Out of the Shadows Indonesia Rebuilds, Breaks Ties with the Past

WWW.VANTAGEASIA.COM SEPTEMBER – OCTOBER 2016 VOLUME 1 | ISSUE 2 ASIA BUSINESS LAW JOURNAL ASIA BUSINESS LAW JOURNAL

LEGAL INTELLIGENCE FOR IN-HOUSE COUNSEL

Out of the shadows Indonesia rebuilds, breaks ties with the past

SEPTEMBER – OCTOBER 2016 The battle for supremacy in arbitration UNCITRAL’s regional chief talks reform Asian corporates wise up to M&A insurance Vantage Asia India looks East with desires for expansion

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CONTENTS 33

3 LEADER Clear insight: Shining a light on the bigger picture

4 NEWS • Brexit trade swing to Asia? • China’s pharma M&A appetite • Korea’s BKL sets up in Yangon

15 BUSINESS LAW DIGEST • Thailand’s Foreign Business Act • Vietnam’s draft insurance review • New drone rules in Australia

24 IN-HOUSE AGENDA Calendar of events for regional corporate counsel associations

27 DISPUTE DIGEST • Indonesia: award misconceptions • Enforcement risk in China • SICC decision turns up the heat

33 COVER STORY Out of the Shadows: Despite the challenges, Indonesia makes its best efforts to rebuild

53 IN FOCUS Arbitration Wars: Battle for supremacy 53 67 SPOTLIGHT UNCITRAL’s regional chief: Q&A

73 INTELLIGENCE REPORT 67 Deal Shields: Corporates in Asia wise up to M&A insurance

85 ASIA-SPECIFIC A View to the East: India eyes expansion in Asia

92 CORRESPONDENTS Expert advice from Asia Business Law Journal’s correspondent law firms

92 CHINA – CORPORATE & COMMERCIAL 95 INDIA – INTELLECTUAL PROPERTY 98 PHILIPPINES – CORPORATE & COMMERCIAL Allbright Law Offices Anand & Anand ACCRA Law Offices 93 CHINA – DISPUTE RESOLUTION 96 INDONESIA – CORPORATE & COMMERCIAL 99 SINGAPORE – CORPORATE & COMMERCIAL Boss & Young Lubis Ganie Surowidjojo Central Chambers Law Corporation 94 INDIA – CORPORATE & COMMERCIAL 97 OFFSHORE FINANCE 100 THAILAND – CORPORATE & COMMERCIAL Khaitan & Co Maples and Calder Silk Legal

1 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS EDITORIAL BOARD LAW JOURNAL September-October 2016 Volume 1 / Issue 2 ISSN: 2518-3141

EDITORIAL Email: [email protected] Telephone: +852 3622 2673 Himavat Chaudhuri Gavin Denton Deepak Dhawan Andrew Godwin Will Herbert Gigi-Anne Hoh Chief Legal and Head of Chambers, Executive Director, Author, Associate Director, President, Japan Regional Legal Counsel, Regulatory Affairs Officer, Arbitration Chambers Corporate Affairs & Law, Asian Law Centre, In-house Counsel Syngenta Asia-Pacific SUBSCRIPTIONS Tata Sky Hong Kong Indian Oil Corporation Melbourne Law School Network Email: [email protected] Telephone: +852 3622 2623 www.vantageasia.com

EDITOR John Church CONTRIBUTORS Tanya Khan Akhil Prasad João Ribeiro Yudhistira Setiawan Ashok Sharma Lin Shi James Kelly, Vandana Chatlani, Vice President/Managing Country Counsel, Head, Regional Centre President, Founder & President, President, Paul Campbell Director, Australia & Boeing International for Asia-Pacific, Indonesian Corporate Indian Corporate Hong Kong Corporate CREATIVE CONSULTANT Asia-Pacific,Association Corporation India UNCITRAL Counsel Association Counsel Association Counsel Association of Corporate Counsel Apostrophe Design HEAD OF MARKETING Anita Fung BUSINESS DEVELOPMENT MANAGER Thom Andrews ASSOCIATE PUBLISHERS Kim Cheung, Tina Tucker Huen Wong Dharmendra Yadav Steven Yeo Professor Yeo Peter Zhang Shawn Zhao Xiaoxue PUBLISHERS Honorary Chairman, Vice President, Senior Vice President & Tiong-min General Counsel and Vice President and James Burden, Kelley Fong Hong Kong International Singapore Corporate General Counsel, Dean, Singapore Board Secretary, General Counsel, Arbitration Centre Counsel Association Asia Manulife Management University Greater China Greater China, School of Law Sony Mobile Hewlett Packard

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Printed in Hong Kong © Vantage Asia Publishing Ltd, 2016 2 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 LEADER OPINION

Clear insight

Shining a light on the bigger picture

elcome to the second and local laws, as well as corruption. The these risks can be mitigated with M&A issue of Asia Business views on reform from inside this nation insurance. Both brokers and insurers have Law Journal. We are well worth reading. recognized significant upticks in deals of hope you enjoyed Alternative dispute resolution has grown late in tandem with a greater awareness in our inaugural rapidly from a side order to a main course the region of the types of products on offer issueW and found useful items of interest on the menu for corporate counsel and law and how they apply to advisers and their within its pages. Many thanks, too, to firms alike. Arbitration Wars looks at the clients. And a rise in claims mirrors an all the well-wishers for their letters of top performers and the pretenders in the increase in business, the experts say, across support. We aim to continue as we have region, and explores where and why the sectors including infrastructure, health- started, by providing our readers with industry is successful. The major players are care, agriculture and education. We look at credible insights and legal intelligence for rapidly being joined by others in the region the policies and the regional markets that in-house counsel, law firms and the wider vying for a slice of the pie. We also look at are showing an interest. legal community. crucial national regulatory developments A View to the East analyses India’s desire In this issue, as our cover with its iconic that will influence future trends. to expand and strengthen trade in the Asian shadow puppet suggests, our main feature In our Spotlight section, Asia Business neighbourhood. We look at prominent Out of the Shadows focuses on Indonesia Law Journal asks João Ribeiro, head of Indian enterprises and the inroads they and its path to a more open legal frame- the United Nations Commission on have made in the region, as well as the work that will encourage foreign invest- International Trade Law’s Regional Centre increasing interest of Asia’s multinationals ment. As the lawyers and counsel we for Asia and the Pacific, for his views on in Indian markets. Bilateral relationships visited testified, change has been slow legal reform in a region where countries are strong but changes in investment in coming for the nation in the wake of and economies are often as diametrically regulation in some jurisdictions require economic doldrums brought about in part opposed in some aspects as they are similar Indian investors and their legal advisers by a commodities slump, but also due to in others. Ribeiro offers opinions on legal to be on their toes. historical influences dating back to an convergence, sustainable development, In addition, our regular sections – antiquated civil law system inherited from arbitration, cross-border trade, contract including In-house Agenda’s wrap-up of Dutch colonialism. law, e-commerce and many other issues events for our corporate counsel associ- Reforms are underway to encourage confronting Asia. His RCAP project has ation partners, Correspondents, Dispute investment and the government has led been so successful that it has been extended Digest, and more – are full of intel to keep the way by spending on infrastructure and for a further five years, until 2022, and his you up to date on regional legal issues. providing a more agreeable environment. views make fascinating reading. And don’t forget to drop us a line and let But problems remain, not least of which Deal Shields explores the risks posed in us know your thoughts on Asia’s newest are the duplicitous and opaque national mergers and acquisitions (M&A) and how and finest regional business law magazine.

Best wishes,

John Church Editor, Asia Business Law Journal Editor-in-chief, Vantage Asia

3 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS THE WRAP

BREXIT MAY CAUSE TRADE SWING TO ASIA

s law firms scramble to explain delay the free trade negotiations currently The 23 June referendum in which the possible Brexit scenarios to clients, underway,” she said. UK voted to leave the EU has startled Asome analyses say the Asian region But Asian countries may benefit from the world, with manifold regulatory and is set for a trade windfall from the UK’s this opportunity as well. “Exiting the EU commercial uncertainties making regional exit from the EU. will require Britain to negotiate separate business leaders restless – and not sur- According to Anna Elliott, a Sydney- [FTAs] with Asia-Pacific countries – if it so prisingly, leading international law firms based partner at Squire Patton Boggs, desires,” said Elliott. “This has the have responded by alerting investors to several Asia-Pacific countries either have potential to benefit countries in the potential risks ahead. negotiated, or are currently negotiating, Asia-Pacific region such as China, as “There is a great deal of concern among free trade agreements (FTAs) with the EU. Britain – in the event of Brexit – would be Asian corporates with interests in the UK, “Brexit may require existing FTAs with expected to focus on developing stronger but now also there are concerns that other the EU to be renegotiated to adjust for a trade relationships in the Asia-Pacific countries will put their membership of the non-Britain EU, and, depending on how region, offering trading opportunities for EU up for discussion in coming weeks complex Britain’s exit from the EU is, may both governments and companies.” and months,” said Jacky Scanlan-Dyas, a

4 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS THE WRAP

Tokyo-based partner at Hogan Lovells. “This “In such circumstances, UK financial tax treaty with each EU member state, not will have an inevitable impact on how Asian services institutions would effectively be- all treaties provide for 0% withholding, and corporates view doing business in the EU.” come non-EU ‘third country’ entities,” said several are less protective than the equiva- Trade arrangements with the UK are Robert Stirling, a London-based partner at lent provisions under the relevant direc- now fated to be re-designed, whatever Skadden. “The same limits will apply to UK tives,” he said. the result of Brexit negotiations, since the financial services institution subsidiaries “As a result, the attractiveness of cor- current EU trade treaties cannot cover the of US and other non-EU companies. Many porate structures with an English parent UK once its exit is complete. such companies rely on their UK subsid- company may be reduced by Brexit. Those “From a legal perspective, it is import- iaries to provide services within the EU, for planning new investments may therefore ant to stress that on Brexit occurring, all which passport authority is required.” wish to select a different EU jurisdiction for existing UK trading arrangements with the Therefore, “Brexit raises issues on this purpose, and in appropriate situations EU, EFTA [European Free Trade Associa- whether and how UK banks, insurers, bro- consideration should be given to migrating tion] and the rest of the world will lapse, ker-dealers, investment managers, invest- an existing English company parent struc- unless replacements are agreed,” said ment exchanges and clearing houses can ture into another EU jurisdiction.” Scanlan-Dyas. “Decisions will need to be provide services to EU clients and access EU Companies already in the European made on which new trading arrangements counterparties post-Brexit,” added Patrick market should not be heedless of two to prioritize.” Brandt, a counsel at Skadden in London. important issues in their daily operation What tortures businesses and investors Philip Butler, the London-based global – their workforce and tax arrangements. the most at the moment is their lack of abil- co-chair of DLA Piper’s financial services “It is likely that the UK will seek to impose ity to foresee which version of a Brexit deal the UK and the other EU states will agree on. The worst scenario, in which Down- ing Street severs all links to the European “The uncertainties in a Brexit continent, is unlikely. However, since contribution to the EU’s scenario are so great that there budget and the free movement of workers – two important obligations in exchange for rights to access the EU single market – may be a temptation to do are the major anathema to Brexit support- ers, there is still a good chance that the new nothing until negotiations start Theresa May government will bring back a deal that falls short of the business commu- to create a clearer picture” nity’s expectations. “The uncertainties in a Brexit scenario are so great that there may be a temptation sector, said Brexit might have both pros and some restriction on immigration as a result,” to do nothing until negotiations start to cons for financial institutions. “Post-Brexit, said Crowley Woodford, a London-based create a clearer picture,” said Guy Lougher, there is, on the one hand, scope for regulat- partner at Ashurst. “This may result in the a London-based partner at Pinsent Masons. ed firms which do business both in the UK introduction of some form of visa system, as “However, the days when a business can say and the EU to be exposed to two sets of reg- is currently in place for non-EU citizens. You ‘wait and see’ are gone.” ulatory requirements which may be equally should consider what impact that may have Some companies have already taken onerous, but in different ways,” he said. “On on your workforce. Do you have non-UK EU action in response to the uncertainties. the other hand, if the UK takes the opportu- citizens working in your business in the UK? Lougher said his firm had started advising nity to lessen the burden of regulation, Equally, do you have UK citizens working in clients on the review of business-critical firms may see this as an opportunity.” your business within EU member states?” contracts. “Agreements which specifically Brexit may also change decision-makers’ The tax issue is more complicated. reference the EU as the territory governed minds about how to develop their businesses “Depending on your business model and by the contract may lack clarity,” he said. in Europe. David Lakhdhir, a London-based corporate structure, [concerns] may include “There may also be ambiguity around how partner at Paul Weiss Rifkind Wharton & increased customs duties, the tax treatment the impact of tariffs will be shared.” Garrison, said part of the reason the UK had of foreign exchange gains and losses, tax If the UK government fails to set satisfac- been recognized as a good location for the equalisation arrangements for employees tory arrangements with the EU, UK financial parent of a European group was that EU di- and a change to the existing value-added services institutions may no longer enjoy rectives ensured that intra-group dividends, tax position,” said Paul Miller, a London- their current free entry to the EU single mar- interest and royalties could move free of based tax partner at Ashurst. “Where Brexit ket by losing a variety of “passporting” rights, withholding taxes. causes changes to the group holding struc- which allow companies in one EU member “Although the UK has an extensive net- ture and/or business relocations, these will state to provide services in any other. work of double-tax treaties and an income also have significant tax implications.”

5 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS THE WRAP

Morgan Lewis takes Dentons talent for regional expansion

partner in Morgan Lewis & Bockius’ newly opened Shang- A hai office said the firm would continue to consider further growth and expansion opportunities in Asia in line with client needs. Corporate transactional partners Mitch Dudek, Todd Liao, Alex Wang, Eddie Hsu and Cindy Pan, plus 18 associates and 12 staff, joined the new office of Morgan Lewis from Dentons’ Shanghai outpost. “Morgan Lewis has aggressively targeted Asia, opening in Singapore last year through a merger with one of Singapore’s leading firms, the Stamford Law Firm, and seeing a major expansion in Tokyo in 2014, when 10 lawyers joined from Bingham McCutchen,” Dudek told Asia Business Law Journal’s sister publication, China Business Law Journal. “Morgan Lewis also has an office in Beijing, and is one of the few global firms to have two offices in Kazakhstan, the centre of energy and infrastructure projects in Central Asia. “Moving to Morgan Lewis allows us and our clients to take full advantage of fantastic synergies across practices and geographic regions,” added Dudek. “The firm is especially nimble at assembling and integrating teams of lawyers from across the globe to achieve the optimum results for clients. Morgan Lewis’ new Shanghai partners have worked together for more than a decade. They joined Dentons in 2011 from Paul Hastings. “I am thrilled to welcome a team of lawyers who are deeply familiar with China and its business and legal systems,” said Jami Wintz McKeon, global chair of Morgan Lewis. “Shanghai is not only China’s largest city but it is a global financial centre of critical importance to our clients all around the world.” The firm’s Shanghai office opened on 2 September. It is Morgan Lewis’ second in China and sixth in Asia. The 2,000-lawyer firm now has 29 offices worldwide.

6 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS DEAL DIGEST

NORTON ROSE SEES MALAYSIAN LNG DEAL THROUGH FOR JX NIPPON

Norton Rose Fulbright advised JX Nippon Oil & Energy Corporation on the acquisition of a 10% stake in Petronas LNG 9 (PL9SB), a wholly owned subsidiary of Petronas valued at more than US$400 million. Norton Rose said in a statement that as part of the transaction, JX and Petronas signed a marketing support agreement. PL9SB owns the ninth LNG liquefaction train within the Petronas LNG Complex in Sarawak, Malaysia, which is expected to commence commercial operations in the first quarter of next year. “We were pleased to have assisted JX Nippon on this important regional acquisition,” Japan’s M3 takes stake in said Norton Rose partner Michael Joyce, Health Impetus who led the firm’s team in Sydney. “The deal reflects the bright apanese medical web portal company management through work with pharma- future for the oil and M3 has acquired a majority stake in ceutical companies; direct-to-consumer gas sector in the Asia- JHealth Impetus, an Indian company services; healthcare technology; and Pacific, and drew from that focuses on niche areas of the health- serving pharmaceutical companies, hospi- our experience in two care industry. tals and doctors in niche areas of patient of our global priority M3 acquired the stake by purchasing treatment management. industry areas of energy shares from Health Care at Home India Legal counsel: Trilegal represented M3, and transport.” and by subscribing to Health Impetus conducting due diligence on Health Impe- Legal Counsel: equity shares. tus and drafting and negotiating the trans- Michael Joyce was M3 operates m3.com, a web portal action documents. The team comprised assisted by Sydney- for medical professionals that delivers partner Ashwyn Misra, counsel Shamin based senior associate healthcare related information to 250,000 Shah and associate Jeet Chaudhuri. Kathryn Martin, and the physicians in Japan while also providing Partners Gautam Saha and Heena Singh Sydney team worked marketing and research and development at AZB & Partners, along with associate with local Malaysian support to pharmaceutical companies. Vinit Nalavadi, advised Health Care at law firm Skrine to Health Impetus focuses on disease Home India. complete the deal.

7 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS DEAL DIGEST

Big increase in China outbound pharma M&A

hanghai Fosun Pharmaceutical Chen Qiyu, chairman of Fosun Pharma, acquired Vitaco Holdings by way of scheme (Group), a leading Chinese healthcare said in a statement the Gland Pharma deal of arrangement. The deal valued Vitaco at Sprovider, will acquire an approximate would strengthen the firm’s global presence A$313.7 million (US$237 million). Vitaco is 86% stake in Indian pharmaceutical com- and accelerate the speed of its internation- a leading sports nutrition and health food pany Gland Pharma for US$1.26 billion. alization. “Fosun Pharma is dedicated to business in Australia and New Zealand. This is the largest overseas acquisition implementing our investment model of Legal counsel: Khaitan & Co acted for ever made by a Chinese pharmaceutical ‘combining China’s growth momentum Fosun, with its team led by partner Niren company, and also China’s largest takeover with global resources’ with the win-win Patel. Troutman Sanders acted as foreign of an Indian company. co-operation with Gland,” he added. counsel to Fosun Pharmaceutical and its As of early July 2016, Chinese firms had Established in 1978, Gland Pharma team was led by Shanghai partner Ding announced more than US$3.9 billion in develops and manufactures generic inject- Chengfei. Cyril Amarchand Mangaldas acted overseas acquisitions in the pharmaceutical, ables for use in almost 90 countries on five as legal counsel to Gland Pharma with its biotechnology and healthcare sectors, a continents, with a focus on the Indian and team led by Mumbai-based managing part- 10-fold increase on the amount spent in all US markets. ner Cyril Shroff and Bangalore-based partner of 2012, according to Bloomberg data. In another deal, Hong Kong-listed Luye Reeba Chacko. Simpson Thacher & Bartlett Following the close of the transaction, Pharma Group acquired Swiss company was offshore counsel for Gland Pharma. Gland Pharma will remain headquartered Acino’s transdermal drug delivery systems. K&L Gates acted for Luye on the Acino in Hyderabad. P V N Raju, founder of Gland The parties agreed that a carve-out of other deal. Its team was led by Frankfurt partner Pharma, and his son, Ravi Penmetsa, will business sectors of Acino would be consum- Claudius Paul. Walder Wyss advised Luye continue to sit on the board, as managing mated prior to the closing of the transaction. on Swiss law. Ashurst advised Luye on Hong director and chief executive officer. Their Recently, Shanghai Pharmaceuticals Holding Kong capital markets law. Clifford Chance family will retain a stake in Gland Pharma. and Primavera Capital Fund II also jointly acted for Acino.

8 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS DEAL DIGEST

THE NEW FUND IN THE ROOM IN HK

ong Kong has recently seen the Club Consumer Debt Fund – with terms advertisements, invitations or documents – establishment of the Elephant Club similar to those typically applicable to loans. including information on websites – of an H Consumer Debt Fund, the city’s The investment fund, which aims to investment fund can be issued to the first hybrid fund linked to a peer-to-peer raise up to HK$2 billion (US$258 million) in general public if the fund is intended to be (P2P) lending platform, a structure that the medium term, is managed by Capital sold only to professional investors. might be popular in Hong Kong until it Focus Asset Management. Raised capital Another challenge, according to Wong, is develops specific rules on P2P lending, says will be largely invested in notes issued by how to replicate the commercial terms of the one legal expert involved. Elephant Club, a licensed money lender in loans in the investment fund. “Commercially “At present, there are no laws and reg- Hong Kong that provides an online plat- this is very important, and we experienced ulations in Hong Kong which specifically form for P2P lending. a lot of practical difficulties in aligning the regulate peer-to-peer lending,” Michael Investors in the fund indirectly invest in terms and operations of the investment fund Wong, a Hong Kong-based partner at K&L the consumer lending business of Elephant with the underlying loans,” he said. Gates, told Asia Business Law Journal’s sister Club, the notes of which are to be acquired “In the end we created a structure which, publication, China Business Law Journal. by the fund. The fund is private and only although not the same as a traditional peer- “However, peer-to-peer lending, depend- accessible to a confined scope of investors, to-peer lending arrangement, is something ing on the structure, could potentially fall including professional investors. that we consider very similar, and that foul of Hong Kong laws and regulations Wong said the main reason for formu- could work effectively as well.” generally applicable to deposit taking, lating this structure was that “the laws Legal counsel: K&L Gates advised on the money lending and advertisements relat- and regulations in Hong Kong relating to formation of the Elephant Club Consumer ing to investments and deposits.” offering of investments funds under the Debt Fund, the financing structure between For compliance purposes, Wong and his professional investors exemption are very the fund and Elephant Club, and on the reg- team designed a structure under which, in- clear”, particularly given a Court of Final ulatory issues in relation to the online plat- stead of having the investors directly lending Appeal decision in 2015 in the case of Pacific form. Michael Wong led the deal, supported to the borrowers, the investors will invest in Sun Advisors Limited & Anor v Securities by Hong Kong partner Neil Campbell, who an investment fund – namely, the Elephant and Futures Commission, which held that advised on the financing aspects.

9 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS MARKET PULSE

HSF LEGAL SERVICES STRATEGY CONTINUES WITH LAUNCH IN SHANGHAI Herbert Smith Freehills has launched a legal services office in Shanghai, a first for China. The office will run low-cost legal services and support dispute and transactional matters in Asia, according to reports. The new office follows similar arrangements launched in Perth, Australia, and Belfast, in Northern Ireland, in the past 12 months. The firm says the 13-strong legal team in Shanghai will offer legal expertise, process efficiency and client tech solutions for high- volume or document-intensive work that will complement the firm’s high-end operations in Beijing, Shanghai, Hong Kong, and internationally. “By equipping this new team with the technology and processes proven at our existing legal hubs in Belfast and Perth, we can offer clients a cost- effective way of tackling the document-intensive elements of these projects on the ground in China,” Libby Jackson, the firm’s MAS roadmap updates old Global Head of Alternative Legal Services, said in a statement. payment regulations “This innovation of a new centre in Shanghai helps us deliver on the firm’s commitment to he Monetary Authority of Singapore a national payments council system that providing innovative and cost- (MAS) has laid out plans to develop a leverages fintech and fosters innovation and effective service delivery options Tworking regulatory framework tar- competition. The adoption of electronic to our clients,” added Global geting electronic payments, and to update payments would also be enhanced. Co-CEO Sonya Leydecker. “It is older laws on money changing and payment The report noted that “similar to experi- part of our new strategy launched systems into a single piece of legislation. ences in benchmark jurisdictions, the exist- earlier this year, and continues the The MAS commissioned KPMG to ing [regulatory] model has been challenged pioneering work we have done collaborate on a “payments roadmap” that by rapid changes and innovations enabled in the alternative delivery of our focuses on understanding how consumers by technology. These include consumer services to clients.” and businesses make payments. adoption of less secure instruments, Herbert Smith Freehills says The KPMG report recommends stream- movement of users to digital and online its Alternative Legal Services lining the current regulatory regime into platforms to make and receive payments, global initiative has more than a “singular” format that can be applied innovations in clearing and settlement 350 lawyers, legal assistants and on an activity basis, rather than specific services with the potential to disrupt the technologists working from payment systems. long-standing model, and more sophisticat- centres in Belfast, Brisbane, An MAS report said the recommen- ed cyber criminals.” London, Melbourne, Perth, Sydney dations also included establishing a new A copy of the Singapore Payments Road- and now Shanghai. governance model for payments through map is available on the MAS website.

10 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS MARKET PULSE

ADVISERS PRESENT REPORT ON DRAFT LIBERALIZATION RULES

report prepared by Hammurabi & sector to ensure a deeper talent pool in to discuss the report at a meeting with Solomon, the Indian National Bar the legal profession. The final phase would stakeholders in mid-September. “The draft AAssociation (INBA) and Medhaad- involve policy changes to permit foreign rules need further amendments on issues visors, on the draft Bar Council of India lawyers to practise law in India by forming concerning various stakeholders,” he said. (BCI) Rules for Registration and Regulation joint ventures and collaborating with “The government … should [consider] the of Foreign Lawyers in India, 2016, has been Indian lawyers. It would also entail fram- impact on all stakeholders holistically and presented to the Ministry of Law. ing policies and setting up a disciplinary within the purview of [its] agenda of eco- The 87-page report was submitted to body to regulate foreign law practice. nomic reforms and ease of doing business the law secretary, Suresh Chandra, on 30 Kumar told Asia Business Law Journal’s in India. It is also pertinent for the govern- August and to the joint secretary of the sister publication, India Business Law ment to understand various principles and Ministry of Commerce, Sudhanshu Pan- Journal, that the Ministry of Law was likely guidelines adopted by other countries.” dey, on 31 August. It examines global best practices followed in other jurisdictions including the US, the UK, Singapore, Brazil, South Africa, South Korea, Japan, Russia, China, Malaysia and Indonesia. According to Manoj Kumar, the founder of Hammurabi & Solomon, reforms in the legal services sector should focus on the ease of doing business. He emphasized that every stakeholder would be impacted differently by the reforms and that they needed to be addressed carefully. INBA’s secretary general, Kaviraj Singh, said that the Indian legal market would see a tangible increase in work opportunities if foreign lawyers were permitted to practise in India through collaborations with local law firms. He added that a greater shift of legal process outsourcing to India would also add value to the market. The report recommends a phased entry of foreign lawyers and law firms. The first phase would be to allow foreign lawyers to practise in the areas covered in the draft BCI rules by the end of the current financial year (31 March 2017). The second phase would see the reform of laws such as the Ad- vocates Act, 1961, and the Limited Liability Partnership Act, 2008, which would allow a firm to expand its partnership, remove restrictions on advertising and foster reforms in the education

11 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS MARKET PULSE

JAPANESE BIG FISH TIES UP WITH THAI FIRM

ori Hamada & Matsumoto is to cross-border M&A and international trade, increasing Japanese investment interest integrate with Thailand's Chan- and Niwes Phancharoenworakul, the man- in Thailand and Myanmar has reportedly M dler & Thong-ek Law Offices in aging partner of C&T, will lead the new prompted the marriage with C&T, with its a process that will be completed by January practice, according to MHM’s head office. compliment of 45 lawyers. MHM opened 2017. The new operation in Thailand MHM has advised Japanese clients in a desk at AKSET Law in Jakarta earlier this will be called Chandler MHM Limited. Thailand for many years via its own Bang- year and has offices in Tokyo, Osaka, Fukuoka, Satoshi Kawai, a partner who specializes in kok office, staffed with five lawyers, but Beijing, Shanghai, Singapore and Yangon.

