Investing In
INTERACTIVE EDITION
Vol 8 Issue 3 April 2010
MAGAZINE FOR THE IN-HOUSE COMMUNITY IN ASIA & THE MIDDLE EAST l www.inhousecommunity.com
INVEsting in the Americas The Challenges, Risks and Rewards PUBLISHED BY A new M&A hurdle to overcome in the PRC Introducing Wake & Paine LLP Q&A: Ahmad Rizwan of Dubai Government Alternative billing: a new era FINANCIAL INSTITUTIONS • ENERGY • INFRASTRUCTURE AND COMMODITIES • TRANSPORT • TECHNOLOGY
Norton Rose Group has always served the needs of clients with interests in the Asia Pacific 700 lawyers, region. But now that Norton Rose Australia has joined forces with us, we’ll be even better placed. The move will create a major legal 13 offices, one team practice across the region. 700 lawyers in 13 offices to be precise. Our clients right around the world will benefit from a new wealth of resources, knowledge and contacts. Norton Rose Group www.nortonrose.com/asiapacific in Asia Pacific Vol 8 Issue 3 In this issue April 2010 Investing in the Americas Special Report 24 A window of opportunity With the help of experienced guides, the time might be right for Asian companies to explore investment opportunities in the US, says M&A partner Robert DeLaMater of Sullivan & Cromwell LLP. 26 An informed approach Partners from Dewey & LeBoeuf’s Washington office explain how companies can form effective M&A strategies whilst avoiding the 23 pitfalls of a CFIUS screening. 30 With eyes wide open… Cover illustration: www.oweiss.com The rewards for Asian investors in Latin America are plentiful, say lawyers from Diaz, Reus & Targ, LLP. Yet awareness of risks, and how best to handle them, are vital to success. 36 Close attention to detail Thorough due diligence and a careful review of the applicability of a range of regulations will go a long way to ensuring successful 12 investment in the US, say M&A lawyers from Shearman & Sterling LLP. Plus 17 Internal fraud investigation in Asia An executive summary – based on a presentation by Navigant Consulting and Winston & Strawn LLP – of the implications of the FCPA for companies in Asia, and steps organisations can take to avoid or mitigate violations. 42 Dealing with product liability in the PRC 14 Liability claims are becoming more popular in the PRC due to increasing consumer protection laws and a more demanding public, explains Beiten Burkhardt lawyer Willi Vett. Is your company prepared? Departments 3 News Focus Why the PRC’s proposed national security review mechanism for foreign investment in China is causing investors uncertainty on a number of issues. 17 4 The Briefing The latest news, moves and deals from across the region. 14 Ear to the Ground Taking an alternate route: the importance of getting legal billing right. www.oweiss.com 40 In-House Insight Ahmad Rizwan, legal advisor with the Government of Dubai, shares the core competencies which he and his employer rely on for success. 44 Jurisdiction Updates All the latest legal developments from across the region. 48 50 Asian-Counsel Direct Important contact details at your fingertips. 53 Helping Hands Striving to save Japan’s legendary Itou Contributors An associate attorney with Diaz, Reus & Targ, LLP, Sumeet Chugan focuses on interna- tional litigation, arbitration, white collar crime, complex civil and appellate litigation, Rebecca Brookes – Managing Editor [email protected] OFAC and bank secrecy laws, and money-laundering compliance research and trial sup- port. He is also skilled in M&A, financial services and cross-border transaction issues. Brian Chun – Design Manager [email protected] Robert DeLaMater is a partner of Sullivan & Cromwell LLP in the firm’s M&A Group. From 1993 to 2003 he was a resident partner in S&C’s Tokyo and Hong Kong offices, Wendy Chan – Events Manager advising clients throughout Asia in the region’s most significant transactions. Recently, [email protected] he advised Tokio Marine in its acquisition of Philadelphia Consolidated, and AIG in various dispositions including the pending US$15.5 billion sale of Alico to MetLife. Ricky Chiu – Business Development [email protected] Michael Diaz, Jr. is the founding and managing partner of Diaz, Reus & Targ, LLP. He Yvette Tan – Research Manager concentrates his practice on domestic and international trade and investment transactions, [email protected] litigation and arbitration of complex commercial disputes, white collar crime and regula- tory investigations. Gigi Ma – Distribution Manager [email protected] Benjamin P. Fishburne is a partner in Winston & Strawn’s Hong Kong office. Active in Tim Gilkison – Managing Director domestic and international business transactions for more than 30 years, he has advised [email protected] US and non-US clients during his career on investment, acquisitions, technology transfer, business ethics, and major infrastructure projects in many regions including the Middle Patrick Dransfield – Publishing Dir’ East, Southeast Asia, Eastern Europe, and Latin America. He also represents clients in [email protected] international dispute resolution. Arun Mistry – Director James E. Gordon is managing director and practice leader of Navigant Consulting’s Disputes & Investigations practice in Asia. With more than 25 years of experience, Editorial Enquiries Gordon has developed expertise in internal investigations, electronic discovery and com- Tel:...... (852) 2542 4279 Fax:...... (852) 2575 0004 puter forensics, and was one of the pioneers in investigating computer and cyber-crime. [email protected] He has focused his career on conducting and managing complex high stakes litigation and investigations for a diverse group of clients. Advertising & Subscriptions Tel: ...... (852) 2542 1225 Xiaomin (Samantha) Hu is an associate attorney with Diaz, Reus & Targ, LLP. A native [email protected] of China, Hu is a US trained attorney and fluent speaker of English and Mandarin Chinese. She is skilled in corporate affairs including advising public and private entities Published 10 times annually by on investment, intellectual property, corporate, and immigration related matters. Pacific Business Press Limited 1712, 17/F, Asian House Gregory D. Puff is a partner in Shearman & Sterling’s M&A Group in Hong Kong. Puff 1 Hennessy Road, Wan Chai has been involved in a wide array of public and private mergers and hostile transactions, Hong Kong S.A.R. stock and asset purchases, and joint ventures. He is admitted to the Bar in New York and Publishers of Hong Kong and is a Certified Public Accountant. • Asian-Counsel Magazine • Asian-Counsel In-House Handbook • Asian-Counsel Weekly Briefing Brian Wheeler is a senior associate in the M&A Group at Shearman & Sterling. Prior to transferring to the Tokyo office in October 2006, he was based in the firm’s London Organisers of office. He has represented corporations, private equity firms and investment banks in a • In-House Congress events wide range of transactions, including cross-border transactions, and recently represented Forums for the Shiseido in its acquisition of Bare Escentuals Inc. In-House Community Asian-Counsel is grateful for the continued editorial contributions of: © 2010 Pacific Business Press Limited and contributors
Opinions expressed herein do not constitute legal advice, and do not necessarily reflect the views of the publishers. ISSN 1729-3405 LONDON • PARIS • BEIJING • HONG KONG • SINGAPORE • BEIJING • SHANGHAI • BRISBANE • MELBOURNE • PERTH • SYDNEY • AUCKLAND • WELLINGTON Markets Are Blooming: Is Your Career?
In-house
AP Head of Compliance (12+ yrs pqe) Hong Kong Take on a leadership role at this Fortune 500 company. This position requires substantial compliance experience, preferably at a multinational or media, technology or financial services company. This is an EB role. Ref: 8834/AC Senior Manager: Legal & Compliance (8+ yrs pqe) Mumbai Assistant General Counsel (8+ yrs pqe) Hong Kong This top tier Our client, a widely recognized multinational, is seeking an financial services firm is seeking an Assistant General Counsel at the experienced professional who can take the lead in developing VP level. You must be ready to give legal support and advice to a key their new legal team in India. A strong understanding of Indian law regional business group. Experience in banking legal services such and regulations that are applicable to payments, remittances and as treasury or cash management would be a plus, fluent English and e-commerce is necessary to succeed. General banking knowledge strong negotiation skills a must. Ref: 8856/AC would be helpful. Ref: 8816/AC
Senior Counsel (6-8 yrs pqe) Hong Kong Work directly with the Legal Counsel (4+ yrs pqe) Hong Kong Exciting opportunity to work CEO at this top Hong Kong investment group. The ideal candidate has on one of the world’s fastest growing markets at this financial services a background in aircraft finance, leasing or engineering and can be firm. This position covers mainly private equity funds with a PRC focus. trusted with key accounts. Hong Kong or PRC qualification with good Excellent documentation and drafting skills required. Ref: 8846/AC English and native Mandarin required. Ref: 8855/AC Legal Counsel (4+ yrs pqe) Singapore Support the international Contract Risk Manager (8+ yrs pqe) Shanghai Proactive lawyer business of this respected professional services firm. You must have needed to take the lead on a variety of complex commercial experience in contract review, drafting and negotiation, preferably in- transactions at this Fortune 500 company. You must have excellent house, and be ready to work with a global team. This is a new role drafting and negotiation skills, preferably with some experience in with excellent prospects for expansion. Ref: 8829/AC the energy sector. PRC and US Bar with fluent Mandarin and English required. Ref: 8854/AC Legal Counsel (3+ yrs pqe) Shanghai Great opportunity on the expanding legal team at this Hong Kong based financial services Legal and Compliance Officer (8+ yrs pqe) Tokyo Help lead the firm. The ideal candidate is PRC qualified and has proven experience legal department for this well-known multinational corporation. You in property funds, financing, asset management and private equities. must have a good understanding of Japanese funds settlement, anti- Native Mandarin and good English required. Ref: 8859/AC money laundering, credit card and banking law. Fluent Japanese and English a must. Ref: 8817/AC Private Practice Real Estate Lawyer (2-4 yrs pqe) Hong Kong This prestigious UK
Licensing and Transactions Counsel (4-5 yrs pqe) Beijing law firm is seeking a junior associate to join their Hong Kong real Develop your career by joining the team of this world leading tech estate team. You will work closely with a partner who is experienced company. You must have proven experience in IP law with a focus on in property development, investment acquisitions and real estate telecom or technical matters. Patent, licensing and litigation experience finance. Conveyancing experience and Chinese language skills with good English required. Ref: 8852/AC required. Ref: 8843/AC
Legal Counsel (4+ yrs pqe) Hong Kong Exciting opportunity to work Associate (3-4 yrs pqe) Shanghai Join this US law firm that is a on one of the world’s fastest growing markets at this financial services world leader in M&A and securities deals. This position covers US firm. This position covers mainly private equity funds with a PRC focus. capital markets and M&A. JD graduates preferred, but those with a Excellent documentation and drafting skills needed. Ref: 8846/AC LLM and PRC qualification will also be considered. Native Mandarin and excellent English a must. Ref: 8840/AC
HONG KONG Tel: (852) 2520 1168 Fax: (852) 2865 0925 Email: [email protected] SINGAPORE Tel: (65) 6220 2722 Fax: (65) 6220 7112 Email: [email protected] BEIJING Tel: (86) 10 6581 1781 Fax: (86) 10 6581 1773 Email: [email protected] SHANGHAI Tel: (86) 132 2996 6550 Email: [email protected] www.hughescastell.com
AC Apr10 Blooming.indd 1 4/27/2010 9:14:31 AM The Briefing
NEWS FOCUS Plan for M&A national security review underway Acceleration in planning of the PRC’s proposed national security review mechanism for foreign investment in China is causing investors uncertainty on a number of
issues, says partner Peter Wang of Jones Day.
China is in the process of developing new rules for tions by foreign investors to undergo a separate national national security reviews of mergers and acquisitions security review in addition to antitrust review. It has been between Chinese and foreign companies. The new Plan widely understood that such national security review for National Security Review Mechanism (NSR Plan) will would be conducted by a separate authority according to establish a multi-ministry committee to review national forthcoming laws and regulations, but no implementing security issues presented by foreign mergers and acquisi- rules have been published and no cases are reported to tions with Chinese domestic companies. This will present have been subjected to separate national security review an additional regulatory hurdle for foreign transactions, under the AML. The NSR Plan is expected to make Article separate from the competition review under the 2008 31 operational. Anti-Monopoly Law (AML). Article 31 of the AML already In addition to the AML, Article 12 of the Rules on provides for national security reviews, but until now no Mergers and Acquisitions of Domestic Enterprises by Foreign mechanism for those reviews has been implemented. Investors (Foreign M&A Rules) requires foreign investors This development comes amidst increasing expres- to report to the Ministry of Commerce (MOFCOM) sions of concern by foreign governments and business any transactions in which they will acquire control of organisations about a perceived increase in domestic domestic entities in key economic sectors or which affect protectionism and economic nationalism in China. The national economic security or famous Chinese brands. NSR Plan is expected to be promulgated as early as Article 12 does not include a list of “key economic sec- this year, though further details have not been made tors” or define “national economic security”. Although publicly available. the antitrust merger review chapter of the Foreign M&A Rules is understood to have been superseded by the Legal and regulatory background AML, Article 12 appears to remain in force. As of March A vigorous debate has been underway in China for years 2010 there have been no reports of MOFCOM receiving regarding the perceived national security issues arising notifications or explicitly challenging transactions pursu- from foreign acquisitions of domestic companies, with ant to Article 12, although a number of transactions (such particular concern focused on “strategic and sensitive” as Carlyle/Xugong) have failed to obtain approval for industries and Chinese national champions. It was widely undisclosed reasons. reported that Carlyle Group’s proposed acquisition of Xuzhou Machinery in 2005 failed to obtain Chinese gov- The national security review plan ernment approval due to national security concerns. During the annual session of the National People’s Con- The AML’s Article 31 requires mergers and acquisi- gress in March 2010, Premier Wen Jiabao stated in his
4 ASIAN-COUNSEL www.inhousecommunity.com annual Government Work Report that national security review of foreign the Chinese government will “acceler- investment in US companies. ate the establishment of the National “The plan is said to The details currently available Security Review Mechanism of foreign about the NSR Plan remain thin and investment.” A new plan for national be modeled after the leave considerable uncertainty about security review of mergers and acquisi- Committee on Foreign a number of issues, including: tions by foreign investors has already reportedly been submitted to the State Investment in the United • How broadly “national security” Council for approval. This NSR Plan States (CFIUS), which will be defined; was jointly drafted by MOFCOM, the • Industries considered important National Development and Reform is responsible for US to national security; Commission (NDRC), and the Legisla- national security review • The timeframe and process for tive Affairs Office of the State Council. review and approval; The NSR Plan was reportedly com- of foreign investment in • Whether review will be initiated pleted in early 2009, but approval was upon the discretion of the Joint delayed due to the global financial crisis. US companies” Ministerial Committee, through It now is expected to be promulgated a mandatory prior notifica- as early as this year. However, further tion system governed by objec- details of the draft Plan currently are not available, and it tive reporting thresholds (as for antitrust review), or is unclear whether the Plan itself will be published. otherwise; • The relationship between the National Security Review The Joint Ministerial Committee Committee and the Anti-Monopoly Commission, both The proposed national security review will reportedly be of which are joint ministerial-level authorities with simi- conducted by a Joint Ministerial Committee comprised of lar constituent members; ministers from multiple government ministries including • The relationships among national security review, Arti- NDRC, MOFCOM, the Ministry of Industry and Informa- cle 12 of the Rules on Foreign M&A, and the Catalogue tion Technology (MIIT), the Commission of Science, Tech- for the Guidance of Foreign Investment Industries (which nology and Industry for National Defense (COSTIND), the designates industries in which foreign investment is Ministry of Science and Technology (MOST), the Ministry prohibited, restricted or permitted). of Agriculture, the State-Owned Assets Supervision and Administration Commission (SASAC), the China Banking Practical impact and policy considerations Regulatory Commission (CBRC), the State Administration When finalised, the national security review mechanism of Industry and Commerce (SAIC), the State Administra- will provide an additional regulatory hurdle for mergers tion of Taxation (SAT), and some important trade associa- and acquisitions by foreign investors in China, albeit one tions. The Committee will be headed by a state leader at that Chinese legislators and regulators would say follows the vice-premier level. existing practice in other jurisdictions such as the US CFIUS process. Despite these international precedents, Chinese Uncertain scope and process of review national security review is likely to add to increasing con- The scope of transactions subject to national security cern by Western observers about domestic protectionism review will apparently depend both on the industry and economic nationalism in China, which has been sparked involved and the scale of the proposed transaction. by recent actions such as a government initiative favoring The NSR Plan reportedly includes a list of strategic and indigenous innovation in government procurement. sensitive industries but that list will not to be published, “according to international practice.” The plan is said to be modeled after the Committee on Foreign Investment [email protected] in the United States (CFIUS), which is responsible for US www.jonesday.com
APRIL 2010 5 The Briefing
MOVES
Asia’s latest corporate legal appointments
AUSTRALIA Telecom and Media Practice. Ear- Allens Arthur Robinson (AAR) lier in his career, Abbas worked has bolstered its Melbourne prac- as Director (Tariff and Costing) tice with the appointment of in the Government of India’s Anthony Arrow, one of Australia’s Department of Telecommunica- leading infrastructure and construc- tions, where he had extensive tion lawyers, to its projects team. interactions with members of Anthony Arrow Currently General Counsel at John regional and international telecom Asim Abbas Holland Group Pty Ltd, Arrow has significant experience agencies. He later joined a leading Indian law firm as a in front-end construction and major infrastructure proj- telecom specialist, and has also served as Vice-President ects. He has recently worked on the Victorian Desalina- (legal) at the corporate office of Bharti Airtel Limited. tion Plant PPP, the Peninsula Link PPP and the Ararat Prison PPP projects. Based in Mumbai, Amitabh Sharma is joining the firm’s Infra- AAR has also appointed resources structure and Projects Practice. and native title practitioner Mar- He was previously a partner in shall McKenna as partner. His another Indian firm where he spent practice focuses on commercial, almost five years focusing on infra- mining and native title litigation, structure and projects matters. His in addition to land access agree- Amitabh Sharma wide experience includes advis- Marshall ments, negotiating compensation, ing on investments, financing and structuring of infra- McKenna heritage and intellectual property. structure projects, public-private partnership projects, McKenna joins AAR from Perth firm Hunt & Humphry, environment, health and safety, forestry and land laws. where he has been a partner since 2000. Sharma has advised domestic and foreign entities, fund- ing agencies and lenders and PE funds on infrastructure, HONG KONG power and mining projects. Sidley Austin has strengthened its Hong Kong offering with the Also based in Mumbai, Shishir appointment of Alex Lloyd as a Mehta will join the firm’s Banking partner in its US Corporate Finance and Finance Practice. He started Practice. Lloyd’s practice focuses his legal career in London as a on debt and equity capital markets trainee solicitor with Slaughter including high yield debt offerings, Alex Lloyd and May where he later became IPOs, restructurings, SEC regulatory compliance and liabil- an associate, focusing on banking, ity management transactions, and he has represented issu- finance, private equity and corpo- Shishir Mehta ers and underwriters in a number of high yield offerings in rate matters. Mehta subsequently Asia. Lloyd has practised law in Hong Kong for five years, joined White & Case in New York, gaining valuable after previously practising in London and Washington DC. experience in leverage and acquisitions financing. He has regularly advised on financing transactions including INDIA credit facility arrangements, security documents, inter- Khaitan & Co has appointed three new partners to its creditor arrangements, debt restructuring and cross- Indian team: border issues. He is accredited to practice law in Gujarat Based in New Delhi, Asim Abbas will head the firm’s in India, in New York, and in England and Wales.
