Philippines Email: [email protected] www.accralaw.com
82 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
SINGAPORE – CORPORATE & COMMERCIAL
“interfere” in the businesses in which they By Ronnie Tan have placed a stake. Central Chambers In general, venture capitalists and funds Law Corporation are adamant that if a start-up has a promis- ing product, but its founders prove impos- sible to work with, they will not hesitate to drop the start-up. The journey together can be a long one and the start-up must share in the purpose of its funding partner. Investors and funds have much to offer the start-up in terms of spearheading growth through:
• Adding value to the start-up by broaden- The investor’s purpose ing their network and expertise; • Offering strategic business planning; • Opening business doors; and in VC, funds industries • Creating international footprints.
As for the fear of “interference”, it should be noted that investors or funds are “Techventure” kicked off in September this The interest from investors is clear for typically granted corporate rights under an year to great fanfare. Many who attended all to see. Securing investor confidence, it investment agreement with the start-up, the event could not help but agree that the is suggested, stems from the attitude and which include: start-up space in Singapore is brimming mind-set of start-ups and their founders. with opportunity and has never been more The start-up mentality is widely viewed • Right to appoint a nominee director and vibrant. The Singapore government signified as the most important consideration behind alternate director, as well as a representa- its endorsement not only with Deputy the investment decision-making process tive on the start-up’s committees; Prime Minister Teo Chee Hean gracing the of funds and venture capitalists. • Right to appoint observers to the board event’s opening ceremony, but also with The authors have worked with these and committee meetings; his announcing of disruptive innovation as funds and observe that what investors really • Right to information; part of the overall budget for the entrepre- look out for, apart from the appeal of the • Veto or approval rights; neurial sector at a whopping S$19 billion product or invention of the start-up, is the • Right of redemption of preference shares (US$13.7 billion). It was an affirming display mind-set of the founder. The founder has (in the event of default); and of the direction that Singapore has charted to be someone they can mentor and work • Right to appoint an authorised cheque towards establishing a robust start-up and with, and they are looking for humility and signatory. technology innovation ecosystem. the ability to appreciate investor concerns. Recent years have witnessed numerous An understanding of core investment The authors speak regularly with funds government-led initiatives spawning the concerns is crucial for the budding start-up. looking to invest in the next disruptive start-up space along with foreign stakehold- Many do not grasp that funding is not solely medical device or application, and observe ers. Notably, NUS Enterprise, the leading motivated by the popularity of the enter- that the investor/start-up relationship can player in pairing start-ups with funds, prise or its product. Funds have their own be evinced from the way both sides work recently partnered with unBound Media mandate to assess the prospects of start-ups, together. Syphne, for example, is a start-up to host a platform for discussing the latest notwithstanding attention they may receive. that has developed a portable unit to trends in global and Asian innovation. Such “It’s a great time for start-ups and I wish manage stroke patients from the home. The efforts have provided start-ups with vital we could be involved now as a start-up,” synergy between the various stakeholders in financial support. remarked Royston Tay, one of the co-found- Syphne is evident in the steps taken by the At Techventure, the National Research ers of Zopim, which was eventually bought start-up to allay investor concerns at every Foundation launched the new SWITCH out by the US-based Zendesk. Tay presently stage of the project, which in turn translates programme in partnership with SLUSH from plies his trade in an investment fund keen into investor confidence. This is the key to a Finland. New support initiatives are reported to uncover the next “big thing”. Asked about successful co-existence. almost weekly as the collaboration between the types of start-ups he would collaborate funds and start-ups strengthens amidst the with now that he is in funding, he explained flourishing start-up scene. Mentions of Block that he would gravitate towards an enter- RONNIE TAN is managing director of 71 and Block 79 have found their way even prise that not only boasts aspirations but Central Chambers Law Corporation. into the US through start-up publications also is in tune with the funding concerns SARA LIEW, equity director at the practice, and paraphernalia there. that at times prompt investors and funds to also contributed to this article.