LEGAL NEWS IN BRIEF

CMS BACK IN ASIAN EXITS ADD and partner Keith McGuire restructures its partner new offices in Asia for the HONG KONG TO GLOBAL TALLY from the Singapore office remuneration and equity firm include Seoul and a International commercial FOR ASHURST followed those of Hong following a recent drop presence via alliance in firm CMS Hasche Sigle The Singapore departure Kong managing partner in revenue. Jakarta with Witara Cakra recently opened a Hong of managing partner Lina lee and corporate Advocates. Kong office focusing on Shaun Lascelles followed partner Jonathan Hsui. dispute resolution and hot on the heels of two Other high-profile exits WHITE & CASE mergers and acquisitions exits from Hong Kong around the world have RAIDS 10 FOR WALKERS SPINS (M&A). and many more globally contributed to a wave of SYDNEY OFFICE WEBB FOR HK The firm last had a for Ashurst recently. The departures in the past 12 White & Case has snared CORPORATE TEAM presence in Hong Kong departures of Lascelles months or so as the firm 10 partners from Herbert Walkers has hired James via CMS Cameron Smith Freehills to launch Webb for its Finance & McKenna, which closed its Australian practice Corporate Group in Hong in 2003. amid reports that more Kong. The new partner “Setting up our own raids are to come. The Webb has offshore and office in Hong Kong New York-headquartered onshore experience, and will allow us to provide firm’s new project finance was stationed previously effective local support team came mainly from in the British Virgin to clients from Europe, Herbert’s Sydney and Islands, Cayman Islands, China, the Asia-Pacific Melbourne offices, with London and Singapore. region and the US,” one more each from Hong Webb advises on debt said Nicolas Wiegand, Kong and Singapore. transactions, acquisition a partner in the CMS Meanwhile, reports finance, leveraged finance, International Arbitration from Down Under are project finance, real Group and head of the speculating that White estate finance, structured Hong Kong office. “As & Case is still hunting a finance, bond issuances, such, we are responding corporate team, with pos- general lending and to growing business vol- sible target firms including restructurings. umes and meeting the Gilbert + Tobin, Clayton He also acts on corporate need for client proximity Nicolas Utz, Allens, and King & transactions, including and cross-border advice.” Wiegand Wood Mallesons. Recent mergers and acquisitions,

12 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 NEWS MARKET PULSE

BKL sets up shop in Yangon

outh Korean firm Bae Kim & lee (BKL) has opened an international office in Yangon to provide services in areas including for- Seign investments, real estate development projects, M&A negotiations and licensing, and assist companies wishing to expand their presence in Myanmar. BKL’s Myanmar team will be led by Eric Yang Eun Yong, with other members including Bae Yong Geun, Kim By- oung Pil, Ahn Cheol Hyo and Zaw Kaung Htet. Myanmar has shown annual growth rates of about 8%, and with the country’s recent opening up the firm expects foreign companies to have more opportunities to take part in private and public sector projects, especially in sectors such as energy and infrastructure. The Yangon office strengthens BKL’s strategy in Southeast Asia. Last year, with a view to becoming more specialized in legal services to the region, BKL opened offices in Hanoi and Ho Chi Minh City, and in Hong Kong, adding to its offices in Seoul, Beijing and Shanghai. The firm also has lawyers present in Thailand, Indonesia, Malaysia, Cambodia and Laos, and has built a co-operative relationship with major law firms in those countries, enabling it to provided legal services across the region.

joint ventures, share- GIDE’S VIETNAM PHILIPPINE LAW boost our capabilities in was appointed CIETAC’s holder arrangements and CHIEF CHANGES FIRM JOINS helping clients navigate deputy secretary-gen- corporate restructurings. TO PWC RAJAH & TANN the diverse legal landscape eral. In 2015, Wang PwC has appointed Full service Philippine in Asia.” was installed as direc- Nasir Dao as a partner in firm C&G Law will join tor-general of the China WITHERS HIRES Vietnam and head of PwC Rajah & Tann Asia from Council for Promotion of SINGAPORE OFF- Legal offices in Hanoi and 1 January 2017. C&G has CIETAC APPOINTS International Trade’s legal SHORE SPECIALIST Ho Chi Minh City. a staff of more than 30 SECRETARY- affairs department, until Withers has recruited Dao joins from Gide lawyers and specializes in GENERAL he returned to CIETAC to offshore specialist Loyrette Nouel, where corporate and commercial, Wang Chengjie was take up his new position. Marcus Hinkley as spe- he headed the Vietnam litigation and arbitration, recently appointed as the cial counsel in Singapore. practice. Prior to Gide, he taxation, and labour and new secretary-general of He was previously with worked at Hogan Lovells employment. the China International Collas Crill as head of its and led its Vietnam Via the alliance, the firm’s Economic and Trade Singapore office. offices. As a corporate clients now have access Arbitration Commission Hinkley’s experience and M&A specialist, Dao to 650 lawyers in 12 offices (CIETAC) and president extends to trusts across has worked in Vietnam around the region. of the commission’s multiple jurisdictions, as for the past 12 years and Jaime Renato Gatmaytan, Arbitration Court. well as family offices and his Vietnam practice C&G Law’s managing part- Wang has nearly 30 HNWIs on wealth struc- spans private equity ner, will join Rajah & Tann’s years’ experience in the turing, with an accent on investments, private Regional Management area of dispute resolu- Southeast Asia. and public M&A, joint Council as the Philippines’ tion. During his time in “His onshore experience ventures and general representative. “Joining CIETAC, from 1991-2009, in Southeast Asia and corporate, investment the Rajah & Tann Asia he acted consecutively as industry-recognized and commercial matters. network is not only timely, chief of the filing division, expertise in advising Dao’s appointment but necessary to meet the research institute and offshore trusts will follows a decision by growing demands of our business development be a valuable asset,” Gide to consolidate its clients,” he said. division, and in 2007 said Withers managing two offices in the country Rajah & Tann Asia’s chair- director Margaret and work solely from man, Lee Eng Beng, said: Wang Robertson. Ho Chi Minh City. “C&G Law will certainly Chengjie

13 ABLJ ⁄ SEPTEMBER – OCTOBER 2016

BUSINESS LAW DIGEST

THAILAND’S FOREIGN BUSINESS ACT: LIBERALIZATION CONTINUES?

oreign investors may find doing busi- • Earlier this year, ministerial regulations which currently offer certain services ness in Thailand easier if proposed liberalized commercial banking from relating to, or necessary for, operating F ministerial regulations come into the requirement to obtain a foreign commercial banking business and asset effect. Two exciting points to note regard- business licence. Following on from management business – may enjoy fur- ing exemptions from the foreign business those regulations, commercial banks ther exemptions from the requirement licence requirement are: and asset management companies – to obtain a foreign business licence.

15 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 Lawyers in 17 offices across major cities and financial centers in Asia Pacific More than 50-year’s experience of advising many of Asia Pacific’s leading companies Combination of local and international experience to provide clients with the legal insight and practical business advice Established longstanding relationships with regulators to provide clients with invaluable insight and guidance

AUSTRALIA: Brisbane, Melbourne, Sydney

CHINA: Beijing, Hong Kong, Shanghai

INDONESIA: Jakarta

JAPAN: Tokyo

SOUTH KOREA: Seoul  What others say… MALAYSIA: Kuala Lumpur MYANMAR: Yangon

PHILIPPINES: Manila Band 1 in 56 practice categories across the globe, including 20 Band SINGAPORE: Singapore 1 rankings for practices in the Asia TAIWAN: Taipei Pacific region THAILAND: Bangkok Chambers Asia Pacific/Chambers VIETNAM: Hanoi, Ho Chi Minh City Global 2016

For the seventh consecutive year, Baker & McKenzie has been voted as the most responsive law firm in more jurisdictions than any other law firm across the Asia Pacific region. ASIAN-MENA Counsel’s Representative Corporate Asia & Middle East Survey 2015  Our breath of services include: In line with its reputation as a firm of many offices and a strength in Aitrust & Competition Healthcare emerging markets it is unsurprising Automotive Hotels, Resorts & Tourism that Baker & McKenzie has a Banking & Finance Intellectual Property substantial Asian network with bases Capital Markets IT & Communications in Australia, China, Hong Kong, Compliance & Investigations Luxury & Fashion Indonesia, Japan, Korea, Malaysia, Dispute Resolution Mergers & Acquisitions Singapore, Taiwan, Thailand and Employment Private Equity Vietnam. Energy, Mining & Infrastructure Real Estate Environment & Climate Change Tax IFLR 1000:The Guide to the World’s Financial Institutions Trade & Commerce Leading Business Law Firms 2015

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Baker & McKenzie is a member of Baker & McKenzie International, a Swiss Verein. BUSINESS LAW DIGEST

• Representative offices and business Group 2. Businesses with limited scope operators that are contracted to pro- and with no effect on local operators: vide services to government agencies representative offices, regional offices, or state-owned enterprises no longer business operators who are contracted to require a foreign business licence. provide services to government agencies or This is the first time the Ministry of state-owned enterprises. Commerce (MOC) has attempted to liberalize these businesses. The draft regulations follow the liberalization trend of the past couple of Approved by cabinet on 12 July 2016, the years. Earlier this year, the MOC issued draft regulations seek to liberalize by way ministerial regulations to exempt certain for persons intending to conduct Group 2 of exempting the following two groups of businesses under the Foreign Business Act, businesses in the future. businesses from schedule 3 of the Foreign e.g., commercial banking, life and non-life Business Act, thereby removing the require- insurance, due to these businesses already Next steps ment to obtain a foreign business licence: being regulated by their own specific laws. The draft regulations will be sent to the For Group 2 businesses, we expect that Council of State for review, and then re- Group 1. Businesses covered by specific the MOC will have to provide further turned to Cabinet for approval before being laws and requested by specific authori- clarification on what happens to exist- officially issued as ministerial regulations by ties: the connected businesses of coming businesses, and if there will be any the MOC. We will monitor the progress and mercial banking. notifications or registration requirements keep you informed of any updates.

GROUP OF BUSINESS SCOPE OF BUSINESS ACTIVITY

1. Group of businesses 1. The following are 12 services relating to or necessary for operating commercial banking business: under specific laws and 1.1. Providing Shariah banking services requested by authorities 1.2. Appointment of banking agents 1.3. Providing escrow account services and escrow agent services 1.4. Operating private repurchase (private repo) transactions 1.5. Acting as agents in accepting insurance applications and collecting insurance premiums or fees of export guarantee and loan guarantee to clients 1.6. Providing services to financial businesses within the same business group, other financial institutions and companies within their business group, Bank of Thailand or government entities (insourcing) 1.7. Renting of immovable properties 1.8. Purchase or acceptance of transfer of debtors under certain financing transactions 1.9. Providing cash management services for general clients 1.10. Providing document preparation services relating to clients’ businesses 1.11. Acting as agents in receiving payments or accepting applications 1.12. Hire-purchase and leasing 2. Asset management businesses under the law on asset management company

2. Group of businesses with 1. Representative office limited scope and with no 2. Regional office effect on local operators 3. Business operators who are contracted to provide services to government agencies 4. Business operators who are contracted to provide services to state-owned enterprises

17 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 BUSINESS LAW DIGEST

VIETNAM DRAFT DECREES IMPROVE INSURANCE LEGAL ENVIRONMENT

he Vietnamese government is on, among other things, qualifications and Accordingly, an offshore insurer wish- proposing a comprehensive review shareholding structure for institutional ing to set up or invest in a local insurer in T and reform of the insurance legal shareholders in local joint stock insur- Vietnam, whether in the form of an LLC framework covering all legal aspects, from ers, IT systems, additional operational or JSC, must have, among other things: at corporate establishment and operations to reserves, and restrictions on offshore least 10 years of operational experience; financial and investment regimes, and avail- reinsurance. a minimum of US$2 billion as total asset able for insurers, insurance brokers, agents Set out below are some key proposed value; and a good standing in the past and insurance-related entities in Vietnam. amendments under the draft new decrees. three years. The government recently released drafts Institutional shareholders must also of two new decrees to propose reforms and Institutional shareholders own at least 20% of the insurance JSC’s to- amendments to replace the nearly 10-year- Under the current rules, to set up a local tal shares. The Ministry of Finance (MOF) old rules under decree No. 45, decree No. insurer in the form of a joint stock compa- proposed this requirement to try to im- 46, as amended in 2011 by decree No. 123, ny (JSC) in Vietnam, there must be at least prove corporate governance and financial and in 2014 by decree No. 68 (collectively, two founding institutional shareholders capacity for insurance JSCs in Vietnam. the current rules), implementing the Law investing in the local insurer. The draft on Insurance Business. new decrees additionally require that those Restrictions on reinsurance The draft new decrees aim to improve institutional shareholders must satisfy the The MOF proposed revising the provisions and streamline the legal framework and same requirements as those that currently on reinsurance to improve the retention address practical issues for the develop- only apply to institutional investors in an level of the local insurance market, reduce ment of the market. However, they also insurance joint venture or limited liability the reliance on offshore reinsurers, and contain some stricter or new requirements company (LLC). more quickly protect the interests of the

18 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 BUSINESS LAW DIGEST

insured, especially for major projects in be designated must not exceed 90% of Other amendments Vietnam. For these purposes, the proposals the level of insurance liability. An insurer may establish transaction offices include the following requirements under or business locations only in the provinces the Draft New Decrees: Registration of vehicle insurance or cities where the insurer has established • When a local insurer cedes insurance The MOF proposes requiring non-life its head office or branch offices. Insurance to offshore insurers, it must collect insurers to register policy wording, terms brokers may also collect consultancy ser- reinsurance commissions to cover the and conditions, and the premium schedule vice supply fees to be paid by customers costs and expenses of their insurance of vehicle insurance products. (in addition to brokerage commissions arrangements and corporate manage- An approval from the MOF is required paid by insurers). ment. A minimum rate of reinsurance before the relevant non-life insurers Non-life insurers are required to make commission will be provided by the can sell those insurance products to the operational reserves for the risk of natural finance ministry; market. This requirement does not apply disasters. Life insurers are required to • The maximum level of liability per to compulsory civil liability insurance for make operational reserves for payment of single risk or loss that a local insurer vehicle owners. committed interest rates for life insurance, may retain must not exceed 10% of its pension and investment-link insurance owner equity capital; Requirements for agents products. Operational reserves, for • A minimum level of liability per The draft new decrees add a new requirement reinsurance, or health insurance, are also single risk or loss must follow specific that every insurance agent must apply for required for any insurer that provides re- guidance by the MOF. If a local insurer a new insurance agent certificate if he or insurance or health insurance, respectively. cedes insurance in accordance with a she has not acted as an insurance agent for The draft new decrees are available on designation of the insured (fronting), a period of two years, or when he or she the MOF website for public comment, and the maximum rate of reinsurance to moves to act for a new insurer. are subject to change. BUSINESS LAW DIGEST

NEW RULES FOR DRONES TAKE OFF IN AUSTRALIA

n 24 March, Australia’s Civil The purpose of the amendments is to New classifications Aviation Safety Authority (CASA) differentiate between low and high-risk Weight classifications have been intro- O registered amendments to the operations, reduce the cost and require- duced, namely: Civil Aviation Safety Regulations 1998, ments for those that are lower risk, and • Micro (<100g); which govern unmanned aircraft such as have more complex operational matters • Very small (<2kg); drones. These amendments will take effect dealt with in a future Manual of Stan- • Small (2-25kg); on 29 September 2016. dards, which will be developed in con- • Medium (25-150kg); and junction with the industry. Whether an • Large (>150kg). Purpose of the amendments operation is lower risk will be determined Since 2007, the number of authorised by reference to weight and operational Requirements for lower risk RPAs remote piloted aircraft operators has use of the aircraft. Currently, commercial operators of all increased from fewer than 25 to more than RPAs must hold either an Unmanned Aerial 500. An industry that was formerly limited 3 main changes to regulations Vehicle Operators Certificate (OUC) or to military purposes has evolved into a Change in terminology Remote Pilot Certificate (RPC), now called buzzing commercial and recreational space, The Regulations’ terminology will align a Remote Pilot Licence (RPL). Both these with drones now commonly used for such with that of the International Civil qualifications require the applicant to diverse purposes as aerial photography, Aviation Organization. undergo rigorous and costly training pro- infrastructure inspection and surveying. Changes will include replacing the grammes involving obtaining the Aircraft This expanding usage has prompted CASA term “unmanned aerial vehicle” (UAV) Radio Operator’s Certificate, passing theory to reconsider the regulatory framework it with “remotely piloted aircraft” (RPA), and practical assessments, and participating first devised in 2002, introducing amend- and the term “unmanned aircraft in flight training. The cost of these training ments to reduce red tape and accommodate systems” (UAS) with “remotely piloted programmes is usually between A$2,500 low-risk beneficial use. aircraft systems” (RPAS). (US$1,900) and A$3,000.

20 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 BUSINESS LAW DIGEST

The amendments mean certain commercial operators can now operate without needing to obtain certification. CASA has classified what it considers to be lower risk RPA operations as excluded RPAs, exempt from licensing requirements. Commercial operators of excluded RPAs (except for micro RPAs) must still notify CASA that they intend to use the drone for hire subject to air traffic control) or beyond or reward (i.e., for any form of the operator’s visual line of sight; remuneration), with CASA • Not complying with the Manual of planning to create a live database tracking Standards; these notifications. • Launching or releasing an autonomous aircraft; Stiff penalties • Operating a non-excluded RPA The regulations also incorpo- without certification; rate 11 strict liability offences, • Not notifying CASA of operating which attract a penalty of up to anything but a micro RPA; and A$9,000 (being 50 penalty points), mean- • Not keeping records and providing ing there are now 20 offences relating to information to CASA as required. drones, all of which are strict liability. These include: CASA still carries a heavy evidentiary burden in prosecuting on any of these • Operating an unmanned aircraft in grounds, so it is unclear how regularly these controlled airspace (being airspace penalties will be imposed.

21 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 BUSINESS LAW DIGEST

BEIJING COURT DENIES FIRST ‘RIGHT TO BE FORGOTTEN’ CASE

he Haidian District Court of Beijing recently denied an employee’s request to remove the Tlink between his name and that of his previous employer, which has a reputation for being involved in fraud. This is the first case in China to deal with the “right to be forgotten”. The employee worked for an educational institution in Wuxi from July 2014 to November 2014. In April 2015, the employee undertook a search on a website of an internet company that provides internet search services to the public, and found that by entering his name as a search term, the results included many references to the Wuxi company he had worked for, and that by entering the Wuxi company’s name, information about fraud was listed. The employee sued the internet company and requested that it delete the link to some damaging key words, grant an aplogy and compensate his loss. The employee asserted that the Wuxi company had a negative reputation within the education industry. The employee alleged that the internet company had violated his right of reputation, right to his name and his right to be forgotten, which should be a part of his general personality rights, by linking his name to the Wuxi company. However, the court ruled that there was no intention on the part of the internet company to humiliate or dis- parage the employee. The search results were automat- ically produced by the search engine based on algorith- mic technology. Therefore the internet company did not violate the employee’s right to his name. The court further held that the information that the employee had requested to be deleted was directly related to him, and the right he asserted was not a part of the scope of personality rights provided in China’s Civil Code. In conclusion, the court rejected all of the employee’s claims. In a separate privacy-related case in Guangzhou, a local court ruled that an employer had violated employees’ privacy rights by arranging for them to have a hepatitis B examination and then publishing the results. Generally speaking, awareness of privacy concerns is increasing in China, particularly among employees. It The courts in China appear to be more willing to rule on cases involving privacy breaches. Employers should ensure they follow the relevant data privacy legislation when dealing with employees’ personal information, particularly in light of the fact that employees are more prepared to protect their rights through the judicial process.

22 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 INTERNATIONAL ARBITRATION With approximately 1,000 lawyers in 16 offices globally, Morrison & Foerster is one of the largest U.S. firms in the Asia Pacific region with offices in Beijing, Shanghai, Hong Kong, Singapore and Tokyo.

Lawyers at Morrison & Foerster have represented numerous clients in cross-border litigation and arbitration matters. We routinely represent leading companies in high-stakes arbitration under the rules of major institutions, such as ICC, HKIAC, JCAA, SIAC, CIETAC, LCIA, and before ad hoc tribunals as well. We advise clients and conduct arbitration proceedings in various languages, including English, Japanese, and Chinese.

TIER 1: HIGHLY RANKED: DISPUTE RESOLUTION: INTERNATIONAL ARBITRATION INTERNATIONAL FIRMS (JAPAN) (HONG KONG)

JAPAN Guests enjoy the ACC’s end of financial year WHITE COLLAR CRIME ADDRESSED event in Sydney.

The Japan In-House Counsel Network’s (JICN) September meeting is hosted by Paul Hastings partner Hiroyuki Hagiwara, with the topic of international aspects of white collar crime. Apart from expertise in complex litigation and arbitration, anti-corruption and FCPA, antitrust and competition, Hagiwara, who joined Hastings from Ropes & Gray in July, also specializes in investigations and white collar defence. In mid-July, JICN welcomed Yuri Ide, a partner in Anderson Mori & Tomotsune’s financial AUSTRALIA restructuring team. Ide provided case studies of out-of-court workouts and in-court restructuring in Japan and also spoke about cross-border cases. The JICN also recently welcomed Ethan NATIONAL CONFERENCE WILL Kate, a senior associate at Hogan Lovells, for a presentation on how to manage third parties TOUCH ALL THE BASES and associated risks and what happens when problems occur. Registration is open for Other sessions covered series of successful net- the 2016 ACC Australia include: building a world- working events was held National Conference, to be class legal team; address- across the country in Sydney, held on 16-18 November in ing cyber risk; corporate Melbourne, Adelaide and HONG KONG Canberra, Australian Capital culture and ethical behaviour Perth, with in-house peers Territory. Inspiring in-house within an organization; and connecting and taking time speakers, both national and protecting your workforce to celebrate the successes of HKCCA SEES YEAR OUT international, will provide in a crisis. Conference the past 12 months. thought-leadership on topics registration is restricted to For ACC Australia, the end WITH ARRAY OF EVENTS relevant to in-house counsel. in-house lawyers working in of financial year events were A packed programme the corporate or government also a great way to celebrate Hong Kong Corporate Counsel Association includes the ACC Australia sectors only. To find out the first year of the alliance (HKCCA) has been busy organizing activities in in-house Lawyer Awards more visit: acla.acc.com/ with the Association of the approach to the year’s end. On 1 September, Dinner, and optional master- national-conference-2016 Corporate Counsel. As 20 members attended the Chinese University of classes on detecting decep- In other news from ACC part of a global network of Hong Kong to hear insights from Paul Mitchard, tion (learning about advanced Australia, the end of June more than 40,000 in-house QC, director of career planning and professional- interviewing techniques brought another financial counsel, members of ism in the university’s Faculty of Law. Titled Get- for in-house counsel) and year to a close and provided ACC Australia have been ting the Best out of Your Law Firm: With a Focus influencing skills (focusing on members, and the broader enjoying the myriad new on Disputes, the seminar explored preventing and building relationships and net- legal profession, the oppor- resources and tools now containing disputes, and how to ensure lawyers works within an organization). tunity to come together. A available to them. take a pro-active approach to dispute resolution. Upcoming events include: (1) Intelligent Due Diligence: Utilising Human Sources to Answer SINGAPORE Critical Questions, on 14 September 2016, sponsored by the Mintz Group; (2) IP Infringements & Shadow Companies, on 20 September, sponsored by Stephenson Harwood; and (3) The BAFIS CHAPTER CHARTS REVEALING COURSE Trans-Pacific Partnership – Developments and Opportunities, on 27 September, sponsored by Since the Singapore Corporate Counsel as they unfold, such as working with Clifford Freshfields Bruckhaus Deringer. Association (SCCA) set up its Banking and Chance to discuss the high-profile Panama On 18 August, John Knox, co-founder and head Financial Services Chapter (BAFIS) last year, Papers expose. of Asia, AdventBalance, spoke on how key trends in it has made some interesting discoveries in The event helped some 100 attendees the legal industry (including the New Law business its operation. understand what their roles and responsibili- model) will impact in-house counsels’ work and In the course of running the chapter, ties entail in this unfolding crisis, including an choice of external legal support. SCCA members have said they found it appreciation of what a client on the receiving beneficial to have an industry response to end of such an expose may be going through. regulatory papers, without naming any spe- The chapter has met twice since the start HKCCA cific financial institutions. of the year, discussing legal issues that keep members The SCCA is taking on this role with the general counsel awake at night, and looking attend the 1 support of law firms such as Dentons Rodyk, at data protection, with support from Baker & September and Rajah and Tann, and will be reaching out Mckenzie. event at to more law firms in this way. Two more meetings are scheduled to dis- the Chinese Other feedback revealed that the SCCA cuss how outsourcing, cloud computing and University of can play a supportive role in educating mem- financial technology innovations are changing Hong Kong. bers about how to deal with current issues the face of banking and financial services.

24 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 IN-HOUSE AGENDA

SINGAPORE INDONESIA

BUSY BUSY IN INDONESIAN COUNSEL UP SINGAPORE TO SPEED ON SIAC RULES In response to new rules issued by Singapore The Singapore Corporate International Arbitration Centre (SIAC), the Counsel Association’s (SCCA) Indonesian Corporate Counsel Association has aligned with acade- (ICCA) held a seminar on 23 August at the mies, professors and third Grand Hyatt in Jakarta to familiarize members party training providers to and discuss the updates. collaborate on a professional at The Capella Sentosa, event held at The New Black Entitled SIAC Rules 2016: Key Changes development and social with keynote addresses on Café. On the training front, and Comparison to BANI [Indonesia National engagement events. the SCCA’s plans and its a recent programme titled Board of Arbitration] Rules, the seminar was The association is opening potential position within the Drafting Skills and Tomorrow’s jointly organized by Dewi Negara Fachri & employment avenues to new legal arena, for the benefit of In-House Counsel Today, Partners in association with Hogan Lovells. corporate counsel with little in-house lawyers. produced by Sheela Awat, The ICCA’s event diary has continued to experience. Its mentorship Adding to the association’s was a success and will be pack in a series of successful events including programme allows the sharing social platform is a new followed by a Negotiation Skill a meeting with officials from the Indonesian of issues within the corporate concept called “Peering In Workshop, by Sarah Hawes Investment Coordinating Board (BKPM) for counsel’s day-to-day work Talk”, (pictured) organized by from Herbert Smith Freehills. an overview of its recent investment policy suite, and has been popular its youthful Peers Committee Another collaboration to in Indonesia. In July, the ICCA also held a with younger counsel. members. Lee Guan Liu, a watch out for before the end seminar on regulatory and legal entity-related The association is also survivor of the 9/11 attacks, of the year is one titled The policies, in association with Public Notary arranging a Black Tie Gala shared his heartwarming Doctrine of Good Faith, by Aryanti Artisari. Night on 4 November 2016, personal story at the first Fountain Court. These events use a combination of presentations from guest speakers and panel discussions among ICCA members, so that speakers can run through key information INDIA related to the topics. The events are designed to give ICCA members a practical guide to specific legal topics while providing insight SUMMIT CARRIES GLOBAL THEME from different perspectives and highlighting updates of interest or relevance. The Indian Corporate Counsel Association (ICCA) hosted its Sixth Annual International Please visit the events page of the ICCA’s Summit – ICCA Congress 2016 from 25-27 August at the Taj Mahal Hotel in New Delhi. website for further details. Carrying a theme of Globalization of Legal Services the summit was happy to have India’s Ministry of Commerce, Services Export Promotion Council and Ministry of Law and Justice as supporting partners. The ICCA noted that India’s legal industry is maturing at a steady pace, and it is in its best SINGAPORE interests to observe, assimilate and absorb the know-how and best practices which have evolved across the world over the years. The summit’s objective was to create opportunities for international law firm professionals and in-house counsel to interact over the course of three days, and participate in well PRESIDENT RE-ELECTED moderated, structured panel discussions on relevant issues. There was also plenty of time for WITH FRESH AGENDA personal interaction on the conference sidelines. Invited dignitaries included Shri Suresh Chandra, the Indian government’s law secretary, The Singapore Corporate Counsel Shri Sudhagshu Pandey, joint secretary at the Department of Commerce, and Shri Lalit Association (SCCA) re-elected Wong Bhasin, president of the Society of Indian law Firms. Taur Jiun as president for another term of two years on 16 June. Wong has been president of the association since 2013. As the association enters its 14th year, it has refreshed its vision and mission, aiming to be Asia’s centre of competence for the practice of law in-house. To that end, it is test-piloting a Competency Framework with various stakeholders, including senior in-house counsel, hiring managers, human resource practitioners and the Singapore Academy of Law. The Competency Framework is a set of professional standards for in-house lawyers at different phases of their careers across three different compe- tencies, namely legal knowledge, manage- Dignitaries at the session on Globalization of Legal Services (from left): Mahaveer Singhvi, Indian ment skills and ethical conduct. Ministry of External Affairs; Shahana Basu, Max India; Mohit Shukla, Barclays; Dipali Talwar, Tata The SCCA will curate training events that Steel; Jenik Radon, Columbia University (US); Arjuna Nadaraja, Law Council of Australia. match the requirements of the framework.