6 ASIAN-COUNSEL www.inhousecommunity.com
With over twenty years’ experience in the global legal market, Laurence Simons offers far more than jobs. As well as advice on which fi rms are looking and why, we offer a truly consultative service tailored entirely to your needs, so whether you require help in negotiating packages or expert assistance in writing your CV and business plan, Laurence Simons’ should be your fi rst port of call. Our team is run by some of our most senior people. People who can add real value to your search. We don’t pretend that our partnership will always deliver the perfect job, but we do promise that we will work responsibly, professionally and in complete confi dence to help you identify and secure your ideal career move.
Corporate Counsel 5+ PQE | Beijing Legal Counsel China 7 + PQE | Shanghai Our client, an innovative market leading US technology MNC seeks an attorney to be Our client designs personal equipment for a vast array of communications their sole counsel in Beijing. The role will support the Company’s offi ces throughout products. They now seek a lawyer to join the APAC legal team and focus on China the PRC and will focus on software license, reseller, consulting and other customer in a newly created position. Ideal applicants will have experience of general contracts. There will also be responsibility for IP, managing litigation, supporting JVs, corporate commercial matters, including licensing, distribution, marketing and providing internal legal training and acting as the FCPA compliance offi cer in China. sales agreements. Fluent Mandarin language skills are essential and whilst this At least 5 years’ experience, gained in the PRC and US training and experience would role will focus on China, you will work on matters throughout APAC. International be ideal. Fluency in English and Mandarin essential. Ref: 104201 experience and Common-law qualifi cation, or similar are required. Ref: 105600
Corporate Energy Counsel 8+PQE | Hong Kong/China Litigation Counsel 5+ PQE | Hong Kong/Singapore Our Client, a cutting edge solar power technology MNC requires a senior legal Global leader in private wealth management with an outstanding reputation in counsel to lead their China operations. A unique opportunity to partner with Asia now requires an ambitious experienced litigator to join them for a 6 month management in a truly dynamic environment. Solid PRC corporate experience contract. Applicants will have at least 5 years’ PQE gained in litigation and cross essential and a knowledge of construction, including EPC contracts would be border experience is required. Ideally you will have China/Taiwan experience an advantage. Fluent Mandarin and English language skills are prerequisites. and some banking/fi nance experience, though this is not necessary for the right Candidates from in house and private practice will be considered and a proactive applicant. This role can be based in Hong Kong or Singapore and you must be approach is a prerequisite. Ref: 111400 immediately available to commence work. Ref: 104801
Asia Pacifi c Counsel 7+ PQE | Singapore Commercial Counsel 4+PQE | Hong Kong/Singapore One of the world’s leading open source software providers, this US multinational Leading Global Telecommunications Service Provider seeks two further lawyers to join now wishes to hire a Senior APAC attorney. You will mainly deal with various IT- the APAC regional team in Hong Kong and Singapore. The roles will support the sales related agreements, contracts and support the legal needs of the business in the and business development teams and provide advice on the structuring of transactions, region. Ideal applicants will have 7 years’ plus experience including substantial a key part of the role will focus on contract drafting and negotiation. You will need commercial transactional work. Your strong negotiation skills and strategic outlook to be between 4-9 years’ qualifi ed in a common law jurisdiction and preferably be will be rewarded with excellent and defi ned career progression. Ref: 102301 already working in a high tech or telecommunications company. Ref: 104101
Corporate Partner | Shanghai Shipping Partner | Shanghai Our Client, a Global 100 Law fi rm with over 20 offi ces worldwide is seeking an additional Rare opportunity for a Partner to join this leading International law fi rm with an Partner or team for their Shanghai offi ce. A solid track record in M&A, FDI and Private excellent reputation across the region. Senior associates on the cusp of partnerships Equity is a prerequisite. Whilst a portable book of business and Mandarin language will be considered. The successful candidate will have strong commercial litigation skills are required, Mandarin language skills may not be essential for the right individual. A or shipping experience covering the full range of maritime work, acting on behalf stellar opportunity for a dynamic, entrepreneurial, energized lawyer who wants to join an of charterers, owners and P&I clubs. Lawyers in Singapore and Hong Kong who are international law fi rm with an established track record in Asia. Ref: 105401 keen on relocating to Shanghai will be considered. Ref: 107100
Funds Associate 4-7PQE | Hong Kong Competition Antitrust Associate 3-5PQE | Beijing US law fi rm with one of the largest funds/fi nancial services teams seeks a mid to Premier Law Firm seeks a competition/anti trust lawyer for their highly regarded senior associate. The role will handle investment fund transactions, particularly the team in Beijing. The ideal applicant will have 3 plus years’ experience, a Common development of innovative fund structures and fi nancial products, including hedge Law or US qualifi cation and will already be working for a leading international fi rm funds and private equity arrangements. Ideally candidates will have a strong in the APAC region. Whilst fl uent Mandarin and an EU competition background Funds background, but top tier M&A lawyers looking to switch will be considered. are preferred, they are not essential. A genuine commitment to making a long Chinese language skills and experience gained in this region preferred. Ref: 106001 term career in China is essential. Ref: 105001
To hear more about these roles, please contact:Tara Brennan, Rebecca Collins or Denvy Lo on +852 3154 9271 or email [email protected]. If we successfully place someone you refer you will be entitled to receive HK$8000 worth of gift certifi cates.
www.laurencesimons.com The Briefing
NEWS in brief One year on: measuring the success of Hong Kong’s Civil Justice Reform
n 2 April 2009, the High Court of Hong Kong have been shortened, one of his main criticisms is that cost introduced significant changes to its civil proce- savings in large disputes have been minimal. “We acted in a Odure processes through the Civil Justice Reform large shareholders’ dispute last year – one of the biggest dis- (CJR). The underlying objectives of the CJR were to putes in 2009 – which took less than a year to reach trial,” increase the cost effectiveness of proceedings and to ensure he says. Whilst Kwan concedes that prior to the CJR a simi- that cases are dealt with expeditiously. So with the passing lar matter would have taken at least two years to reach trial, of the CJR’s one year anniversary, just how effective have he notes, “Although the client saved on time, the work had the reforms been? to be front-loaded – we were forced to put a bigger team “With only twelve months post CJR and the lack of on the matter in order to comply with the Court’s deadlines statistics on costs for comparison purpose, it is difficult to – which meant that costs were not necessarily saved.” illustrate in monetary terms whether or not litigation has Whilst fast-tracking has improved timing in some mat- become more affordable or cost effective,” says partner ters, there is still room for improvement. Kwan says that James Kwan of Simmons & Simmons’ Disputes Group since the implementation of the reforms, he has experi- in Hong Kong. “To an extent, cost effectiveness can be enced delays in obtaining hearing dates in busy lists. “There reflected by how well the CJR has eliminated delays and have been cases where interlocutory applications have improved the efficiency of proceedings, and some specific taken six months to complete, and I had a discovery applica- measures have assisted in this regard.” He refers to the tion which took three months to hear because of the lack introduction of measures at the pleading stage which cause of availability of dates,” he notes. He is eager to encourage pleadings to be more focused – parties are now required to continuity of case management by having a single judge support pleadings with a statement of truth, forcing them preside over the various steps in individual matters where to take more responsibility regarding the substance of their practical, and believes there would be further benefits were claims and defence – whilst case management conferences, the courts to adopt arbitration-style discovery and consider mediation and better control over time extension applica- resolving interlocutory applications tions are also assisting to expedite matters. on paper unless a hearing is Yet these measures and other aspects of the CJR have truly necessary. also presented some problems. According to Kwan, one such problem is the lack of sufficiently-qualified mediators in Hong Kong – outside the construction space – to deal with commercial disputes. And whilst pre-trial timing may
8 ASIAN-COUNSEL www.inhousecommunity.com people make the difference
To view opportunities advertised on our website please visit www.aquissearch.com For a confidential discussion call +852 2537 0333 or email [email protected] or [email protected]
Investment Banking Counsel Singapore An outstanding opportunity has arisen for an experienced lawyer to join this global financial powerhouse supporting investment banking activities across the region. This is a deal driven role covering IPO, M&A and related transactions across Asia Pacific with a focus on South East Asia.
Working within an established legal infrastructure the successful applicant will advise investment bankers on the legal risks and ensuring they are properly monitored and escalated to ensure deals are managed efficiently across Asia.
The successful applicant will have at least six years of post qualification experience from a leading US or UK firm to be considered and experience working in the Asian market is an advantage. Outstanding remuneration on offer and excellent career prospects for top performers.
Reference number: 851
Derivatives Counsel Hong Kong This preeminent investment bank has an established sales and trading desk that provides cutting edge products and solutions across the region. A new role has been created for an experienced derivatives lawyer to work on structured solutions for a variety of clients.
In this role the successful applicant will provide transactional and advisory support across a breadth of equity and credit linked products including hybrid and retail structured products. You will also be drafting and negotiating complex transaction documentation, assisting with the structuring and execution of those transactions and providing regulatory advice as needed.
The position calls for an experienced derivatives counsel with at least four years of post qualification experience and strong technical skills. This is an opportunity to develop within a growing platform offering excellent compensation.
Reference number: 855 The Briefing
DEALS
INDIA A snapshot of recent noteworthy AZB & Partners has advised Reliance Industries Lim- transactions from across the region ited (RIL) in respect of the establishment of a 50:50 joint venture company between RIL and US-based sports mar- keting and management company IMG. The JV company AUSTRALIA will create and operate sports and entertainment proper- Blake Dawson has advised PetroChina in respect of the ties in India and develop a “world-class” sports coaching proposed acquisition, with its joint venture partner Royal infrastructure for the country. Deal closing is subject to the Dutch Shell, of Queensland-based Arrow Energy, an inte- satisfaction of certain conditions. Partner Shuva Mandal grated energy company with extensive interests in the coal led the transaction. seam gas sector. Valued at A$3.5 billion (US$3.27b), the deal will proceed by scheme of arrangement and is subject INDONESIA to shareholder and regulatory approval. It is the largest WongPartnership LLP has acted as Singapore counsel Chinese joint venture bid in Australian corporate history for a group of banks headed by the Japan Bank for Inter- and the first major acquisition in Australia by PetroChina, national Cooperation in respect of the approximate the world’s largest company by market capitalisation. Part- US$595 million financing granted to Indonesia’s independ- ner Justin Shmith led the firm’s advisory team. ent power producer PT Cirebon Electric Power, to finance a power venture in Cirebon in West Java, Indonesia. This CHINA is the first new international independent power producer Davis Polk & Wardwell LLP has advised China Mer- project to be financed in Indonesia since 1997. Partner chants Bank Co Ltd, the PRC’s sixth largest bank in Alvin Chia acted on the matter. terms of assets, in respect of its US$3.2 billion global rights offering. The offering consisted of a public offering of A OMAN shares (listed on the Shanghai Stock Exchange) in the PRC, Lovells Lee & Lee has advised Sembcorp Utilities Pte a public offering of H shares (listed on the HKSE) in Hong Ltd and the Oman Investment Corporation in respect Kong, and private placements of H shares to institutional of a US$1 billion construction, financing and development investors outside the PRC and Hong Kong. The transac- of an independent water and power project in Salalah, tion marks the first global rights offering by a Chinese Oman. The bidding and financing occurred amid the bank and the first rights offering by a Chinese company credit crunch which affected the cost and availability of made available to US investors. UBS AG and CICC were bank loans. After several months of intensive negotiation, the global coordinators of the offering. The firm’s advisory financial close took place towards the end of last month. team was led by James C Lin. This is the first power and water project in the Middle East that involves funding from Chinese institutions. Singapore HONG KONG office partner Ken Hawkes led the transaction. White & Case LLP has advised Richard Li’s Hong Kong- based Pacific Century Group (PCG) in respect of the PHILIPPINES closing of its purchase of AIG’s investment advisory and Pinsent Masons has advised Power Sector Assets and asset management business. The worldwide deal closed in Liabilities Management Corporation (PSALM) – the New York on 26 March 2010. The New York-based AIG state agency responsible for handling the sale of the Philip- Investments operates in 32 countries and manages approx- pines’ National Power Corporation’s asset – in respect imately US$87 billion of investments for institutional and of the bidding for the privatisation of the 1200-MW Ilijan retail clients. PCG’s current interests are focused in infra- Natural Gas-Fired Power Plant on 16 April 2010. The suc- structure, property, satellite communications and other cessful bidder was San Miguel Energy Corporation, with a investments in Asia-Pacific. The firm’s advisory team was bid of US$870 million. Hong Kong partner John Yeap led led by partners Steve Teichman and John Hartley. the firm’s advisory team.