Central Chambers Law Corporation Contact details: 150 Cecil Street #03-00 Tel: +65 6538 0810 Singapore 069543 Email: [email protected] www.centralchambers.com.sg
83 ABLJ ⁄ NOVEMBER – DECEMBER 2016 CORRESPONDENTS
THAILAND – CORPORATE & COMMERCIAL
by the Thai Board of Investment (BOI) and By Jason Corbett several imaginative business structures. Silk Legal Foreign investors are permitted to own domestic companies with approval from the BOI, an agency tasked with encourag- ing foreign investment in Thai businesses. However, and crucially, the ability under the BOI for an overseas holding company to hold 100% of a Thai company permits a neat work-around for this situation. Alternatively, this foreign ownership stake can be accomplished through a foreign busi- ness licence (FBL). With approval for a 100% VC and Thai corporations: foreign owner of a Thai company under the BOI or through an FBL, a holding company in (for example) Singapore can then own the Navigating local law domestic Thai company and issue equity interests of its own stock – including hybrid and future equity interests not permitted under Thai law – to the VC, employees and As the venture capital (VC) market contin- or services; they don’t want to squelch that other shareholders. This corporate struc- ues to grow, Thai start-ups are a natural creativity – they want to harness it. ture complies with Thai business law while focus for VC firms interested in Southeast Typical VC investments embody this preserving the nimble ownership model Asian investment. Start-ups making use philosophy in several ways, often by making preferred by VC investors. of new technology have a need for initial the VC financer into a sort of silent investor Several tax advantages are available capital, are interested in disrupting existing that takes no active role in management to companies adopting this structure. In markets, and offer potentially large equity but enjoys the rights to profit from the addition to permitting a broader spectrum returns on investment – a perfect asset company’s future growth – for instance, at of investment types, other jurisdictions may for the investment portfolio of many VCs, the time of the company’s IPO. have different tax rates on corporate or which have the available capital to seed Legal instruments such as warrants and individual incomes. By creating an offshore new ventures and bet on the next new call options, future equity grants, employee investment vehicle for a Thai company, in a thing, rather than financing existing and stock option agreements, convertible notes, location which has double tax agreements well-seasoned companies. and hybrid debt instruments offer investors with Thailand already in place, the investor This perfect asset is not always a perfect a possible future equity position in exchange is able to reduce withholding tax on profits fit, however, due to several quirks of the for early-stage financing, while preserving and dividends. Thai legal system. As you will see, Thai the management structure of the existing Investors can allocate the management law does not recognize the full spectrum start-up as much as possible. Companies in functions of the enterprise between jurisdic- of equity and debt relationships that exist the VC firm’s portfolio keep their existing tions to realize income where the tax rates in other legal systems such as Singapore, team and management style, and their VC are the most advantageous, and otherwise Europe, or the US. The outlier status of sponsors get the chance to participate in structure the company to maximize profita- Thailand in this regard necessitates an alter- future profits, which can be huge. bility and shareholder returns. native approach, which fortunately includes These legal relationships are murky at International investment and cross-bor- positive knock-on effects. times, occupying neither a pure “debt” nor der transactions necessarily involve the The standard business model of a VC firm “equity” position in the corporate books. Yet combination of different legal regimes, and involves financing a number of new compa- they have been recognized by US, Australian picking and choosing between different nies with the hope of realizing significant gains and European legal systems, and VC firms jurisdictions. Quirks in the law make the from enough of them to be profitable. VCs and other investors in those jurisdictions process of investing more interesting, are in the business of providing financing at an frequently make use of these instruments. but they need not make it more difficult. early stage, and then letting their companies Technical legal factors create several Thailand’s system of foreign investment innovate, experiment and expand. And while obstacles to VC business in Thailand – but includes a host of challenges – but with a VCs have to be great at spotting the compa- also offer a way forward for investors close understanding of relevant laws, it also nies that will become successful, they don’t who can structure investments creatively. allows a compelling way forward. need to, or even particularly want to, take Specifically, Thai law can restrict the ability an active role in managing their companies. of local corporations to issue many of the Venture capitalists want new companies that hybrid or future equity positions VCs so often JASON CORBETT is the managing partner think differently and create new products use. An ideal work-around is made possible at Silk Legal in Bangkok.
SILK LEGAL Contact details: RSU Tower, 8th Floor, Suite 805, 571 Sukhumvit Road Tel: +66 (0)2107 2007 (Soi 31), North Klongton, Watthana, Bangkok Mob: +66 (0)86 304 4707 www.silklegal.com Email: [email protected]
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