25 ABLJ ⁄ SEPTEMBER – OCTOBER 2016

DISPUTE DIGEST

MISCONCEPTION OVER FOREIGN ARBITRAL AWARDS IN INDONESIA

ndonesia has been a signatory to the New was to be made to the District Court (Pen- The process then became somewhat York Convention (1958 UN Convention on gadilan Negeri) in the district in which the bogged down, until 1999 when Indonesia Ithe Recognition and Enforcement of award was rendered. Thus, it was assumed issued its new Arbitration Law, Law No. Foreign Arbitral Awards) since 1981. None- that an award rendered outside the bound- 30 (1999). Under this law, the jurisdiction theless, the question of whether it is possi- aries of Indonesia, and thus not within the to issue exequatur for all foreign-rendered ble to enforce a foreign-rendered award in jurisdiction of any District Court, could awards not involving the state itself was Indonesia seems to come up with surprising not be registered or enforced. Furthermore, vested in the District Court of Central frequency, both in various conferences and in article 463 of the RV provides that, except for Jakarta, and after that the process began to enquiries from offshore lawyers and clients, to general average awards, judgments of foreign move along in a more expedient manner. most of the firms active in dispute resolution courts cannot be enforced in Indonesia at all. There have been some ups and downs, in this jurisdiction. Why the misconception? Therefore, prior to ratification of the New but basically foreign arbitral awards have In fact it was not until 1990 that the York Convention and issuance of Supreme enjoyed enforcement for approximately the necessary regulation was promulgated to Court regulation No. 1 of 1990, an attempt past 25 years. One might find it surprising, facilitate enforcement of foreign awards. to enforce a foreign-rendered award in Indo- as well as rather negligent, that various Before then, enforcement of arbitral awards nesia would usually prove futile. scholars and speakers at conferences who was handled in the same manner as enforce- Supreme Court regulation No. 1 of 1990 do not have any direct experience in Indo- ment of final and binding court judgments. designated the Supreme Court as the court nesia – and may never have even set foot Both arbitration and civil litigation were with jurisdiction to issue exequatur for in the country – are still claiming that this regulated under the mid-19th century Dutch enforcement of foreign-rendered awards. No is not possible. Indeed, it may have been im- Code of Civil Procedure, Reglement op de fast-track time limit was provided, however, possible prior to 1990, or more accurately Rechtsvordering (generally known as the RV), and so such applications were docketed 1991, after one aberrant case met with which, along with other Dutch procedural into the Supreme Court’s normal caseload. opposition through a related decision of the laws, had been adopted by Indonesia upon Nonetheless, the initial applications, filed court, but that situation was remedied by its independence in 1945. in the early 1990s, were acted upon with appropriate legislation long ago. Under the RV, registration and applica- reasonable promptness – some in less than The enforcement process is not with- tion for enforcement of domestic awards six months. out some hiccups, of course, but these are

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There have been some ups and downs, but basically primarily administrative and not judicial. foreign arbitral awards (bi-passing the normal intermediary appeal Before an award can be enforced it must be to the High Court), which must decide registered with the court. For foreign-ren- have enjoyed enforcement upon the appeal within 90 days. Issuance of dered awards the designated registry is at the for approximately the exequatur, however, is not subject to appeal. District Court of Central Jakarta, as previ- Nor may a decision of the Supreme Court ously mentioned. Law No. 30 (1999) requires past 25 years either issuing or rejecting exequatur, or exe- that registration be effected by the arbitra- cution where the government of Indonesia tors or their duly authorized representatives. is a party, be appealed. Local counsel and arbitrators are, of course, Law No. 30 of 1999 enumerates only aware of this requirement and will ensure very limited grounds on which the court that the tribunal grants power of attorney for with the award within a set time, usually may decline to issue the exequatur order, registration, usually both in the award and in eight days. If this order is not complied essentially if the parties have not agreed to a separate instrument. with, the court will issue the order for at- arbitrate their disputes, or if the dispute is However, if parties to an arbitration held tachment of the respondent’s assets, which not of a commercial nature, or is beyond elsewhere do not consult local counsel, or will then be sent to the court having juris- the parties’ authority mutually to settle read the relevant legislation themselves, diction over the respondent, or its assets, to (such as divorce, adoption and similar). some delay in registration may be experi- attend to such execution. Grounds to seek annulment of an award enced while the successful party seeks to But note that the assets must be clearly are also limited, considerably more so than, obtain a power of attorney from a tribunal identified, including bank account num- for example, in the UNCITRAL Model Law, already functus officio. bers, if applicable. The court cannot assist and include only such defects as forgery, Another requirement that has often in locating these, not even for execution fraud or deliberate concealment of docu- proven to be troublesome is the necessity to of court judgments. Those assets identi- ments that would have been decisive. include with the application for registration fied will be attached by a bailiff and sold In conclusion, it should be noted a “certification from the diplomatic repre- through the state auction house, unless a that Indonesia is actually a very arbitra- sentative of the Republic of Indonesia in the private sale has been approved. Needless tion-friendly jurisdiction. Law No. 30 of country in which the international arbitra- to say, all of these steps should be closely 1999 makes it clear that where the parties tion award was rendered, stating that such monitored by counsel to avoid delay. have agreed to arbitrate, the courts may not country and the Republic of Indonesia are The District Court of Central Jakarta interfere in any manner except to assist in bound by a bilateral or multilateral treaty keeps records of awards registered, and the enforcement, or, if no other appoint- on the recognition and implementation of those for which exequatur has been ing authority has been designated by the international arbitration awards”, (the New requested, and issued. However, if the re- parties, to appoint or recuse a missing or York Convention being the only such treaty spondent is resident or maintains its assets contested arbitrator. Even an interim award to which Indonesia is party). outside of central Jakarta, execution will be on jurisdiction cannot be appealed to the Unfortunately, to date this requirement carried out in one or more of the approx- courts, as may be permitted in some com- has not been effectively communicated by imately 300 other district courts in the mon law jurisdictions. The administrative Indonesia’s foreign ministry to its consul- archipelago, which may not keep adequate requirements may cause the process to take ates, often causing some administrative records, so no complete data are available. a bit longer than in some other jurisdic- delay. Again, prior familiarity with these The above notwithstanding, to the knowl- tions, but it is more certain and often requirements will minimize the burden of edge of the author’s firm, not a single appli- quicker than in many others. meeting them. cation for exequatur of a registered foreign Once the award is registered, the appli- award has been rejected since promulgation cant (normally the claimant) may apply for of the 1999 Arbitration Law. KAREN MILLS is a chartered arbitrator the order of exequatur. Once such order is In the event that the court rejects the and international legal consultant with issued, the court will summon the losing issuance of exequatur, the matter can be KarimSyah Law Firm in Jakarta party and give it the opportunity to comply appealed directly to the Supreme Court

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IMPROPER SERVICE POSES ENFORCEMENT RISK IN CHINA

mproper service in arbitration proceed- discusses how a party can mitigate the risk courts’ overall good track record of enforc- ings has been commonly relied upon as a of improper service. ing arbitral awards in the past 10 years. Iground by PRC courts to set aside or re- From the authors’ research of publicly fuse enforcement of arbitral awards made available cases spanning 14 years, from COURT POSITION in China or overseas. What is less clear is 2002 to 2015, we found 111 Chinese The common causes for challenging the when service is considered improper. awards (both domestic and foreign-related) service process include the scenarios be- PRC laws do not shed any light on the and 14 foreign awards of which enforce- low. Most of the reasons for service failure question. The rules of many arbitration in- ment was challenged on the ground of are not attributable to the party upon stitutions, although containing provisions improper service. Among the 111 Chi- whom service is sought. on service, are not intended to address nese awards, 17 were set aside or denied Defective service process. Some every situation that may arise in practice. enforcement by the court, accounting for Chinese courts regarded typographical As such, the answer rests completely with- a 15.3% success rate of the challenges on errors on the delivery address made by in the discretion of the Chinese courts. An service in arbitration proceedings. Out of the arbitration institution or the tribunal, empirical analysis of PRC court decisions the 14 foreign awards, five (35%) were not albeit negligible, as a valid ground for chal- is thus necessary and important. This enforced by the court. The statistics are lenging the arbitral award. Also, one award article reports the authors’ findings and astonishing, taking into account the PRC was set aside due to the absence of the

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courier’s signature on the return receipt, In 2003, the China Marine Arbitration recommend that it should be mindful of despite the fact that the mail was returned Commission (CMAC) made an arbitral the following steps. after being rejected by the recipient. award arising from a dispute between Hei- Choose the right arbitration institu- No reasonable second attempt. Many longjiang Hongchang International Freight tion. Before choosing an arbitration insti- arbitration rules require a reasonable Forwarding, FUSCO and Trans Marine in tution, the parties should carefully read inquiry into the other addresses of a party respect of a vessel charter contract. Hong- their rules to see if the institution has any if service at the first one fails. Free public chang applied to Tianjin Maritime Court, peculiar requirements on service that they record searches can count as a reasonable requesting that the award be vacated on are not prepared to accept. It is advisable attempt. Failure to do so would result in the ground that it never received any ar- to choose reputable arbitration institutions the arbitral award being defeated. On the bitration documents from the CMAC and such as the China International Economic other hand, simply asking the other party was deprived of the opportunity to present and Trade Arbitration Commission, the to provide an alternative address may not its case as it was not aware of the arbitra- Hong Kong International Arbitration be a sufficient effort in the view of some tion proceeding. Centre, and the Singapore International Chinese courts. According to the CMAC, the arbitration Arbitration Centre. Intentionally hiding the valid address documents mailed to Hongchang at its Carefully draft the arbitration clause. of the other party. If service at one address then registration address were all returned The parties may consider adopting a more of a party fails, the opposing party must due to Hongchang’s change of address. detailed arbitration clause to include provide other valid addresses of the un- The CMAC then asked FUSCO to provide agreement on arbitrator appointments and served party that are within its knowledge, an alternative address of Hongchang but specific requirements on service process,

Before choosing an arbitration institution, the parties should carefully read their rules to see if the institution has any peculiar requirements on service that they are not prepared to accept

failing which the validity and enforce- received no useful response, so it treated such as the time period, the address/person ability of the arbitral award is at risk. The the then registration address of Hong- to be served, and confirmation of receipt. burden of proving the opposing party has chang as its last known address. Keep the other party informed. A such knowledge is on the unserved party. The Tianjin court, however, was of the party should notify the other party of Receipt by a third party. If the arbitra- view that the CMAC failed to make a rea- any changes in its address and, if pos- tion documents are signed for by someone sonable attempt as required under CMAC sible, provide all valid addresses to the other than the parties themselves (for arbitration rules. The court held that after other party. The purpose of doing so is to individuals), or the parties’ employees/au- knowing Hongchang changed its address, ensure a timely receipt of all arbitration thorized attorneys (for legal entities), some the CMAC should have consulted with the documents and, if not, to hold the other courts would consider the service process local company registrar for Hongchang’s party accountable for failing to provide to be ineffective, notwithstanding that the latest address, which was a reasonable and the valid addresses to the arbitration recipient and the party are closely connect- common practice. The CMAC’s failure to institution or tribunal. ed. As for the authorized attorney, a formal do so constituted a valid ground for setting power of attorney (POA) is required even aside the CMAC award. SHEN PENG is a special counsel with the before the service process starts. Other- dispute resolution group at Baker & McKenzie, wise, the lawyer’s acceptance of the mail STEPS TO CONSIDER based in Beijing. Cui Hailin, an associate with may not be effective service even if he or If a party wishes to protect itself from the the same group, also contributed to this article. she later receives a POA. consequences of improper service, we

30 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 DISPUTE DIGEST

INAUGURAL SICC DECISION TURNS UP HEAT ON COAL CONTRACT

he first written judgment of the KEY FACTS related to BI would supply coal to the facili- Singapore International Commer- An Australian company, Binderless Coal ty. In January 2007, the parties established Tcial Court (SICC) provides insight Briquetting Company (BCBC), held an the joint venture company Kaltim Supa- into Singapore’s approach to contrac- exclusive licence for the “binderless coal bri- coal (KSC) in Indonesia. BCBC Singapore tual interpretation. The case involved a quetting process” (BCB process), by which (BCBCS), a Singaporean company in the joint venture dispute between parties in raw coal is processed into briquettes with same corporate group as BCBC, would Australia and Indonesia, with associated higher calorific value and lower moisture hold 51% of the shares, with PT Bayan companies in Singapore, over the con- content than normal. Bayan International Resources TBK, a publically listed Indone- struction and commissioning of a coal (BI), a Singaporean entity, was part of the sian entity in the Bayan Resources Group, briquette processing plant in Indonesia. In Bayan Resources Group (BR), an Indonesian holding the remaining shares. a very comprehensive judgment, the SICC group of companies with interests in coal. The project’s construction and commis- considered the obligations of the parties BCBC and BI agreed to construct and sioning costs exceeded budget, so BCBCS under a joint venture deed, along with commission a plant in Indonesia employing committed more funds and requested BR other project agreements and side deeds. the BCB process, and that companies to do the same. Further, KSC obtained a

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US$10 million working capital loan facility up their “significant right” to withhold there were common grounds on which an from Standard Chartered Bank (SCB). consent to calls for funding, they would agreement would be held to be unenforce- In December 2011, BR sent a default have articulated this in the funding MOU. able, the agreements were not tainted by notice to BCBC’s publically listed parent The SICC also commented on what it illegality as they were consistent with the company, White Energy Company (WEC) considered to be relevant extrinsic evi- regulations introduced by the Indonesian and BCBCS, alleging breaches of the JV dence. It looked at BR seeking clarification government. deed by BCBCS and a total failure of con- of the costs associated with its funding Notably, the judgment provides detailed sideration and purpose of the same. obligations, and did not consider this to consideration of the pricing mechanisms WEC responded by alleging that BR was be relevant contextual evidence of BR’s in the coal supply agreements and related in breach of its funding obligation and re- awareness of its legal obligation to contrib- side letter, which may prove useful in questing confirmation that BR would meet ute to such costs under the funding MOU. similar commercial settings. the same. Without admitting liability, and Ultimately, it determined that BR was to mitigate further loss and damage, BR under no obligation to: IMPLIED TERM agreed to transfer certain funds. One of the contentious counterclaim 1. Provide funding for commissioning issues was whether there was an implied CONTRACTUAL INTERPRETATION costs or care and maintenance costs, term in the JV deed that BCBCS was re- In considering the funding issues and even though it was subject to good faith quired to use skill and care when providing BR’s obligations, the SICC provided some obligations under the JV deed; or technical assistance to KSC. interesting comments on the approach to 2. Consent to KSC obtaining a further The SICC addressed the approach to contractual interpretation under Singa- advance to repay debts owed to BCBCS. implied terms in Singapore noting that a porean law, including where extrinsic court must: evidence can be utilized, and what form ILLEGALITY CONSIDERED that might take. The SICC considered whether the coal 1. Ascertain how the gap in the contract supply agreements and related side arises, as the implication will only be It focused on whether BR was obliged to: agreements for the supply of coal in 2011 considered where parties did not con- and 2012 were illegal or entered into for template the gap; 1. Provide funding for the commissioning, an illegal purpose under Indonesian law, 2. Consider whether it is necessary in a operations and maintenance of the and thus unenforceable in Singapore. This business or commercial sense to imply project in accordance with a funding economic model used for pricing the coal the term to give the contract efficacy; memorandum of understanding (MOU); triggered possible transfer pricing and tax and 2. Consent to KSC obtaining an advance implications following the Indonesian 3. Consider if the specific term to be from SCB to repay monies lent to it by government’s introduction of regulations implied is one that the parties would BCBCS; and on mandated minimum benchmark prices have responded ‘Oh, of course!’ had the 3. Contribute 49% of KSC’s care and main- for various types of coal in 2010. proposed term been put to them at the tenance costs. The SICC explored the two distinct time of the contract. strands that comprise illegality in Singa- The SICC looked at the terms of the JV pore. First, as a matter of public policy … a The SICC held that the obligation in deed and funding MOU, which were both Singapore court will not enforce a contract the JV deed on BCBCS did not go so far expressly governed by Singaporean law, or award for damages for its breach, if its as to impose an obligation to provide the under which a contextual approach is tak- object or purpose would involve doing an assistance as it related to design, build- en to contractual interpretation (objective act in a foreign and friendly state which ing or operating of coal preparation and intention, i.e., “the intention of the parties would violate the law of that state. briquetting plants. at the time they entered into a contract Second, on an independent conflict As such, there was no implied contrac- based on all relevant evidence”]. Extrinsic of laws basis, the SICC confirmed that tual duty to use the reasonable care and evidence, including subsequent conduct, a contract would be … invalid insofar as skill expected of a competent designer, can be used to interpret a contract if it is the performance of it is unlawful by the builder or operator of the same. “relevant, reasonably available to all the law of the country where the contract is contracting parties and relates to a clear or to be performed. BR’s argument that the obvious context”. coal supply agreement and associated side ANDREW STEPHENSON is a partner with In considering the JV deed, the SICC letter were illegal was dependent upon Corrs Chambers Westgarth in Melbourne. looked at the natural and ordinary mean- them being illegal under Indonesian law. LINDSAY HOGAN, a senior associate at the ing of the funding obligations clauses and After considering expert evidence from firm, and JACLYN SMITH, an associate, also contributed to this article. held that had the parties intended to give both sides, the SICC found that while

32 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

DESPITE ECONOMIC CHALLENGES AND AN OFTEN PRECARIOUS LEGAL LANDSCAPE FOR FOREIGNERS, INDONESIA IS MAKING BEST EFFORTS TO REBUILD ITSELF AND BREAK TIES WITH THE PAST, WRITES JOHN CHURCH

OUT OF THE SHADOWS COVER STORY

o a great extent the future for Indonesia, Indonesia finished behind only Argentina on the index that Southeast Asia’s biggest fish and the most ranks 95 countries according to regulatory and compliance re- populous Muslim nation in the world, is gimes. It has occupied a position in the Index’s top 10 for the past being determined by its past. In an eco- three years, despite a more pro-business approach by government. nomic context, the more recent Many lawyers point to the antiquated civil law system inherit- past has included global drops in ed from Dutch colonialism for the frailties of the current system. commodity prices, led by oil, all There is one voice perhaps most apt for an introduction to Indone- of which has hit the nation hard and severely curbed merger and sia’s evolution of law. acquisition (M&A) activity. “The main challenge is that there is a basic difference between Big and medium-sized energy miners have slowed production the civil law system and the common law system. This is obvious,” and in some cases ceased operations, a ripple that has swiftly pro- Kartini Muljadi, senior partner and founder of Kartini Muljadi & pelled its way up the distribution and supply networks and in turn Rekan, tells Asia Business Law Journal on a recent visit to her of- created a lively uptick in disputes and litigation work. fices in Jakarta. Muljadi was a former judge of the Special District In a more historical context, too, the past is steering the future. Court in Jakarta, mainly handling civil and commercial cases be- Indonesia’s legal history is one of Dutch imperial genetics, with its fore founding one of the nation’s most prestigious corporate firms. adoption of civil law as opposed to the more frequently encoun- She is one of Indonesia’s most distinguished commercial lawyers. tered common law systems that dominate the neighbourhood. Muljadi says that, although most Indonesians avoid corruption, Past corruption, political nepotism and difficulties updating the “There is corruption in the implementation of the Indonesian le- civil code are among issues that colluded to bestow on Indonesia gal system by those implementing our legal systems. The proof of in February this year the dubious honour of being ranked “the these are the corruption cases in several Indonesian courts.” second-most-complex place for multinationals to stay compliant Illustrating her point is an anecdotal example from Stephanus with corporate regulation and legislation in 2015”, as per the TMF Haryanto, managing partner at Adnan Kelana Haryanto & Her- Group’s Global Benchmark Complexity Index. manto in Jakarta. The former lecturer in legal studies says there are

There will always be loopholes that can be used by Indonesian lawyers to defend a bad faith debtor. Therefore, what the lawyers of the creditors can do is to anticipate all possible arguments that can be made by such a delinquent debtor Stephanus Haryanto Managing Partner Adnan Kelana Haryanto & Hermanto

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precedents where lenders lost their money because debtors acted in bad faith by using the court system, in this case to declare a loan agreement invalid. “Usually, the argument is related to the element of ‘good cause’ as stipulated in article 1320 of the Indonesian Civil Code,” explains Haryanto. “Under Indonesian contract law, a contract is valid if it has the element of mutual consent, legal capacity, certain object matter, and good cause. Despite the fact that a debtor has provided representation and warranties that all permits have been obtained to enter into the loan agreement, a bad faith debtor may use the fact that it has not obtained certain governmental permits when entering into the agreement to seek a court declaration that the loan agreement is null and void. “Logically, it should be the bad faith debtor that must be ‘punished’ by the Indonesian court for violating the clause on representation and warranties. Unfortunately, for certain reasons, the court has ruled in favour of the bad faith debtor and caused losses to good faith creditors. “There will always be loopholes that can be used by Indonesian lawyers to defend a bad faith debtor. Therefore, what the lawyers of the creditors can do is to anticipate all possible arguments that can be made by such a delinquent debtor. It is recommended for the creditors to engage the services of a law firm that not only has good corporate lawyers, but also has a good litigation practice. The experienced litigators may provide good advice to their corporate lawyers in anticipating possible loopholes in a loan agreement.” The arguments of local laws making such arrangements illegal has been effective in the past, most recently this year in a court decision effectively disabling Standard Chartered Bank from recoup- ing a US$1 billion loan to Borneo Lumbung Energi & Metal, one of the bank’s largest exposures to a single borrower. Christine Herrera, a partner at Makes & Partners in Jakarta, says the idea that loan agreements are invalid if prior approval has not been obtained from the government, as pointed out in the above case, has led “many lenders [to] believe that this is a legal loophole and debtors can exploit it to escape from repayment obligations. As a result, many foreign lenders became more anxious about the certainty of their financing arrangements against local debtors.”

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It’s just one example of the way a system can work against the With business being a considerable priority for a moribund biggest and best companies who ignore or, for whatever reason, economy, Irfan Ghazali, a partner with Makes & Partners in Jakarta, fail to heed the advice of local expertise. And there is a knock- says the government has been moving at double time to introduce on effect, a cultural divide that impacts corporate counsel, as policy programmes for which investors have been longing for years, Yudhistira Setiawan, president of the Indonesian Association of under the auspices of Economic Deregulation Packages (EDPs). Corporate Counsel, observes. The first EDP was launched in September 2015, and since then “As you may appreciate, there is an understanding or mindset there have been about 150 regulations either revised or currently in Indonesia that ‘there is no rule without exception’, and there is under review, to support the objectives of these reforms. always room to ‘play’ – this is something that has been going on for “The EDPs also address the issue of streamlining business pro- years, since the Suharto era,” he says. cedures and the investment red tape Indonesia is infamous for,” “Now with the spirit of the New Indonesia, the role of legal says Ghazali. “Indonesia’s investment co-ordinating board [BKPM] counsel in a company has to change or shift, as we have to perform has been in charge of co-ordinating and ensuring the fastest possi- our duties and responsibilities in compliance with prevailing regu- ble way for investors to facilitate investment in the country.” lations. However, the mindset of management at some Indonesian He says more recent EDPs have brought about more optimism companies does not change fast, as it has been embedded for years, for Indonesia’s investment landscape. “The 10th EDP in February and inherited from their predecessors. 2016 revised the Indonesian Negative Investment List, which sets “Particularly when they have to face issues on anti-corruption and out applicable limitations on foreign ownership in each business anti-bribery in order to, say, obtain a licence or permit from govern- sector/industry, while the 12th EDP, announced at the end of April ment authorities. This example happens every day in Indonesia and 2016, specifically addresses the ranking of Indonesia in the World when a legal counsel steps in to give advice, many listen to us, but Bank’s Ease of Doing Business, focusing on simpler procedures for many do not, as they prioritize business rather than compliance.” incorporating a company, acquiring basic licences, and simplifying dispute settlement process at the judiciary.” On 18 May 2016, the government issued the new negative list of investment under Presidential Regulation No. 44 of 2016 regarding List of Business Fields that are Closed and Business Fields that are Open with Conditions to Investment, says Cornel Juniarto, a senior partner at Hermawan Juniarto. The EDPs also PR No. 44 (2016) has opened more than 30 business lines, address the issue which were previously limited for foreign ownership, to 100% open for foreign ownership, including e-commerce (with partner- of streamlining ship scheme and investment value above 1 billion Indonesian ru- business piah (US$75,000), raw materials for the pharmaceutical industry, healthcare support services, food & beverage business, the film in- procedures and dustry, toll roads, and telecommunications equipment. Rosetini Ibrahim, founding partner at Rosetini & Partners Law the investment Firm in Jakarta, adds that a more relaxed restriction for foreign red tape ownership in distribution companies, from a maximum 33% foreign ownership to 67%, is welcomed by many foreign investors. Indonesia is “By having a less restrictive negative list, foreign investors will infamous for have more opportunity to invest in many fields that were previously closed to them,” she says. “In practice, we still need to confirm with the BKPM whether a certain business field is really open to Irfan Ghazali foreign investors.” Partner While policymakers work to incentivize investment, the buzz word Makes & Partners at the major Jakarta law firms is primarily “infrastructure”. Be it toll roads, ports, power stations or bridges, projects are coming online to help prop up the economy, the government is making efforts to simpli- fy and demystify regulation at local and national levels, and law firms are scrambling to lend their expertise. In April, the Wiyono Partnership assisted two subsidiaries of Jasa Marga, the largest toll road operator in Indonesia, in securing

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Wiyono Sari Managing Partner Wiyono Partnership

We are also advising our client in the development and financing of 425km of railway and coal transport facilities located in Central Kalimantan project financing for construction for: the Solo-Ngawi toll road, for investors,” he says, adding that several major improvements being a loan facility of 4.37 trillion rupiah (US$336 million), and the Nga- made by the government include expanding the scope of guaran- wi-Kertosono toll road, for a loan facility of 3.37 trillion rupiah. tees, managing land acquisitions more efficiently, institutionalizing “We are also advising our client in the development and financing lenders’ step-in rights, introducing the concept of availability pay- of 425km of railway and coal transport facilities located in Central ments in certain industries, and introducing a Viability Gap Fund. Kalimantan,” says Wiyono Sari, the firm’s managing partner in Jakar- Juniarto, from Hermawan Juniarto, explains that the availabil- ta, in charge of the transactions. “The estimated project cost is about ity payment (AP) scheme is regulated under MOF regulation No. US$7.2 billion. The key challenge of this project is to get government 190, enacted on 8 October 2015, to support the public private part- guarantee, and to secure financing both for equity and debt portions.” nership (PPP) programme. “Under this scheme, the government “The Indonesia Infrastructure Guarantee Fund (IIGF) is a ve- contracting agency (GCA) will make payments to the SPV [special hicle established by the government [the Ministry of Finance purpose vehicle] based on the services provided in accordance with (MOF)], to give government guarantees, and thus far the projects the quality of criteria stipulated under the PPP agreement,” says guaranteed by the IIGF are still limited in number. Juniarto. “This availability payment shall be commenced from the “We foresee that the need for such guarantees will grow very commercial operation date, and [when] the project has met the fast. The key challenge faced by the IIGF is limited capital con- specifications stipulated under the PPP agreement.” tributed by the government of Indonesia. The IIGF should have On 6 June 2016, Hermawan Juniarto and Synergy Capital formed adequate capital in order to gain confidence from foreign a joint venture company that focuses on debt restructuring advisory

Under this scheme, the government contracting agency (GCA) will make payments to the SPV [special purpose vehicle] based on the services provided in accordance with the quality of criteria stipulated under the PPP agreement Cornel Juniarto Senior Partner Hermawan Juniarto

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services. The company provides solutions for clients that require either bilateral or court sanctioned restructuring. The AP scheme is not applicable for PPP projects that have received viability gap funding (VGF) support, says Juniarto. “On the implementation of the AP scheme, the GCA is required to allocate the budget for the availability payment following the state/region budget mechanism. By receiving this AP scheme, such a project is not restricted in obtaining the government guarantee.” Juniarto says the process for approvals with the AP scheme has been straightforward, much faster than the process for approving the provision of VGF. “The availability payment mechanism for PPP projects was introduced in October 2015, and in August 2016, one project [Palapa Ring West Package] reached financial close. The other package [Palapa Ring Central Package] is expected to reach financial close in September 2016.” The Palapa Ring Project is a national fibre-optic backbone project developed within Indonesia, which is listed as a priority infrastructure project and a national strategic project. It is divided into three packages of West, Central and East, and planned to be commercially operable by 2018. Wiyono says the central government is assessing various local regulations with a view to curbing red tape. “The central government is about to revoke 3,143 local regulations that create unnecessary barriers for foreign investment, especially infrastructure development,” he says. “Our president also established the KPPIP [Committee for Acceleration of Priority Infrastructure Delivery] … to serve as a point of contact for de-bottlenecking the commu- nication gap between the central government and local authorities.” On this note, Ghazali, from Makes & Partners, warns that foreign investors can be tripped up by national and local regulation. “Regulations at the national level are mostly published, well documented and relatively easy to find,” Ghazali says. “Challenges may arise out of the interpretation of such regulation by the policymakers. Always seek local guidance to confirm the prevailing interpretation of the regulation, and anticipate if such interpretation changes in the event of change in policy leadership. “Regulations at the local level, however, are not always properly documented and not easy to find. Always conduct extra assessments when dealing with local regulatory compliance. This

38 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

includes having eyes on the ground to understand how existing business operations (i.e., competitors) comply with the local regulations – as a benchmark.” Hoping to fuel this boom in infrastructure projects is the gov- This law is expected to ernment’s trump card for capital: a tax amnesty. Best guesses are that about US$200 billion is parked in Singapore alone by Indone- repatriate all funds owned by sians who may have evaded tax in the first instance. Widodo wants Indonesians that have been it back to bolster his infrastructure drive and the government guesstimates it can recoup US$76 billion of this money. In return, deposited overseas, mostly in it will forgive all tax indiscretions and charge low redemptions payment rates of between 2% and 10%. Singapore. This is a very good “As a highly-taxed jurisdiction, the Indonesian DGT [Director step in the right direction General of Taxation] has made considerable effort to make efficient M&A transactions,” says Hanim Hamzah, regional managing partner at Roosdiono & Partners (a member of ZICOlaw). “These tax allowances are also required as the country wishes to deep- en the capital markets being suitable instruments for infrastructure funding. The recent Tax Amnesty Law has garnered significant interest – we have seen parties using the provisions of the law to au- dit their tax exposures and in more than one M&A transaction, have included getting amnesty as a pre-condition to closing,” she says. Opinions on the tax amnesty, which expires in March next year, seem generally favourable. “This law is expected to repatriate all funds owned by Indonesians that have been deposited overseas, David Abraham mostly in Singapore. This is a very good step in the right direction,” Founding Partner says David Abraham, the founding partner of Abraham Law Firm. Abraham Law Firm

BEST FIRMS ASIA BUSINESS LAW JOURNAL ASKED SOME OF THE TOP FIRMS IN INDONESIA WHO THEY WOULD RECOMMEND, EXCLUDING THEMSELVES, FOR WORK IN VARIOUS PRACTICE AREAS. HERE IS A COMPILATION OF THEIR RESPONSES.