10 ASIAN-COUNSEL www.inhousecommunity.com
The Briefing
DEALS
and placed under Section 4(2), Rule 144A and Reg S outside SINGAPORE Korea. The transaction marks the largest Korean IPO since WongPartnership LLP has acted as Singapore counsel for 2006, with approximately 50 percent of the common shares Bharti Airtel Limited in respect of the grant, valued at subscribed for by overseas investors. The Davis Polk advi- approximately US$7.5 billion, from a consortium of lenders sory team was led by Tokyo partner Eugene C Gregor, to Bharti Airtel International (Netherlands) BV and Bharti whilst partners Woong-Soon Song and Jong-Ho Song International (Singapore) Pte Limited, in connection with led the Shin & Kim team. KLI and the selling shareholders the acquisition by the former of the entire issued share were advised by Simpson Thacher & Bartlett LLP as to capital of a leading African mobile operator Zain Africa BV, US law and by Lee & Ko on Korean law. the African unit of the Zain Group. Partners Susan Wong, Choo Ai Leen and Tan Kay Kheng acted on the matter. THAILAND Watson, Farley & Williams LLP has advised Conergy SOUTH KOREA Renewable Energy Singapore Pte Ltd (Conergy) in Davis Polk & Wardwell LLP and Shin & Kim have advised respect of the formation of a consortium with Yanhee Solar the consortium of underwriters in respect of a global and Annex Power to develop and construct one of Thai- IPO by Korea Life Insurance (KLI) of more than 217 million land’s largest private solar projects to date: a 3MW plant. common shares valued at approximately KRW1.8 trillion Conergy will be responsible for the design, engineering, and (US$1.6b). KLI is the oldest Korean life insurance company. components supply of the project. The plant is expected to The common shares were listed on the Korea Exchange and be completed in Q4 2010. The firm’s Singapore team was were offered through a registered public offering in Korea led by partner Ken Cheung.
http://www.andrewhitchen. com/
www.andrewhitchen.com
12 ASIAN-COUNSEL www.inhousecommunity.com NEWS in brief Secret copyright treaty published
A secretive global negotiation on new copyright rules will not force countries to adopt ‘three strikes’ internet disconnection policies. A draft of the Anti-Counterfeiting Trade Agreement (ACTA) has been published officially for the first time.
he treaty, which is being negotiated outside of exist- it an offence to get around the technical measures used to ing trade bodies the World Trade Organisation and stop the copying of material sold on CDs, DVDs or other Tthe World Intellectual Property Organisation, has digital media. been the subject of negotiation by governments for two “Each Party shall provide for adequate legal protection and a half years, but its contents have been kept secret and effective legal remedies, in the form of civil remedies from citizens, until [now]. or criminal penalties in appropriate cases of wilful conduct, Under pressure from digital rights activists and follow- against the circumvention of effective technological meas- ing the European Parliament’s vow last month to ures that are used by authors, performers or produc- take the European Commission to court if the ers or phonograms in connection with the exercise documents were not published, the govern- of their rights and that restrict unauthorized acts ments negotiating the treaty have agreed to in respect of their works, performances, and publish the current draft. phonogram,” it says…. It reveals that fears that the Agreement There were fears at one point that ACTA would force all signatory governments to dis- would demand that signatory countries search connect businesses and households from the people on their way in and out of the country, check- internet after three accusations that copyright infringe- ing digital media devices for copyright infringement. The ment had taken place were ill-founded. treaty specifically excludes such activity from its scope. ACTA does say, though, that the existing immunity of “Parties may exclude from the application of this Sec- internet service providers (ISPs) from legal action because tion small quantities of goods of a non-commercial nature of subscribers’ copyright infringements should be depend- contained in travellers’ personal luggage [or sent in small ent on it taking action to curb infringement. consignments.],” it says. The Agreement lays out two options [regarding poten- The treaty is being negotiated by the US, Japan, South tial ISP immunity], either of which might be agreed on when Korea, Mexico, Canada, New Zealand, the European Com- the treaty is ratified later this year…. mission and others…. The treaty demands that signatories pass laws making www.out-law.com
In next month’s issue… ® Don’t miss next month’s edition of Asian-Counsel, in which we take a look at the state of legal markets in the Middle East. We also investigate the reasons behind increasing business interaction between Asia and the Middle East, which sectors are hot, and why law firms and companies alike are being drawn to opportunities in emerging markets such as Qatar and Saudi Arabia. For information on how to contribute email: [email protected]
APRIL 2010 13 Ear to the Ground
Taking an alternate route
Managing director Robert Sawhney of SRC Associates Ltd (Hong Kong), a boutique consultancy which provides strategic and advisory services for professional service firms and SMEs, explains the importance of getting legal billing right.
recently leaked memo from was 110%; in 2008, our realiza- fees and discounts from the company’s a New York-based global tion was 97%; for 2009, we origi- reduced number of law firm panel A 100 law firm stated: nally budgeted 93%, and we are members. Whether she is right to dic- “As you are all aware, our pricing now running at a realization of tate on law firm profitability is subject power is diminished. In more and around 89%. We want incremental to question, but there is little doubt more areas, clients are seeking business and we are realistic about that as a client one can demand some discounts or other billing arrange- what is needed to obtain attractive degree of pricing certainty and many ments. On new business pitches, incremental business…we are corporations are doing just that. discounts are routinely being willing to fix fees. If a particular Additionally, Lexis Nexis surveys sought. In 2007, our realization partner rate or particular class from 2009 show that over 50 percent rate is a sticking point, we can of in-house counsel believe that law discount those rates to be com- firms are too profitable, whilst 55 per- petitive. We can quote a blended cent plan to reduce their spending on rate. In brief, we are flexible on outside counsel in 2010. ALTERNATEALTERNATE rates and want to do what we need to do in order to expand The Big Boys our share of the high-end busi- Earlier this year, Microsoft’s General ness out there.” Counsel Brad Smith was quoted as saying that up to 45 percent of the As the memo suggests, there technology giant’s legal bills will be seems to be little doubt that in- on an alternative fee basis, with the house counsel are now in a posi- company also facing a reduced legal tion to dictate fees to law firms budget of about 10 percent. He is cer- like never before. This has been tainly not alone in the emphasis he backed up by comments in the places on alternative fees. Other public arena. Amy Schulman, notable in-house counsel in the the General Counsel of Pfizer, United States – including DuPont’s GC has stated that law firms have Thomas Sager; United Technologies’ ROUTEROUTE been too profitable in the past Associate GC Chester Paul Beach; and and she is now insisting on fixed FMC Technologies’ GC Jeffrey Carr –
14 ASIAN-COUNSEL www.inhousecommunity.com Taking an alternate route
By Robert Sawhney, SRC Associates Ltd
Figure 1: Strengths of hourly billing model Figure 2: Weaknesses of hourly billing model
It is simple There is no certainty over the final cost 56% 94%
I can break the bill down There is no incentive for the firm to be quick and efficient 55% 82%
I can compare the cost of different firms It encourages padding 50% 74%
It is measurable I cannot measure the value-add 49% 54%
It provides transparency It is hard to assess the quality of the work 34% 46%
It is more practical than the alternatives I am subsidising the high salaries paid to junior staff 11% 43%
There are no strengths 10%
(Source: Stop the Clock: A research report on fees and value in legal services. BDO Stoy Hayward, 2007) are all strong advocates of alternative departments being cut, in-house staff as Valorem or Exemplar in the US – billing arrangements. Recent research are now under increasing pressure to appear happy to charge 100 percent of from Australia also suggests that in- control legal spend, and it is unsur- their work on a fixed fee basis, many house departments in that country are prising that alternative fee arrange- of the larger law firms from the US putting almost 40 percent of their ments such as fixed fees provide the and the UK are also moving towards legal spend towards fixed fees. certainty and control that corporations more alternative fee work. They also However, the deal that really are seeking. have sophisticated systems for scop- made people sit up and take notice In order to secure both longstand- ing work upfront. was that between Levi Strauss and ing and new clients, many law firms From a law firm perspective, the law firm Orrick Herrington & have begun to embrace this new way preferred terminology for alternative Sutcliffe. Under the terms of that of billing. Whilst smaller firms – such fees is value pricing… at least, that is arrangement, Levi has agreed to give what consultants tell them. In essence, all their worldwide legal work to law firms need to tie-in their price set- Orrick which will, in return, charge ting with their overall strategy and fees on a yearly basis (to be payable In essence, law firms marketing efforts so they better under- in monthly installments). stand the value they deliver to clients need to tie-in their price and indeed, what clients value! From The rationale and anatomy of setting with their overall an in-house perspective, research does alternative fees support the concept that in-house The concept of alternative fees is strategy and marketing decision makers choose law firms that hardly new. The demise of the billa- efforts so they better have specialised expertise in their ble hour has been proclaimed for over industries and who understand the 20 years now, yet during this time understand the value they commercial aspects of their business. little really changed. The recent deliver to clients This is the ‘value add’ in the relation- global financial crisis, however, has ship and hence requires a different given in-house counsel the proverbial and indeed, what way of communicating between arrows they needed to throw at exter- lawyer and client. clients value nal counsel to elicit a shift in think- There are a number of alternative ing. With the budgets of many legal fee arrangements around:
APRIL 2010 15 Ear to the Ground
• Fixed price agreements (FPA) – common method to ensure this does the bundling together of services not happen is for in-house counsel to over a time period or matter with Firms may resort to the hold some money back to be based on unlimited access to the service outcome. This motivates law firms to provider; argument, “How can we put their best people on the job to • Change order – put in place when price upfront when we ensure that agreed objectives and, in additional service needs arise that some cases, certain outcomes are are not covered in the original don’t know how much met. Firms may resort to the argu- FPA. Services rendered here are work is involved?”. In ment, “How can we price upfront charged separately; when we don’t know how much work • Service guarantees – perhaps wor- reality, firms should know is involved?”. In reality, firms should rying, but some firms are offering know based on experience how much based on experience money-back guarantees based on time something will take and the client satisfaction at the discretion how much time costs involved. They will also have of the client; the historic data to help them gauge • Risk based – sharing in the sav- something will take and costs. If they don’t, maybe they are ings/revenue generated for clients the costs involved the type of firm you don’t want to be or the size of a transaction; working with! • Task based – a set fee for each Setting the price and scope of task, such as filing a motion or work will require detailed conversa- deposition etc; or situation facing them, the service tions between both parties that focus • Discounted rates for a guaranteed provider can reduce any resulting on the objectives of the work, the out- volume of work; anxiety by providing up-front fee comes expected, and expectations of • Discount rate plus kicker – agreed schedules or sharing in the outcome service quality. This may be a new hourly rate plus performance success of a project. conversation for many law firms and based pay; their clients. Once the historic data • Annual retainers; Relationship pricing has been dug up, General Counsel are • Buy-in, follow-on approach – offer- Including discounted rates for large starting to demand discounts of 20 to ing low prices on an initial engage- volumes of work or the buy-in, fol- 30 percent, a fact that should ‘encour- ment in return for the client’s low-on approach, the underlying idea age’ firms to adopt a new way of promise of future purchase of linked here is that building long term rela- working which focuses on modern services or ancillary services. tionships with the right kinds of cli- practice management and increased ents can be beneficial for both the efficiency. In other words, moving to In reality, these approaches can be client and the service provider. a new type of business model. summarised under two major head- More than ever before, it seems ings identified by Leonard Berry and Getting it right that alternative fee arrangements have Manjit Yadav in the Sloan Management There are a number of arguments gained real traction. I believe the ben- Review (1996): against alternative fees (aside from efits to both the client and law firm regulatory issues, such as litigation are palpable and in the long run will Pricing strategies to reduce tax requirements in Hong Kong), increase the profitability and working uncertainty although not many hold water. relationships of both parties, with first These include service guarantees, In-house counsel are often concerned movers gaining a real advantage. benefit driven pricing, and fixed price that outsourced work will be pushed agreements, with the idea being that down to lower level juniors to save [email protected] where clients are unsure of the service money under a fixed fee model. A www.srchk.com
16 ASIAN-COUNSEL www.inhousecommunity.com Internal fraud investigation in Asia Implications of the FCPA and critical steps for organisations
An executive summary based on a presentation by James E. Gordon of Navigant Consulting and Benjamin P. Fishburne of Winston & Strawn LLP. Feature
Think ignorance is bliss? The enforcers of the United States’ Foreign Corrupt Practices Act would beg to disagree. We take a look at the potential implications of the FCPA for Asian companies, and consider how organisations can take practical steps to combat internal fraud.
n 31 March 2010, Navigant Consulting and Legal aspects and practical implications Winston & Strawn LLP (in association with The FCPA’s broad jurisdictional application means that any Luk & Co) conducted an exclusive seminar person (regardless of nationality) who engages in acts in Ofor senior in-house counsel and company furtherance of an improper payment in the United States directors in Hong Kong on how can be caught by its provisions. organisations can best evaluate and US-incorporated subsidiaries of Asian- mitigate the risk of corporate fraud. based companies are also implicated, Led by James E. Gordon, managing as are Asian companies who choose to director and practice leader of undertake listings on US stock Navigant Consulting’s Disputes & exchanges. Whilst on the face of it the Investigations practice in Asia, and Act does not cover foreign individu- partner Benjamin P. Fishburne of als, foreign subsidiaries or foreign Winston & Strawn – two recognised joint ventures, such parties can be experts in the field of Foreign found to be aiders, abettors or co- Corrupt Practices Act (FCPA) mat- conspirators of improper payments ters and corporate fraud investigation The FCPA’s broad under the Act. Furthermore, the activi- – the seminar provided an overview jurisdictional ties of overseas entities can often lead of the United States’ FCPA and prac- to investigation of a US parent com- tical guidance as to how organisa- application means that pany and its management. Accordingly, tions should conduct internal fraud any person (regardless both Gordon and Fishburne say that investigations and ensure compli- an awareness of the legislation’s appli- ance from employees and relevant of nationality) who cation and reach is vital for in-house third parties. engages in acts in counsel and senior management work- Although the underpinning con- ing in Asia. cepts of the FCPA are not new – furtherance of an The FCPA prohibits the making of Fishburne says the core provisions of improper payment in direct and indirect bribes (through third the FCPA were originally passed in parties) to foreign officials in return for 1977, with several subsequent amend- the United States can securing an advantage or receiving ments in 1988 and 1998 – it is a subject be caught by its beneficial treatment for business pur- which has recently generated much poses. Under the legislation, a “bribe” discussion in Asia, and for good reason. provisions is viewed as anything from a payment Increasing enforcement under the or offer of payment, or promise or FCPA and escalating penalties require companies operating authorisation of such payment or offer, to providing anything in Asia to have a strong appreciation as to how they may be of value. affected by the Act’s provisions, and why traditional ways Fishburne says that any company which may be covered of conducting business in Asia mean compliance can by FCPA provisions needs to be very careful in undertaking require even greater vigilance. gift-giving and providing hospitality in the course of
18 ASIAN-COUNSEL www.inhousecommunity.com Internal fraud investigation in Asia
By Rebecca Brookes
business. In many Asian markets, this can be troubling as the FCPA requires US public companies to have such con- such displays can be very important in the business context. trols, as well as accurate books and records. In addition to The provisions do not mean that companies need to refrain being good business practice, such efforts are worthwhile in from all such activities, but Fishburne advises that it is better light of the FCPA’s wide-reach, as the criminal and civil to err on the side of caution. “Gifts valued at RMB200 penalties for violation can certainly add up. Business entities (approximately US$25) or more must be disclosed,” he face a US$2 million penalty per violation, for instance, says. “You need to evaluate what might be an appropriate whilst individuals can face fines up to US$100,000 and level for the gift. With banquets in China, for instance, use imprisonment. There can be additional consequences for a rule of reason and think about what your company’s rules breach of the Act’s anti-bribery provisions, including debar- are in relation to entertainment. If you are entertaining or ment from contracting with the US Government and loss of hosting people on a business trip, my rule is that 70 percent certain US export privileges. Organisations found to be in of the trip has to be directly related to business… it can’t all breach may also be subject to compliance monitoring for a be strictly for the sake of entertainment.” lengthy timeframe. With respect to payments to third parties, the FCPA The threat of such penalties is very real. In recent years, includes a “knowing standard”: essentially, the existence of the US Government has brought enforcement actions warning signs that should “reasonably alert [a person] to a against companies in numerous sectors – including the high probability of an FCPA violation” will satisfy the test. manufacturing, financial services, energy, pharmaceutical Fishburne says the standard clearly warns against a “head in and telecommunications industries – as a result of improper the sand” when it comes to agents and commissioned sales interaction with government officials in various Asian representatives. Companies have a positive duty to deter- countries including China, India, Vietnam and Indonesia. mine the reputations of such third parties as they can also be When it comes to the attention of management that there held liable when bribes have been paid by third parties with- has been a breach or possible breach, the best and first course out the company’s knowledge. “A conscious disregard and of action is to find out what actually happened through an deliberate ignorance of a known circumstance is sure to lead internal investigation. “Don’t ignore it!” says Fishburne. “If to violation,” he cautions. “However, you’re in a pretty good you get caught whilst looking the other way, the outcome is position under the knowing standard if you have undertaken only going to be worse.” Additionally, the company should proper due diligence in addition to having decent contracts. consider whether voluntary disclosure of You have then gone a long way to protecting your company the actual or possible breach is in its from the actions of an intermediary or agent.” own interests. “If you conduct Devising and maintaining a system of internal account- an investigation yourself and ing controls will also go a long way to demonstrating that it’s credible, and you also transactions have been authorised, executed and recorded decide to flag the issue with properly, should a company ever be investigated. Moreover, the regulators, a solid inves- tigation will provide a basis
“If you conduct an investigation yourself and it’s credible, and you also decide to flag the issue with the regulators, a solid investigation will provide a basis for the Department of Justice accepting its findings and not just immediately handing you over to Benjamin P. Fishburne the FBI for further investigation”
APRIL 2010 19 Feature