BANKING & FINANCE: CORPORATE & DISPUTE RESOLUTION: PROJECT FINANCE & Ginting & Reksodiputro; COMMERCIAL: Budidjaja & Associates; INFRASTRUCTURE: Dermawan & Co; Makes & Partners; Melli Darsa Assegaf, Hamzah & Partners; Lubis Gani Soerowidjojo; Hadiputranto Hadinoto & & Co; Soemadipradja & Taher; Hiswara Bunjamin Tanjung; HHP; Melli Darsa & Partners (HHP, local affiliate HHP; Hiswara Bunjamin Lubis Santosa & Maramis. Associates; Widwayan & of Baker & McKenzie); & Tandjung (an affiliate of Partners. Ginting & Reksodiputro (local Herbert Smith Freehills); INTELLECTUAL affiliate of Allen & Overy); ABNR. PROPERTY: TECHNOLOGY, MEDIA Ali Budiardjo Nugroho Suryomurcito & Co; K&K AND TELECOMS: Reksodiputro (ABNR); Assegaf Advocates; SKC Law; Biro Christian Teo & Associates; Hamzah & Partners. Oktroi Roseno; HHP; Rouse HHP; Bahar & Partners; SSEK & Co. Legal Consultants.

39 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

“Our firm advised IIGF “With litigation, we recently represented a big Indonesian “WE HANDLE AN in providing government pharmaceutical company against another multinational ARBITRATION CASE pharmaceutical company in South Jakarta District Court in a guarantees for four toll dispute related to wrongful interference with a contract. We AT SINGAPORE road projects, namely: the won the case at the District Court level, and the case is now in INTERNATIONAL the appeal stage with the Jakarta High Court.” Batang-Semarang toll road, ARBITRATION CENTRE with an investment cost of STEPHANUS HARYANTO, FOR CLAIMING Adnan Kelana Haryanto & Hermanto about US$1.1 billion; the US$2.5 MILLION, Pandaan-Malang toll road REPRESENTING with an investment cost of “We assisted the Ministry of Telecommunication, OUR SWISS CLIENT about US$590 million; the being the Government Contracting Agency (GCA) FOR THEIR RIGHT Manado-Bitung toll road, in the PPP transaction phase of the Palapa Ring BASED ON A COAL with an investment cost of Project. For the West and Central Packages, our TRANSACTION WHICH about US$500 million; and assistance covered finalization and negotiation of WAS DELIVERED TO the Balikpapan-Samarinda the co-operation agreement, as well as assistance THE PHILIPPINE BUYER. toll road, with an investment up until financial close of the project. For the THE DEFENDANT cost of about US$990 million. East Package, aside from the above-mentioned WAS AN INDONESIAN These four projects are the assistance, we finalized the pre-feasibility study COMPANY, AND WE first toll road projects to get document, prepared the project’s feasibility and WON THE CASE AND government guarantees. It bankability, co-ordinated with the Indonesia STARTED EXECUTING was a challenge to identify Infrastructure Guarantee Fund (IIGF) in relation appropriate and relevant risks to government guarantee, and assisted the GCA THE AWARD THROUGH to be guaranteed, and the to obtain required approval or licences and INDONESIAN COURTS, scope of guarantee.” assistance to the procurement of an SPV.” BUT THE TIMEFRAME WIYONO SARI, FOUNDER, CORNEL JUNIARTO, SENIOR PARTNER, BECAME LONGER Wiyono Partnership Hermawan Juniarto THAN WE PREDICTED BECAUSE THE PROCESS TO GET A COURT DECISION ON THE AWARD TOOK SO LONG, AND WE COULD NOT BIG DEALS ENFORCE THE AWARD IF WE COULDN’T GET A WE ASKED LAW FIRMS IN JAKARTA TO OUTLINE COURT DECISION. RECENT DEALS THEY WERE INVOLVED IN THAT THEY RENO ISKANDARSYAH, THOUGHT WERE OF INTEREST. HERE ARE SOME OF MANAGING PARTNER, THEIR NOMINATIONS. Iskandarsyah & Partners

“We represented Essential Scope to draft a shareholder agreement (SHA), share subscription agreement (SSA) and supplemental agreement. We also oversaw the compliance of condition precedents, under SHA, SSA and supplemental agreements until closing was reached. The transaction was essentially a combination of acquiring shares of the local company in Indonesia, and a huge plot of land in Deli Serdang, Medan, that will be used for a cemetery. The deal value is about 240 billion rupiah (US$18.1 million). The timeframe is about 12 months. Challenges were the co-ordination of closing, namely signing of deed of sale and purchase of land, and previous binding agreements that have been signed, and licensing issues identified by the local government.” EDDY MAREK LEKS, CEO AND MANAGING PARTNER, Leks&Co Lawyers

40 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

“WE RECENTLY WERE INVOLVED IN A POULTRY CARTEL CASE, WHICH IS INTERESTING TO HIGHLIGHT AS MANY PROTECTED SECTORS CONTINUE TO BE DOMINATED BY CERTAIN INTERESTS [FAMILIES]. HAVING SAID THAT, INDONESIA’S ANTI-MONOPOLY LAW IS AMONG THE MORE ADVANCED LAWS IN ASEAN, AND THE COMMISSION HAS BEEN VERY ACTIVE IN PURSUING MONOPOLISTIC BEHAVIOUR.” HANIM HAMZAH, REGIONAL MANAGING PARTNER, Roosdiono & Partners (a member of ZICOlaw)

“We initiated a “We advised FMO Nederlandse Financierings-Maatschappij voor Starbucks cease and Ontwikkelingslanden, on the financial restructuring and upsizing desist warning letters of term facility financing to Jakarta Tank Terminal for its US$100 million tank terminal project. Norton Rose Fulbright acted for the programme that senior lenders on the successful restructuring of their facilities to the showed almost 80% Vopak terminal in the Port of Jakarta (Indonesia). The negotiations success, handled by and documentation took place in record time in order to close our associates and led before Christmas 2015. The financing was arranged mainly out of the by Kin Wah Chow, Netherlands and Singapore. The terminal is operated in Jakarta.” one of our foreign- TASDIKIAH SIREGAR, PARTNER, Norton Rose Fulbright and its associate firm TNB & Partners registered lawyers, valued on an hourly “WE HAVE HELPED MANY FOREIGN COMPANIES TO SET UP NEW FOREIGN basis far exceeding INVESTMENT COMPANIES AND TO EXPAND THE BUSINESS OF EXISTING the standard set for COMPANIES. WE ALSO CARRIED OUT SEVERAL ACQUISITION TRANSACTIONS AND the works, within OR TRANSFER OF SHARES/ TRANSFER OF ASSETS, MOSTLY FOREIGN COMPANIES the timeframe of ACQUIRED SHARES AND/OR ASSETS OF INDONESIAN COMPANIES. THIS WORK one year, and with USUALLY INCLUDES LEGAL DUE DILIGENCE, THE SCOPE OF WHICH MAY VARY strong protection of DEPENDING UPON THE STRUCTURE THE TRANSACTIONS.” ROSETINI IBRAHIM, FOUNDING PARTNER, the concentric circle Rosetini & Partners Law Firm marks and green colour of the marks, “The firm acted as legal counsel to Bentoel Internasional Investama with the word marks in its issuance of new shares to existing shareholders by giving pre- of course having emptive rights. The deal value was approximately US$980 million. This stronger protection is the second-largest rights issue transaction in Indonesia to date. No against, for instance, local bank was involved, and Makes had to perform multiple roles in STARMUGS or this transaction. The bank involved was Deutsche Bank (Singapore) and SETARBAK, etc.” the accounting firm was PWC. The partner in charge of the deal was GUNAWAN Iwan Setiawan. It was a very challenging deal for the team and we were SURYOMURCITO, very pleased with its success. The deal was concluded in June 2016.” MANAGING PARTNER, CHRISTINE HERRERA, FOREIGN LEGAL COUNSEL, Suryomurcito & Co Makes & Partners Law Firm

41 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

For investment, it must be more than 10 billion rupiah, excluding land and building ... This is therefore not beneficial for the real estate company, and extremely confusing if the company only invests in, say, condominium units

Eddy Leks CEO and Managing Partner Leks & Co Lawyers

Rosetini, from Rosetini & Partners, says: “Many business people assets and pay the ransom fees (known as uang tebusan). “The dis- have waited for a long time for this Tax Amnesty Law. For many closed assets, pursuant to the law, cover tangible and intangible who have assets overseas and locally that have not been disclosed, assets, movable and fixed assets, commercial or non-commercial this is an opportunity to disclose such assets and then use such assets, and assets that are located both onshore within the territo- assets for their investment in Indonesia. As a consequence, many ry of Indonesia, and overseas. people may need to restructure their existing investments in com- “Any taxpayers who appropriated or generated the assets but panies in Indonesia or overseas.” There may be associated assets failed to pay the outstanding payable tax up to the recent tax year transfer transactions as well, and those transactions may require [1 January 2015 – 31 December 2015] can apply for a tax amnesty. assistance from lawyers, bankers, consultants and others, such as However, the programme does not apply to taxpayers who are notary and land deed officials. currently the subject of any investigation process, proceedings or Ghazali, from Makes & Partners, says the law enables both indi- criminal sanctions as a result of committing tax crime(s).” viduals and corporate taxpayers to receive pardons for tax liabilities Ghazali says that at the moment, the channeling of funds gener- arising from outstanding payable tax, insofar as they disclose their ated from the programme to real sector projects, including property and infrastructure, is not yet significant, and industry players are still focusing on resolving the technical challenges of channeling the Our legal system and funds to financial products, including stocks and bonds. processes are very long Abraham caveats that although initia- and take so much time, tives like the amnesty show the government is ready to accept investment from Indone- so ADR has become sians overseas, it is not ready to fully allow an alternative way foreign property ownership. “You can clearly see the contradiction,” he says. “Government to make settlements statements allowing dual citizenship for In- other than through donesians is also a law that could show the political will to join globalization.” litigation in the court Abraham says new laws enacted in In- donesia allow foreigners to purchase apart- Reno Iskandarsyah ments, but with many restrictions. One of Managing Partner them is value, and another is the requirement Iskandarsyah & Partners that foreigners who intend to purchase such

42 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

apartments have to have some connection to Indonesia. In short, that in the first months after the new regulation “there was a a tourist cannot travel to Indonesia and purchase an apartment. natural push against [it], given that USD and IDR have been used “This is very unlike Singapore, Malaysia, Thailand, and even Aus- freely in Indonesia for decades. However, in line with the coun- tralia and the US,” he says. “Australia limits these purchases to only try’s domestic size and domestic economic growth, it is crucial to new apartments. Should Indonesia match these countries, it will strengthen the rupiah and have the currency pumped back into open up a whole new market and jumpstart the economy, which is the system for further growth. I feel that the confusion no longer currently dull to say the least.” applies as it is clear that transactions prior to July 2015 need not Larger property investors also encounter problems, according to be in rupiah.” Eddy Marek Leks, CEO and managing partner at Leks & Co Lawyers. The litigation and alternative dispute resolution (ADR) sector “FDI in Indonesia must meet investment and capital requirements,” is also a hotspot for Jakarta law firms as the effects of the commod- he says. “For investment, it must be more than 10 billion rupiah, ex- ities slump take their toll on projects and their financiers. “Our cluding land and building. For capital, it must be paid up at least 2.5 legal system and processes are very long and take so much time, billion rupiah. For the real estate sector, the main assets and inven- so ADR has become an alternative way to make settlements oth- tory are the real property, i.e., land and building. ers than through litigation in the court,” says Reno Iskandarsyah, “If the investment must be more than 10 billion rupiah, but that managing partner at Iskandarsyah & Partners and a litigation spe- excludes land and building, it means that the component of its invest- cialist. ment, namely real property, will not be calculated as part of that 10 “The big challenges are process to execution of the award through billion rupiah investment value. The company may acquire 100 billion our legal system; the process needs to be reviewed as to whether rupiah worth of land, but since the investment value excludes land awards are effected in the public interest or not. If not, the award and building, the company must then allocate 10 billion rupiah from must be approved to be executed, but the process to gain approvals elsewhere, such as working capital. This is therefore not beneficial for needs more time, and sometime extra expense for the administration the real estate company, and extremely confusing if the company only process. In this way, the foreign party faces two levels of process and invests in, say, condominium units.” expense, and sometime there’s also resistance from the parties to ex- Tasdikiah Siregar, a partner at Norton Rose Fulbright in association with local firm TNB & Partners, says a Bank Indonesia (central bank) regulation on the requirement to use rupiah currency was issued in 2015, and has had a significant The confusion no longer impact in areas like the shipping charter service business. “Shipping com- applies as it is clear that panies used to be able to charge for transactions prior to July charter services in a foreign currency,” she says. “Since July 2015, they can 2015 need not be in rupiah no longer charge or denominate their services in a foreign currency. Given that most shipping company Hanim Hamzah loan facilities are in US dollars or Regional Managing Partner Roosdiono & Partners another foreign currency, this require- (a member of ZICOlaw) ment raises practical difficulties for their business operations. “A Bank Indonesia circular allows the bank to grant dis- ecute awards, and it will take more pensation on this require- time to process.” ment to those that apply Haryanto, from Adnan Kelana for it,” she says. Haryanto & Hermanto, says the “However, the circular Indonesian Supreme Court has does not set out a clear enacted regulation No. 1 (2016) procedure for obtaining pertaining to the procedure to such dispensation.” conduct court-annexed media- Hamzah, from Roos- tion. “In this new regulation, to diono & Partners, notes the extent possible, mediation

43 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

must be attended by the litigants themselves, and not just by their attor- of patents, industrial designs and trademark applications are bur- neys,” he says. “However, the effectiveness of this new regulation to re- dened with huge backlogs. solve disputes by way of mediation is still doubted by litigation lawyers.” The budget for investigation activities of the Directorate of In- Herrera, from Makes, says enforcement of arbitral awards has vestigation is also based on fiscal year budgeting, and again under consistently ranked as the most challenging issue in resolving cas- ministry budget control. “Therefore if within a year the complaints es through arbitration. “Although an arbitral award is binding, the received by the directorate overcome the budget there will be no counterpart can always find a reason to qualify the arbitral process action by the directorate,” says Suryomurcito. “Or worse, the of- as either in violation of the country’s public policy, or as in defect,” ficers would be likely to suggest to the complainants to bear the she says. “These may render the award unenforceable or annulled – operational cost of raids if they want these actions to be taken.” which virtually makes the arbitral award impotent. According to Achmad Fatchy, founder of AFFA Intellectual “While most disputes related to foreign companies are handled Property Rights in Jakarta, amendments to the Patent, Trade- in the arbitration fora, the local counterparts often find any legal mark and Industrial Design laws are all in various stages of loophole possible to resort the case back to the local domestic completion. Fatchy says amendments to the Patent Law aim court. This can often create another layer of complexity – where to streamline the application process through incentives, an one case is adjudicated in multiple fora. Always seek legal guidance e-filing system and an easier annuity payment method, while to ensure that the overall dispute strategy covers litigation at both amendments to the Trademark Law notably include the intro- arbitration and the domestic court.” duction of non-traditional marks such as sound, 3-D marks and The IP sector gained some serious ground recently, says Gu- holograms. The flow of mark registrations is also set to be over- nawan Suryomurcito, managing partner at Suryomurcito & Co, hauled, with shortened examination periods to reduce the back- when, on 25 July, Anang Hermansyah, a member of parliament, log at the Trademark Office.

[An independent IP body] will have a simpler bureaucracy, which will make it quicker to respond and co-operate with related ministries

Gunawan Suryomurcito Managing Partner Suryomurcito & Co

proposed the formation of an independent IP body. “Independent “It is very important for in-house counsel around the world to – as in not to become a directorate general under any ministry, as monitor their trademark portfolios, especially regarding the use of it is now,” Suryomurcito says. “As an independent body, it will have trademark,” says Fatchy. “According to article 61 (2)(a) of the Indone- a simpler bureaucracy, which will make it quicker to respond and sian Trademark Law, a trademark can be cancelled if it has not been co-operate with related ministries.” used in trade for relevant goods and/or services for at least three Suryomurcito says a few years ago he suggested something sim- consecutive years from the date of registration or of last use. A well- ilar in an article, for the government to promulgate an IP umbrella known mark is by no means immune from a non-use cancellation.” law especially for the creation and development of IP in relation He points to the recent IKEA case in 2015, where IKEA effective- to the invention and innovation in technology, which were lagging ly lost the use of its mark. “The judge decided that the Trademark behind compared to the copyright industry. “Indonesia needs a na- registrations owned by [IKEA] shall be cancelled due to non-use tional IP strategy embodied in a special IP law, and an IP strategy to allow the plaintiff to use and register the same trademark,” says council responsible directly to the president,” he says. Fatchy. “The cassation at the Supreme Court by Inter Ikea Systems The current system, with the IP Office of Indonesia under a BV also did not overturn the decision issued by the lower court, cit- ministry budget, makes it difficult to hire enough quality staff as ing it had not used the trademark registration for three years from patent and trademark examiners, he says. As a result, examination the date of registration or since the date of last use.”

44 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 COVER STORY

INDONESIA LAW FIRMS DIRECTORY

45 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS LAW DIRECTORY – INDONESIA

Abraham Law Firm ESTABLISHED IN 1988

Total number of professionals: 7 (1 partner) Principal office:Jakarta

Key practice areas: Criminal, Civil, administrative, international, oil, gas and Administrative, Class Action, Legal mining ventures, telecommunication, Opinion, Aviation, Maritime, International maritime, construction, trading and Law, Telecommunication, Tax law, immigration law as well as other areas of Contract Drafting, Immigration, Labor, law that are required by the client. Oil, Gas and Mining, Property. Jakarta Prince Centre, 10th Floor Our services: Our law firm runs its Jl. Jend. Sudirman Kav. 3-4 Jakarta 10220, Indonesia practice from its office in Jakarta, T: +62 21 5738 987 Indonesia, and furnishes legal services T: +62 21 5739 123 including, but not limited to, legal advice F: +62-21 5738 279 and opinions, as well as representing E: [email protected] clients in litigation within the court system, and in arbitration. The areas Website of practice include civil, criminal, www.abraham-lawfirm.com

Adnan Kelana Haryanto & Hermanto (AKHH Lawyers) ESTABLISHED IN 2001

Total number of professionals: 20 (6 partners) Principal office:Jakarta Branch office:Batam

Key practice areas: Anti-trust, Arbitration practice of law for more than 20 years. Jakarta and Litigation, Banking and Financial Their combined experience and client Chase Plaza, 18th Floor Services, Bankruptcy Proceedings, Capital base have paved the way for the delivery Jl. Jend. Sudirman Kav. 21 Markets, Corporate/Commercial (M&A), of effective and well-coordinated legal Jakarta 12920, Indonesia Consumer Protection, Environmental representation to some of the world’s T: +62 21 5208 270 Law, Energy and Natural Resources, and Indonesia’s leading multinational F: +62 21 5208 277 Foreign Investment, Intellectual Property, enterprises, as well as government entities Batam International Trade and World Trade and private individuals. In addition to his Sumber Jaya Complex Block A Organization, Telecommunications. role as a lawyer, founding partner Stefanus No. 5-6, Jl. RadenPatahNagoya Haryanto has the experience to act as an Batam 29432, Indonesia Our services: Adnan Kelana Haryanto & expert witness on Indonesian laws before T: +62 77 8422 100 F: +62 77 8456 282 Hermanto (the ‘Firm’) is one of Jakarta’s the Singapore High Court, Hong Kong leading independent law firms engaged High Court, Federal Court of Australia in transnational practice. The Firm’s Victoria District Registry General Division, Website www.akhh.com founding partners have been in the and US District Court of Northern Illinois.

46 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS LAW DIRECTORY – INDONESIA

Hadiputranto Hadinoto & Partners ESTABLISHED IN 1989

Total number of professionals: 116 (17 partners) Principal office:Jakarta

Key practice areas: Banking & Finance, We have built excellent and longstanding Jakarta Capital Markets, Corporate/M&A, Dispute working relationships with Indonesian The Indonesia Stock Resolution, Employment, Energy, Mining government agencies, regulators and key Exchange Building Tower II, 21st Floor and Infrastructure, Intellectual Property, industry players, and bringing the benefit of Sudirman Central Business District IT/Telecommunications, Real Estate, those relationships to our clients is a value Jl. Jend. Sudirman Kav. 52-53 Restructuring & Insolvency, Tax, Trade & proposition that sets us apart from our Jakarta 12190, Indonesia Commerce. competitors. T: +62 21 2960 8888 Our legal consultants provide sophisticated F: +62 2960 8999 E: [email protected] Our services: Hadiputranto Hadinoto & advice on corporate and commercial Partners is widely recognized as one of the transactions across a broad range of industries. Contact leading law firms in Indonesia. As a member Our practice areas and partners are Timur Sukirno firm of Baker & McKenzie International, consistently ranked as the best in their Managing Partner we bring a unique combination of local fields by high-profile legal publications such knowledge and global experience to every as The Asia Pacific Legal500, Chamber Asia- Website matter. Pacific, IFLR1000 and Asialaw Profiles. www.hhp.co.id

Hermawan Juniarto ESTABLISHED IN 2005

Total number of professionals: 49 (7 partners) Principal office:Jakarta

Key practice areas: Corporate & Hermawan Juniarto distinguishes itself from Commercial, Infrastructure, Project finance, other firms by offering clients particularly Banking, Asset Finance, Energy & Natural strong resources in many disciplines, and its Jakarta Resources, Telecommunications & IT, depth of practice enables it to handle the The Energy Building, 52nd Floor Dispute practice group, Intellectual Property. most complex matters. SCBD Lot 11A Jl. Jend. Sudirman Kav. 52-53 We work with a number of international Jakarta 12190, Indonesia Our services: Hermawan Juniarto is widely law firms to open up the provision of legal T: +62 21 2995 9057 regarded as one of Indonesia’s leading services across various sectors/industries. F: +62 21 2995 9058 emerging firms, dedicated to providing a Our philosophy ensures that clients receive full range of corporate legal services, and a clear, concise and practical advice based Contact Irawati Hermawan challenging and dynamic legal environment. on an in-depth knowledge of the legal, CEO & Managing Partner Its strength is in its team of experienced regulatory and commercial environments. [email protected] and highly trained lawyers who understand Our lawyers have extensive experience in the value of knowledge, as well as creativity “getting the deal done” both quickly and in a Website and innovation, in addressing clients’ needs. commercially effective manner. www.hermawanjuniarto.com

47 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS LAW DIRECTORY – INDONESIA

Imran Muntaz & Co ESTABLISHED IN 2012

Total number of professionals: 13 (2 partners) Principal office:Jakarta

Key practice areas: Capital Markets Banking & Finance & Securities, Corporate Commercial/ Imran Muntaz & Co assists clients in their Mergers & Acquisitions, Banking & bilateral or syndication financing process Finance, Energy & Natural Resources, including financing structure, facility Commercial Disputes. agreements and security documents, including their corporate approval. Our services: Capital Markets & Securities Energy & Natural Resources We represent issuers and underwriters in We handle many projects in the area various equity/debt offerings and private of energy and natural resources and placement through local or international have been assisting clients through offering in reliance with Regs or 144A. many years of experience by providing We also assist our clients in tender legal advice and transactional support offer transactions, conflict of interest to companies operating in the oil and transactions, material transactions gas, energy and natural sectors. Imran and other transactions under Financial Muntaz & Co advises clients based on the Services Authority (OJK) regulations. prevailing laws and regulations, ensures clients achieve their goals such as joint Corporate Commercial/Mergers & venture agreements, land title and sale Acquisitions and acquisition of assets, government Imran Muntaz & Co assists clients in advisory work, operating agreements, the preparation of the very beginning of environmental and forestry issues and transactions, such as conducting legal due many more in the fastest and diligence, preparation of the necessary smoothest way. corporate approvals, entering sale and purchase and other related agreements, Commercial Disputes and ensuring regulatory compliance and We provide clients with strong support smooth transactions of acquisitions, and represent clients in tort, breach mergers, reorganizations, joint ventures of contract, internal corporate fraud, and corporate restructuring. Further, we employment, and other areas. help clients in various industries, such as plantation, banks, multi-finance, cement, construction, property, horticulture, Jakarta Office 8 Building logistic, media & telecommunication, and 35th Floor, Zone G many more, both private and public listed Sudirman Central Business companies, by providing a flexible and District Lot. 28 responsive way to adjust and fulfil clients’ Jl. Jend. Sudirman Kav. 52-53 needs. By determination of providing Jakarta 12190, Indonesia T: +62 21 2933 3800 strong yet friendly protection for clients, E: [email protected] we will provide services in all phases of [email protected] business arrangements, including contract drafting, contract negotiation, contract Contact review and contract execution, from a Imran Muntaz simple agreement to a complex cross border transaction agreement. Website www.imcolaw.com

48 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS LAW DIRECTORY – INDONESIA

Kandar & Partners ESTABLISHED IN 2013

Total number of professionals: 6 (2 partners) Principal office:Jakarta

Key practice areas: of maintaining good relationships with • Foreign and Domestic Investment clients, all of our team members are • General Corporate accessible and keen to develop strong, • Mergers and Acquisitions long-term relationships with clients. We • Banking, Project and Corporate are committed to providing our clients Finance with accurate legal advice in a clear and • Energy and Natural Resources concise manner. Our open-style approach • Infrastructure is both practical and professional. The • Manufacturing firm focuses on providing businesses • Pharmaceutical with commercial, corporate, regulatory • Manpower and transactional advice. Our mission • Telecommunications is to provide solid and diligent legal • E-commerce and Information representation that is aggressive in Technology seeking results. • Insurance The lawyers at Kandar & Partners are specialists in foreign investment, Our services: Kandar & Partners is corporate matters, M&As, banking an independent Indonesian corporate and finance, as well as in energy, and commercial law firm that provides natural resources and infrastructure, comprehensive legal services to meet the to name a few. The composition of our interests and objectives of our clients, specialised team allows us to provide both domestic and foreign. The firm value-for-money legal services without is supported by a team of high-profile compromising quality and service. Our professionals with a deep understanding expertise ensures clients always receive of Indonesian law who consistently first-class legal advice. Our lawyers have demonstrate knowledge of the received numerous awards from a number commercial and business environment. of law-based publishing companies, Our lawyers are fluent in both most recently from Asialaw (as Asialaw English and Bahasa Indonesia, qualified Market-Leading Lawyer 2016 in Energy Jakarta to practise as licensed advocates and and Mineral Resources) and the Corporate Gedung Trio, Suite 201 have all acted for numerous local and LiveWire (Winner of Corporate LiveWire’s Jalan Mampang Prapatan Raya international companies in a variety of 2016 Global Awards in Energy and Natural No. 17 E-F project developments and commercial Resources (Indonesia)). Jakarta 12790, Indonesia T: +62 21 7919 1333 transactions. We maintain strong F: +62 21 7919 1345 professional networks with prominent regional and international law firms as Contact well as other professional and advisory Fadjar Kandar firms, which in turn enables us to better Managing Partner cater to the clients’ needs. E: [email protected] We provide a wide range of legal services for both domestic and multi- Barryl Rolandi Partner jurisdictional transactions. We are E: [email protected] committed to providing high-quality and timely advice, offering localized solutions consistent with international Website standards. Understanding the importance www.kandarlaw.com

49 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS LAW DIRECTORY – INDONESIA

Lubis Ganie Surowidjojo (LGS) ESTABLISHED IN 1984

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50 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA BUSINESS LAW DIRECTORY – INDONESIA

Makes & Partners Law Firm ESTABLISHED IN 1993

Total number of professionals: 30 (5 partners) Principal office:Jakarta

Key practice areas: Capital markets, Corporate Wong Partnership’s strengths will reach far Finance, Banking, M&A, Project Finance, and wide into ASEAN and beyond. Telecommunications and Debt Restructurings, The firm’s clients include Indonesian and Litigation and Dispute Resolution. international issuers, underwriters, banks and investors, as well as borrowers, the Our services: Makes & Partners is an government of Indonesia and other public independent, innovative and creative entities. Its private clients are some of the Jakarta Indonesian law firm and a leader in Indonesian largest corporate groups and numerous Menara Batavia, 7th Floor corporate finance and corporate commercial investment banks in Indonesia. Jl. K.H. Mas Mansyur Kav. 126 Jakarta 10220, Indonesia legal services. The firm welcomes the era International clients include major financial T: +62 21 5747 181 (Hunting) of greater ASEAN and Pan-Asian economic institutions and multinational corporations F: +62 21 5747 180 cooperation and integration with leading operating in a variety of industries and business E: [email protected] Singapore firm, Wong Partnership LLP. sectors. The firm represents the government Through its strategic alliance, the excellent of Indonesia in its privatization and divestment Website legal services of the firm complemented by matters as well as international investors. www.makeslaw.com

Rosetini & Partners Law Firm ESTABLISHED IN 2005

Total number of professionals: 12 (2 partners) Principal office:Jakarta

Key practice areas: Corporate, General Corporate Matters and Foreign Jakarta Foreign Direct Investment, Mergers & Direct Investment Office 8, 18-19th Floor Acquisitions, Banking and Finance. The firm offers legal assistance in relation SCBD lot 28 to the presence and operations of Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190, Indonesia Our services: Rosetini & Partners is companies doing business in Indonesia. T: +62 21 2933 3618 committed to provide quality legal Mergers & Acquisition F: +62 21 2933 3619 service with a high degree of attention We assist in the structuring of to its clients. transactions for our clients, so that they Contact Rosetini Ibrahim The firm has had a strategic alliance with will have the most beneficial structure E: [email protected] a law firm in Japan, Nishimura & Asahi, and still comply with prevailing laws. Yuvensius Pranata since November 2014. Banking & Finance E: [email protected] The firm is a member of Mackrell The firm represents banks and finance Noriaki Machida International, a network of independent companies with respect to their E: [email protected] law firms from 60 countries around the transactions with clients and their Website globe with 4,500 lawyers worldwide. compliance with the relevant regulations. www.rosetini.co.id

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THE BATTLE FOR GLOBAL SUPREMACY IN AN INDUSTRY OF CONFLICT AVOIDANCE IS OPENING NEW FRONTS IN ASIA, WHERE A FIERCE DUEL IS ONGOING, WRITES PAUL CAMPBELL ARBITRATION WA R S

ong Kong International Arbitration Centre’s “My main objectives for the first year in the role are to: (1) ensure the (HKIAC) newly appointed secretary-general continued provision of high quality service by the HKIAC’s secretar- Sarah Grimmer will have to hit the ground iat; (2) build on groundwork that has already been laid, particularly running – and even pick up the pace – if she hopes as regards the HKIAC’s tribunal secretary services and accreditation to hold on to the gains achieved by her predeces- courses; (3) identify new initiatives that meet a need in the legal and/ sor. Chiann Bao in September took up a new role or business community; and (4) promote the HKIAC’s rules and ser- Has regional counsel at the Hong Kong office of Skadden Arps Slate vices in relevant regions and industries,” says Grimmer. Meagher & Flom, after a six-year stint that saw the HKIAC emerge as There’s no time for complacency. By some measures, Singapore the most-improved dispute resolution body worldwide, according to International Arbitration Centre (SIAC) has a case to claim that it’s the most recent annual survey by Queen Mary University of London. now Asia’s top dog, with faster growth and bigger, more lucrative The urgency of her task is not lost on the new secretary-general. cases. And while the SIAC had to settle for silver this time around,

53 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 IN FOCUS

Singapore as an arbitral seat stole the gold ahead of its older and more “Due-process paranoia”, as the authors of the Queen Mary report established neighbour. Snapping at the heels of both is a pack of re- termed it – the reluctance of tribunals to make tough decisions be- gional rivals, all chasing a slice of an increasingly competitive market. cause of the fear it would leave any award open to a challenge on the Still, Grimmer points to the HKIAC being ranked first worldwide for grounds that a party had been denied the chance to make their case location, value for money, IT services and helpfulness of staff in the fully. The issue was repeatedly raised in the answers of the survey’s GAR Hearing Centres Survey, 2016. 763 respondents, and in nearly all of the 105 in-depth interviews. Rutger Metsch, a White & Case research fellow in international Kevin Nash, deputy registrar and centre director at the SIAC, says arbitration at Queen Mary, and one of the survey’s authors, says the that while there are a variety of methods to determine costs across HKIAC and the SIAC are well regarded “because of the very clear the institutions, “it is ultimately the experience, efficiency and ethos pro-arbitration stance of their courts and legislators, and their ability of an institution” that ensure costs are kept in check. to respond to, or stimulate, change”. “In addition to a competitive cost structure, the SIAC Rules That openness to change and innovation is likely to become an 2016 introduce a number of market-leading innovations to save even more important ingredient for success. While a clear majority time and costs, including a new procedure for the early dismiss- of respondents said arbitration was their preferred method of resolv- al of claims and defences, new provisions to deal with multi-party ing international commercial disputes – 56% as a standalone solution; and multi-contract disputes, and further refinements to the SIAC’s 90% when combined with other forms of dispute resolution – even popular emergency arbitrator and expedited arbitration proce- arbitration’s biggest fans see a huge need for improvements. dures,” he says.

The HKIAC offers one of the most modern and comprehensive sets of rules on the market, and its international secretariat now has significant experience administering those rules

Sarah Grimmer Secretary-General HKIAC

“If you talk to any user of the arbitration system, their first and last Joe Liu, managing counsel with the HKIAC, says the centre has words are ‘cost, cost, cost’,” says Paul Aston, a partner at Holman Fen- introduced several mechanisms to control costs. “One of the most wick Willan in Singapore. “Arbitrators have a duty to think about how effective and innovative measures taken by the HKIAC is to allow to run an arbitration in the most cost-effective and efficient manner.” parties to choose how to pay their arbitrators, i.e., by hourly rates Ironically, the actual cost of the arbitrators and the administra- [capped at HK$6,500 (US$840) per hour] or based on the amount tion of the tribunal make up quite a small proportion of the total in dispute,” he says. Parties can first assess the value and complexity expense, he adds. “It’s the legal and expert costs that go through of their dispute and choose the best cost-saving method to pay the the roof,” and there are ways that these can be controlled, such as arbitral tribunal. through firm control of the procedures, agreeing to clear limits on Liu adds that the HKIAC is also assisted by an arbitration feed- such costly items as discovery and testimony by expert witnesses, back system introduced in July last year, which allows users to eval- and enforcing deadlines. “Arbitrators have the power to punish peo- uate the conduct of their arbitral proceedings and the performance ple whose bad behaviour means the costs are ratcheted up, but they of their arbitrators. The HKIAC draws on users’ feedback to appoint don’t, because they’re scared.” arbitrators who are able to conduct proceedings without delays.

54 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 IN FOCUS

Kim Rooney, a barrister, international arbitrator and alternate member of the International Chamber of Commerce (ICC) Interna- tional Court of Arbitration, observes: “Some of the features that we used to promote it early in its history – such as it was flexible and it was fast; it didn’t have appeal mechanisms; it was cheaper – some of them have, over time, been undermined a bit. Arbitration was originally de- Peter Godwin scribed as an alternative dispute resolution mechanism, but it’s now Managing Partner ‘mainstream dispute resolution’ for cross-border disputes in Asia.” Herbert Smith Freehills On the plus side, though, are the fundamental advantages that made ADR an attractive option in the first place: the ability to en- Arbitration in Japan itself force awards; the perceived neutrality of tribunals, and the flexibility to find a set of rules that suits both parties. is barely developing at all, Lacking a framework of bilateral treaties providing for the recip- certainly not quickly. What rocal recognition and enforcement of judgments – such as exists between rich nations in the West – Asian governments have recognized is developing is the use of the need to support the growth of arbitration and other dispute resolution approaches outside the court system. arbitration ex-Japan by Japan, for example, has no bilateral treaties. It is a signatory to the Japanese companies 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, more commonly known as the New York Conven- tion, along with more than 150 other jurisdictions around the world. Cross-border takeovers and investments involving Asian entities The so-called Model Law provides a blueprint for legislation that en- have surged to more than US$900 billion until August this year, up sures an increasingly global landscape in which parties can operate from US$420 billion just four years ago, according to Bloomberg on common ground. data. Asians are increasingly the ones doing the buying – US$283 “Arbitration in Japan itself is barely developing at all, certainly not billion in outbound deals this year, versus US$110 billion in the same quickly. What is developing is the use of arbitration ex-Japan by Japa- period of 2012. And intra-Asia trade and investment is growing fast, nese companies,” says Peter Godwin, managing partner in Japan and too. The economic volatility of recent years is adding a further boost head of the dispute resolution practice at Herbert Smith Freehills. to the market as tough times inevitably sour relationships forged “This is largely a consequence of their cross-border investments and when the outlook was rosy. It is these factors that help explain Asia’s the suitability of arbitration in ensuring a neutral safe venue for dis- growing arbitration presence, as well as the rise of Hong Kong and pute resolution.” Singapore to become the third and fourth-ranked seats globally.

As well as research being undertaken by KPMG into how Hong Kong can develop its international offering, the government is also in the process of developing a new legal hub in the heart of Hong Kong

Gavin Denton Head of Chambers Arbitration Chambers Hong Kong

55 ABLJ ⁄ SEPTEMBER – OCTOBER 2016

IN FOCUS

“Just as the shift in economic activity changes from the Atlantic to the Pacific, you will see that naturally they’ll become number one and number two, because all of the economic activity takes place between parties in Asia,” says Davyd Wong, in-house counsel at KPMG, which was commissioned by Hong Kong’s government to look at ways to enhance the city’s role as an arbitration hub. “It makes less and less sense to have the arbitration in London.” Robert Pé Grimmer believes the HKIAC holds some advantages. “I would Partner mention two points,” she says. “First, through its 2013 Adminis- Gibson Dunn & Crutcher tered Arbitration Rules, the HKIAC offers one of the most modern and comprehensive sets of rules on the market [nominated by GAR Myanmar’s decision to stick as one of the best developments of 2013], and its international secretariat now has significant experience administering those rules. closely to the text of the Second, Hong Kong is widely regarded as the natural choice of seat for arbitrations between Chinese and non-Chinese parties. Every Model Law is wise because it year the HKIAC administers a high volume of disputes involving will immediately give foreign Chinese parties. Research shows that awards made in Hong Kong or issued by the HKIAC enjoy a stronger record of enforcement in investors confidence China, a record that awards made in other jurisdictions have not been able to match.” In June last year, the HKIAC also organised successful judicial training for judges from China, Thailand, the Philippines, Sri Lanka, The government there enacted a new Arbitration Law this year India and Indonesia. These judges become familiar with the arbitral based on the Model Law, three years after the former military junta procedures and practices in Hong Kong, and are in a better position acceded to the New York Convention. “Myanmar’s decision to stick to enforce awards made in Hong Kong. closely to the text of the Model Law is wise because it will imme- But the flowering of arbitration in Asia isn’t just restricted to diately give foreign investors confidence,” says Robert Pé, a Hong Hong Kong and Singapore; it is spreading across the region, with Kong-based partner with Gibson Dunn & Crutcher who is also a governments from India to Australia competing to prove them- legal adviser to Aung San Suu Kyi. The longtime political prisoner, selves arbitration-friendly in order to facilitate global commerce and who is now leading a democratically elected government in the re- reassure investors. That’s particularly important for newly opened source-rich nation of 53 million people, needs to attract overseas frontier markets, such as Myanmar. funding to help build an economy left weakened by decades of mili-

Just as the shift in economic activity changes from the Atlantic to the Pacific, you will see that naturally they’ll become number one and number two, because all of the economic activity takes place between parties in Asia

Davyd Wong In-house Counsel KPMG

57 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 PRACTITIONER’S PERSPECTIVE

FAILURE TO SPECIFY SEAT MAY CAUSE

PROBLEMS Anthony Poon Simon Hui

In a recent PRC case, the Taizhou In July 2011, the Chinese party (P) must check whether any restrictions under Intermediate People’s Court refused sued the foreign party (D) in the Taizhou the national arbitration law of the seat may enforcement of an ICC award on grounds Intermediate People’s Court for breaching apply. Where the parties have not agreed of public policy because the court had the non-compete clause in the JVA, seeking on a seat, the arbitral rules will usually previously held that the arbitration clause various remedies. D invoked the arbitration provide how the seat is to be determined. was invalid. This outcome could have been clause claiming that the court had no juris- However, arbitral rules may differ signifi- avoided if the parties had specified a suit- diction to hear the dispute. cantly in this regard. able arbitral seat in the arbitration clause. The court applied PRC law in determining In circumstances where the parties have The seat is an important legal concept, the validity of the arbitration clause, as the failed to designate a seat in the arbitra- as its law provides the supporting legal parties had not agreed on any law governing tion clause and there is no default seat framework for the arbitration and its courts the arbitration clause, or an arbitral seat that under the arbitration rules, there will be supervise the arbitration. The seat also usu- would have allowed the court to apply a uncertainty as to which law governs the ally determines the nationality of the award different, less restrictive law (e.g., Hong Kong proceedings and which courts supervise that is relevant to enforcement. The seat law). In December 2012, the court held that the arbitration. can therefore have a material impact on the arbitration clause was invalid and that it The period of uncertainty may be the course and outcome of the arbitration, had jurisdiction to hear the dispute because relatively short where the institution and is not to be confused with the factual the clause neither designated an arbitral determines the seat, but could last three venue where arbitration meetings and institution, nor could the court determine months or more where the seat will be hearings are conducted. the institution through the relevant arbitra- determined some time after the formation Absent of any agreement to the con- tion rules as required under PRC law. This of the tribunal. trary, the law of the seat, which is often ruling was upheld by the Supreme People’s Unless the parties have specified the law not the same as the substantive law of the Court (SPC) in March 2012. of the arbitration clause, which is often contract, usually also governs the arbitra- While the court proceedings were not the case, such uncertainty will also tion clause. It is important to understand pending, D commenced ICC arbitration extend to matters governed by the law of that the substantive law of the contract proceedings against P in Hong Kong. Since the arbitration clause, such as its validity. may not extend to the arbitration clause P did not exercise its right to choose the We therefore also recommend that parties because the arbitration clause exists inde- arbitral seat, the ICC Court of Arbitration expressly adopt the law of the seat as the pendently and is separable from the other fixed Hong Kong as the seat. Two ICC law of the arbitration clause. contract terms. awards were rendered, one in July 2014, the Parties should avoid giving the respon- Matters governed by the law of the arbi- other in November 2014. On 9 December dent a unilateral right to choose the seat, as tration clause include the formation, validity 2014, D applied to the Taizhou Intermediate was the case in the Taizhou case, because and interpretation of the arbitration clause. People’s Court to enforce the awards. On unless the parties have agreed on the For example, unlike under Hong Kong law, 2 June 2016, the Taizhou court held that law governing the arbitration clause, this an arbitration clause is not valid under PRC enforcement of the awards would be in approach will not only result in uncertain- law if it does not designate an arbitral insti- breach of PRC public policy because the ties but also give a recalcitrant respondent tution or provide for arbitral rules through awards were in conflict with the Taizhou an opportunity to try to frustrate the arbi- which the institution can be determined. court’s ruling. tration by choosing a seat under the law of which the arbitration clause is not valid. THE TAIZHOU CASE ACTIONS TO CONSIDER The parties entered into a Sino-foreign joint We recommend that parties should always ANTHONY POON and SIMON HUI are venture agreement (JVA) governed by PRC designate a seat in the arbitration clause partners at Baker & McKenzie in Hong Kong law with an arbitration clause that left the and expressly adopt the law of the seat as and Shanghai, respectively. determination of the arbitral seat open. the law of the arbitration clause. Parties

58 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 IN FOCUS

tary rule, international financial and trade sanc- ue, the rapid development of international ar- tions, and endemic corruption. But as investors bitration will continue, adds Abhinav Bhushan, have found to their cost, time and time again, For Hong Kong, director of ICC Arbitration and ADR for South simply enacting international obligations into Asia. “Increasing cross-border business inev- domestic law isn’t enough. you need a itably requires an increase in the demand for And while Myanmar may have the politi- dispute resolution to meet international stan- cal will to honour the terms of the treaty, the competitor, just dards,” he says. “Due to a lack of international chronic lack of capacity within the judicial as Singapore exposure … some Asian countries may have le- system will take time to fix. Outside help from gal practitioners with limited training in inter- arbitral bodies, such as a recent two-day work- needs Hong national arbitration … which in individual cases shop by the ICC in Yangon, have only reached a Kong, because will probably lead to unsatisfactory outcomes of small core of judges so far. the arbitration advocacy.” “At the moment it appears to be a matter of if you live in real Bhushan’s counterpart in North Asia, Fan chance as to whether or not an arbitral award Mingchao, adds: “Asia needs a pool of arbitra- – foreign or domestic – would be referred to a competition you tors and lawyers, better legal education, a drive judge with knowledge of and exposure to the have to push to attend arbitration training, courses, and a convention,” says Pe, adding that it would make committed interest in the field of arbitration. sense to draw up an “arbitration list” of desig- yourself to the This will be important for a sustainable develop- nated judges who would hear all cases involv- edge, and that ment of international arbitration in this region.” ing foreign awards. India and Malaysia are both touting reforms Such a system has been put in place in Chi- will make you to arbitration laws that are designed to reduce na, where sweeping reforms of the civil justice stand out court interference and improve procedural ef- system last year won the country’s courts a top ficiency. Both countries use the common law, place in the World Bank “Doing Business 2016” and both are offering themselves as low-cost ranking. That is quite a turnaround for a coun- Brad Wang alternatives. Malaysia is also seeking to position Managing Counsel try whose primary arbitration body, the China itself as a global centre of expertise in Shariah International Economic and Trade Arbitration CIETAC Hong Kong law, while the Perth Centre for Energy & Re- Commission (CIETAC), was at the bottom of sources Arbitration seeks to leverage Austra- the perceptions pile in Queen Mary’s 2010 poll. lia’s expertise in that sector. Even South Korea “Probably as a result of Singapore’s emer- is trying to muscle in on the act with the new gence as an arbitration hub, there has been Seoul International Dispute Resolution Centre. greater competition in the arbitration world, “If you look at the rules, from one institu- and that has created a virtuous circle for cli- tion to another, they are pretty similar,” says ents,” says Mike Hales, a Perth-based partner Wang. “It’s like if you look at Android or iOS, at Minter Ellison. they always learn from each other. They have Brad Wang, managing counsel at CIETAC their own features but they are quite similar, Hong Kong Arbitration Centre, says it’s and it’s up to the user which one to use.” important not to focus too closely on the Mainland China is not a so-called Model rivalry between the HKIAC and the SIAC. Law jurisdiction, so international parties may “It’s really about the bigger picture,” he not be familiar with the procedures. CIETAC says. “It’s about the rise of Asia in terms of Hong Kong acts as a bridge, he says, giving international arbitration. For Hong Kong, both sides the flexibility to find a model that you need a competitor, just as Singapore needs fits their level of comfort. Hong Kong, because if you live in real competi- Chinese President Xi Jinping’s “One Belt, tion you have to push yourself to the edge, One Road” initiative, the new Asian Infra- and that will make you stand out.” structure and Investment Bank, and pledges As long as political stability to invest hundreds of billions of dol- and economic lars across Africa and Latin growth contin- America, bring with

59 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 Local Connections. Global Influence.

We are a law firm with global influence. With a global network of over 1,500 lawyers in 46 offices across 21 countries, we support clients wherever law, business and government interact. We recently advised Fairfax Asia Limited on the first listed M&A transaction involving an Indonesian insurance company to go before Indonesia’s financial services authority, the Singapore Public Utilities Board on the Jurong Island Desalination Plant project and Asian Development Bank on the solid waste management regime in Thailand, Philippines and Myanmar. We are at the forefront of market practice. We advised on the first IPO and Indian listings by a small finance bankEquitas ( Holdings), an e-commerce company (Infibeam), a dairy company (Prabhat), and the largest franchisee of PepsiCo beverages in the world (outside US) (Varun Beverages). We also advised on two of the highest subscribed IPOs in India (Quess Corp, oversubscribed 174 times and VRL Logistics, oversubscribed 74 times). • Recognized by Law360 as Top 20 Global Law Practice • #3 in India (International Firms by Value – Managers Counsel) by Bloomberg Global Legal Advisors League • Recognized by Asian Legal Business as Top 50 International Law Firms in Asia • #3 in India (International Firms by Deal Count) by Thomson Reuters Mid-Market • Recognized in Chambers, The Legal 500 and IFLR1000 as a leading Projects & M&A Review 2015 Energy, and Capital Markets practice in Asia, particularly Singapore and India • #3 Deal of the Year Awards by India Business Law Journal • #1 in India IPOs (International Firms by Deal Count as Underwriters Counsel) in 2015–2016 by Prime Database • Awarded International Capital Markets Law Firm of the Year 2015–2016 by Legal Era • #1 in Global M&A Market Review (India) (International Firms) by Bloomberg for 1H 2015 • #1 in UK Mid-Market M&A by Thomson Reuters for 1H 2015 • #1 in Mid-Market M&A (India) (International Firms) by Thomson Reuters • #6 in EMEA M&A by Mergermarket for 1H 2015 for 1H 2015 • #8 in Worldwide M&A by Mergermarket for 1H 2015 • #2 in India (International Firms by Deal Count – Managers Counsel) by • #9 in The 10 Mightiest M&A Practice Groups by Law 360 Bloomberg Global Legal Advisors League Tables 2015

Contacts Ignatius Hwang Biswajit Chatterjee Managing Partner, Singapore Partner, Singapore T +65 6922 8660 Co-chair, India Practice E [email protected] T +65 6922 8664 E [email protected] squirepattonboggs.com IN FOCUS

Singapore does have an edge over Hong Kong for Indian users for two reasons – familiarity with Singapore- based arbitrators, and the neutral reputation of Singapore’s judiciary

Ashok Sharma President Indian Corporate Counsel Association

them a considerable array of opportunities for Hong Kong’s devel- Court will also tie arbitrators’ remuneration to the time they take to oped banking and professional services sector in financing, project submit awards for review, with discretionary financial sanctions for risk, quality management, infrastructure and real estate services. And non-compliance: up to 10% where a draft award is submitted four or with that, an anticipated boom in legal and arbitration services involv- five months late (in the case of tribunals and sole arbitrators, respec- ing Chinese parties that may feel comfortable with Hong Kong and their tively), and 20% or more for drafts that are 10 or 11 months late. The partners from less familiar markets. London Court of International Arbitration (LCIA) from late last year Hong Kong’s Department of Justice is beefing up its division that began releasing data on the costs and duration of its cases, making it advises on arbitration, as well as its capacity to handle education- easier for potential users to predict. al and marketing campaigns to promote the city. The government Hong Kong and Singapore both also have advantages over some has committed to legal reforms to keep Hong Kong at the forefront of their Asian rivals in that legal systems operate on the common of the race to innovate and meet changing needs of clients. law, providing both familiarity to parties and their advisers, as well The government has committed to introducing draft legislation as predictability of precedence and jurisprudence. The judiciaries in to allow third-party funding of commercial arbitration at the next both centres have a reputation for impartiality and competency, and session of the Legislative Council, for example. That is expected to both governments have adopted a hands-off approach to arbitration, open up new business opportunities for specialist funds such as the although opinions differ on this. US$525 million Harbour Litigation Funding. “Singapore does have an edge over Hong Kong for Indian users Not to be outdone, Singapore’s government released draft legis- for two reasons – familiarity with Singapore-based arbitrators, and lation to legalize the practice in the summer, while a revised set of the neutral reputation of Singapore’s judiciary,” says Ashok Shar- SIAC rules came into effect on 1 August. CIETAC Hong Kong also ma, founder and president of the India Corporate Counsel Associ- has a new set of rules to allow for the practice. ation (ICCA). “Hong Kong has not been able to create that impres- So are we likely to see a fragmentation of the global arbitration sion so far. The SIAC’s presence in India also helps.” market as reforms smooth out the differences between national cus- Countries where courts are considered corrupt, inefficient and toms and jurisprudence? It’s unlikely, says KPMG’s Wang. For a start, prone to interfering in arbitral awards – or where governments im- the traditional global centres in London and Paris won’t go down pose policy restrictions that hinder their enforcement – will find it without a fight. Their deep pools of expertise offer them a bulwark difficult to compete internationally. against the oncoming Asian tide. They are also pushing through While India’s government passed long-awaited reforms to its Ar- their own reforms, most notably trying to address the opacity of arbitration Law last year that aimed to restrict the ability of judges to bitration that is the root cause of many of the delays and rising costs. interfere in foreign arbitral awards, these have yet to be tested in the The ICC, for example, is identifying arbitrators sitting in its cas- courts. “To my mind, recent changes in regulatory regime of arbi- es. This will help parties assess the likely availability and caseload of tration in India will go a long way to attracting international com- potential appointees in ICC arbitrations, says Godwin from Herbert mercial arbitration to India,” says Sharma, an experienced arbitrator Smith Freehills. A full caseload may hinder an arbitrator’s ability to who has served on many of the industry’s representative committees run a tribunal and delay the rendering of any award, he says. The ICC including ICC India and the ICC Commission on Arbitration.

61 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ACI American Conference Institute Business Information in a Global Context

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November 15–16, 2016 “This was the missed opportunity which drove international com- The court’s first judgment in May – BCBC Singapore and Anor InterContinental Hotel Singapore | Singapore mercial arbitrations [ICAs] to other jurisdictions. The ICADR [India’s v Bayan Resources TBK – has been held up as a model, both in the International Centre for Alternative Dispute Resolution], whose quality of the international panel of judges, as well as for the efficien- chairperson is the chief justice of India, is gearing up in a big way to cy of the process. th provide a credible arbitral institution in India to conduct ICAs. India “Commentators have debated whether the judgment bolsters the 5 Asia-Pacific Summit on has a large pool of arbitrators and lawyers to handle ICAs.” argument that the SICC will eventually rival – or even supplant – the A reminder of what’s at stake came in in August as NTT Docomo [SIAC] as the preferred international dispute resolution forum in the tried to drag the Indian government into its dispute with Tata Group state,” says Alastair Henderson, a Singapore-based partner at Herbert over a US$1.17 billion LCIA award being held up in India’s courts Smith Freehills. “The efficiency, flexibility and transparency of the ANTI-CORRUPTION on a public policy issue concerning the country’s capital controls. SICC suggests that parties are likely to consider the court as a viable NTT says the government should stump up the money because Tata alternative forum.” COMPLIANCE AND RISK MANAGEMENT could have paid the award using its overseas assets, which wouldn’t Gavin Denton, head of Arbitration Chambers Hong Kong, says need the approval of India’s central bank and finance ministry. that while the Singaporean government has undoubtedly offered Country-Specific Strategies to Ensure Compliance and Minimize Perceptions are hard to shake, such as the notion that it is im- very significant support to its legal and arbitration community, the possible to enforce foreign awards in Indonesia’s courts. “The per- Hong Kong government is actively looking at new ways to ensure the Risk of Complex and Costly Government Investigations ception is still wrong,” says Karen Mills, a US barrister and arbitra- Hong Kong remains one of, if not the, leading seat for international tor at KarimSyah Law Firm in Jakarta. “It often takes a while. The arbitration in the region. hold-up is usually the administrative requirements, but we have “As well as the research being undertaken by KPGM into how Unparalleled benchmarking and networking opportunities at been successful every time.” Hong Kong can develop its international offering, the govern- Asia’s premier anti-corruption compliance conference. Join your peers for what is regarded as the Premier In-House Counsel/Compliance Anti-Corruption Compliance Event in Asia and benefit from unparalleled benchmark opportunities. The hold-up [with enforcing foreign Now in its 5th successful year, ACI’s annual Asia Pacific Summit on Anti-corruption Compliance and Risk awards in Indonesia’s courts] is usually Management will provide you with advanced and real-world practical insights on innovations on compliance the administrative requirements, but and the best mitigation strategies and updates on the fast evolving anti-corruption landscape in the region, with in-depth discussions of China, Indonesia, India, Thailand, Myanmar, Malaysia, South Korea and Vietnam we have been successful every time Karen Mills Confirmed Speakers from: Barrister and Arbitrator GE Aviation Vale Celanese (China) Tyco KarimSyah Law Firm Medtronic Western Digital Microsoft Family Assets Siemens Grid Solution Intel (Hong Kong) PT NGC / Maxpower Scotiabank GSK (India) General Motors (Indonesia) For now, Singapore and Hong Kong have an unassailable lead and ment is also in the process of developing a new legal hub in the Diageo SNC-Lavalin (Australia) Motorola Solutions DaVita any fragmentation is likely to reverse over time, with consolidation heart of Hong Kong by making space available in the west wing HP Rockwell Automation Maersk Line Caterpillar around the two main centres and a few pockets of niche specialization. of the former Central Government Offices and the entire former Smith& Nephew (Australia) Alcon Pte Ltd If there is a true contest, it is in the different models pursued French Mission Building,” says Denton. “These initiatives will by both governments. Hong Kong has taken a free market, more provide very significant support to Hong Kong’s arbitration com- “a la carte” approach, setting the landscape and providing some munity and will undoubtedly act as an incentive for international administrative and marketing support to competing institutions. and entrepreneurial organizations to enter into and expand the Singapore’s approach, on the other hand, has been more intensive Hong Kong market.” and top-to-bottom, with investments in new facilities and institu- While the aggressive interventionist style of Singapore may USE THIS CODE AND SAVE 10% OFF: tions such as the Singapore International Commercial Court. The have handed momentum to the Lion City for now, Hong Kong is court was established to address “problems often encountered in no first-round knock-out by any stretch of the imagination. “Hong P10-999-ABLJ17 international arbitration”, such as over-formalization, delays, costs, Kong and Singapore will continue to battle it out for the benefit of absence of appeals and lack of consistency and transparency in de- both consumers and the profession generally,” says Wang. “The two cision making, the government said at the time. will be in a lockstep for the foreseeable future.” Register Now | AmericanConference.com/ACSingapore

63 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 PRACTITIONER’S PERSPECTIVE