for the Department of Justice accepting its findings and not are connections, which may in turn put the team on the just immediately handing you over to the FBI for further right path to finding the required information. investigation,” he says. Gordon stresses the importance of ensuring the investiga- tive team has experience in the context of the relevant geo- Critical steps for a successful investigation graphical region, and that it possesses appropriate language A violation of the FCPA or other means of corruption can capabilities and understands local customs and idiosyncra- come to light in a multitude of ways: via whistleblower, sies. This will assist in assessing how the relevant data is rumours, high profile transactions, regulatory requirements, likely to be stored and therefore collated. “In China, SMS and areas of operational risk. So what is the appropriate texting and instant messaging are prevalent ways of business course of action, whatever the originating circumstances, communication. Emailing is not relied on as much as it is in when a company in Asia is confronted with a violation of the business environment in the United States, for instance. the FCPA or other possible fraud? Those in relevant posi- It is key that the team knows where to look for the right tions of responsibility need to be aware of key criteria for information,” he says. conducting successful internal investigations. According to Once found, preservation of evidence is just as important Gordon, adherence to the following points is crucial to and Gordon says it is essential to keep knowledge of the ensure the integrity of an investigation: investigation on a need-to-know basis. “Loss, destruction or • proper selection of an investigative team and delinea- deletion of hard copy files or electronic data could be fatal to tion of roles and responsibilities; an investigation. The consequences of leaving the individual • clear objectives as to the information that needs to be suspected of wrongdoing to his/her own devices within the ascertained; company could prove highly erroneous, as would be the • identification, collection and preservation of documents distribution of knowledge about the investigation to others and electronic data; and sympathetic to the offender’s plight.” Amongst others, things • organisation of information and documenting the the investigative team should look out for include the state of sequence of events for counsel/company interviews. local books and records, data privacy issues, travel and enter- tainment expenses, freight forwarding and customs pay- In choosing a suitable investigative team, in-house counsel ments, cash payments to agents and distributors, and should be aware that teams comprised solely of employees payments to offshore bank accounts. “Also be aware that may restrict the investigation to only that which has occurred companies might keep different sets of records for different within the company’s boundaries, when external activities audiences,” says Gordon. “Companies might keep one set might be just as important in sourcing the nature for themselves, one for the tax department, one for customs, of the offending behaviour. Regardless of one for the parent company, etc.” composition, it is vital that the team Interviews are also a crucial source of information, and map out all areas of inquiry and seek the timing of such activity is critical – completed in haste, as much knowledge – internally and relevant material may be missed. “Interviews should be externally – as is necessary in order conducted when the investigation is substantially com- to be effective. Doing so will allow pleted,” says Gordon. “Yet clients often want investiga- the team to determine where there tions to be completed as quickly as possible. This could be
“In China, SMS texting and instant messaging are prevalent ways of business communication. Emailing is not relied on as much as it is in the business environment in the United States, for instance. It is key that the team knows where
James E. Gordon to look for the right information”
20 ASIAN-COUNSEL www.inhousecommunity.com Internal fraud investigation in Asia
By Rebecca Brookes
due to a range of reasons, including monetary pressures. Effective tools to combat internal fraud From an in-house perspective there has to be a balance, as In addition to the above, companies should ensure they have you want to get as much information as possible out of an carefully crafted ethical and corporate policies to reduce investigation.” exposure to potential litigation and fines under the FCPA and comparable legislation. “After such policies have been rolled Reporting requirements out, employees should be reminded periodically of their It is important that the approach taken to an investigation be importance,” says Fishburne. He notes that training is also well-documented, with the aim at the conclusion of an inves- critical, and says this can involve hypothetical and real-life tigation to produce a comprehensive report detailing all rel- examples and interactive elements. Gordon agrees, adding evant evidence, preservation protocols, and recommendations that training programs are essential to creating, maintaining for further work or options available. Interim reports are just and demonstrating internal compliance programs to employ- as important, and must be provided during the course of the ees and outside entities. Properly taking such measures may investigation. “It has to be an interactive process,” stresses help companies avoid FCPA violation in the future, and will Gordon. “The more you learn and communicate, the faster certainly assist with long-term goals of achieving a best prac- and more effective (not to mention cost-effective) the inves- tice internal fraud monitoring system. tigative process will be.” With consulting and advisory firms on hand to offer proper guidance where required, in-house counsel and senior Red flags and due diligence management should not feel alone or overwhelmed at the There are also steps that should be taken in advance of under- prospect of creating relevant policies or training programs, or taking any acquisition, merger or associated transaction, to conducting investigations to address issues of fraud. Gordon avoid possible violations of the FCPA or invoking similar also believes that technology will begin to offer more of a legislation from jurisdictions outside the US. Companies can lending hand, indicating that emerging and proven compli- look for ‘red flags’ – potential compliance issues that need to ance technology will begin to mitigate many of the compli- be addressed before the transaction proceeds – in the transac- ance risks that companies currently face. “Applications are tion partner’s records or activities, including unusual pay- now available that will automatically monitor, document and ment patterns or financial arrangements, a refusal to certify rate compliance risks across a broad range of activities on an or verify FCPA compliance, and a lack of transparency in integrated web based global platform,” he says. “Channel their records. Companies should also proceed with caution partners that pose higher compliance risks will be flagged for where a transaction partner has been recommended by a further vetting giving companies control and confidence in potential government official customer, or where they have the integrity of their sales, marketing, procurement, adminis- close relationships with government officials. tration and chartable functions.” He anticipates that over the Thorough due diligence can also go a long way to pre- next few years, global compliance technology will provide venting future headaches. This process should be performed companies – especially the multinationals – not only a com- by the investors or designated agents to confirm that the pletive edge, but also a positive return on their investment. target business is properly represented, and in order to Opening your eyes to the possibility of fraud within your secure information that will assist in asset valuation. In organisation, or from the parties that your organisation deals addition to meeting corporate governance and stakeholder with, and being prepared and willing to undertake thorough requirements (where applicable), a comprehensive job ena- investigations when the need arises, should go a long way in bles a company to review its target’s or its transaction part- ensuring that you protect your company from the potential ner’s background and history, reputation and connections wrath of the FCPA. (political or otherwise). Due diligence is also necessary in For more information on the issues discussed in this respect of intermediaries. “Don’t sign people up to represent article, please contact: you without having answered all the questions you need to know about them,” warns Gordon. “Don’t always take what [email protected] www.navigantconsulting.com third parties say at face value – common sense dictates that there is a reason for due diligence, and initial inquiry may [email protected] save you a lot of trouble down the track.” www.winston.com
APRIL 2010 21
e Special Special Report th in ricas
A window of opportunity for investing in the US An informed approach: avoiding the pitfalls of CFIUS With eyes wide open: the rewards, and risks, of pursuing business in Latin America Close attention to detail: why careful due diligence and a review of US regulations are essential
Ame sting INVE 26 30 36 24 ASIAN-COUNSEL ASIAN-COUNSEL Illustration: www.oweiss.com Special report INVEsting in the Americas
A window of opportunity With the help of experienced guides, New York-based M&A partner Robert DeLaMater of Sullivan & Cromwell LLP highlights why the time might be right for Asian companies to explore investment opportunities in the United States.
hose of us working as lawyers in Asia a decade and host governments were, if not supportive, at least toler- ago remember the Asian financial crisis of ant of such foreign investments. By way of examples, as 1997-98 as having had two sides: great chal- the Korean chaebol restructured, iconic local brands such lenge and stress for many Asian companies as Oriental Brewery were sold to European or US buyers; Tpressured by the crisis, but also great opportunity for com- and financial institutions throughout Asia, with excellent panies from outside the region (and for stronger companies local market positions but severely impaired capital, within the region) to acquire on attractive terms businesses accepted substantial investments from foreign investors. that formerly were not available at any reasonable price. Since late 2007 the shoe has been very much on the Many Asian companies were willing to accept substantial other foot, as US businesses that were once out of reach for minority investments with control rights, enter into joint Asian investors and acquirors have been willing and even ventures or sell subsidiaries, assets or even the entire com- eager to talk. Despite a few well-publicised episodes over pany; and their workforces, customer and supplier bases the years such as CNOOC/Unocal and Dubai Ports/P&O and ongoing concerns about the application of the CFIUS process in particular situations, the United States has for many years been among the most open markets in the world for foreign control of substantial business enterprises.
“The United States has for many years been among the most open markets in the world for foreign control of substantial business enterprises. Indeed, the US routinely receives far more foreign direct investment annually than any other country (even two to three times the FDI inflows to China in some years)”
24 ASIAN-COUNSEL www.inhousecommunity.com A window of opportunity
By Robert DeLaMater, Sullivan & Cromwell LLP
Indeed, the US routinely receives far more foreign direct investment (FDI) annually than any other country (even two to three times the FDI inflows to China in some years). The events of 2007-2009 in the country’s credit and financial markets put many US companies under such pressure, and reduced market values of some businesses so dramatically, that the doors opened wider than ever before, and formerly acquisitive US companies became motivated sellers of important businesses. Prominent US …the United States market and legal financial institutions accepted substantial investments from sovereign wealth funds and other investors, many system are highly articulated, from Asia, and were forced to offer for sale subsidiaries or complex and full of pitfalls for the previous stake investments even in highly promising unwary buyer in search of the land of growth areas in Asian and other emerging markets. Examples such as Barclays/Lehman, Nomura/Lehman, opportunity Tata/Jaguar Land Rover, Prudential plc/AIA and negotia- tions over various General Motors lines illustrate the opportunities available to Asian and other non-US inves- particularised representations and warranties and condi- tors to acquire attractive businesses from US sellers that tions to closing. All of this leads to more extended nego- themselves had formerly sought rapid growth through tiations and detailed documentation, which increases the Asian ventures. importance of lawyers’ advice on legal requirements and As with any foreign travel, forays into new or unfamil- market practice. iar destinations require experienced guides. Far from being Secondly, the United States exhibits a cyclical pattern unchartered territory, the United States market and legal of alternating periods of deregulation and re-regulation, system are highly articulated, complex and full of pitfalls and one of the consequences of the recent US financial for the unwary buyer in search of the land of opportunity. crisis is a strong trend toward increasing regulation of the Fortunately, as these pages will illustrate, the US market is financial sector in particular, as well as of business gener- also blessed with many experienced and knowledgeable ally. The recent enactment of comprehensive health care guides, in the form of lawyers who have been advising reform, continuing legislative debate about financial sector non-US acquirors and investors for many years in all regulation, heightened enforcement attention to the Foreign manner of different transactions. Many US law firms have Corrupt Practices Act and anti-money laundering rules, established presences in Asia that can serve as portals to and changes to standards for antitrust review of business the US market. The pieces contributed to this publication combinations illustrate the need for up-to-date legal advice provide important guidance on many issues to be consid- on the regulatory issues implicated by a particular transac- ered carefully by potential investors, but given the limita- tion as well as the regulatory consequences for the target’s tions of space this guidance is necessarily only the ongoing business operations. beginning of the inquiry that any diligent acquirer will History may never repeat itself in exactly the same way, wish to pursue. but to cite again the experience of the Asian financial Two recent trends illustrate the increased role of legal crisis, history demonstrates that opportunities offered by advisors in structuring and executing US transactions. crises do not persist indefinitely. As this publication makes Firstly, difficult markets lead acquirors to employ more clear, US lawyers stand ready to assist non-US acquirors complex forms of consideration or financing (such as and investors who believe the time is right for exploring structured equity or debt facilities or securities with tai- the Americas. lored terms), pursue a more extended due diligence review that may drill deeply into key issues or exposures [email protected] www.sullcrom.com of the target company, and impose nonstandard and highly
APRIL 2010 25 Special report INVEsting in the Americas
An informed approach Looking to acquire assets in the US? Partners Harry L. Clark and W. Clark McFadden II of Dewey & LeBoeuf’s Washington office explain how companies can form an effective M&A strategy whilst avoiding the pitfalls of a CFIUS screening.
sian and other non-United States investors who gaining control over a US business and hence, again, are considering acquisition of a significant are not covered by Exon-Florio; interest in US business operations need to con- • Many perceived national security concerns can readily sider the potential relevance of the US “Exon- be resolved through negotiation with US officials and Florio”A law, which authorises suspension or prohibition of innocuous changes to the transaction and contractual certain transactions that threaten to impair national security. commitments by the parties; The law establishes the US Committee on Foreign • There is a growing awareness in the US government Investment in the United States (CFIUS) to screen invest- about the importance of welcoming Asian, and espe- ment transactions involving foreign persons that could cially Chinese, investment into the US economy; affect US national security. CFIUS is comprised of the • A sophisticated and supportive US business partner can heads of a variety of departments and agencies of the US be effective in neutralising opposition to a proposed federal government and is chaired by the Secretary of transaction; the Treasury. • Whilst transactions that have effectively been blocked Even if CFIUS screening does not result in the blocking by CFIUS – such as CNOOC’s 2005 effort to acquire of a proposed transaction (which is rare), it can present Unocal and the 2009 Northwest Non-Ferrous substantial challenges for Asian investors. Such challenges International Company/Firstgold Corp. transaction – can include extensive and intrusive requests for informa- generate extensive publicity, they are in fact exceed- tion regarding the transaction and company management, ingly rare. delays of several weeks or more, adjustments to the trans- Informed prior review, careful preparation and the advice action, commitments to the US Government to satisfy per- of knowledgeable and experienced practitioners can sharply ceived US national security concerns, and political attacks reduce the unpredictability and potential for miscalculation against the transaction and the foreign investor. that can otherwise characterise the CFIUS process. At the same time, CFIUS screening is rarely a major problem for Asian M&A transactions, and concerns in this Exon-Florio and other national security- area are often overestimated: related measures • Many investments in the United States do not involve Breadth of Exon-Florio acquisitions of interests in an existing US business and The “Exon-Florio” amendment to the United States’ Defense hence are not covered by Exon-Florio; Production Act – reenacted in 2007 as the Foreign Investment • Many investments do not result in a non-US person and National Security Act – generally authorises the
26 ASIAN-COUNSEL www.inhousecommunity.com An informed approach
By Harry L. Clark and W. Clark McFadden II of Dewey & LeBoeuf
President to disrupt or block a transaction if it has resulted Transactions that are determined to be relatively sensitive or could result in a foreign person gaining control of a US or that entail any of certain statutory factors are normally business and the transaction threatens national security. subjected to an additional forty-five day “investigation”. Acquisition of control of US assets that do not constitute a One factor that will generally result in an “investigation” is “business” does not implicate the statute. At the same time, foreign government ownership or control of the non-US CFIUS has a broad view of what constitutes “control”. acquirer. Thus, one should expect CFIUS screening of an CFIUS has found in some circumstances that a foreign investment by a state-owned company to continue through acquirer controls a US business when it obtains an equity a forty-five day investigation, although waivers of this stake of less than 20 percent and is one of multiple persons requirement are granted for transactions that are deemed with the ability to direct operations of the US business. clearly to be benign. A very small portion of cases is dis- posed of through subsequent examination by the President CFIUS screening under a fifteen-day deadline. While the screening process Parties have the option of subjecting covered transactions is designed to last no more than ninety days (and is ordinar- to CFIUS screening by notifying the transaction to the ily completed in thirty days), more time is often needed for committee. Notice of a transaction to CFIUS is never informal work with executive branch and congressional mandatory. But CFIUS can request that a party to a trans- offices before the official screening process begins. action file a notice, and, in any event, CFIUS can self- CFIUS normally clears without incident covered trans- initiate a review. In the absence of clearance by CFIUS, a actions that do not involve national security concerns. If covered transaction is indefinitely susceptible to adverse CFIUS identifies security concerns, it will often negotiate action under Exon-Florio. Clearance by CFIUS generally with the transaction parties “mitigation measures” on the insulates a transaction from adverse action under the stat- basis of which the transaction will be cleared. These com- ute. CFIUS screening is administered by staff of CFIUS- mitments can include, for example, changes to the transac- member departments and agencies, with the Treasury tion structure (e.g. selling a security-sensitive subsidiary to Department, the Defense Department, the Department of a US buyer) and safeguards to address perceived security Homeland Security and – for energy-related transactions concerns (e.g. compliance policies and procedures and – the Energy Department normally taking leading roles. requirements to report matters to the US Government). Upon receiving notice of a covered transaction, CFIUS screens it for national security concerns, typically conclud- ing its examination at the end of a thirty-day “review”.
“CFIUS has found in some circumstances that a foreign acquirer controls a US business when it obtains an equity stake of less than 20 percent and is one of multiple persons with the ability to direct operations of the US business”
Harry L. Clark
APRIL 2010 27 Special report INVEsting in the Americas
National security concerns that can be relevant to resolution of the US Government’s The Exon-Florio statute does not include a definition of consideration of foreign direct investment transactions. “national security”. CFIUS practice, however, shows a These include policy, political and media considerations. marked broadening in recent years of the types of covered It has become increasingly likely that Members of transactions that are considered to potentially present con- Congress will express interest in and views about the cerns under Exon-Florio. Covered transactions that involve outcome of CFIUS examinations, often at the instigation military, advanced technology and, as of the last ten years, of commercial competitors. It can be important for parties energy assets or activity are typically considered to present to address the concerns of Members of Congress in a national security issues. timely manner.
Party disclosure requirements Other investment and national security-related measures CFIUS recently expanded the body of information that United States agencies administer a variety of other rules transaction parties must include in the notice of the trans- that bear on foreign investment. Other national security- action. Information required to be disclosed – such as related measures that affect foreign investment include extensive personal information about individuals associ- trade regulations regarding inter-nation technology transfer ated with foreign acquiring entities – can be difficult to and trade in military and otherwise sensitive items. They compile, and disclosure to the US Government can be also include government contracting rules relating to clas- discomfiting to some. At the same time, the government is sified information. Agencies examine transactions under required to treat as confidential information submitted to these measures independently of CFIUS screening, and CFIUS in the notice and other filings. CFIUS often requires that these other requirements be sat- isfied prior to CFIUS screening. Finally, many other US Multidimensional character of US examinations of legal requirements can affect foreign investment including foreign investment antitrust, telecommunications, consumer protection and Apart from the legal and technical aspects of a CFIUS environmental protection rules. screening, parties need to be sensitive to other considerations Informed approach to Exon-Florio and related measures The Obama Administration has recently demonstrated that that it generally seeks to implement Exon-Florio require- ments in a manner that does not needlessly penalise invest- ment in the United States. For example, a subsidiary of China National Petroleum Corporation recently formed a joint venture with ION Geophysical Corporation, a leading
“Apart from the legal and technical aspects of a CFIUS screening, parties need to be sensitive to other considerations that can be relevant to resolution of the US Government’s consideration of foreign direct investment transactions. These include policy, political and media considerations” W. Clark McFadden II
28 ASIAN-COUNSEL www.inhousecommunity.com An informed approach
By Harry L. Clark and W. Clark McFadden II of Dewey & LeBoeuf
If it is uncertain whether a transaction is a covered trans- action, it is often advisable to submit an Exon-Florio notice to CFIUS but show in the notice why the parties believe that it is not covered. CFIUS will dismiss the notice if it deter- mines that the transaction is not covered. If the transaction might be considered to be covered by Exon-Florio, a sensitivity analysis is needed. Firstly, the Asian acquirer should assess its own status in the eyes of CFIUS examiners. For example, is it government-owned or controlled? Is it linked to government leaders in other ways? Has it had significant legal compliance challenges? In addition, the Asian acquirer should evaluate the status under Exon-Florio of the US operations that would at least arguably come under its control. Important questions If the transaction might be include, for example: • Whether they are in a relatively sensitive area for Exon- considered to be covered by Exon- Florio purposes e.g. the defense, advanced technology, Florio, a sensitivity analysis is energy or homeland security sectors; • Whether they engage in government contracting; needed. Firstly, the Asian acquirer • Whether they hold classified information; should assess its own status in the • Whether they engage in activity that requires export eyes of CFIUS examiners licensing authority; and • Whether they hold what might be deemed “critical infrastructure” such as oil refining or liquefied natural gas facilities.
US petroleum sector seismic solutions company, without The acquirer should also ask whether there are other factors apparent incident under Exon-Florio. Meanwhile reports that might result in an unusual level of opposition to the indicate that in February 2010, CFIUS cleared the merger transaction. A foremost such factor would be a US com- of the printed circuit board (PCB) business of Meadville petitor that is capable of generating US media scrutiny and Holdings Limited of Hong Kong and TTM Technologies political opposition. Inc, the largest PCB manufacturer in North America. This Based on this assessment, and with expert advice, the involved the establishment of a special security agreement Asian investor should be able to make an informed judg- regarding the governance and operations of TTM’s defense- ment about how best to approach a transaction vis-à-vis related production business. China Investment Corporation, Exon-Florio and other US legal requirements. a major state-controlled sovereign wealth entity, also recently completed a transaction with the US energy com- pany AES Corporation. In addressing whether and how to approach Exon-Florio and related measures, an Asian acquirer should begin by The authors would like to thank their colleagues Paul Chen and Heng Loong, from Dewey LeBoeuf’s evaluating whether a transaction under consideration is cov- Hong Kong office, for their assistance in the writing ered by Exon-Florio. Again, the key question is whether it of this article. could be considered to result in non-US control of existing [email protected] US business operations. A transaction can be covered even [email protected] if, for example, the acquisition is of a non-US company that [email protected] holds US operations and even if the US operations are [email protected] already controlled by other foreign persons. www.deweyleboeuf.com
APRIL 2010 29 Special report INVEsting in the Americas
With eyes wide open… The rewards for Asian investors who look to Latin America are plentiful, say managing partner Michael Diaz, Jr. and associates Sumeet Chugani and Samantha Hu of Diaz, Reus & Targ, LLP. Yet awareness of associated risks, and how best to handle them, are vital to success.
t is no secret, and indeed well-publicised, that Asia’s raw materials and energy. Agriculture – namely soybeans population growth and economic expansion have and cotton – as well as metals and fossil fuels are exported stimulated the region’s hunger for natural resources to fulfill the needs of Asia’s ever-increasing population. and agricultural commodities. Many Asian nations, Investors from Asia have noticed Latin America’s ability to Ihowever, do not have the domestic supply of raw materials produce and supply what are labeled “scarce” goods in to maintain such drastic growth. Enter Latin America. Rich Asia’s domestic markets. This, in turn, has created a strong in copper, oil, timber, and various agricultural products, interdependence between Asia and Latin America which, Latin America as a region is well-positioned to satisfy despite the global recession, will see a steady growth rate Asia’s growing resource needs. With Sino-Latin American in trade. This bond creates exciting business opportunities trade alone exceeding US$120 billion in 2009, there is no for investors looking beyond commodity trade between doubt that a strong connection already exists between Asian and Latin American nations. China and Latin America. The recent signing of several Free Trade Agreements (FTAs) between various Asian and Agriculture & raw materials Latin American nations further confirms the strong rela- While many Asian nations are making concerted efforts tionship between the regions. to be self-sufficient, limited arable land requires importa- Investors throughout Asia are looking to Latin America tion of agriculture to fulfill their citizens’ needs. With as a vital marketplace for the supply of raw materials needed vast land availability and varying geothermal climates, for their export-driven industries. While Latin America is Latin America can offer diverse agricultural commodities. certainly a lucrative market, investors must be conscious of For example, over 50 percent of China’s massive the risks and hazards associated with doing business in the soybean import currently comes from Argentina, Brazil, region. As Latin America grows it will offer investors and Paraguay. golden opportunities. These boons, however, come with Asian demand for consumer electronics, hybrid vehi- challenges. Only those investors who are able to success- cles and electric cars – and the raw materials needed to fully balance risk and reward will truly benefit from the produce these commodities – has also forced Asian nations integration of Asia-Latin American trade and investment. to look beyond their borders for additional lithium supplies, and investors continually look towards Latin American The rewards: fulfillment of Asia’s needs countries where a majority of the world’s lithium deposits As this past decade has demonstrated, Latin America is one are found. Chile, Bolivia, and Argentina, which together of Asia’s most reliable suppliers of agricultural products, hold 80 percent of the world’s known lithium reserves, will
30 ASIAN-COUNSEL www.inhousecommunity.com With eyes wide open…
By Michael Diaz, Jr., Sumeet Chugani and Samantha Hu of Diaz, Reus & Targ, LLP
be key players in the future development of Asian indus- these, crude oil, hydroelectric power and industrial bio- tries. The number of investors seeking to acquire lithium mass are high on the wish list of many Asian nations. As a through “land grabbing” from Latin American owners or result, investment in these industries has dramatically direct importation will also continue to increase. increased in the recent past. Copper ore, used widely in the automotive industry, is In addition to recently signing two large crude oil deals also being widely sought out by Asian companies, both with Venezuela and Brazil, China has – alongside Ecuador, state-run and private. With the demand for this commodity Peru, Columbia and Argentina – staked out a strong pres- drastically rising and domestic supply severely limited, ence in the oil business in South America. China has also Asian investment in Latin America is projected to increase entered long-term contracts for offshore drilling with many ten-fold by 2020, despite dire predictions to the contrary. of these nations. The financial impact of these agreements Notably, in 2008, Chile and Peru accounted for over 50 are wondrous for emerging Latin American nations. Last percent of China’s copper ore imports. Recently, Chinalco September, Petroleos de Venezuela and China National – China’s largest domestic producer of aluminum and Petroleum Corporation, both state-owned enterprises, copper – invested US$900 million in Peruvian Copper and entered into an agreement calling for over US$16 billion continues to inject money into further mining. China has for China to sustain current crude oil importation and fund also invested more than US$500 million for further devel- further development of oil reserves in Venezuela’s Orinoco opment of Cuba’s nickel mines. As Asian-based companies river belt. China National Offshore Oil Corporation continue to place their stake in long term endeavours, look (CNOOC) signed an agreement with Venezuela to further for Latin America’s infrastructure to further develop. This develop a different block of the Orinoco River Belt. China will lead to additional investment opportunities for the and Brazil have also signed a long-term agreement to Asia-Latin American financier. ensure that China will receive 100,000 to 160,000 barrels of oil a day in exchange for financing Petrobas, a Brazilian Energy supply entity, with US$10 billion for further development along Even with its most abundant resources, immense domestic Brazil’s coasts. consumption within Asia threatens the depletion of its Asian investors utilise varied payment forms to finance energy reserves. China, for example, holds the world’s their operations and partnerships with Latin American cor- third largest coal reserve, yet its reserve/production ratio porations. Stock and bond purchases, share-swaps, and leaves the country no option than to replenish abroad. The long-term indentures are just a few examples. This is evi- need to ensure a long-term energy supply is forcing Asian dence that Asia will be in Latin America for the long term; companies to search for assets and supply agreements this is not just a short-term quenching of Asia’s thirst for overseas. Again, Latin America is fulfilling this need, using commodities and energy supply. its unique geology which has gifted the region with vast amounts of minerals and petroleum. On the energy side, The future of the Asia-Latin America synergy Latin America produces enormous amounts of crude oil, In 2010, China is poised to achieve an economic growth gas, biomass, hydroelectric, coal and nuclear power. Of rate of 8 percent, and an approximate population increase
“Even with its most abundant resources, immense domestic consumption within Asia threatens the depletion of its energy reserves. China, for example, holds the world’s third largest coal reserve, yet its reserve/ production ratio leaves the country no option than to
Michael Diaz, Jr. replenish abroad”
APRIL 2010 31 Special report INVEsting in the Americas
of 6 percent. India is set to hit a 9 percent economic growth As trade and investment opportunities arise between Asia rate by year’s end. The economic policies of these nations and Latin America, investors must fully understand the risks will continue to play catch-up to their respective growth involved before jumping into any venture. Due to language platforms. The story is the same throughout much of barriers, cultural differences and geographic obstacles Greater Asia. The increase in Asia-Latin American FTAs between Asia and Latin America, evaluating and mitigating indicates, however, that Asian governments are beginning those risks is not an easy task. Latin American nations also to take essential steps to meet these demands. On 1 March have unique political and legal systems, in addition to a 2010, the bilateral free trade agreement between Peru and business culture distinct from many Asian counterparts. China became effective. China, as Peru’s second most important trade partner, now gains tariff-free products Political and other significant risks including bovine fiber, seafood and agricultural commodi- Political risks are a grave concern for most investors. The ties, while Peru holds onto a deep-pocketed investor. The instability of many Latin American governments may scare agreement prompts more than 10,000 new Peruvian com- off foreign investors who are risk-averse. For Asian inves- panies to export to China in its first decade. tors who are used to a different business culture and gov- Costa Rica is following in Peru’s footsteps. On 8 April ernance, Latin America’s political dynamic is complicated 2010, Costa Rica signed a FTA with China to remove trade and at times too fluid to quickly grasp. Another issue is the barriers and enhance bilateral ties. Most importantly, the inconsistency in foreign investment policy and regulations FTA lifts tariffs off more than 90 percent of the products during an election period. In other words, political officials traded between the nations. As China’s ninth largest trading often make glaring misrepresentations in their election partner in Latin America, Costa Rica hopes that the FTA speeches regarding foreign investment policy to gain sup- will open more sectors for Asian investment as well as port from foreign investors, yet fail to uphold their prom- synergise a relationship of culture, sports and technology. ises. Accordingly, investors must do their homework. This Costa Rica has also signed a FTA with Singapore to elimi- includes familiarising themselves with the history and nate duties on future Costa Rican imports. After seeing the political climate of any nation which may be a target for growth potential from lowering barriers and opening its investment. On the other hand, Latin American countries borders to Asian counterparts, other Latin American nations are similar to Asian countries in terms of the importance of will likely follow suit. connections, or “guanxi” as the Chinese call it. Contacts In the near future, massive cross-border investments with key players in political and financial circles will make will increase imports while guaranteeing long-term sup- investments smoother and more successful. plies for each nation’s potential needs. The coming decade Investors must also consider risks of national expropria- will witness Asian and Latin American corporations expand- tion, as they will not be keen to invest billions of dollars in ing their domestic markets overseas in an attempt to create a nation where the government is likely to take their prop- wealth at multiple ends of a new trading platform. This erty without compensation or prohibit expatriation of prof- opens up exciting business opportunities for investors on its. Many US citizens have been forced to bring cases both sides of the Asia-Latin American market beyond the seeking just compensation for property seized by govern- important natural resources and commodities trade. ments in Latin America. Land is usually the subject of
The risks: evaluation and mitigation “In 2010, China is poised to achieve an economic growth rate of 8 percent, and an approximate population increase of 6 percent. India is set to hit a 9 percent economic growth rate by year’s end…. The increase in Asia-Latin American free trade agreements indicates… that Asian governments are beginning Sumeet Chugani to take essential steps to meet these demands”
32 ASIAN-COUNSEL www.inhousecommunity.com With eyes wide open…
By Michael Diaz, Jr., Sumeet Chugani and Samantha Hu of Diaz, Reus & Targ, LLP
expropriation, which makes this factor more important in more secure protection for foreign investors. Such agree- the agricultural, travel, transportation, and real estate indus- ments between Chile and China, for example, set forth tries. Protectionist labor unions, which invoke strike activi- beneficial investment policies and dispute resolution ties within Latin American nations, also place fear in the mechanisms and have allowed Chile to become more hearts of foreign investors. In 2008, massive strikes caused attractive to the Greater Asia-Latin American investor. In a detrimental financial impact to Shougang’s (Shoudu Iron addition, bilateral agreements between China and Peru, and Steel Group Company, China’s fourth-largest steel and between Singapore and Costa Rica, provide even company) Peruvian factory and mining operation. Likewise, greater incentives for Asian-based importation of Latin Chinese investors lost millions of dollars in oil projects in American commodities. Ecuador due to political unrest, strikes and riots. Foreign businesses will also have to put up with non-governmental Money laundering concerns organisations and wildlife advocates seeking to protect Foreign investors must also be aware of money laundering Latin America’s natural resources. risks within Latin American nations. Latin American coun- Unforeseen events such as earthquakes in Chile and tries have, by and large, prepared themselves very well to mudslides in Argentina can also cause investments and meet the anti-money laundering requirements of the business to halt, or cause dramatic spikes and fluctuations Financial Action Task Force and other global anti-money in market futures for designated commodities. Investors laundering regimes. However, money laundering – includ- need to be aware of how natural disasters can affect the ing terrorist and drug financing – is still pervasive in the stock and bond value in Asia’s domestic stock markets. For region. Venezuela, for instance, has been criticised and is example, copper futures rose as much as 5 percent in the considered “high risk” for international investors based on Greater Asian markets just days after the 2010 earthquake its close ties to the Middle East. Due to the large amount of in Chile. money transferred during an investment project or interna- Many of the above mentioned risks are hard to predict. tional trade, any monetary movement may be susceptible to Government policies can change, legal systems could shift, triggering red flags. Unlike political risks, money launder- and unforeseen events always loom. If such events do occur, ing threats can be mitigated by taking precautions such as Asia-Latin American investors must be ready to communi- conducting due diligence on a respective transactional cate through diplomatic channels to protect their interests counterparty, by making careful inquiries, and by maintain- and have a plan prepared to protect foreign assets. ing proper documentation throughout the transaction. Investors would be wise to evaluate all risks (legal, If a foreign investor’s activities have been flagged for political and financial) in order to select the appropriate terrorist links or money laundering concerns or the local nation to invest in. Bilateral trade agreements will provide authorities have commenced an investigation, the investor must swiftly seek experienced anti-money laundering counsel who can assemble a team to represent the client’s best interests throughout the investigation.