MANAGING INTERNATIONAL

ARBITRATIONS Craig Celniker Sarah Thomas

Efficiency is a top priority for users of inter- rules that allow the commencement of a statute of limitations) prior to briefing on national arbitration and is one of the reasons single arbitration for multiple contracts and the dispute. This is often advisable; partial why they select arbitration over litigation. the consolidation of multiple arbitrations. awards on key issues may streamline the Due to the increasing complexity of interna- Parties should select their party-appointed arbitration and even encourage settlement. tional arbitrations – which often involve mul- arbitrator with great care and pursue If the calculation of damages is likely to be tiple parties and multiple contracts – robust appropriate opportunities to provide input complex, the tribunal may find it beneficial and active management is more important on the selection of the chairperson. Parties to bifurcate the arbitration into liability and today than ever. While typically viewed as should always seek the appointment of quantum phases. The tribunal should set a a responsibility of the tribunal, the efficient arbitrators known to be robust and active date for the final in-person hearing in the management of arbitration is a responsibility case managers. Throughout the arbitration, procedural order and then stick to it. It is pref- that is shared with the parties. Thanks to the parties should participate in good faith, erable from an efficiency perspective to hold developments in national arbitration legisla- co-operating and compromising where not any intermediate conferences by telephone. tion and procedural rules, the parties and the strategically disadvantageous. Prior to the final hearing, the tribunal tribunal have a variety of tools available. should consider convening a conference to TOOLS AVAILABLE TO TRIBUNALS align expectations and confirm hearing logis- GUIDANCE FOR ARBITRATION USERS The tribunal holds primary responsibility tics. The most effective arbitrators often use Efficient management of arbitration begins for ensuring the efficient management of the pre-hearing conference to narrow the from the negotiation of the arbitration agree- arbitration. Most procedural rules empower dispute by providing guidance on key issues ment. A small investment of time in this the tribunal to conduct the case as it believes that parties should address at the hearing. often overlooked clause can help avoid costly appropriate. It is imperative that arbitrators To further shorten hearing time, it is and time consuming procedural disputes strive to be active and robust case managers common for tribunals to direct that witness later. Parties should select a pro-arbitration who resolve disputes in an efficient manner. statements must stand as direct testimony. seat that will act in support of arbitration Some institutions have imposed through their The tribunal can ensure the efficiency and and refrain from unwarranted interference. rules an affirmative duty on arbitrators to fairness of the hearing by imposing strict Parties should insist upon administration by a manage arbitrations quickly and efficiently. time limits for opening statements, witness respected international or regional institution Arbitrators should only accept appoint- examination and closing statements. The and select modern procedural rules. ments if they have adequate availability. tribunal should consider limiting or excluding Parties should conclude structured arbitra- The most effective arbitrators set mutual new arguments and evidence at the hearing. tion agreements that tailor the procedure to expectations – especially as to “ground rules” Effective arbitrators do not wait for the the value of the dispute, or consider agreeing – early in the arbitration. To ensure that the hearing to be over before starting delibera- in advance to the application of new expe- parties are aligned, the tribunal may consider tions. They meet to deliberate at appropriate dited procedures. Parties should consider convening a procedural conference as soon milestones, enabling the tribunal to identify recording their mutual expectations for the as practicable after its formation to set a and narrow issues in dispute. Arbitrators often taking of evidence, including the production schedule and expectations for the arbitra- direct the parties to submit post-hearing briefs, of documents. Parties may consider agreeing tion. Some institutions require this. often targeted to key issues relevant to the to the application of the International Bar As soon as possible after this, it is helpful tribunal’s deliberations. These are a helpful aid Association Rules on the Taking of Evidence for the tribunal to issue a procedural order, in the drafting of the award. Most importantly, in International Arbitration. setting out a comprehensive briefing sched- the tribunal should render its award promptly. Once a dispute has arisen, parties should ule, and practices and procedures, that will conduct an early case assessment and analyze govern the conduct of the arbitration. CRAIG CELNIKER is a partner and their decision to arbitrate thoroughly. If the In order to streamline the proceeding, it SARAH THOMAS is an associate at dispute involves multiple contracts, parties is open to the tribunal to dispose of prelim- Morrison Foerster in Hong Kong should consider relying on new procedural inary questions (e.g., jurisdiction, standing,

64 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 PRACTITIONER’S PERSPECTIVE

DRAFTING EFFECTIVE

ARBITRATION CLAUSES K K Cheung

Smooth conduct of arbitration requires a parties are advised to stipulate their choice In case one member of the tribunal cannot well-drafted arbitration clause, which must of law in the arbitration agreement. act as arbitrator for whatever reason, the not only be enforceable but also conducive Sometimes the governing law of the other two arbitrators may continue with the to speedy dispute resolution and tailor-made contract may be different from the procedural case with the consent of the parties. to minimize procedural disputes. law of the arbitration. For the sake of clarity, Ad hoc arbitration gives the parties more the applicable procedure law of the arbitration NATIONALITY OF ARBITRATORS flexibility and autonomy in the arbitration should be expressly stated in the arbitration Parties may wish to restrict the nationality proceedings, whereas institutional arbitration agreement. The place of arbitration concerns of the arbitrators for the sake of impartial- is known for administrative convenience the procedure and enforcement of the arbitra- ity and neutrality. In this regard, parties and the institutions’ supervisory functions. tion. Factors such as neutrality, language and should be aware of the difficulty in finding In choosing among arbitration institutions, local judicial attitude towards arbitration are arbitrators of the preferred nationality. For factors such as language, reputation of the relevant. Parties are advised to designate the example, arbitrators of PRC arbitration must arbitration institutions and institutional place of arbitration at a contracting member be appointed from the panel of arbitrators of arbitral rules should be considered. state to the New York Convention if enforcing the designated arbitration institution, unless Leading institutions provide model clauses the award worldwide is needed. the parties agree otherwise and the chairman for parties to consider. Depending on the Parties may agree on the language to be of that institution confirms so. case, parties are encouraged to follow the used in arbitration. Without agreement, the Given the variety and complexities of model clauses as closely as possible. If the default language in PRC arbitration is Chinese, commercial disputes, it is impossible to have parties opt for administered arbitration, the while arbitral tribunals in Hong Kong can a one-size-fits-all arbitration clause. Terms chosen institution will provide administrative determine the language in the proceedings. additional to the model arbitration clauses and support to the parties throughout the arbi- Practically speaking, the choice of to the above may be required to suit particular tration. On the other hand, the parties have language affects the pool size of potential cases. In anticipation of multiparty arbitra- to follow the procedures of the rules of the arbitrators and legal advisers and the ease of tions, terms on joint appointment of arbitra- institution, which are more elaborated. the witnesses to give evidence. Translation tors, joinder and consolidation are necessary. It is prudent for parties to seek local legal of documents is time and cost consuming. In In drafting multi-contract arbitration clauses, advice in drafting arbitration clauses to ensure cases where numerous marginally relevant particular attention should be paid to the pos- compliance with legal requirements. For documents are translated, the costs on trans- sibility of consolidation of arbitral proceedings instance, arbitration proceedings in China lation may be unworthy of incurrence. and cross-referencing between contracts. must generally be administered by recognized It is never too early to agree on arbitration arbitration institutions. In Hong Kong, arbitra- NUMBER OF ARBITRATORS clauses. Parties are always encouraged to tion agreements must be in writing. For arbi- The usual practice is that the arbitral tribu- agree in advance how the arbitration should tration in China with anticipated enforcement nals are constituted by either one or three be conducted. Once disputes have arisen, in Hong Kong, it should be noted that the arbitrators. If the arbitration clause is silent every point, be it substantive or procedural, mainland arbitration institution must be on the on the number of arbitrators, the number is can be a point of contention. Instead of list of recognized mainland arbitral authorities determined according to the relevant local keeping the arbitration clauses silent on arbi- gazetted by the Hong Kong government. law and/or arbitration rules. tration arrangements, the above-mentioned The number of arbitrators has a direct issues should be considered with other APPLICABLE LAW impact on the costs and the length of the case-specific features. Absent any express designation of the appli- arbitration. To explain, delays in three-mem- cable law of the arbitration, the arbitral tribu- ber arbitration proceedings are not uncom- nal will determine the applicable law based mon due to the arbitrators’ difficulties K K CHEUNG is a partner at on the parties’ intention and the conflict of in fixing the dates of arbitration. But a Deacons in Hong Kong laws principles. For the avoidance of doubt, three-member arbitral tribunal has its merits.

65 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 The most prestigious arbitration institution of Mainland China since 1956 now has its Hong Kong center which also administers cases, and carries one-‐of-‐a-‐kind features: CIETAC HKAC • Cases under HK arbitration law • CIETAC arbitration rules to apply 中国国际经济贸易仲裁委员会 Mission 香港仲裁中心 • Hong Kong arbitral award • Open panel for arbitrators man

THE CHOICE FOR CHINA-RELATED ARBITRATION. 涉外仲裁明智之选

1956年成立的中国久负盛名的仲裁机构在香港设立仲裁中心，并管理仲裁案件。匠心独运，特色鲜明：

• 适用香港仲裁法

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Mission man

From an ambitious pilot scheme, João Ribeiro has built the United Nations Commission on International Trade Law’s Regional Centre for Asia and the Pacific into a respected institution, assisting nations in developing sound legal frameworks for business. With a new mandate until 2022, the centre’s head speaks to Asia Business Law Journal about the successes and challenges of running UNCITRAL’s only regional centre A

67 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 SPOTLIGHT

When you think about the law and business, In line with the goals law through: rules-based regional architec- what do you see as the two biggest issues fac- ture; promoting the adoption of regulato- ing the region in the next decade? Why? that were outlined ry regimes in engagement with the private sector, including the settlement of disputes; RIBEIRO: There are barriers on access during the ASEAN-UN and encouraging a central role for ASEAN in to justice and persistently disabling legisla- summit ... UNCITRAL the economic integration in the greater East tion for the digitalization of the economy as Asian region. a result of frail legal local capacity and lack may play an of modern frameworks. This results mainly important role in You’ve previously mentioned working with from legislative disparities in legal frame- ASEAN this year on CISG (UN Convention works conducive to unbearable transaction- promoting good on Contracts for the International Sale of al costs for SMEs [small and medium-sized Goods), eCC (the UN Convention on the Use of enterprises] to join the share of benefits re- governance and Electronic Communications in International sultant from increased cross-border trade. rule of law Contracts), and on the Model Law on Arbitra- Legal models circulate in a manner that is tion. Can you outline the biggest challenges in not always coherent with the desire to build adopting and implementing each one? regional integration. Often, it is possible to identify stronger harmonization of busi- RIBEIRO: Intra-ASEAN trade, in 2015, ness laws of some jurisdictions in the region How positive are you about the AEC (ASEAN was only 24% of its total trade; also, on what with other non-regional jurisdictions (for Economic Community)? Does ASEAN have concerns intra-ASEAN FDI, it accounts for instance, within the Commonwealth), than the wherewithal, i.e., the resources and the only 16.7% of its total FDI. We believe this intra-regionally. so-called institutional glue, to make it work? is due, to a great extent, to a severe lack of Some examples: the Malaysian sale of How critical is the success of the AEC to legal harmonization of international trade goods law is closer to the one of the Bahamas ASEAN’s future? law (arbitration, conciliation, sale of goods, than to the one in Indonesia. The Singapor- use of electronic communications in inter- ean law on arbitration is closer to the one of RIBEIRO: This is a matter in which national contracts, secured transactions and Peru than to the one of Lao PDR. Japanese the UN does not have, and should not have, public procurement). contract law is closer to the one in Germany a position. But of course we are following Modern business relies heavily on than to the one of Myanmar. closely ASEAN’s implementation of the AEC. cross-border supply chains. The ASEAN As we can see, this is hardly in line with I would like to recall [UN] secretary-general AEC, the “One Belt, One Road” initiative, the regional political discourse of econom- Ban Ki-moon’s remarks at the 6th annual APEC [Asia-Pacific Economic Co-opera- ic and legal integration. We believe that ASEAN-UN summit, stating that the UN is tion], GCC [Gulf Co-operation Council], if states in the region, in the next decade, striving to renew its commitments to devel- SAARC [South Asian Association for Re- choose, in a co-ordinated fashion, to actively opment with regional organizations like the gional Cooperation] and trade agreements pursue modern, harmonized and sound leg- ASEAN in ushering in a new era of the new are all based on the principle of further islative frameworks on international sale of sustainable development agenda. economic integration and all aim for the re- goods, on electronic commerce, internation- Realizing the goals of the AEC will be es- moval of trade barriers. Therefore, we may al commercial arbitration and secured trans- sential in financing that agenda. In line with ask the question: is diversity of B2B legal actions, the region will be at the forefront of the goals that were outlined during the ASE- frameworks a non-tariff barrier? modern private trade law and will expand AN-UN summit, specifically those related to We believe that adopting the CISG and its intra-trade statistics and become more economic co-operation in trade facilitation, the e-CC, and enacting modern legislation resilient to financial crises and commodities UNCITRAL may play an important role on arbitration based on our Model Law, prices fluctuations. in promoting good governance and rule of offers eight advantages for businesses that

68 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 SPOTLIGHT

We are happy with what we have achieved, while there is a long, long and challenging road ahead

69 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 SPOTLIGHT

states cannot afford to ignore: (1) efficient Currently, only arbitration can ensure all 2021, which articulates commitments of contract management, namely in the context these elements across borders. A universal several UN agencies and programmes to be of cross-border supply chains; (2) reduced jurisdiction resulting from a network of in- delivered as one, to maximize its resources transactional costs; (3) trust-building among ternational commercial courts should pref- and contributions in the best interests of the partners; (4) improved value for money in erably derive from internationally-recog- people of Laos. The success of the UNPF will cross-border transactions, since risk incor- nized standards (hard law) with a legitimate be measured by Lao PDR’s progress towards poration in transaction price is lowered; (5) law-making process. Uniform law has a di- the graduation from Least Developed Coun- levelling the contractual bargaining position rect link of legitimacy, established between try (LDC) status and the achievement of the for SMEs in developing countries (90-95% the peoples of states through their govern- sustainable development goals with equity – of all ASEAN businesses); (6) reducing entry ments participating in UNCITRAL, when and we will be engaged in that effort. cost in global markets; (7) a noticeable effect drafting and adopting uniform law. And fi- To be fair, throughout the region, we on redistribution of market wealth; and (8) nally, most UNCITRAL texts have the duty can see a strong commitment to trade law effective and affordable means to settle com- of uniform interpretation, an international reforms. Mostly, that drive is happening in mercial disputes, while at the same time po- public law obligation for the states, deriving the context of the WTO, but also, as I high- tentially reducing the risk of disputes. from an international treaty, and, I believe, a lighted, on a growing and tangible number of

Throughout the region, we can see a strong commitment to trade law reforms. Mostly, that drive is happening in the context of the WTO, but also, as I highlighted, on a growing and tangible number of legal reforms in the field of arbitration, contract law, e-commerce, secured transactions and insolvency

What are your thoughts on the new Singapore key duty for the success of such courts. legal reforms in the field of arbitration, con- International Commercial Court? Is this the If these courts choose to apply domestic tract law, e-commerce, secured transactions kind of institution that will bring about the laws, they are not bound by this duty, which and insolvency. I would say that ASEAN and beginning of integration of commercial law may limit their international scope. There- APEC states, the signatories of the WTO and enforcement in Asia? fore, these new international commercial Trade Facilitation Agreement (TFA) and of courts may well be a new driving force for the Trans-Pacific Partnership (TPP) would RIBEIRO: I would say, on a personal the expansion of uniform law standards; be the ones to benefit the most, should they note, that one of the reasons for that may be but also, we believe, uniform law standards request it, from our technical assistance and the fact that rule of law and governance are can be the driving force for the consolida- capacity building programmes. burning issues in some political agendas of tion of these courts. Anything that facili- These states seem to be actively engaged the region. tates access to justice is inherently good, in implementing the WTO TFA, and, in the There is a fast paced rise of individual eman- and worth supporting. case of the ASEAN, to implementing the cipation (economic, knowledge-based, and agreement to establish and implement the cultural), of legal rights awareness and of Myanmar, Laos, Vietnam, East Timor, Philip- ASEAN Single Window [trade facilitation cosmopolitanism. These developments are pines ... which nations can benefit most from initiative], and, more recently for some, the linked with an increased aspiration for ac- your assistance? Trans-Pacific Partnership (article 14.5). In countability of governments, and of dispute all these agreements, paperless trade is a resolution systems. RIBEIRO: We are able to provide tech- key pillar. They promote cross-border pa- A sound international dispute resolution sys- nical assistance to these states, namely by perless trade which requires legal interop- tem needs to possess at least five elements: reviewing draft legislation, and providing erability and mutual legal recognition. For both subjective and objective legitimacy; capacity building. Allow me to highlight that to happen, states are required to main- recognition of that legitimacy; uniform judi- Laos. UNCITRAL has joined the Lao PDR- tain a legal framework governing electronic cial interpretation; and enforceability. UN Partnership Framework (UNPF) 2017- transactions consistent with the e-CC.

70 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 SPOTLIGHT

What’s your mandate for your term as head of training, judicial roundtables, technical UNCITRAL’s Regional Centre for Asia-Pacific RCAP was meant assistance, capacity building, etc.). In 2015, (RCAP)? What are the major challenges you to be a five-year that number was 105, an average of more will need to overcome? Do you have a set term than two per week. in your position? pilot project ... I am glad to share that What do you see as the biggest opportunities RIBEIRO: This was the first, and re- and hurdles in ADR in Asia? What about the mains the only, UNCITRAL regional cen- the government enforcement of settlement agreements? tre in 50 years of its history. It was set up of [South] Korea, in 2012, and its operation is possible due RIBEIRO: The key hurdle is the lack to the generous support by the Republic of through the of legislative frameworks on international Korea, and by the Government of the Hong commercial conciliation – which is inter- Kong SAR, China. Ministry of Justice, twined with the lack of a mechanism for RCAP was meant to be a five-year pilot has extended its cross-border enforcement. project. My appointment is yearly based and I believe that conciliation/mediation has I am expected to stay until the end of 2016. financial support, an unlocked potential in the region. That I am glad to share that the government of allowing us to potential could be unlocked by the current [South] Korea, through the Ministry of Jus- legislative activity of UNCITRAL Working tice and Incheon city, has extended its fi- extend this project Group II, dealing with the issue of enforce- nancial support, allowing us to extend this ability of mediated settlement agreements. project five more years, till 2022. The com- five more years, Mediation is becoming more popular and is ing years will witness a plurennial and sys- till 2022 being used both as an independent process tematized programmatic approach around and in conjunction with litigation and arbi- three core areas, namely: integrated trade tration. To a certain extent, this is a result of law reforms; sustainable development goals; the increasing demands placed on the limit- and aid-for-trade, all pursuing long-term ed resources of courts and tribunals. capacity building, in particular in LDCs, Convention, the South Pacific – we expect to An important characteristic of mediation LLDCs [Landlocked Developing Countries] support more the Small Island Developing is its capacity to resolve disputes while and SIDS [Small Island Developing States] in States of the South Pacific. On CISG, from also maintaining positive business rela- Asia and the Pacific. 2000 to 2012, only three states in the region tionships between the parties. Where dis- The main challenges we faced during the ratified the convention. Since 2013, Bah- putes arise between commercial partners, initial period were: a lack of regional aware- rain and Vietnam have done it and we are a collaborative as opposed to an adver- ness on the work of UNCITRAL; relatively currently assisting four more states in their sarial approach to resolving them is more moderated political priority by regional gov- adoption process. conducive to the maintenance of strong ernments on harmonizing business law; and Countries benefiting from our capaci- commercial relations. the complex and unavoidably long-term ap- ty building and training assistance include But of course, the main obstacle for proach required for meaningful legal reforms. Bhutan, Cambodia, China, the Democratic international mediation remains the en- In 2012, 15 out of 56 states in the region People’s Republic of Korea, Fiji, India, Ka- forceability of a mediated settlement. had arbitration legislation based on the UN- zakhstan, Lao PDR, Maldives, Mongolia, Ne- The working group considered that CITRAL Model Law on International Com- pal, Papua New Guinea, the Philippines, Sri the New York Convention could provide a mercial Arbitration (MLICA). Today, we Lanka, East Timor, Thailand and Vietnam. useful framework to work from, although have 20 (a 33.3% rise, in less than four years). Noteworthy in 2015 were the ratification by it recognised that there are distinct issues Furthermore, with the very recent promul- Sri Lanka of the e-CC, and the ratification by raised by the enforcement of settlements. gation of the new arbitration law in the Re- Vietnam of the CISG. The working group identified a number of public of Korea, the region accounts for 40% We are happy with what we have issues, including the lack of any domestic of total states, and 56% of total jurisdictions, achieved, while there is a long, long, and legislation for enforcing settlement agree- adopting the Model Law, with amendments challenging road ahead. In 2012, UNCI- ments in many nations worldwide – [this as adopted in 2006. TRAL delivered or supported 37 events in was] an issue that was left for domestic leg- We cover one of the sub-regions with Asia-Pacific (conferences, workshops, sem- islators in the 2002 UNCITRAL Model Law the lowest rate of adoption of the New York inars, lectures, technical briefings, tailored on International Commercial Conciliation.

71 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 SPOTLIGHT

You’re based in South Korea. How do you see The choice before You’ve spoken about this before, but how im- the country positioned as an arbitration hub? portant is looking after SMEs in the Asian Has it missed the boat? us might not be mix, compared to elsewhere? What are some of the disadvantages SMEs face and how can RIBEIRO: From my personal point of between having these be overcome? view, this country is, as others in the region, or not having well positioned to be an international arbi- RIBEIRO: In ASEAN, SMEs account tration hub. First of all, it is one of the civil transparency in for more than 96% of all enterprises. The law jurisdictions in the region with more ex- investor-state contribution of SMEs to GDP is between posure to common law, namely because Ko- 30% and 53% and the contribution of SMEs rean legal professionals often choose to take arbitration. The to exports is between 19% and 31%. Com- LLMs in the US. Second, the Republic of Ko- mercial partners in several countries co-op- rea is still the only country in the region that choice might be erate under strict timelines and conditions. has in force fully-fledged trade agreements having or not having When one party uses contractual forms, with both the EU and the US, positioning it- especially from advanced economies, this self as a neutral venue for dispute resolution a sound and reliable gives them an advantage in familiarity, re- between businesses of those trading blocks investor-state ducing costs to the party that less needs and businesses from Japan, China and the costs to be reduced. All this becomes ASEAN (with several legal traditions). arbitration system dramatically overwhelming when we But again, many jurisdictions in the region think of SMEs. are well positioned. Singapore and Hong Kong Another noticeable phenomenon that are now reaping the rewards resulting from we cannot ignore is the digitalization of the over 20 years of committed and far-sighted economy and its impact. Economic digita- investment in their legal services. And they Observatory. This is an innovative ap- lization is reducing costs associated with also benefit greatly from their links to the proach, being developed with KCAB and access, discovery, and distribution of goods Commonwealth and its common law system. Seoul National University’s Asia-Pacific and services to nearly zero. They also liberalized extensively their legal in- Law Institute. The Observatory is expected The implications are clear: innovation dustries. When we look at the evolution of the to disseminate the Mauritius Convention in business models and the emergence of number of international arbitration cases in and the UNCITRAL Rules on Transparency the new triple M businesses (micro-mul- Singapore, we see that the rise happened after in treaty-based investor-state arbitration, tinationals, micro-work and micro-supply foreign lawyers were allowed in and represent- while retrieving all relevant information chains management). ed clients in international cases. and research related to ISDS in the region, Triple M businesses will be able to play But we are also witnessing the rise of spe- including monitoring all ongoing negotia- a larger role. And the core of their activity cialized arbitration hubs such as Kuala Lum- tions and current trade agreements which is being cross-border oriented and interna- pur (focusing on Islamic finance arbitration, concern ISDS. tional, which will make them vulnerable to Islamic law arbitration and sports arbitra- Of particular relevance is the fact that legal barriers and a lack of affordable access tion) or Perth (on energy and resources sec- the Observatory is expected to publish a to justice, to enforce a contract or to resolve tors). I can see the Republic of Korea becom- report on ISDS and transparency. More a dispute, usually of lower value claims. ing a hub for the resolution of international broadly, investment treaties are a means It was not by chance that UNCITRAL commercial disputes in the medical equip- for controlling risks associated with foreign decided to establish the Working Group ment and healthcare tourism industries and investment. Their uptake can translate to on Micro, Small and Medium-sized Enter- in entertainment (TV, cultural, etc.). For the increased foreign investment and a sub- prises in 2013. It identified four main areas country to become a heavyweight in the field, sequent path towards economic develop- where the working group could concen- specialization could be the way forward. ment. Transparency in treaty-based ISA can trate its work. First, guidance on simplified enhance international trade and develop- business start-ups and operation proce- Can you tell us about your partnership with ment in the Asia-Pacific region and beyond. dures; second, effective access to financial the Asia-Pacific Law Institute and the Korean The choice before us might not be between services, including mobile payment sys- Commercial Arbitration Board (KCAB)? having or not having transparency in inves- tems; third, access to credit and alternative tor-state arbitration. The choice before us dispute resolution; and fourth, the devel- RIBEIRO: It’s the ISDS [investor-state might be having or not having a sound and opment of workable alternatives to formal dispute settlement] Asia-Pacific Transparency reliable investor-state arbitration system. insolvency processes.

72 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 INTELLIGENCE REPORT

DEAL SHIELDS

M&A INSURANCE IS A GROWTH INDUSTRY IN ASIA AS CORPORATE BUYERS WISE UP TO THE VALUE OF PROTECTION FROM TRANSACTION RISKS, WRITES JAMES KELLY 20160926_ArbitratingInAsia.pdf 1 26/09/2016 4:01:07 PM

CMY

K 20160926_ArbitratingInAsia.pdf 1 26/09/2016 4:01:07 PM

INTELLIGENCE REPORT

isky business is forecast to become a valuable differentiator in competitive auctions. “Our expe- be big business for those rience has been that once a client or their adviser has used transac- offering mergers and action insurance once, it is likely that they will look at it on future deals quisition (M&A) insur- as well,” says Seccombe. “Asia still has a way to go before use is at the ance across Asia this year. same level as it is in Europe and Australia, but we are certainly seeing With private equity (PE) it move in the right direction.” funds divesting mature The key jurisdictions with significant deal flow in Asia are Hong assets, cashed-up Chinese conglomerates looking to diversify their Kong, Singapore, Japan and South Korea, although China, Malaysia portfolios, and the relaxation of foreign investment limits in India, and the Philippines are showing growth. As competition for assets insurance firms offering risk protection for M&A and cross-border increases, buyers are now looking elsewhere for corporate targets transactions will be kept busy. in unfamiliar jurisdictions. While countries in the region are at different levels of maturity, “One of the things we are seeing is people looking to acquire a the consensus is that transaction risk insurance is increasingly part target company in a jurisdiction or sector where they haven’t been of the mix in M&A deals. before, and that gives them an increased level of the unknown,” says

C “Brokers and insurers have seen a significant increase in both re- AIG’s Hong Kong-based regional manager of M&A, Michael Turnbull. quests for quotations and bound insured deals over the past three “But what they do have experience in doing is getting an insurance M years,” says William Seccombe, who leads Jardine Lloyd Thompson’s policy issued in their local jurisdiction that covers their normal Y M&A Transaction Risk Insurance business in Asia. “Part of the rea- day-to-day business risks. It’s quite a nice solution in terms of having CM son for this is following a general global trend, but the investment an insurance product written by underwriters who understand the

MY made by the insurance industry in Asia in terms of people, marketing jurisdiction they are going into. So, for example for China, Malaysia or and training has also led to greater awareness of the products and Indonesia you may have a policy written out of Hong Kong, togeth- CY their application by both clients and their advisers.” er with your cyber risk policy or property policy, or whatever other CMY Once the domain of the financial investor, transaction risk insur- policies you have. It’s something people are pretty comfortable with K ance is now regularly used by strategic buyers, and has in many cases because they understand how those policies work.”

One of the things we are seeing is people looking to acquire a target company in a jurisdiction or sector where they haven’t been before

Michael Turnbull Regional Manager of M&A, AIG, Hong Kong

75 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 • Managing Partner: Wu Mingde • Number of partners: 371 • Number of associates: 1335

Firm Overview:

We are one of the leading full-service Chinese law firms in the People’s Republic of China (PRC). As a national law firm headquartered in Shanghai, we provide a comprehensive range of legal solutions and services to both domestic and international clients from our offices in Shanghai, and our additional offices in Beijing, Chengdu, Chongqing, Fuzhou, Hangzhou, Hefei, Hong Kong, Jinan, Nanjing, Qingdao, Shanghai Shenzhen, Suzhou, Taiyuan, Tianjin, Xiamen and Zhengzhou. 11,12/F, Shanghai Tower No.501,Yincheng Middle Road While size is only one of many indicators of the success and resourcefulness of a law Pudong New Area Shanghai, 200120, P.R.China firm, since the creation of our firm via a merger of three firms with a common vision Tel: (86 21) 2051 1000 we have been leading in this respect among our peers in China, and we are now one Fax: (86 21) 2051 1999 of the largest in Asia. Through co-operation, teamwork and a dedication to excel- lence, we are committed to providing practical solutions for our clients with respect to Beijing both litigation and transactional matters. We have currently 1335 registered lawyers • (including 371 partners and senior international consultants), many of whom hold Chengdu advanced doctoral degrees. Many of our lawyers are admitted in international juris- • dictions such as various states in the United States, in England and Wales, Australia, in Chongqing • France and in Japan, and are fluent in English, Japanese, French, German, Korean and Fuzhou other major languages. Partners and counsel in our partner Hong Kong law firm are • similarly highly qualified. Hangzhou • Hefei Awards • Jinan • We are consistently recognized by various institutions and in major rankings as one of Nanjing the top PRC law firms: • Qingdao • Chambers and Partners has designated us as a leading Chinese law firm for three • consecutive years, and has also rated both the firm as a whole and several partners Shenzhen of the firm as “Band 1” or “leaders in the field” in many core practice areas including • Suzhou corporate and mergers and acquisitions (M&A), private equity and venture capital, • capital markets, international trade, banking and finance, dispute resolutions, intel- Taiyuan lectual property and tax. • • Legal 500: The Guide to Asia’s Commercial Law Firms ranked us as one of the top Tianjin • firms in Shanghai for Foreign Direct Investment, Corporate and Commercial Law, Xiamen and highlighting us as the “corporate and commercial firm other firms aspire to be.” • • IFLR 1000/AsiaLaw Profile has for many years rated AllBright as “1st Tier” in core Zhengzhou practice areas such as corporate and M&A, private equity, capital markets, and • banking and finance. Hong Kong • Asia Legal Business has granted us many awards in its annual China Law Award events, where we are frequent finalists in all major award categories.