Legal risks Given Latin America’s different legal systems, foreign investors must understand the pertinent laws and regula- tions that will affect their investments. Investors must also contemplate an exit strategy which conforms to local Latin American countries are laws. Since many Latin American countries have overly bureaucratic, unstable and inefficient judicial systems, it is similar to Asian countries in terms critical to work with a reputable, experienced partner that is of the importance of connections, familiar with domestic laws, customs, trade practices, busi- ness norms and regulations. Maintaining continuity of the or “guanxi” as the Chinese call it applicable investment policies and regulations is essential for long-term investments in infrastructure and mining.
APRIL 2010 33 Special report INVEsting in the Americas
“Where there is money, there is usually fraud and corruption close afoot. For Asian investors who may be new to the Latin American financial and business culture, the chances of losing money based on illegitimate schemes or fraudulent tactics are very high” Samantha Hu
Well-designed dispute resolution procedures form an always investigate a counterparty’s background and finan- essential part of one’s overall investment, as they often give cial situation. In addition, for those investing in Latin an investor the best chance to protect his or her interests in American mining projects, it is essential to ensure that the a neutral forum. Thus, Asian investors venturing into Latin counterparty owns the property rights and the licenses to America must carefully evaluate, consider and implement exploit the resources. In a recent survey of 900 senior such procedures prior to entrance. Arbitration is usually executives worldwide, 72 percent of those companies preferred over litigation because of cost and time savings, operating in Latin America saw themselves as vulnerable as well as the flexibility of mutually selecting an arbitration to fraud and corruption. Asian investors must evaluate and tribunal and designated arbitrators. A well-drafted arbitra- carefully consider the threat that fraud and corruption tion clause should include, at a minimum, a proper arbitra- plays in their industries. Doing so will help mitigate the tion tribunal and the applicable laws, procedures and a risk of entering the Latin American market. chosen language for arbitration. Of course, it is always Likewise, internal compliance programs and properly beneficial for Asian investors to ensure that a nation trained employees will help minimise this risk. Creating it seeks to invest in is a party to the 1958 New York compliance programs can be costly for foreign investors Convention, which provides for recognition and enforce- not physically present in Latin America. Accordingly, ment of cross-border arbitration awards. retaining local counsel familiar with domestic law and business culture may be the most economical approach. Fraud, bribery and corruption Where there is money, there is usually fraud and corruption The time is now close afoot. For Asian investors who may be new to the This past decade has demonstrated that the Greater Asia- Latin American financial and business culture, the chances Latin American strategic relationship has benefited both of losing money based on illegitimate schemes or fraudu- regions: Asia has acquired much-needed commodities, lent tactics are very high. Thousands of people continue to while Latin America has obtained foreign direct investment lose their hard-earned money because of pyramid or Ponzi used to spur growth and become an emerging power player schemes and other financial frauds. in the global economy. Asian investors, seeing their gov- Investors must be aware of the posed risk of fraud in ernments’ keen eye towards Latin America, now seek to tap order to formulate a specific plan to avoid it. Having trust- into the benefits of this important marketplace. The out- worthy and experienced legal counsel present when sign- come will be beneficial to both sides as long as all parties ing any agreement will help protect against such risks. are cautious about the myriad of risks involved and take This is especially true if the agreement is in a foreign lan- necessary steps to avoid them. guage and encompasses unfamiliar and ever-changing local laws and regulations. If an investor chooses not to hire an attorney, he or she must do the necessary home- work. Reading and understanding the local regulations, [email protected] laws, contracts, agreements and policies will prove to be a [email protected] [email protected] wise move. Careful investigation and due diligence are www.diazreus.com required before entering any negotiation. An investor must
34 ASIAN-COUNSEL www.inhousecommunity.com
Special report INVEsting in the Americas
Close attention to detail Thorough due diligence and a careful review of the applicability of a range of regulations will go a long way towards ensuring a successful investment in the United States, say M&A lawyers Gregory Puff and Brian Wheeler of Shearman & Sterling.
uch has been written about the need for care- Elandia’s textbook response was not without benefit. ful due diligence in connection with any The US$2 million fine that was levied was below what the acquisition. However, many buyers are una- government’s guidelines called for, and the DOJ declined ware of the scope of US regulations that may to bring criminal charges against Elandia itself. However, haveM an impact on transactions, including those which given the substantial harm that Elandia suffered as a result involve non-US parties or non-US business. For example, of the ill-fated acquisition, and what the government called in August 2007, Elandia International Inc (Elandia) dis- its “commendable cooperation” with their investigation, closed in a US Securities and Exchange Commission (SEC) the DOJ’s prosecution seems rather harsh. It is, however, filing that its management had identified control deficien- consistent with the government’s clear views on the sub- cies in its financial reporting. The disclosure was later ject. In its FCPA Opinion Procedure Releases, the DOJ revealed to result from a pattern of bribes paid in Yemen provides guidance on its decision-making process in deter- and Honduras by its subsidiary Latin Node, Inc – the acqui- mining penalties for violations at newly-acquired busi- sition of which had closed barely two months earlier. nesses. Among the critical factors considered is whether the In addition to promptly disclosing the potential prob- acquiror conducted “reasonable due diligence”. It is here lems to investors, Elandia immediately conducted an inter- that Elandia failed. Elandia appears to have relied on the nal investigation (eventually involving external counsel seller’s representations regarding FCPA matters rather than and a committee of its board of directors), terminated the conducting its own due diligence. This case illustrates how agreements that resulted from the improper payments, and the DOJ is stepping up its enforcement of FCPA cases, and voluntarily notified and cooperated with the US Department demonstrates the necessity of conducting and documenting of Justice (DOJ) and the SEC. The individuals involved, careful due diligence. who included corporate officers and senior employees, Similarly, when Halliburton agreed in 2009 to pay a were promptly fired. It was not enough: the Department of record US$579 million fine to the SEC and the DOJ relat- Justice brought criminal charges against Latin Node under ing to corrupt practices at its former subsidiary Kellogg, the Foreign Corrupt Practices Act (FCPA), resulting in a Brown & Root (KBR), the SEC strongly criticised what it guilty plea by Latin Node and the payment of a fine by characterised as due diligence failures on the part of Elandia in an amount equal to approximately 10 percent of Halliburton, particularly with respect to KBR’s agents, the purchase price. Elandia was eventually forced to write through whom the bribes were paid. Among the specific off its entire investment, wind down Latin Node’s opera- failures cited were an inadequate effort to determine how a tions and terminate nearly all of its employees. particular agent carried out his duties, the lack of any
36 ASIAN-COUNSEL www.inhousecommunity.com Close attention to detail
By Gregory Puff and Brian Wheeler of Shearman & Sterling
specific description of the agent’s duties, inadequate issue, can play a similarly unwelcome and often surprising accounting and audit of the fees received by the agent, and role in a transaction. While Dubai Port World’s acquisition the reliance on false representations of KBR when approv- of the US assets of Peninsular and Oriental Steam ing a new contract with an agent in lieu of conducting its Navigation Company, a British company, was not prohib- own investigation. The SEC’s enumeration of these fail- ited by a CFIUS decision (the acquisition was in fact ini- ures provides a valuable roadmap for acquirors. If any tially cleared by CFIUS before being resubmitted for questions remain after this thorough diligence review, additional review), it was the adequacy of the CFIUS acquirors should proceed with caution. Alternatives include review that played a major role in the ensuing, highly- requiring the target company to remedy the failures prior to politicised public debate that ultimately led to Dubai Port closing, maintaining the acquired company or business as World giving up on the US assets. Experienced buyers a stand-alone entity until the issues are resolved, or simply acquiring businesses where CFIUS filings are made know walking away from the transaction. that a careful review of potential issues identified through While the results in the Latin Node and Halliburton due diligence, and early vetting of those issues, can lead to cases are drastic, the risks of not conducting adequate pre- successful results; last-minute and hastily prepared pres- closing due diligence are substantial, and include criminal entations have led to undesirable outcomes. risk under various statutes, regulatory risk, civil lawsuits US regulations imposing trade sanctions can also raise and reputational risk. The thorough internal investigation similar concerns. The Iran Sanctions Act and the Helms- that will be needed if inappropriate conduct is suspected Burton Act (which imposes restrictions on trade with will also involve substantial cost and distraction, as will Cuba) can result in liability even for a non-US acquiror. ongoing remediation and monitoring and potential changes Any business transactions in these countries should be in the target’s business. Depending on the severity of the carefully reviewed in order to assess the possible applica- conduct, retaining employees may become difficult as tion of US regulations. morale suffers. But these are not the only potential traps for the The FCPA is one potential pitfall for the unprepared unwary: widely known rules may have a much broader buyer. In addition, foreign investment review, sanctions, scope than expected. For example, the importance of care- banking regulations and antitrust regulations can also fully reviewing the regulatory regime when acquiring a affect an unknowing or unprepared buyer – even in what US bank is well-known. In addition to potential state-law appears to be a non-US transaction. change of control approvals, the acquisition of a regulated The Committee on Foreign Investment in the United US bank requires the acquiror to seek prior approval from States (CFIUS), discussed in more detail elsewhere in this the Federal Reserve Board (the Fed) to become a bank
“While the results in the Latin Node and Halliburton cases are drastic, the risks of not conducting adequate pre-closing due diligence are substantial, and include criminal risk under various statutes, regulatory risk, civil lawsuits and reputational risk” Gregory Puff
APRIL 2010 37 Special report INVEsting in the Americas
“In addition to potential state-law change of control approvals, the acquisition of a regulated US bank requires the acquiror to seek prior approval from the Federal Reserve Board… to become a bank holding company. The Fed conducts a thorough review of the acquiror, including a determination of whether the
Brian Wheeler acquiror is “well-capitalised” and “well-managed”
holding company (BHC). The Fed conducts a thorough Similarly, premerger notification may be required review of the acquiror, including a determination of under the Hart-Scott-Rodino Act (the HSR Act) in a whether the acquiror is “well-capitalised” and “well-man- non-US transaction. The HSR Act generally requires that aged”. But a critical part of the review is not within the an investment of more than US$63.4 million in a US com- acquiror’s control – the Fed must also find that the acqui- pany be reported to both the Department of Justice and the ror is subject to “comprehensive consolidated supervision” Federal Trade Commission. This requirement, however, is in its home jurisdiction. The Fed has determined, for not limited to acquisitions of US companies. A transaction example, that banking supervision in Japan satisfies this involving two non-US parties is subject to the same notifi- requirement (Mizuho Financial Group and Mitsubisi UFJ cation requirement and waiting period as a domestic trans- Financial Group were approved as BHCs), as does that of action if it involves the acquisition of a company with Korea (Shinhan Financial Group), but has not made a more than US$63.4 million of sales or assets in the US, or determination with respect to other Asian jurisdictions. the acquisition of assets outside the US if those assets gen- Further, the Bank Holding Company Act (BHCA) does not erate at least US$63.4 million of sales in the US. Careful simply govern the management of the bank or its parent review of the target’s business is required to ensure that the company going forward – the acquiror will need to con- HSR Act’s filing requirement and waiting period do not duct extensive due diligence to ensure that all of the direct come as a surprise. and indirect activities and investments of both the target Successful buyers know there is no substitute for care- and the acquiror and their subsidiaries are BHCA- ful pre-closing due diligence, and special attention should compliant. Consolidated positions of 5 percent or more of be paid to regulations that may have a broad application. the voting securities of any company, even non-financial, This is true not just in acquisitions of US companies, but with a branch or subsidiary in the US may require special in any acquisition or investment that involves US assets, approval from the Fed. subsidiaries or material sales. A close look at the target’s But it is also important to note that US banking regula- business, taking the acquiror’s existing business into con- tion does not simply cover the acquisition of US banks – sideration, is necessary to determine the applicability of while the degree of burden varies depending on the nature US regulations. Anything less may lead to dramatic and of the investment, even the acquisition of less than 25 per- unexpected consequences. cent of a non-US bank that has a single US branch may require certain approvals, and the acquisition of control of [email protected] such an entity would be subject to the BHCA’s restrictions [email protected] on activities. www.shearman.com
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The challenges that lie ahead Ahmad Rizwan, a legal advisor with the Government of Dubai, says that in-house counsel now face more competition, greater expectations and a tougher business environment than ever before. He shares with us the core competencies both he and his employer rely on for success.
Asian-Counsel: How did your career lead you to your Department of Finance and the Dubai Financial Support current role? Fund. Ahmad Rizwan: When I qualified to practice law in 1993 back in Malaysia, I never thought that my career destiny AC: How do you manage your time as legal advisor to would lead me to my current role with the Government two government entities? of Dubai. Fresh out of law school I was no different from AR: The core competencies and KPIs for both roles are many young lawyers, full of ideals straight from the law centred primarily on money matters from a legal perspec- books and wanting to change the way the world works. As tive, ergo whether to treat these two roles as one or to my legal practice evolved in time, reality of the world also separate the functions becomes academic. Furthermore set in, and so I fashioned my practice to be more adaptable the inter-connectivity of the functions, roles and respon- to life’s realities. sibilities of the Department of Finance – Government of Having started my career as a banking and finance Dubai and the Dubai Financial Support Fund are closely lawyer, I realised that in order to be more adaptable and to interlinked and thus it makes the choice a non-issue. I add value to my clients, I needed to add corporate knowl- utilise five core competencies in managing my time in edge to my practice. I subsequently took on a wider focus both roles, specifically: resource allocation, proficiency, of legal practice to include banking, finance, corporate and specialisation, communication and collaboration. These Islamic finance. Eventually, I decided to peek into the ‘other five core competencies reflect the organisational values side’, moving in-house as the Head of Legal for a Malaysian and ethos of the Government of Dubai that are applied financial institution. A few years later I decided to further efficiently throughout its organisational structure, which ‘complicate’ my career by moving into investment banking, ultimately allows me the flexibility to reach out and tap into and I relocated to Dubai to take up a role as Head of Legal the expertise and experience of my other learned colleagues & Execution of an international investment bank. from the various governmental departments and entities As it turned out, I could not resist the pull from the rapid both efficiently and effortlessly. development of the UAE’s legal system, and I returned to legal practice with Habib Al Mulla & Company, a pre- AC: In which circumstances might the entities you mium Dubai-based law firm. After undertaking two years advise seek the advice of external counsel? Are there any of private practice in Dubai, I was humbly honored to be criteria followed in choosing suitable practitioners? presented with the opportunity to join the esteemed Gov- AR: The institution of the Government’s legal advisor may ernment of Dubai in my current roles as legal advisor to the itself not be particularly old, but the customary rules and
40 ASIAN-COUNSEL www.inhousecommunity.com The challenges that lie ahead
By Rebecca Brookes
norms – including the use of external specialists – have appreciate our goals and not focus solely on minimising now more or less been respected for ages. Governments legal risk, but rather marry the two in order for us to achieve have always relied on experts, specialists or people of our objectives. knowledge and wisdom to advise on specific issues relat- ing to the government or its transactions. We do not try to AC: How has the in-house role evolved during your re-invent the wheel in this respect, and in many instances years in practice? rely on advice of external counsel who are specialists in AR: It has often been perceived by many that the role of specific fields. in-house counsel in an organisation is operational rather Nonetheless, due to the close relations and high level than strategic. It is my view that this dimension has now of communication between the Legal Affairs Department drastically evolved, with the driver behind this evolution of the Dubai Government and all of the other governmen- being the status of the primary fuel that in-house counsel tal departments, reliance on external counsel is somewhat manage: legal risks and commercial knowledge. limited to a very small number of sectors and specialised For the first time in the world’s economic history, legal areas. The Legal Affairs Department risks combined with a lack of com- of the Dubai Government boasts mercial knowledge have become a some of the most experienced legal permanent and fundamental threat experts in the region and this knowl- to stakeholder value. In today’s com- edge bank, together with its human In-house counsel, plex, multi-cultural and cross-border resources capital, are utilised effi- “ business environment, approaches to ciently across the various govern- as the janitors of legal risk require a new blending of ment departments. legal and expertise standards. Choosing the right external coun- legal risks, have now In-house counsel, as the jani- sel for us has provided various chal- tors of legal risks, have now sud- lenges, even though Dubai hosts many suddenly became the denly became the guardians of one of the top international law firms guardians of one of of the pillars of an organisation’s from a global perspective. Our core strategic interests, and subsequently focus first and foremost is conflict of the pillars of an enjoy a more celebrated attention interest and we undertake a micro- from all levels within the organisa- scopic examination to ensure that the organisation’s tion. Nonetheless, as history has external counsel we engage are not strategic interests, abundantly demonstrated, this also conflicted in any way whatsoever. We means that in-house counsel now also place a heavy premium on exter- and subsequently face bigger challenges, more com- nal counsel that illuminates regional petition, greater expectations and a knowledge capabilities and cultural enjoy a more tougher business environment. With sensitivities. Many heavyweight law the changing status of legal risks, the firms tend to market their interna- celebrated attention responsibilities of in-house counsel tional reputation as their selling point from all levels within have grown more important, and but in this current day and age, such indeed changed quite profoundly so notion alone is not a strong factor. Our the organisation that the correct equilibrium between selection process utilises the basic ” performing the role of guardian of and time-tested principles of the Five the organisation and being a busi- Cs: Competency; Capacity; Commit- ness facilitator can be found. This ment; Communication; and Cost. It is also includes knowledge and exper- important to us that each external counsel engaged acts as a tise in other related areas including compliance, risk man- strategic lawyer and not a mere technician. They must fully agement and business ethics. a c
APRIL 2010 41 Feature Dealing with product liability in the PRC A proliferation of consumer protection laws and a more demanding public look to set the scene for a host of liability claims in the PRC, explains lawyer Willi Vett of Beiten Burkhardt’s Shanghai office. Is your company prepared?