Government and Association Awards: AllBright has won awards from the China Lawyers Association on several occasions, such as “National Leading Law Firm” awards, “Leading Law Firm in Shanghai” awards, and the “Leading Partnership Award” from the Shanghai Bureau of Justice. www.allbrightlaw.com

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According to Turnbull: “M&A insurance can be really useful in some quite complicated dynamics. There are a number of things that navigating the way through things like concern around enforcement we look at that would include what sector is the target operating in, risk in overseas jurisdictions and the like. When parties enter into is it one that we would consider to be more high-risk, and what’s corporate M&A transactions there comes with that an element of the the size of the deal, because there is an argument that on the larg- unknown and of risk, so when they complete the purchase of the com- er-sized transactions your likelihood of getting a client can be high- • Managing Partner: Wu Mingde pany they are looking to buy they can sometimes find out that, despite er. We would also look at who are the parties involved. We do have • Number of partners: 371 their best efforts, and following what is quite a rigorous process, there insureds who use this product as their way of doing deals, so if we’ve • Number of associates: 1335 are some unknown issues and some problems they hadn’t foreseen.” got repeat clients and we are familiar with the way they work their William Lewis, head of M&A, Asia-Pacific, at Ironshore, says some transactions, and the way their advisers work, then it will give us a Firm Overview: clients choose to take out a product because of the financial strength good level of comfort as well. of an insurer versus the counter party. “Another reason is that they “There’s a whole load of factors we would take into account out- We are one of the leading full-service Chinese law firms in the People’s Republic are usually able to get a better position under the insurance policy side the normal traditional insurance sense and then there are the of China (PRC). As a national law firm headquartered in Shanghai, we provide a than they would otherwise get under the SPA [sale and purchase other insurance factors that would come into play on any policy, like comprehensive range of legal solutions and services to both domestic and inter- agreement]. We always look for a fully negotiated sale and purchase your excess or deductible level, and policy periods as well.” national clients from our offices in Shanghai, and our additional offices in Beijing, agreement, but obviously when we are underwriting it we do take a As the number of policies issued has increased, so too have claims, Chengdu, Chongqing, Fuzhou, Hangzhou, Hefei, Hong Kong, Jinan, Nanjing, Qingdao, Shanghai view on some things, so often they might be able to get a warranty or typically relating to financial statements and tax-related issues. “Claims Shenzhen, Suzhou, Taiyuan, Tianjin, Xiamen and Zhengzhou. 11,12/F, Shanghai Tower No.501,Yincheng Middle Road indemnity covered that they might not have been able to get put into would come once the deal completes,” says Turnbull. “The policy is While size is only one of many indicators of the success and resourcefulness of a law Pudong New Area the sale and purchase agreement if they didn’t use insurance. And it there to cover the unknown risks that, despite you having done your Shanghai, 200120, P.R.China firm, since the creation of our firm via a merger of three firms with a common vision does provide a clean exit to the vendor.” best due diligence, there are problems uncovered after the event. Tel: (86 21) 2051 1000 we have been leading in this respect among our peers in China, and we are now one Fax: (86 21) 2051 1999 Given the unique nature of each M&A transaction, the pricing “Confidentially stops us talking about deal-specific claims, but of the largest in Asia. Through co-operation, teamwork and a dedication to excel- of these bespoke policies is more art than science. “Trying to price I can certainly confirm we are paying out millions of dollars each lence, we are committed to providing practical solutions for our clients with respect to Beijing things on an actuarial basis is a bit more tricky,” says Turnbull. “So year on claims, and in many ways it’s a good thing, as it demon- both litigation and transactional matters. We have currently 1335 registered lawyers • if you think about a transaction where you’ve got a Chinese target strates the policies are working and that the products the insured (including 371 partners and senior international consultants), many of whom hold Chengdu being sold by a Hong Kong seller to a Singaporean buyer, you get are buying have real value.” advanced doctoral degrees. Many of our lawyers are admitted in international juris- • dictions such as various states in the United States, in England and Wales, Australia, in Chongqing • France and in Japan, and are fluent in English, Japanese, French, German, Korean and Fuzhou other major languages. Partners and counsel in our partner Hong Kong law firm are • similarly highly qualified. Hangzhou (ASIA-PACIFIC EXCLUDING JAPAN) • M&A QUARTERLY ACTIVITY Hefei Awards • Jinan Total • 2007 1 0 1 Q1 Q2 Q3 Q4 We are consistently recognized by various institutions and in major rankings as one of Nanjing the top PRC law firms: • 2008 12 66 02 Total Qingdao • Chambers and Partners has designated us as a leading Chinese law firm for three • consecutive years, and has also rated both the firm as a whole and several partners Shenzhen 2009 6 662 10 Total of the firm as “Band 1” or “leaders in the field” in many core practice areas including • Suzhou corporate and mergers and acquisitions (M&A), private equity and venture capital, • 2010 66 21 2 11 Total capital markets, international trade, banking and finance, dispute resolutions, intel- Taiyuan lectual property and tax. • 2011 11 1 Total • Legal 500: The Guide to Asia’s Commercial Law Firms ranked us as one of the top Tianjin • firms in Shanghai for Foreign Direct Investment, Corporate and Commercial Law, Xiamen 2012 2 11 100 2 Total and highlighting us as the “corporate and commercial firm other firms aspire to be.” • • IFLR 1000/AsiaLaw Profile has for many years rated AllBright as “1st Tier” in core Zhengzhou practice areas such as corporate and M&A, private equity, capital markets, and • 2013 61 10 116 116 Total banking and finance. Hong Kong • Asia Legal Business has granted us many awards in its annual China Law Award 2014 110 16 10 212 Total events, where we are frequent finalists in all major award categories. 2015 11 2 1 021 Total Government and Association Awards: AllBright has won awards from the China Value of deals (US$bn) Lawyers Association on several occasions, such as “National Leading Law Firm” awards, “Leading Law Firm in Shanghai” awards, and the “Leading Partnership Award” from the Shanghai Bureau of Justice. www.allbrightlaw.com 77 ABLJ ⁄ SEPTEMBER – OCTOBER 2016

Ad FP AllBright 1606 Rev2.indd 2 30/6/2016 5:00 PM M&A BY NUMBERS

2015 ANNOUNCED DEALS BY VALUE (TOP 10)

INDONESIA MALAYSIA RANK FIRM VALUE (US$ NUMBER RANK FIRM VALUE (US$ NUMBER MILLION) OF DEALS MILLION) OF DEALS

1 Baker & McKenzie 1,196 4 1 Herbert Smith Freehills 2,462 3 2 Allen & Overy 1,017 3 2 Norton Rose Fulbright 2,425 3 3 Norton Rose Fulbright 775 1 3 Rahmat Lim 2,411 5 4 Sullivan & Cromwell 775 1 & Partners 5 Clayton Utz 669 1 4 Skrine 2,407 2 6 Cleary Gottlieb Steen 461 1 5 Davis Polk 1,531 2 & Hamilton & Wardwell 7 = Kirkland & Ellis 300 1 6 = Houthoff Buruma 1,365 1 7 = Nagashima Ohno & 300 1 6 = Mannheimer Swartling 1,365 1 Tsunematsu 6 = Morrison 1,365 1 9 Freshfields Bruckhaus 180 2 & Foerster Deringer 6 = Simonsen Vogt Wiig 1,365 1 10 King & Spalding 180 1 10 Allen & Overy 1,153 7

INDIA PHILIPPINES RANK FIRM VALUE (US$ NUMBER RANK FIRM VALUE (US$ NUMBER MILLION) OF DEALS MILLION) OF DEALS

1 AZB & Partners 11,191 82 1 Sidley Austin 1,768 2 2 Khaitan & Co 7,409 51 2 Allen & Overy 1,125 2 3 Shardul Amarchand 5,658 31 3 Linklaters 834 3 Mangaldas & Co 4 King & Wood Mallesons 834 1 4 Cyril Amarchand Mangaldas 5,344 33 5 Ropes & Gray 834 1 5 Amarchand & Mangaldas 4,776 21 6 Uria Menendez 291 1 & Suresh A Shroff & Co 7 = Paul Weiss Rifkind Wharton 100 1 6 J Sagar Associates 3,827 37 & Garrison 7 Luthra & Luthra 3,167 15 7 = Pillsbury Winthrop Shaw 100 1 Law Offices Pittman 8 Davis Polk & Wardwell 2,738 2 9 Cayetano Sebastian Ata Dado 97 1 9 Clifford Chance 2,568 3 & Cruz Law Office 10 Sullivan & Cromwell 2,308 2 10 Picazo Buyco Tan Fider 42 2 & Santos

JAPAN THAILAND RANK FIRM VALUE (US$ NUMBER RANK FIRM VALUE (US$ NUMBER MILLION) OF DEALS MILLION) OF DEALS

1 Mori Hamada 32,650 90 1 Baker & McKenzie 3,261 6 & Matsumoto 2 The Legists 1,843 1 2 Nishimura & Asahi 23,065 65 3 Freshfields Bruckhaus 1,325 2 3 Nagashima Ohno 21,930 41 Deringer & Tsunematsu 4 Linklaters 1,225 5 4 Sullivan & Cromwell 21,152 13 5 Allen & Overy 774 5 5 Freshfields Bruckhaus 20,672 10 Deringer 6 = Allen & Gledhill 616 1 6 Debevoise & Plimpton 18,805 7 6 = Weerawong Chinnavat 616 1 & Peangpanor 7 Skadden Arps Slate 16,457 10 Meagher & Flom 8 Chiomenti Studio 531 1 8 Simpson Thacher 15,510 5 Legale & Bartlett 9 Cuatrecasas Goncalves 233 3 9 Jones Day 12,142 6 Pereira 10 Linklaters 11,610 12 10 Blank Rome 205 1 SOURCE: MERGERMARKET AUSTRALASIA SOUTHEAST ASIA RANK FIRM VALUE (US$ NUMBER RANK FIRM VALUE (US$ NUMBER MILLION) OF DEALS MILLION) OF DEALS 1 Herbert Smith Freehills 61,075 68 1 Allen & Gledhill 47,582 20 2 King & Wood Mallesons 38,196 59 2 WongPartnership 47,324 23 3 Allens 33,827 47 3 Skadden Arps Slate 40,530 4 Meagher & Flom 4 Ashurst 20,858 39 4 Latham & Watkins 38,039 9 5 Gilbert + Tobin 20,043 39 5 Davis Polk & Wardwell 35,220 3 6 Minter Ellison 16,856 52 6 Sullivan & Cromwell 34,464 2 7 Clayton Utz 15,055 12 7 Kim & Chang 33,900 3 8 ENSafrica 11,520 3 8 Paul Weiss Rifkind 33,788 2 9 = Cleary Gottlieb Steen 11,340 1 Wharton & Garrison & Hamilton 9 = Fried Frank Harris 33,689 1 9 = Slaughter 11,340 1 Shriver & Jacobson and May 9 = Morrison & Foerster 33,689 1

GREATER CHINA SOUTH KOREA RANK FIRM VALUE (US$ NUMBER RANK FIRM VALUE (US$ NUMBER MILLION) OF DEALS MILLION) OF DEALS 1 Freshfields Bruckhaus 187,826 46 1 Kim & Chang 56,220 85 85 Deringer 2 Bae Kim & Lee 39,557 53 2 Commerce and Finance 121,972 19 3 Lee & Ko 28,952 58 Law Offices 3 Skadden Arps Slate 109,439 48 4 Shin & Kim 17,896 50 Meagher & Flom 5 Herbert Smith Freehills 17,750 2 4 Linklaters 107,283 30 6 Yulchon 17,139 35 5 Guantao Law Firm 76,928 7 7 Wachtell Lipton Rosen 11,321 1 6 Woo Kwan Lee & Lo 75,151 2 & Katz 7 Zhong Lun Law Firm 51,685 73 8 Cleary Gottlieb Steen & 7,540 3 Hamilton 8 King & Wood Mallesons 48,894 82 9 Freshfields Bruckhaus 6,458 2 9 Fangda Partners 47,481 61 Deringer 10 Stikeman Elliott 41,371 3 10 Sejul 3,872 1

SPOTLIGHT

ASIA BY DEAL VALUE (EXCLUDING AUSTRALASIA AND JAPAN) ASIA BY DEAL COUNT (EXCLUDING AUSTRALASIA AND JAPAN) RANK FIRM VALUE (US$ NUMBER RANK FIRM VALUE (US$ NUMBER MILLION) OF DEALS MILLION) OF DEALS 1 Freshfields Bruckhaus 197,177 58 1 Kim & Chang 90,120 87 Deringer 2 King & Wood Mallesons 49,734 86 2 Skadden Arps Slate 150,219 54 3 AZB & Partners 11,236 83 Meagher & Flom 3 Commerce and Finance 121,972 19 4 Grandall Law Firm 33,952 77 Law Offices 5 Zhong Lun Law Firm 51,685 73 4 Linklaters 114,403 55 6 Fangda Partners 47,481 61 5 Kim & Chang 90,120 87 7 Lee & Ko 29,313 59 6 Guantao Law Firm 76,928 7 8 Freshfields Bruckhaus 197,177 58 7 Sullivan & Cromwell 75,592 17 Deringer 8 Woo Kwan Lee & Lo 75,151 2 9 Baker & McKenzie 28,078 57 9 Davis Polk & Wardwell 67,710 29 10 Linklaters 114,403 55 10 Latham & Watkins 58,651 27 11 Skadden Arps Slate 150,219 54 11 Herbert Smith Freehills 51,988 32 Meagher & Flom 12 Zhong Lun Law Firm 51,685 73 12 Bae Kim & lee 39,557 53 13 King & Wood Mallesons 49,734 86 13 Khaitan & Co 7,409 51 14 Allen & Gledhill 49,212 24 14 Shin & Kim 17,896 50 15 WongPartnership 48,121 28 15 Dacheng Law Offices 33,159 45

INTELLIGENCE REPORT

We are seeing an increase in claims and also an increase in the severity of claims – low frequency but high in severity

William Lewis Head of M&A, Asia-Pacific Ironshore

Ironshore reports a similar trend. “We are seeing an increase in LEAGUE TABLE claims and also an increase in the severity of claims – low frequency but high in severity,” says Lewis. (ASIA-PACIFIC 2015, EXCLUDING JAPAN) While the number of premiums issued is on the rise, so far this isn’t RANK FIRM VALUE (US$ NUMBER impacting pricing, notes Seccombe. “Global capacity now comfortably MILLION) OF DEALS exceeds US$750 million, but local insurance regulations often limit how much of that capacity can be deployed in a particular jurisdiction. What has been relatively unusual compared to other classes of 1 Freshfields Bruckhaus 202,648 59 insurance business is that the availability of capacity has not driven Deringer the pricing down appreciably – it remains relatively stable with some 2 Skadden Arps Slate 152,908 56 industry segments even seeing minor premium increases.” Meagher & Flom The consensus is that 2016 is a busy year, based on enquiries al- 3 Commerce and Finance 121,972 19 ready received. “We’ve seen a number of private equity funds looking Law Offices to cash out of mature investments as part of their investment cycle 4 Linklaters 114,403 55 – that’s a trend we are seeing in Singapore and [South] Korea, and 5 Herbert Smith Freehills 107,250 90 on the other side of the ledger we also see some cashed up funds in Hong Kong that have money to spend,” says Turnbull. We’ve also 6 Kim & Chang 90,120 87 seen some significant outbound investment from Japan through a 7 King & Wood Mallesons 82,304 137 combination of private equity and large corporates perhaps looking 8 Guantao Law Firm 76,928 7 at investing overseas in non-traditional markets. 9 Sullivan & Cromwell 76,723 18 “The sectors we are seeing are wide and varied, and include 10 Woo Kwan Lee & Lo 75,151 2 things like infrastructure, agriculture, healthcare and education. It’s 11 Davis Polk & Wardwell 67,710 30 possible there may be some more challenging market conditions for 12 Latham & Watkins 60,062 33 certain types of companies, but those sorts of dynamics can bring 13 Zhong Lun Law Firm 51,685 73 with them real opportunities for investment as well. We are buoyant 14 Allen & Gledhill 49,212 24 and positive about the outlook.” 15 WongPartnership 48,121 28 These sentiments are echoed by Seccombe: “We would expect to 16 Fangda Partners 47,481 61 see the trend continue through 2016 and into 2017 and the number 17 Stikeman Elliott 43,748 8 of enquiries which we have seen ... bears this out. Markets and in- 18 Paul Weiss Rifkind 41,717 10 termediaries need to ensure that they can respond to the increase in Wharton & Garrison volume while at the same time maintaining consistent pricing and 19 Kirkland & Ellis 40,954 37 breadth of coverage.” 20 Bae Kim & Lee 39,557 53 India is one market that is expected to see an increase in uptake of M&A insurance products. According to data compiled by Bloomberg, SOURCE: MERGERMARKET

81 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA-SPECIFIC

Aung San Suu Kyi is keen for legal reform in Myanmar, says a top legal adviser

logged six and Laos recorded just one. Big deals included the April 2016 acquisition by Central Group of Casino Guichard Perrachon’s Big C Vietnam for US$1.14 billion. Perrachon’s adviser was NautaDu- tilh. Another significant deal was the sale in December 2015 of a 25% stake in Masan Consumer Corporation and a 33% stake in Masan Beverage Limited to Singha Corporation for US$1.1 billion. Baker & Mckenzie advised Singha in the deal. Most recent developments of interest for Vietnam include removing most foreign ownership limits on public companies, and moves by the State Securities Commission to reform the capital market on its disclosure and securities market systems. Nguyen Quoc Phong, a founding partner at Aliat Legal, based in Ho Chi Minh City, says Vietnam negotiated and signed significant bilateral trade agreements in Asia in 2015, notably the Trade Agree- ment between the Socialist Republic of Vietnam and the People’s Democratic Republic of Lao, signed on 3 October 2015, and the Free Trade Agreement between Vietnam and South Korea, which took effect on 20 December 2015. “Vietnam has continued to integrate more closely with the ASEAN region and the most significant example of Corporate Counsel Asia SUMMIT From the publisher of 24 - 25 October 2016 | The Westin Kuala Lumpur | Malaysia Asia Business Law Journal The Corporate Counsel Asia Summit is the premium forum bringing together leading in-house counsel with specialist international law firms and legal services providers. As an invitation-only event taking place behind closed doors, the summit China Lexicon is a unique bilingual guide to the complex offers regional GCs an intimate environment for a focused discussion of key new drivers shaping the legal profession. issues that arise when translating legal terms and definitions from English into Chinese and vice versa. It provides insightful analysis of key terms, phrases and principles DISTINGUISHED SPEAKERS INCLUDE in Chinese and English-language legal terminology, as well as the issues and nuances that come into play when Debolina Partap, Vice President Legal & General Counsel, translating them. Wockhardt Ltd. The summit provided The author, Andrew Godwin, is a former partner of Linklaters Chiann Bao, Secretary General, Hong Kong International a multitude of who spent more than a decade in China and is currently an Arbitration Center associate director of the Asian Law Centre at Melbourne opportunities to build Law School in Australia. Gunny Cho, General Counsel & Vice President, Celltrion Inc relationships with China Lexicon is the perfect desktop companion for all Gaurav Jabulee, South Asia Legal Director, Texas Instruments legal professionals, from academics and lawmakers to in-house counsel and partners at regional and international Eric Pesik, Associate General Counsel and Compliance true decision makers. law firms. It is also of considerable value to law students. Officer and Adjunct Assistant Professor, Seagate Technology LawyerLink Fei Meng Chee, Managing Director & Head, Group Legal Hardcover • 220 pages US$138 • Free worldwide delivery - Wholesale Banking & Group Asset Management & Investments General Counsel Division, CIMB Group Berhad Order your copy now at www.vantageasia.com or call +852 3622 2623

For more information, please contact Khadija Jaafar at [email protected] or read more here: http://events.marcusevans-events.com/ccasiasummit2016/

ABLJ_057_069_CMLVJCX_FINAL.indd 61 4/7/16 6:23 pm INTELLIGENCEASIA-SPECIFIC REPORT

M&A involving Indian companies hit US$48.4 billionAung in San 2015, Suu an Kyi 11% is increase on 2014. Overseas firms announced keenUS$13.2 for legalbillion reform of ac - quisitions in India last year, compared with US$17.1in Myanmar,billion in 2014.says a top legal adviser Experts forecast M&A deal activity will pick up in the final quarter due to changes in the country’s regulatory framework, including the new bankruptcy law and revised FDI regulation for many sectors, includ- logged six and Laos recorded just one. Big deals included the April ing multi-brand retail, telecoms, insurance and defence. 2016 acquisition by Central Group of Casino Guichard Perrachon’s With the relaxation of the FDI cap on India’s insurance sector last Big C Vietnam for US$1.14 billion. Perrachon’s adviser was NautaDu- year, a surge of M&A activity in the industry is expected for this year, tilh. Another significant deal was the sale in December 2015 of a 25% William Seccombe bringing with it more specialized transactional products and exper- stake in Masan Consumer Corporation and a 33% stake in Masan M&A Practice Regional Director tise. “Comparing 2015 with 2014, M&A activity in India remained Beverage Limited to Singha Corporation for US$1.1 billion. Baker & Jardine Lloyd Thompson more or less flat in value and volume,” says Sushant Sarin, national Mckenzie advised Singha in the deal. head, liabilities at Tata AIG General Insurance. “With India emerg- Most recent developments of interest for Vietnam include removing as a frontrunner economy for start-ups, a good number of investing most foreign ownership limits on public companies, and moves Brokers and insurers have seen ments were early-stage funding, with just a handful of mergers. All by the State Securities Commission to reform the capital market on the indicators point to an increase in India M&A activity in 2016.” its disclosure and securities market systems. a significant increase in both While M&A insurance was usually preferred by large global PE Nguyen Quoc Phong, a founding partner at Aliat Legal, based in funds in the past, “we have noticed that this trend is being adopted requests for quotations and Ho Chi Minh City, says Vietnam negotiated and signed significant by domestic funds and corporate houses as well, which has led to a bilateral trade agreements in Asia in 2015, notably the Trade Agree- bound insured deals in significant growth in M&A insurance in the past 12 to18 months”, ment between the Socialist Republic of Vietnam and the People’s says BMR Legal partner Kaushik Mukherjee. “In our experience, we the past three years Democratic Republic of Lao, signed on 3 October 2015, and the Free note that M&A insurance products have been typically used by the Trade Agreement between Vietnam and South Korea, which took ef- global PE community. According to a report from insurance broker fect on 20 December 2015. “Vietnam has continued to integrate more Marsh last year, private equity houses accounted for 61% of M&A closely with the ASEAN region and the most significant example of insurance policies placed in 2014. Such traction has been lacking Corporate Counsel Asia SUMMIT From the publisher of 24 - 25 October 2016 | The Westin Kuala Lumpur | Malaysia Asia Business Law Journal The Corporate Counsel Asia Summit is the premium forum bringing together leading in-house counsel with specialist international law firms and legal services providers. As an invitation-only event taking place behind closed doors, the summit China Lexicon is a unique bilingual guide to the complex offers regional GCs an intimate environment for a focused discussion of key new drivers shaping the legal profession. issues that arise when translating legal terms and definitions from English into Chinese and vice versa. It provides insightful analysis of key terms, phrases and principles DISTINGUISHED SPEAKERS INCLUDE in Chinese and English-language legal terminology, as well as the issues and nuances that come into play when Debolina Partap, Vice President Legal & General Counsel, translating them. Wockhardt Ltd. The summit provided The author, Andrew Godwin, is a former partner of Linklaters Chiann Bao, Secretary General, Hong Kong International a multitude of who spent more than a decade in China and is currently an Arbitration Center associate director of the Asian Law Centre at Melbourne opportunities to build Law School in Australia. Gunny Cho, General Counsel & Vice President, Celltrion Inc relationships with China Lexicon is the perfect desktop companion for all Gaurav Jabulee, South Asia Legal Director, Texas Instruments legal professionals, from academics and lawmakers to in-house counsel and partners at regional and international Eric Pesik, Associate General Counsel and Compliance true decision makers. law firms. It is also of considerable value to law students. Officer and Adjunct Assistant Professor, Seagate Technology LawyerLink Fei Meng Chee, Managing Director & Head, Group Legal Hardcover • 220 pages US$138 • Free worldwide delivery - Wholesale Banking & Group Asset Management & Investments General Counsel Division, CIMB Group Berhad Order your copy now at www.vantageasia.com or call +852 3622 2623

For more information, please contact Khadija Jaafar at [email protected] or read more here: http://events.marcusevans-events.com/ccasiasummit2016/

ABLJ_057_069_CMLVJCX_FINAL.indd 61 4/7/16 6:23 pm INTELLIGENCE REPORT

in corporate M&A transactions, where such solutions can result in and we’ve seen a fairly significant increase in the deal flow in Hong more strategic foreign investment into India. Kong in the past 12 to 18 months.” “Only recently have we seen Indian corporate buyers show inter- Competitor Ironshore, which was acquired by China giant Fosun est towards such solutions. Although today there generally exists a International last year, is also expanding, spreading its team across lack of awareness or appreciation for such products … law firms and the region from its Sydney base to cover Japan, Hong Kong and Sin- consultants have been beneficial in generating awareness towards gapore. Its client portfolio includes private equity houses, and Aus- such niche transactional solutions.” tralian and US corporates looking for opportunities in the region. The opaque nature of India’s tax regime is said to be stymying The regional team works closely with independent specialist M&A the provision of some M&A insurance services, with leading firms insurance brokers on deals, says Ironshore’s Lewis. “They go out and reluctant to offer tax liability coverage in cross-border M&A because market the product, then present their submission to insurers; we of a relatively high risk of disputes. have a look at it, we feed back to them, and then they broke it be- Tax indemnity insurance is purchased either by the buyer or sell- tween us and the insured,” says Lewis. “Our preference is to have one er involved in an acquisition, where a known tax issue has been iden- of the experienced M&A brokers involved.” tified during the due diligence process. The insurer typically agrees This usually happens late in the deal, perhaps the last 10 to 14 to compensate for any additional taxes, interest or penalty that has days. “What we need to have is a reasonably developed sale and pur- to be paid by the insured in the transaction. “Our advice would be chase agreement, and also pretty well progressed due diligence ma- always to take out the insurance, particularly for tax insurance,” says terial, and the written response to the RFI [request for information], Tuli & Co partner Celia Jenkins. etc. It then usually takes five days to underwrite once we’ve got all the Cross-border deals between foreign and Indian companies raise information,” says Lewis. transfer pricing questions about how to value the transactions for tax purposes. Some of the companies in tax disputes with the finance ministry include Nokia, Vodafone Group, Cairn India and Cadbury chocolate maker Mondelez International, for total claims of about US$10 billion. Going forward, Jenkins sees a lot more activity in existing ven- A framework is being put tures, and also in new ventures. “We have had M&A, amendments to in place for Lloyds of the Insurance Act, we also have had the advent of insurance branch offices, a framework for overseas investors and Indian partners to London to enter into form reinsurance companies, which has so far been the monopoly of the General Insurance Corporation. Again, we are looking at an India [early next year] entirely new structure. A framework is being put in place for Lloyds of London to enter into India [early next year]. Once that framework comes through and Lloyds sets up we are looking at an entirely Celia Jenkins new marketplace with a number of people coming in to set up their Partner ventures. I think the next couple of years are going to be very heav- Tuli & Co ily active and I think we are going to see a lot of interesting things in this space.” According to Thomson Reuters, China cross-border activity ac- crued US$161.9 billion in 2015, a 61% increase from the US$100.8 billion accumulated last year. However, despite this level of activity, few mainland China firms offer specialized M&A insurance, leaving it to international advisers and insurers based in Hong Kong to advise on and provide transaction risk insurance. Due to this level of China-related M&A activity, many international insurance firms are looking to move their specialist underwriters away from the traditional hubs of London and North Ameri- ca and into Asia to boost their regional operations. AIG is one of the leaders in the region offering M&A insurance products and is looking to expand after seeing a doubling in business size by premium in the past 12 months, and by a staggering 300% since 2013. “We’ve seen a lot of investment into China in the past 12 months, particularly in the real estate sector, and I don’t see that slowing down,” says Turnbull. “Hong Kong is very much a gateway to China