roduct quality, after-sales service and product agreed on a quality standard, PRC courts can apply the rele- liability concerns have been receiving increased vant industry standard. attention in the PRC. High profile cases, such Contractual claims can only be considered if a contractual Pas the recent milk scandal involving Sanlu, relationship exists. For example, everyday consumers gener- have highlighted product liability concerns and put pres- ally do not have a direct contractual relationship with the sure on national and local authorities to enact legislation manufacturer of consumer goods. The contractual relation- and streamline administrative proceedings. Meanwhile, ship usually exists between the consumer and seller. Likewise, PRC consumers are becoming increasingly aware of separate contractual relationships exist between the seller and their legal rights and are willing to enforce them, if nec- manufacturer and between the manufacturer and parts pro- essary, through court proceedings. ducer. Despite the chain of contracts, a consumer does not Generally speaking, claims can be based on breach of have a direct contractual claim against a parts producer. contract, tort or product liability laws, and sellers, manufac- turers, importers and parts producers may all be held liable Claims based on tort for losses resulting from defective products. Losses due to a The new PRC Tort Law (the Tort Law), which comes into defect can be limited to the product itself or, in more complex force on 1 July 2010, is largely a compilation of existing scenarios, can extend to damage caused by its use. legislation from the PRC Basic Principles of Civil Law, the Furthermore, when a defective part damages a larger product, PRC Product Quality Law and other laws. Tort claims can such as a motor vehicle, damage to the end-product may give be considered if a product causes further damage (for exam- rise to an additional claim. ple, a defective battery damages other parts of the motor vehicle), damages the property of third parties or causes Claims based on contract personal injury. The legal basis for contractual claims is the PRC Contract Claims in tort exist independently from any contractual Law (the Contract Law) together with the underlying con- relationship. Therefore, a consumer could bring a tort claim tract. If the condition of a product upon sale does not meet the against the manufacturer of a defective part or product. A required quality standard, the Contract Law grants the buyer quasi-manufacturer – a company that appears to be the manu- the right to claim for repair, replacement, re-manufacture, facturer because, for example, the product depicts its name or exchange or reduction of the sale price (Articles 155, 111 and logo – may also be held liable. In contrast to claims based on 113). Generally speaking, the quality requirements of a product quality, tortious liability requires the defendant to be product are based primarily on the underlying contractual at fault. Generally, this means that the defendant must, at the agreement (Articles 154 and 61). But if the parties have not very least, have acted negligently. The claimant is obliged to
42 ASIAN-COUNSEL www.inhousecommunity.com Dealing with product liability in the PRC
By Willi Vett, Beiten Burkhardt
supply sufficient evidence of such negligent (or intentional) behaviour. The Tort Law, however, may drop the require- PRC civil law generally requires the ment to prove negligent or intentional behaviour under cer- party claiming compensation to prove tain circumstances that involve matters such as product liability and environmental protection. its claim. However, in a product As the Tort Law is not yet in force, some questions about liability case…. it is up to the its application and interpretation will have to be answered by subsequent regulations and court practice. manufacturer to substantiate a defence Claims based on product quality laws The PRC Product Quality Law (the Product Quality Law) as amended in July 2000 remains the legal foundation for According to the current interpretation of the Product product liability cases. Since 2000, however, many regula- Quality Law, it appears that product liability claims can only tions have been enacted to strengthen the legal framework be made against those who make, sell or license defective for product quality requirements, product recall measures end-products. Product liability claims against suppliers and and consumer action. Some of these are directed at product parts producers are not admissible. But a manufacturer of a quality generally, while others are directed at specific defective end-product will undoubtedly attempt to limit its industries. liability by suing (based on contract) a supplier of a defective Under the Product Quality Law, a manufacturer or seller part that caused the problem. is liable if a product is placed on the market that exhibits a Another aspect of strict liability is a shift in burden of design or manufacturing defect that injures a person or dam- proof. PRC civil law generally requires the party claiming ages property. Certain defences against product liability compensation to prove its claim. However, in a product lia- claims are available to the manufacturer or seller. bility case, the claimant need only prove that the product was The Product Quality Law defines products as all manu- indeed defective and that the defect caused the damage. The factured or processed goods intended for sale. Agricultural claimant need not prove that the manufacturer acted negli- products, non-processed products and raw materials do not gently, which could be difficult as the claimant would not fall within its scope. Buildings are also expressly excluded usually be knowledgeable about the manufacturer’s opera- from the scope of the law. However, this exclusion does not tions. Instead, according to Article 41 of the Product Quality apply to parts of buildings or construction materials. Law, it is up to the manufacturer to substantiate a defence by According to the Product Quality Law, a product is defective proving, for example, that there was no defect when the if it exhibits a manufacturing defect or a product design product was placed on the market, or that the claimant defect, or if the instructions on its safe use are inadequate. grossly violated the safe use limits of the product, and that Both the manufacturer and the seller of a product can be this contributed to the injury or damage. held liable. The manufacturer faces so-called absolute (or strict) liability. This means that even manufacturers that have Facing a shift in attitude not acted negligently are liable for defects in the products. With the proliferation of consumer protection laws in the PRC legal experts disagree about whether strict liability also PRC and the appearance of a more demanding public, manu- applies to sellers, or if they are only liable if they act improp- facturers and sellers are bracing for more liability claims. erly (tortious liability). The structure of the Product Quality Minimising liability involves carefully documenting the Law indicates that sellers only face tortious liability, but this manufacturing and sourcing processes to show that an alleg- remains to be tested in court proceedings. On the other hand, edly defective product was, in fact, in good working order. a seller who does not provide relevant information on the Even in cases of defective products, proper documentation manufacturer or supplier of a defective product is strictly can greatly assist to minimise costs and friction in connec- liable. Lastly, a licensor who allows a third party to use the tion with handling claims and, if required, product recalls. licensor’s trademark, trade name or other distinguishing marks on the defective product may be liable together with [email protected] the manufacturer and seller. www.beitenburkhardt.com
APRIL 2010 43 JURISDICTION UPDATES
CHINA
Foreign-invested partnerships in China: an update
sets out restricted activities and sectors for all foreign invested enterprises (as provided in the Foreign Investment Catalogue), or that involves a project overseen by a government authority, the AIC must seek a written opinion from the relevant government authority within five days after accepting the application.
By Tracy Liu Flexibility for capital contributions Unlike other types of foreign investment enterprises, FIPs are not As we reported in the March edition of Asian-Counsel, a new subject to any minimum capitalisation requirements. The FIP structure for foreign investment – the foreign-invested partner- Registration Regulations allow foreign investors to invest in the FIP ship (FIP) – was officially launched in China on 1 March 2010, with their legitimate Renminbi income derived from China, sub- with local media reporting the registration of China’s first FIP in ject to State Administration of Foreign Exchange approval. The FIP Kunshan, Jiangsu. Registration Regulations further allow foreign investors, as the This new form of foreign-invested enterprise is regulated by general partners in the FIP, to make capital contributions in the the Administrative Measures on the Establishment of Partnership form of services. Enterprises in China by Foreign Enterprises or Foreign Individuals (the FIP Measures) and the Regulations for the Remaining ambiguities Administration of Foreign-invested Partnership The new regulations The PRC Partnership Enterprise Law obliges Enterprises (the FIP Registration Regulations), partners to pay their respective income both effective as of 1 March 2010. indicate that the Ministry taxes according to the relevant taxation of Commerce provisions. However, existing laws and Stringent industry restrictions regulations do not address the taxation of a (MOFCOM) or its local The FIP Registration Regulations proscribe foreign limited partner’s interest in an FIP. FIPs in “prohibited” industrial categories, as counterpart will play a It remains unclear how a foreign- described by the Catalogue for Guidance of small role in the FIP invested venture capital enterprise organ- Foreign Investment in Industry (Foreign ised in the form of a non-legal person and regulatory environment Investment Catalogue), and categories where subject to MOFCOM approval differs from there is a (upper) limit on foreign ownership. a partnership, and whether a foreign- It appears, therefore, that FIPs are subject to more stringent invested venture capital enterprise may now be restructured as industry restrictions than other types of foreign-invested enter- an FIP. Similarly, the regulations do not provide guidance on the prises. formation of foreign-invested RMB funds in the form of partner- ships, an issue of significant market interest. Streamlined establishment process The new regulations indicate that the Ministry of Commerce BEITEN BURKHARDT (MOFCOM) or its local counterpart will play a small role in the FIP Suite 1001, 10/F, Chong Hing Finance Center regulatory environment. The FIP Measures provide that the estab- 288 Nan Jing Road West lishment, modification, liquidation and deregistration of an FIP that Huang Pu District is “in compliance with China’s industrial policies for foreign invest- Shanghai 200003, P.R. China ment” require only registration with the local counterpart of the Tel.: (86) 21 61417807 Administration for Industry and Commerce (AIC). MOFCOM Fax: (86) 21 61417899 approval is not required. Email: [email protected] Under the FIP Registration Regulations, when investors seek www.beitenburkhardt.com to establish an FIP that falls under a “restricted” category which
44 ASIAN-COUNSEL www.inhousecommunity.com INDIA
‘Waiting Period’ for mergers: too long for comfort
here. The inquiry procedure for mergers under section 29 of the CA stipulates both ‘days’ and ‘working days’, thereby making the situation more difficult for enterprises. Section 64 of the CA does not require the CCI to formulate comprehensive merger regulations, but merely to prescribe ‘filing fee’ and ‘forms’ for merger control. It will be interesting to see By Manas Kumar Chaudhuri how the CCI overcomes concerns such as “waiting period” and Varun Chopra within the restricted statutory ambit of its own regulations. The CA also requires the CAT to formulate its own regulations – From 21 May 2009, India’s Competition Act, 2002 (CA) finally unless the CCI and the CAT work in tandem, any such merger became effective, albeit partially. While the provisions relating to regulations may cause additional concerns for enterprises before prohibition of anti-competitive agreements and abuse of domi- the CAT. nant position by enterprises are now operational, the merger Furthermore, while most mergers enhance economic effi- control regime is yet to come into effect. ciencies in the market, a long waiting period for merger approval The CA provides a 210 day waiting period under the merger could jeopardise the commercial rationale for such mergers and control provisions. This is very long when compared to interna- affect consumers which the CA hopes to protect. tional best practices – in most jurisdictions the waiting period normally varies between 30 and 120 business days, with around Conclusion 90 percent of applications approved in the first 30 business days. Irrespective of the CCI’s working days, the waiting period of 210 Enterprises are apparently worried about the long statutory wait- days should be read as ‘calendar days’ so that merging parties do ing period in India under the CA and have voiced their concerns not suffer on account of the CCI’s official holidays. Upon finding in both national and international forums. that filing formalities have been complied with, the CCI should – The Competition Commission of India (CCI) is mandated in order to implement legislative intent – specify the 210 day under Section 64 of the CA to formulate its own regulations. In a waiting period and communicate such specification in writing to few regulations, the CCI has defined ‘working day’ as the days on the party. For example, if finding an application is in order on 1 which it shall function, which does not include public holidays, April 2010, the CCI must communicate to the party in writing Saturdays and Sundays. Coupled with this, the Competition that the ‘waiting period’ of 210 days ends on 27 October 2010, Appellate Tribunal (CAT) – the first appellate tribunal – is also only unless additional time has been requested and allowed. We are required to work on ‘working days’ and closes for vacation for hopeful that as and when the merger control provisions are noti- about six weeks during summer and for about ten days during fied by the Government of India, the CCI will – as intended by winter. Under the CA, an appeal lies from every order of the CCI the amended legislation – proactively and expeditiously dispose to the CAT. The CAT must endeavour to dispose of such appeals merger applications as a non-adversarial ex ante process. within a period of six months. Where a merger is blocked by an Order of the CCI on the Khaitan & Co 210th day (which is in reality about 300 calendar days) and an 801 Ashoka Estate appeal is subsequently lodged with the CAT on the last working 24 Barakhamba Road day before the summer vacation, then it is feasible the final order New Delhi 110 001, India may not be passed by the CAT until the expiry of six months after Tel: (91) 11 4151 5454 Fax: (91) 11 4151 5318 the CAT resumes work after vacation. This could potentially delay Email: [email protected] a transaction by eighteen months. Can parties, especially in cross- Bangalore Kolkata Mumbai New Delhi border transactions, wait this long? The anomaly does not end
APRIL 2010 45 JURISDICTION UPDATES
MALAYSIA
Highlights of new Central Bank of Malaysia Act 2009
fined in this Act. Part VII of the Act, entitled Islamic Financial Business, is divided into two chapters. Chapter 1 governs the establishment and functions of the SAC, the effect of the SAC’s ruling and the appointment of its members. On the other hand, Chapter 2 provides the power of BNM to issue circulars, guidelines etc on Shariah matters By Ahmad Syahir Yahya relating to Islamic financial business. On the establishment of the SAC, Section 51(1) of the Act The Parliament of Malaysia passed the new Central Bank of provides that BNM may establish a SAC which shall be the Malaysia Act 2009 (the Act) in July 2009. The Act received royal authority for the ascertainment of Islamic law for the purposes assent on 19 August 2009 and was later gazetted on 3 September of Islamic financial business. 2009. Officially, the Act came into force on 25 November 2009. According to the Act, the appointment of the members of As highlighted in a press release issued by Bank Negara the SAC shall be made by the Yang di-Pertuan Agong on the Malaysia (BNM) – Malaysia’s Central Bank – on 25 November advice of the Ministry of Finance after consultation with BNM. 2009 with regard to the enforcement of the Act, the legislation The Act also sets out the criteria of members to be appointed provides greater clarity on BNM’s mandate and vests it with the to the SAC whereby the candidates must be “amongst persons necessary powers and instruments to achieve this mandate. In who are qualified in the Shariah or who have knowledge or addition, the Act offers a more robust governance framework experience in the Shariah and in banking, finance, law or such that provides for a high degree of accountability and transpar- other related disciplines”. This is provided under Section 53(1) ency. Furthermore, the Act institutionalises the good practices of the Act. that have been put in place over the recent decade which have proven to be important in enhancing the function and effective- Binding effect of the SAC’s rulings under the Act ness of BNM. It is interesting to note that the Act has put to rest the issue of the binding effect of the rulings made by the SAC, which have been Recognition of a dual financial system in Malaysia disputed in several judicial decisions previously. Section 16B(9) of It is interesting to note that the Act also explicitly acknowledges Act 519 merely provides that the SAC rulings issued by the SAC the dual financial system in Malaysia, which was not mentioned were only binding upon arbitrators. anywhere in the Central Bank of Malaysia Ordinance 1958 (Act Due to the limited binding effect of the SAC’s rulings as 519). Section 27 of the Act clearly states that the “financial system enunciated in the above provisions, the courts in several in Malaysia shall consist of the conventional financial system and decided cases had refused to refer to the SAC’s rulings since the Islamic financial system.” such rulings were not binding upon the court. This is seen as a clear recognition by the Government of Malaysia of the rapid development of Islamic banking and finance in Malaysia alongside conventional banking. This is also consist- Azmi & Associates ent with the goal by the Government to promote Malaysia as an Global Financial Services & Islamic Banking Practice Group international centre for Islamic finance globally. 14th Floor, Menara Keck Seng, 203 Jalan Bukit Bintang, 55100 Kuala Lumpur, Malaysia. Enhancement of the roles and functions of the Shariah Phone: (603) 2118 5000 ext :5063 Advisory Council Fax: (603) 2118 5111 The roles and functions of the Shariah Advisory Council of the E-mail: [email protected] Central Bank of Malaysia (SAC) have been enhanced and rede- www.azmilaw.com
46 ASIAN-COUNSEL www.inhousecommunity.com MIDDLE EAST
Dubai World and Nakheel – three major developments
appeal is possible, this decision clarified that the Special Tribunal probably has exclusive jurisdiction to hear and decide claims now and in advance of a Dubai World company filing a proposed voluntary arrangement under the Decree. Indeed, at least one creditor has filed such claim with the Special Tribunal since. By Mark Blanksby and • On 25 March, the Government of Dubai announced that an Ben Cowling arrangement would be proposed to creditors of Dubai World and Nakheel that was backed by up to US$9.5 billion of state In late 2009, Dubai made headlines for all the wrong reasons with funding. While details of the proposal will only be revealed to the announcement that Dubai World, the owner of Dubai’s individual creditors in private discussions over the coming most-prominent property developer, Nakheel, proposed to weeks, the announcement stated that the Nakheel restructure debt owed to a range of banks and trade creditors. Restructuring Proposal would feature an offer to trade credi- Although Dubai was not alone in suffering the effects of the Global tors of “a significant cash payment shortly and a tradable Financial Crisis, it was nonetheless a dark day for Nakheel – spon- security”. sor of the world-famous “Palm” developments – and for the • On 30 March, the Special Tribunal issued Practice Direction region generally. No. 1 of 2010 stating that it has a policy “to respect and enforce In December 2009, the Government of Dubai enacted spe- arbitration agreements made between [Dubai World] and its cial legislation (Decree No. 57 of 2009) to support the restruc- creditors”. The practice direction states further that “the ture of Dubai World (the Decree) and a Special Tribunal was Tribunal expects the parties to continue with pending arbitration established to oversee the process. The Decree seeks to impose proceedings in accordance with their contractual obligations.” international standards of transparency and fairness to the restruc- This suggests that Decree 57 does not override arbitration turing process and various distinguished judicial officers have been agreements in contracts with Dubai World companies. appointed to the Special Tribunal. The Decree contemplates that a Dubai World company may, if it wishes, issue an application that While there remain many obstacles to the resurrection of Dubai the Special Tribunal give effect to a voluntary arrangement to bind World and Nakheel – not the least of which is the possibility that all of that company’s creditors. creditors may not support the current restructuring proposal – Despite this, the last few months have been a period of sig- the month of March has heralded giant leaps forward. Trade nificant uncertainty for creditors of Dubai World, many of which creditors can now have much greater confidence in knowing the are large multinational construction companies engaged by legal position and what their commercial options are. This can Nakheel and other Dubai World companies on major projects. only be positive for Dubai and its future success. Firstly, the detail of the proposed restructure had not been released. Secondly, given the establishment of the Special Clyde & Co Tribunal, the ability of creditors to pursue claims for payment in Projects and Construction the meantime was not clear, especially in respect of contracts Dubai Office: City Tower 2, Sheikh Zayed Road containing arbitration agreements. PO Box 7001, Dubai, United Arab Emirates In March 2010, there were three major developments that Tel: (971) 4 331 1102 improved the lot of trade creditors: Fax: (971) 4 331 9920 • On 17 March, the Dubai Court of First Instance decided that Email: [email protected] it could not hear a claim brought against Nakheel because [email protected] Decree 57 prevented the Dubai Courts from hearing such www.clydeco.com matters. While there is no law of precedent in Dubai and an
APRIL 2010 47 JURISDICTION UPDATES
SINGAPORE
The role of expert evidence in a patent dispute
R.P.C. 46, where he said at paragraph 12 on the role of an expert witness that: “Their primary function is to educate the court in the tech- nology – they come as teachers, as makers of the mantle for the court to don. For that purpose it does not matter whether they do or do not approximate to the skilled man. What matters is how they are at explaining things.” By Heng Liling
In the recent case of Mühlbauer AG v Manufacturing Integration The SCA further emphasised that in the legal test for inventive Technology Ltd [2010] SGCA 6, the Singapore Court of Appeal step under the Singapore Patents Act, “a person skilled in the art” overruled a judgment from the country’s High Court in does not assume knowledge and expertise that goes beyond Mühlbauer AG v Manufacturing Integration Technology Ltd [2009] what a reasonable person “skilled in the art” would possess. As SGHC 45 concerning the issues of novelty and inventive step, stated in McGhan Medical UK Limited v Nagor Limited Case No holding that Singapore patent No 117982 CH 1999 1720 (28 February 2001), and (“the Patent”) was both novel and non- followed in the Singapore case of Ng Kok obvious, and therefore valid. Although the SCA considered Cheng v Chua Say Tiong [2001] 2 SLR(R) The Patent, owned by Mühlbauer AG the testimony of the expert 326, “the addressee is deemed to be unim- (the Appellant), relates to a device for aginative and uninventive but is equipped checking and rotating electronic compo- witnesses in the case to be nevertheless with a reasonable degree of intel- nents. In the High Court proceedings the helpful, it took the view that ligence and with a wish to make directions in Appellant, as Plaintiff, has alleged that the the patent work.”. the experts’ views were not Manufacturing Integration Technology Ltd In summary, it is important to take note – the Respondent in the Court of Appeal critical except in so far as that experts engaged for the purpose of proceedings (the Respondent) – had they enabled the Court to patent litigation would normally possess infringed the Patent. The Respondent had knowledge as well as expertise that goes understand what the precise acknowledged in the High Court proceed- beyond the notional person skilled in the ings that its device infringed all ten claims of claims were in the Patent art. Therefore, both parties should ensure the Patent, but counterclaimed that the when submitting expert evidence to the Patent was invalid. The Appellant subse- court that the experts only put themselves quently appealed against the lower court’s decision that the in the shoes of “the person skilled in the art” – i.e. skilled but Patent was invalid for lack of novelty and inventive step. unimaginative – and not assume knowledge and expertise that In reaching its decision, the Singapore Court of Appeal (SCA) goes beyond that. Otherwise, the expert evidence may not be felt it necessary to emphasise two preliminary points. One of useful to the court. these preliminary points relates to the role of expert evidence in a patent dispute. Although the SCA considered the testimony of the expert ATMD BIRD & BIRD LLP witnesses in the case to be helpful, it took the view that the 2 Shenton Way, #18-01 SGX Centre 1 experts’ views were not critical except in so far as they enabled Singapore 068804 the Court to understand what the precise claims were in the Tel: (65) 6428 9318 Patent. The SCA further emphasised that it is the Court which Fax: (65) 6223 8762 decides whether or not the requisite legal provisions have (or Email: [email protected] have not) been satisfied. This is consistent with the view stated www.twobirds.com by Jacob L.J. in the English case Technip France SA’s Patent [2004]
48 ASIAN-COUNSEL www.inhousecommunity.com VIETNAM
Mergers, consolidations and acquisitions of credit organizations
must have minimum charter capital which is equal to the legal capital prescribed by laws. Apart from satisfying the require- ment on minimum charter capital, the acquiring credit organi- zation must comply with statutory requirements on the safety percentage of operation. By Tuan Anh Nguyen Forms of Mergers – The following are permitted: On 11 February 2010, the State Bank of Vietnam (SBV) issued • Banks, finance companies, and credit cooperative organiza- Circular 04/2010/TT-NHNN (Circular 04) setting out new legal tions merging with and into a bank; stipulations on mergers, consolidations and acquisitions of mer- • Finance companies merging with and into a finance company; chant banks, financial companies, finance lease companies and • Finance lease companies merging with and into a finance lease credit cooperative organizations (collectively, credit organizations) company. in Vietnam. Circular 04 became effective 45 days from the issuing date and replaced Decision 241/1998/QD-NHNN5, which was Forms of Consolidations – The following are permitted: issued by the SBV on 15 July 1998. • A bank(s) consolidates with other banks, finance companies and credit cooperative organizations to form a new bank; Definitions – The following definition are useful: • Finance companies consolidate to form a new finance company; • Merger: where one or more credit organizations merge with • Finance lease companies consolidate to form a new finance and into another credit organization (merged organization) by lease company. way of transfer of all lawful assets, rights, obligations and inter- ests to the merged organization and, at the same time, termi- Forms of Acquisition – The following are permitted: nation of the existing credit organizations takes place. • A bank is permitted to acquire a finance company(ies) or • Consolidation: where two or more credit organizations are finance lease company(ies); consolidated into a new credit organization (consolidated • A finance company is permitted to acquire a finance lease credit organization) by way of transfer of all lawful assets, company(ies) rights, obligations and interests to the consolidated credit It is unclear as to whether a bank, a finance company or a finance organization and, at the same time, termination of the existing lease company is permitted to acquire other banks, as this form is credit organizations. not specifically mentioned in Circular 04. • Acquisition: where a credit organization purchases all lawful assets, rights, obligations and interests of other credit organiza- Process and Approval: All cases of mergers, consolidations tions. After acquisition, the credit organizations being acquired and acquisitions must be approved by the Governor of the SBV. become subsidiaries of the acquiring credit organization. The process and the documents required – with particular guid- ance as to how the documents shall be prepared for obtaining Conditions – Circular 04 set our specific conditions applicable approval of the Governor of the SBV – are specifically described to each merger, consolidation and acquisition, which are general- in Circular 04. ised as follows: • It must not violate relevant provisions set forth in the Law on bizconsult law LLC Competition; 3/F, VNA Building, 20 Tran Hung Dao Street • There must be a Proposal of Merger, Consolidation or Hanoi – VIETNAM Acquisition, which consists of full information as required in Tel: (84) 4 39332129 Fax: (84) 4 39332130 Circular 04 and which must be consistent with the Contract of Email: [email protected] Merger, Consolidation or Acquisition; www.bizconsult-vietnam.com • The merged, consolidated or acquiring credit organization
APRIL 2010 49 Asian-Counsel Direct
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50 ASIAN-COUNSEL www.inhousecommunity.com Malaysia Middle East Titus & Co., Advocates Titus House, R-77A, Greater Kailash- I, Law Firms Law Firms New Delhi-110 048, India Azmi & Associates AFRIDI & ANGELL Tel: (91) 11 2628 0900, 2628 0800, Global Financial Services & Po Box 9371, Emirates Towers, (91) 11 2628 0100 Islamic Banking Practice Group Level 35, Sheikh Zayed Road, Email: [email protected], [email protected] 14th Floor, Menara Keck Seng, Dubai, U.A.E. Contact: Diljeet Titus ([email protected]) 203 Jalan Bukit Bintang, Tel: (971) 4 330 3900 Suhail Dutt ([email protected]) 55100 Kuala Lumpur, Malaysia. Email: [email protected] Rai S Mittal ([email protected]) Phone: (603) 2118 5000 ext :5063 Contact: Bashir Ahmed Abhixit Singh ([email protected]) Email: [email protected] Website: www.afridi-angell.com Website: www.azmilaw.com —————— —————— Clyde & Co Kadir Andri & Partners Projects and Construction 8th Floor, Menara Safuan, 80, Dubai Office: City Tower 2, Jalan Ampang, 50450 Kuala Lumpur Suite 102, Sheikh Zayed Road PO Box 12677, 50786 Kuala Lumpur, Malaysia PO Box 7001, Dubai, United Arab Emirates Tel: (603) 2078 2888 Tel: (971) 4 331 1102 Email: [email protected] Email: [email protected] Indonesia Contact: Abdul Kadir Kassim (Managing Partner) [email protected] Website: www.kaaplaw.com Webiste www.clydeco.com Law Firms —————— Ali Budiardjo, Nugroho, Reksodiputro Raslan Loong Graha Niaga 24th Fl. Level 3A, Menara Manulife, Jl. Jenderal Sudirman Kav.58 6 Jalan Gelenggang, Damansara Heights, Jakarta 12190, Indonesia 50490 Kuala Lumpur, Malaysia Tel: (62) 21 250 5125/5136 Tel: (603) 2093 3939 Email: [email protected], [email protected] Email: [email protected] Contact: Emir Nurmansyah Website: www.raslanloong.com Singapore Email: [email protected] —————— Website: www.abnrlaw.com Shearn Delamore & Co Law Firms —————— 7th Floor, Wisma Hamzah-Kwong Hing Allen & Gledhill LLP Makarim & Taira S. No. 1 Leboh Ampang One Marina Boulevard #28-00 Summitmas I, 16th – 17th Floors 50100 Kuala Lumpur, Malaysia Singapore 018989 Jl. Jend. Sudirman Kav. 61-62 Tel: (603) 2027 2727 Tel: (65) 6890 7188 Jakarta 12190, Indonesia Email: [email protected] Email: [email protected] Tel: (62) 21 252 1272, 520 0001 Website: www.shearndelamore.com Contact: Lucien Wong (Managing Partner) Email: [email protected] —————— Email: [email protected] Contact: Rahayuningsih Hoed Website: www.allenandgledhill.com Wong & Partners Website: www.makarim.com —————— Suite 21.01, Level 21, —————— The Gardens South Tower, ATMD BIRD & BIRD LLP SSEK Mid Valley City, Lingkaran Syed Putra, 2 Shenton Way, #18-01 SGX Centre 1 Soewito Suhardiman Eddymurthy 59200, Kuala Lumpur, Malaysia. Singapore 068804 Kardono Tel: (603) 2298 7888 Tel: (65) 6428 9318 14th Floor, Mayapada Tower, Email: [email protected] Fax: (65) 6223 8762 Jl. Jend. Sudirman Kav. 28 [email protected] Email: [email protected] Jakarta 12920, Indonesia Website: www.twobirds.com Contact: Ira Eddymurthy (Managing Partner) —————— Tel: (62) 21 5212038, 5212130 Email: [email protected] Website: www.ssek.com
APRIL 2010 51 Asian-Counsel Direct
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52 ASIAN-COUNSEL www.inhousecommunity.com Helping Hands
Striving to save Japan’s legendary Itou
n 2008, Mark Weeks, the managing partner of Orrick assisted WSC with its initiation of a ground- Orrick, Herrington & Sutcliffe LLP’s Tokyo office, breaking collaboration with Japan’s largest paper company, Iwas on a fly-fishing trip to Mongolia when he met Oji Paper, and the Sarufutsu Itou no Kai (SIK), a local Zeb Hogan, the head of National Geographic’s Meg- group formed to protect the Itou and to create a protected afishes Project. This project is the first worldwide habitat area for the fish. Located on the island of Hokkaido, attempt to document and protect the planet’s giant fresh- the protected area – named the Sarufutsu Environmental water fish. After discussing the local Mongolian Taimen, Conservation Forest – spans 2660 hectares (6573 acres). Zeb soon turned the discussion to the Mongolian fish’s Faced with a unique opportunity to develop a model for Japanese cousin, the Itou, a rare species that Mark had other environmental preservation efforts throughout Japan, first encountered as a high school exchange student in the firm’s lawyers assisted WSC in creating a new and Japan more than thirty years ago. innovative approach to this project. A legendary seagoing freshwater fish Orrick also advised on the deal struc- found in Hokkaido, the Itou is a truly ture and terms of the agreement with impressive creature, reaching almost two Oji Paper to protect the Itou habitat. meters in length and living for more than The result of this collaborative twenty years. Unfortunately, it is also an project represents Japan’s first pro- endangered species. Logging activity around tected area on privately-held land the Itou’s native waterways, agricultural expressly dedicated to preserving development, river augmentation projects aquatic biodiversity. and the construction of floodgates and dams Orrick is now advising WSC and threaten the Itou’s environment, including SIK on the various Japanese laws and its route from traditional spawning grounds. regulations that can be used to encour- Unregulated and excessive recreational fish- age further protection of the Itou, ing is also a concern. including exploring the possibility of Upon learning of the Itou’s plight and Orrick’s Mark Weeks with a close friend using local and national Japanese tax the efforts of the Megafishes Project, Weeks made a per- laws to incentivise other landowners with waterfront sonal commitment, as well as a pledge on behalf of Orrick, property to use their land in a manner that protects the to help in whatever way possible. Once back in Tokyo, he Itou habitat. The team is also helping to identify opportu- enlisted the help of the firm’s Tokyo associate Yuko Inui, nities to use Japan’s new Ecotourism Promotion Law to an active member of the environmental preservation com- effectively regulate recreational fishing and to promote mittees of both the Japan Federation of Bar Associations ecotourism. and the Tokyo Bar Association. Inui contacted a specialist Weeks said, “Orrick has always been committed to pro at the Japanese National Institute for Environmental Stud- bono work and community service and we are delighted to ies who ultimately put the Orrick team in touch with the be helping with a project that will preserve critical habitat Wild Salmon Center (WSC), a US-based environmental for not only the Itou but for numerous bird species and organisation active throughout the Pacific Rim. The WSC other flora and fauna found in Hokkaido. We hope that our is currently involved in efforts to preserve the best wild continuing work on this project will lead to the develop- salmon ecosystems where salmonids like the Itou can ment of a sustainable recreational fishery that will preserve thrive. The protection of all wild salmon requires address- the Itou as a species and have tangible economic benefits ing the issues of water quality and over-development. for the local community.”
April 2010 53