84 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA-SPECIFIC

A VIEW TO THE EAST INDIA’S DESIRE TO STRENGTHEN TRADE TIES WITH ITS ASIAN NEIGHBOURS MAY BEAR FRUIT AS INVESTMENT CHANNELS OPEN UP, BUT LEGAL AND CULTURAL HURDLES NEED TO BE CLEARED

VANDANA CHATLANI REPORTS

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Y GOVERNMENT has moved Posco and LG have made significant investments into India, estimat- with a great sense of priority ed at over US$3 billion, according to the MEA, while Indian invest- and speed to turn our Look East ments in South Korea total more than US$2 billion. Policy into [an] Act East Policy.” Malaysian investment in India has focused on telecommunications, These words from Indian prime power, oil and roads through companies such as Maxis Communica- minister Narendra Modi, spo- tions, Axiata, Khazanah and AirAsia, while Indian business has moved ken in November 2014 at the to Malaysia via players such as Wipro, 3i Infotech, Tata Consultancy East Asia Summit in Myanmar, Services, Larsen & Toubro, Ranbaxy Laboratories and Taj Hotels. marked the beginning of a re- India and Japan share a strong economic relationship. According to newed interest in increasing India’s economic and political ties with MEA statistics, 1,229 Japanese companies were registered in India in Mits Asian neighbours. October 2015, 20 more than in December of the previous year. Most Nowhere is this more apparent than in India’s aggressive push for of these companies were in the automobile, electrical equipment, tele- greater cooperation with the Association of Southeast Asian Nations communications, chemical and pharmaceutical sectors. Among the (ASEAN) bloc. In February, India announced that it would extend a Indian companies active in Japan are Amtek Auto, Apollo Tyres, Hin- US$1 billion line of credit to promote projects that support physical dustan Copper, Reliance Communications, Indian Oil, Suzlon Energy, and digital connectivity between India and ASEAN. “We are also at Educomp Solutions, TVS Motors and Lupin Pharmaceuticals. the final stages of a Motor Vehicles Agreement between India, Myan- Singapore, a magnet for financing and fundraising, is a centre for mar and Thailand which will address soft connectivity issues,” said capital markets deals by Indian companies, including US and Indian Anil Wadhwa, secretary (East) for the Ministry of External Affairs IPOs, qualified institutional placements, and high-yield and invest- (MEA), at Delhi Dialogue VIII, a forum to discuss political, economic ment-grade bond offerings. “The most significant India-related deals and socio-cultural issues between ASEAN and India. have been the set-up of private equity funds in Singapore, especially ASEAN-India agreements on trade in services and investment credit and special situations funds,” says Amit Dhume, a partner at came into force on 1 July 2015, building on the free trade agreement Colin Ng & Partners. signed in 2010. The new agreements will ease restrictions on the A friendly and culturally comfortable business environment has movement of professionals in a range of service industries and pro- led thousands of Indian companies to Singapore, with many of them vide new investment opportunities. using it as their launch pad out of India. Singaporean companies are increasingly exploring opportunities in India too, with some such CURRENT TRENDS as Sembcorp Industries, Strontium Technology and Chase Resource Asia’s geographical proximity and diverse industry offerings have at- Management setting up shop. Singapore is helping to design and de- tracted Indian companies for years (see Who’s where? on page 90). velop Amaravati – Andhra Pradesh’s new capital city – the largest Large conglomerates have spread their wings across the continent: infrastructure project Singapore has attempted in India to date. the Tata Group has more than 15 operating companies and employs In some cases, investments into India from Asian economies have over 7,000 people in countries such as Singapore, Bangladesh, Sri outweighed those from India. Daniel Tsai, a partner at Lee & Li in Lanka and Bhutan; Aditya Birla runs chemical operations in Thai- Kaohsiung, says that while Taiwanese enterprises such as China Steel, land and the Philippines, and produces carbon black in China and Foxconn Technology, D-Link and MediaTek have invested in India, South Korea, and cement in Bangladesh and Sri Lanka; and Tech “the amount of Indian investments in Taiwan is relatively much less”. Mahindra has offices in Hong Kong, Indonesia, Japan, Malaysia, the Historically, investments from China into India have been thin, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. but recent interest in sectors such as e-commerce, infrastructure Companies around Asia have been equally bullish about India; and power have seen sizeable investments from the likes of Alibaba, major Korean conglomerates such as Samsung, Hyundai Motors, Didi Kuaidi, Sany Group, Ctrip and Tencent.

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“Chinese companies already have a huge presence in the Indian INVITING INVESTMENTS solar power market,” says Ming Ye, a partner at Shanghai Keenmore In January 2015, Thailand’s BOI introduced a seven-year investment Law Office. “According to India’s Ministry of New and Renewable promotion strategy, which moves away from supporting activities Energy, India imported 161.5 million solar panels in the 2014-15 that involve low technology or low-cost labour and value addition. financial year. Of these, 113.5 million panels, or 70%, were import- Instead, it encourages investments in research and development, in- ed from China.” novation, value creation in the agricultural, industrial and services Ian Zheng, a partner at Zhonghao Law Firm in Chongqing, says sectors, and small and medium-sized enterprises, to promote the Chinese mobile phone maker Gionee is investing US$50 million in country’s competitiveness, in green technology, and in border prov- setting up a plant in India. “Gionee aims to make India a manufac- inces in Southern Thailand, to develop the local economy. In addi-

The most significant India-related deals have been the set-up of private equity funds in Singapore

Amit Dhume Partner Colin Ng & Partners turing hub outside China to cater to demand in African countries,” Singapore he says. Indian companies continue to flock to China following in the footsteps of established players such as Dr Reddy’s Laboratories, Aurobindo Pharmaceuticals, Infosys, Bharat Forge, Binani Cements, Canara Bank, and Bank of Baroda. Two-way trade between India and Thailand in 2014-15 totalled US$9.33 billion, with about US$5.86 billion in Thai exports to In- dia and US$3.47 billion in Indian exports to Thailand, according to statistics from India’s Ministry of Commerce. Statistics published by the Board of Investment (BOI) of Thailand – the country’s central investment promotion authority – show a slowdown in Indian investments into Thailand, says Nitchaya Vaneesorn, an associate at Thanathip & Partners in Bangkok. Declines in the number and value of projects submitted to the BOI by Indian parties for approval, particularly in 2015, are “partly due to the country’s political instability and a decrease in foreign direct investment in general”, she says.

87 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA-SPECIFIC

tion, the policy supports special economic zones, especially in border areas, to create economic connectivity with neighbouring countries. “In light of the new policy, foreign investors engaging or investing in the above promoted activities can … apply for and receive Ming Ye greater investment incentives – tax and non-tax – granted by the BOI,” says Vaneesorn. Partner China has also developed investment-friendly policies in free Shanghai Keenmore trade zones (FTZs) in cities such as Shanghai, Fujian, Tianjin and Law Office Guangzhou. “Goods can be imported, processed and exported free from customs duties in FTZs,” says Edward Sun, the managing partner India imported 161.5 million of Hengtai Law Offices in Shanghai. This, says Sun, has led to “positive changes in the financial sector, such as liberalization of interest solar panels in the 2014-15 rates, free convertibility of the renminbi and relaxation of limits on financial year. Of these, foreign participation in the financial industry and offshore banking business”. In addition, foreign investment in FTZs, other than in ac- 113.5 million panels ... were tivities included on the “negative list”, does not require prior approval. imported from China Resource-rich Indonesia also has a negative investment list, known

NOTES FOR IN-HOUSE COUNSEL

LAWYERS AROUND THE REGION OFFER TIPS FOR SUCCESS

Conduct detailed due diligence before China’s intellectual property There are a number of other entering the [Thai] market to check regulations are based on a “first-to-file” professions that are similar to an regulations in your sector and research system, except in cases of “well-known” attorney [in South Korea]. They include the differing types of legal entities … to trademarks. Foreign IP owners should file a certified public accountant, a licensed determine which one will best suit your and register their assets in China to fend tax accountant, a judicial scrivener operational needs. Contact the Board off counterfeiters or plagiarism, even and a patent attorney. It is important of Investment to see if any investment if they do not have immediate plans to for in-house lawyers to have a pool of privileges apply to your business. Ryan enter the China market. Ming Ye, different experts in advance so that Crowley, foreign services manager, partner, Shanghai Keenmore Law they may receive assistance from proper Dharmniti Law Offices, Bangkok. Office, Shanghai. experts when needed. Matt Mok, foreign Where Singapore is used as the base Understanding Chinese business attorney, Nexus Law Group, Seoul. for various Southeast Asia investments, it culture is required to avoid common In addition to typical financial is important that proper due diligence be mistakes such as a direct conflict diligence, lawyers should conduct undertaken and tax issues and repatriation between companies through a lawyer thorough due diligence into potential of profits issues, etc., be analysed in stand-off. This would only worsen joint venture partners or investment advance in all countries. Amit Dhume, the conflict. Friendly negotiations targets to ensure that they are not partner, Colin Ng & Partners, Singapore. through mediation or arbitration acquiring a potential problem, Take comprehensive minutes when are the main conflict resolution particularly from an anti-bribery and dealing with Chinese counterparties, solutions in China. Lin Zhong, regulatory perspective. Eric Deltour, highlighting open points and seek to partner, Chen & Co, Shanghai. India-focused partner, Dechert, narrow future discussions to open points As Indonesia consists of hundreds of Brussels/Hong Kong. only. Work with bilingual contracts in native ethnic groups, recognizing and To better understand Taiwan law, real time if possible. Analyse who is the studying the culture and practical habits foreign in-house lawyers should not rely real decision maker within the Chinese of the community surrounding the only on the text of statutes and regulations. counterparty; Chinese companies usually Indian investors’ businesses is advisable It is important not to overlook how the have one big decision maker. Mark to minimize the risk of conflict. regulator enforces the law and how the Schaub, international partner, King & Al Hakim Hanafiah, partner, Hanafiah court interprets it. Brian Hsieh, associate Wood Mallesons, Shanghai. Ponggawa & Partners, Jakarta. partner, Formosa Transnational, Taipei.

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as Daftar Negatif Investasi (DNI). Since September 2015, Indonesian president Joko Widodo has issued a series of economic policy packages – Paket Kebijakan Ekonomi. Its 11th package, announced in March, modifies the DNI to attract higher domestic and foreign investment. “On the proposed revised DNI, 35 lines of business will be excluded … thereby permitting some degree of foreign investment,” says Al Hakim Hanafiah, a partner at Hanafiah Ponggawa & Partners in Jakarta. Among the areas to be opened up are the crumb rubber industry, cold storage, [Thailand’s] political sports centres, tourism, e-commerce, the film industry, telecommunications equipment testing institutions, toll roads, non-hazardous instability and a decrease in waste management, raw medicine materials, and warehousing. foreign direct investment in Change is also afoot in South Korea, where the legislature recently passed an act aimed at improving corporate vitality, known general [have contributed as the “One-Shot Act”. Young Ik-Choi and Matt Mok, the managing to less activity from India] partner and a foreign attorney at Nexus Law Group in Seoul, say the act, which will come into force in August, “is expected to encourage companies to realign their business portfolios by allowing the companies easier undertaking of mergers and acquisitions”. Nitchaya Vaneesorn CHALLENGES PERSIST Associate Indian companies doing business in Asia will be familiar with some Thanathip & Partners of the problems in neighbouring jurisdictions, having encountered Bangkok them at home. These include bureaucratic inefficiencies, inconsis- tent regulations and labour law issues. Many such hurdles exist in Indonesia, says Nafis Adwani, a partner at Ali Budiardjo Nugroho Reksodiputro in Jakarta. He says that the government plans to improve the process of securing business permits by introducing a one-stop investment licensing service later this year. But he warns that investors could face “disharmony in certain provisions of the prevailing laws and regulations and in policies that are issued and implemented by different authorities”. To minimize confusion, he suggests consulting with various levels of government officers to get clear answers prior to proceeding. Cultural traps can pose another barrier. Language is often an issue, but understanding the work ethic, customs and hierarchy of a counterparty could play a much bigger role in establishing good faith. Masaya Hirano, a partner at TMI Associates in Tokyo, provides an example: “While Japanese companies have a bottom-up approach in the decision-making process, which is slow but comes with firm commitment, it is completely the opposite in India where decisions are generally made at the top level quickly, but [may be subject to] change or resistance.” Hirano has also observed in his dealings that Japanese parties tend to focus on “detailed studies and fine-tuning with a preference for predictability and stability”, while Indian parties are “more flexible and realistic and are good at achieving a goal in reality”. Hirano believes these approaches complement each other and if they are combined, “they will have great force”. Most Asian countries have clearly drawn lines to show where foreign participation is permitted. China’s Cata- logue for Guiding Foreign Investment in Industries is one example, and in Sun’s opinion, it is “fundamental

89 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 ASIA-SPECIFIC

JAPAN SOUTH KOREA SOUTH Indian Overseas Bank, Bank, Overseas Indian & Mahindra, Mahindra Novelis, Nakhoda, Bank of India, State Motors Tata EAST CHINA SEA PHILIPPINE SEA S.KOREA N.KOREA SINGAPORE Axis Bank, Bank of India, Export-Import Export-Import Axis Bank, Bank of India, HCL Technologies, Flipkart, Bank of India, ICICI Bank, Infosys, Technologies, Hexaware Milaap, Corporation, Insurance Life InMobi, Services, Computer Satyam NIIT, Mphasis, Consultancy Tata Bank of India, State Technologies Zensar Services, VIETNAM Aptech, CGL, Essar Exploration and Production, KCP KCP and Production, Essar Exploration Aptech, CGL, OVL, NIIT, Nagarjuna, Russell, McLeod Industries, Power, Tata Infotech, Tata Carbon Black, Philips Hatcheries Venkateswara PHILIPPINES SOUTH CHINA SEA INDONESIA BRUNEI CHINA Aurobindo Pharmaceuticals, Infosys, Infosys, Pharmaceuticals, Aurobindo Ranbaxy, NIIT, Lupin Pharmaceuticals, Satyam Industries, Reliance Raymond, Bank of India, State Services, Computer Technology, Information Tata Export Promotion Textile The Cotton Phosphorus United of India, Council VIETNAM LAOS Birla Lao Pulp & Lao Pulp Birla Century Plantation, (India), Plyboards SPG HSMM Group, CMC Mining MALAYSIA CAMBODIA LAOS MONGOLIA THAILAND CHINA t

MYANMAR BHUTAN MYANMAR Century Century Plyboards, ONGC, StarAgri Warehousing and Collateral Managemen CAMBODIA Bank of India, East India Bank of India, Essar Restaurant, Curry Futurelinks Group, Glenmark International, Pharmaceuticals, Kirloskar Brothers, Ranbaxy Laboratories, Steel Tata BANGLADESH INDIAN OCEAN NEPAL SRI LANKA INDIA THAILAND Aditya Birla Chemicals, Air India, Apollo Chemicals, Air India, Aditya Birla Indian Dabur, Bank of Baroda, Tyres, Group, Bank, Indorama Overseas Punj- Lupin Pharmaceuticals, Kirloskar, Steel Tata Motors, Tata Ranbaxy, Lloyd, KAZAKHSTAN

NEPAL Asian Paints, Coca-Cola India, India, Coca-Cola Asian Paints, ITC, Unilever, Hindustan Dabur, Corporation, Insurance Life Bank, State National Punjab VSNL, GMR Bank of India, ARABIAN SEA SRI LANKA SRI Bharti Airtel, Gujarat Glass, Glass, Airtel, Gujarat Bharti Indian Oil, Indian Hotels, Indian Bank, ICICI Overseas Larsen International, Ircon Insurance Life & Toubro, Neelkamal Mphasis, Corporation, Housing NTPC, Tata Plastics, Cement UltraTech Development, A SNAPSHOT OF SOME INDIAN COMPANIES AROUND ASIA AROUND COMPANIES INDIAN SOME OF SNAPSHOT A WHO’S WHERE? WHO’S

90 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 IRAN ASIA-SPECIFIC

On the proposed revised [negative investment list], 35 legislation” for any foreign investor to read before entering China. The lines of business catalogue divides industries into four categories for foreign investment will be excluded … – “prohibited”, “restricted”, “permitted” and “encouraged”. As Sun explains, investment projects under these categories are thereby permitting subject to different examination, approval and registration require- some degree of ments. “Foreign investors should be careful and avoid choosing ‘prohibited’ industries for investment. Projects categorized as ‘restricted’ foreign investment are subject to very strict requirements and examination. Governmen- tal examination and approval for investment projects can come from local, municipal, provincial or state authorities.” Indian investors should also be aware that China released the draft of a new foreign investment law on 19 January. “The draft has Al Hakim Hanafiah introduced several major changes to the current foreign investment Partner approval regime, including simplifying the market entry approval re- Hanafiah Ponggawa & Partners, Jakarta

Japanese companies have a quirement for all foreign investment to a ‘negative list management’ system, establishing a national security review system … and an in- bottom-up approach in the formation reporting system,” says Pascal Jiang, a partner at Dentons decision-making process … in Shanghai. In addition, the draft clarifies the definition of “control”, which Jiang says would directly impact foreign investors “who have in India … decisions are counted on a variable interest entity structure or other contractual generally made at controlled structure to control domestic entities to invest in sectors restricted or prohibited to foreign investment in China”. If the draft the top level becomes law, Jiang says, it will affect all foreign investors. “China is different from the West and unique in its growing legal system development,” says Mark Schaub, an international partner at King & Wood Mallesons in Shanghai. “This, coupled with the ‘doing business’ culture of China, can often be a reminder for our Indian Masaya Hirano clients that both a legal and cultural understanding is key to success- Partner ful business in the country.” TMI Associates The picture varies in Hong Kong, a city that straddles East and Tokyo West with an internationally renowned financial market and a vi- brant local entrepreneurial environment. Bank of India, Infosys and Tata Group are among a number of Indian companies that have put down roots there. However, as Yash Rana, the chair of Goodwin Procter’s Hong Kong office, points out, “Indian investors doing business in Hong Kong have found the high cost of real estate, including office space, as well as the high cost of salaries for a qualified workforce, to be a fiscal challenge.” In addition, Rana warns that the recent market volatility in China should be a concern, not to mention the uncertainty of Beijing’s future influence. “Indian businesses should seek help from local counsel who have practical knowledge of navigating the complex tax, legal and regulatory structures in Hong Kong,” he says. “And it is worth taking the time to fully understand the Chinese culture, both socially and in business, before engaging in any investments in Hong Kong.”

91 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

CHINA – CORPORATE & COMMERCIAL

By Mah Soon Sin Labour Protection. This will have an adverse effect upon the reputation of the enterprise. & Helen Hu An information exchange mechanism will AllBright Law Offices also be established by virtue of article 13 of the measures, allowing the MOHRSS to share information with other major authorities such as the administration for industry and commerce, the tax department and other government authorities regulating finance, housing and urban-rural development, as well as with trade unions. This is for the purpose of jointly motivat- ing good enterprises and penalizing those Compliance advised on with poor compliance records. So far, there is no clear indication or elaboration of how authorities will “motivate” or “penalize” the labour protection measures enterprises. Nevertheless, to prevent any operational issues (note that most, if not all, of the governmental applications and approvals are subject to the discretion of On 25 July 2016, China’s Ministry of Human out the following circumstances in which an authorities), it is imperative for enterprises Resources and Social Security (MOHRSS) enterprise will be rated C: to ensure a good compliance record for the issued the Measures on Evaluating and smooth operation of the company. Rating Enterprises’ Compliance and (1) Being punished three times or more for Employers are advised to review the inter- Credibility of Labour Protection, which will violations of labour protection laws; nal policies and relevant documents relating to come into effect on 1 January 2017. (2) Causing mass disturbances, aggressive labour protection to ensure the employment Pursuant to article 6 of the measures, the events or any severe negative social practice of the enterprise is in compliance MOHRSS will evaluate and categorize enter- influence due to the violation of labour with labour laws, regulations and rules of the prises based on the following criteria: protection laws and regulations; People’s Republic of China. Special atten- (3) Being punished for severe violations of tion should be paid to criteria regarding the (1) Internal labour protection rules and labour protection laws such as employ- evaluation and rating of enterprises, namely policies of the employers; ment of child labour and forced labour; working hours, rest days, holidays, minimum (2) Execution of labour contracts by and (4) Refusing to perform order of rectification, wages, social security schemes, etc. It is good between employers and employees; administrative decisions or administrative practice to have proper filings of all executed (3) Compliance with labour dispatch sanctions relating to labour protection labour contracts and ensure that the renewal regulations; supervision within a prescribed period; of expired labour contracts is done in writing. (4) Compliance with regulations banning (5) Interfering or resisting without reason Labour protection rules and employment child labour (under 16 years); the implementation of labour protection regulations – such as rules pertaining to holi- (5) Compliance with regulations protecting supervision by authorities; and days, mandatory marriage leave, and payable female employees and juveniles (above (6) Being criminally liable for violation of wages during sick leave – may vary from 16 years but under 18 years); labour protection laws. province to province in China, as administra- (6) Compliance with regulations pertaining tive authorities of different provinces may to working hours, rest days and holidays; The frequency of supervision (e.g., spot prescribe different rules and have different (7) Payment of wages and implementation checks) will be adjusted based on the rating stances on certain employment issues. Such of minimum wage standards; of the enterprise. Enterprises rated C will be rules may also change from time to time, so (8) Participation in social security schemes subject to frequent and enhanced super- enterprises should keep a close eye on the and payment of premiums; and vision by the authority. The authority will development of labour laws in different prov- (9) Compliance with other applicable labour also meet the person-in-charge of C-rated inces to avoid the risk of non-compliance, protection laws, rules and regulations. enterprises to ensure it complies with labour which could cause significant impact on the protection laws, regulations and rules. enterprise’s business operations. Enterprises will then be categorized into All non-compliance by enterprises three ratings – A, B and C. Only enterprises found during the evaluation process will with a clean record will be rated A. Any enter- be recorded for at least three years. Any MAH SOON SIN is a foreign legal prises that are punished due to any violation significant non-compliance recorded will be consultant at AllBright Law Offices in of labour protection laws and regulations one announced to the public by virtue of article Shanghai, and HELEN HU is a senior or two times will be rated B. The measures set 22 of the Regulations on Supervision of associate at the firm.

Allbright Law Offices Contact details: Tel: +86 21 2051 1000 11-12 Floor, Shanghai Tower, No. 501 Yincheng Middle Road, Fax: +86 21 2051 1999 Pudong New Area, Shanghai 200120, China Email: [email protected] www.allbrightlaw.com Email: [email protected]

92 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

CHINA – DISPUTE RESOLUTION

By Phil Wang & Pursuant to section 26.1 of the Law of the PRC on the Protection of Consumer Rights Xia Xiaoping and Interests, a business operator must Boss & Young remind the consumer to pay attention to the standard terms in respect of the “contents in which the consumers have material interests”, otherwise the consumers have a right to claim the nullification of the contents and the claim must be supported by the people’s court. Actually, section 31 of the interpretation is indeed a logical extension and explanation of this rule. In spite of the fact that the arbitration clause does not exempt an insurance Is standard arbitration clause company from liability, it may substantially increase the insurance consumers’ costs to claim their rights and so could be reasonably valid in insurance contracts? interpreted as “the contents in which the consumers have material interests”. In other words, only if the insurance company has reminded the insurance consumer to notice More insurance companies are choosing to the insurer as set out in the standard form of the standard arbitration clause will the insur- use standard arbitration clauses in their insur- contract as provided by the insurer”. So the ance consumer be bound by it. ance contracts, allowing their preferences for standard arbitration clause does not require The concept of “insurance consumer” has confidentiality to be satisfied and giving them reminding the insurance consumer in an not yet been defined by any laws or official more efficient control over the management appropriate manner to pay attention to the documents, so its legal scope is still in dispute. and resolution of insurance claim disputes. clause, or an express explanation for exempt- Since “insurance consumer” is a subset of con- Especially after the People’s Republic of ing clauses in the insurance law, due to its sumer, the dual criteria in identifying a con- China (PRC) Supreme People’s Court issued character of non-exemption of liability. sumer – i.e. the subject criterion and the pur- the Interpretation of the Application of the pose criterion – should apply. The policyholder Civil Procedure Law of the PRC on 30 January has to be a natural person, while the purpose 2015, this trend could also be seen as a for purchasing insurance must be “for living response to this interpretation, which grants THE CONCEPT OF consumption”. Most debate concentrates on the assured the right to select the people’s the identification of the purpose criterion. court at the place of their domicile as the ‘INSURANCE CONSUMER’ Some types of insurance, such as vehicle insur- competent court for personal insurance cases. ance, health insurance and accident insurance, In practice, the standard arbitration HAS NOT YET BEEN can easily meet the purpose criterion, as these clause is sometimes deemed to be an kinds of insurance serve for personal living and exempting clause before the court, so the DEFINED BY OFFICIAL the policyholder does not purchase them for insurance company is requested to remind profit or commercial exchange. and expressly explain the clause under the DOCUMENTS, SO ITS However, no final conclusion has been insurance law for its validity. However, such a reached on whether investment-linked insur- court decision is incorrect because arbitra- LEGAL SCOPE IS ance can be regarded as “for living consumption, as an effective and legal alternative tion”. The answer to this question depends on dispute resolution other than litigation, only STILL IN DISPUTE the determination of the nature of the primary changes the procedure instead of any liability purpose of the policyholder who purchases the distribution among the parties, and does not However, for the purpose of consumer pro- investment-linked insurance. In other words, it aim to exempt insurance companies from tection, section 31 of the interpretation states depends on whether it is a living consumption liability in the insurance contract. that if the insurance company uses the stand- aiming at avoiding risks and improving emo- According to section 9 of the ard arbitration clause without reminding the tional security, or actually a profit-making act Interpretations of the Supreme People’s insurance consumer in an appropriate manner focusing on the return of the investment. This Court on Certain Issues Concerning the to pay attention to the clause, such clause will issue remains to be determined through further Application of the Insurance Law of the PRC become null and void. Therefore, when facing interpretation by the Supreme People’s Court. (II), the exempting clauses refer to “the liability insurance consumers who lack any professional exemption clauses, deductibles, excess, knowledge and have a poor bargaining position, proportion of claims or payment, and other the insurance company must bear the obliga- PHIL WANG and XIA XIAOPING are clauses exempting or reducing the liability of tion of reminding under the insurance law. partners at Boss & Young in Shanghai.

Boss & Young Contact details: 12th-15th Floor, 100 Bund Square, 100 South Tel: +8621 2316 9090 Zhongshan Road, Huangpu District, Shanghai Fax: +8621 2316 9000 www.boss-young.com Email: [email protected] Email: [email protected]

93 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

INDIA – CORPORATE & COMMERCIAL

By Aditya Patni & • Disclose termination of an agreement with Tarang Shashishekar the agent, within two weeks of termina- Khaitan & Co tion; and

• Disclose the non-involvement of any agent engaged by them in any offer.

The DPP 2016 has provided express powers to the MoD to prevent misuse of agents. The MoD has the right to inform the OEM at any stage that the agent it engages is unacceptable, whereupon the OEM would Framework legitimizes the be obliged to either interact with the MoD directly or engage another agent. The MoD is empowered to demand and role of defence agents inspect relevant financial documents/information, including the contract entered into between the OEM and its agent, to ascertain the legitimacy of the engagement. Needless Engagement of agents in the Indian defence The DPP 2016 expressly allows the use to say, the OEM could risk losing the contract sector has historically been fraught with regu- of agents by foreign OEMs, albeit with strict if the agent it engages manipulates or recom- latory complexity and uncertainty. Previously, oversight and a requirement to comply with a mends, whether officially or unofficially, the the regulatory framework surrounding the comprehensive disclosure regime. OEMs are award of the contract to the OEM, or indulges engagement of agents bore the imprint of the required to disclose at the time of submis- in any corrupt or unethical practices. infamous three decade old Bofors scandal. sion of offers (or within two weeks of the Historically, agents have been permitted in Despite various attempts by the govern- engagement of an agent): full details of the the defence sector, however they were never ment to provide regulatory clarity, original agent; their scope of work, date and period of openly appointed due to the perceived threat equipment manufacturers (OEMs) found it engagement; and details of specific responsi- of a challenge by the MoD or third parties increasingly difficult to understand the legal bilities entrusted to the agent. with competing interests. This is evident framework within which agents could be In a significant change from the earlier as several contracts in the past have been engaged in the defence sector. regime, the DPP 2016 attempts to delink the cancelled due to the government’s strict stand Recognizing their need, and the impor- role of an agent with the ultimate award of a against corruption, coupled with a lack of tant role that agents play in this sector, the contract by prohibiting the entering into of a clarity on the regulatory framework relating to Defence Procurement Procedure 2016 (DPP conditional contract with an agent – where the engagement of agents. 2016) lays down a framework for the engage- the payment to be made to the agent is based, It is encouraging to note that the DPP ment of agents by foreign OEMs for market- directly or indirectly, on the success or failure of 2016 recognises that marketing agents ing their equipment in India, either on the award of the contract. In addition, the DPP are necessary for foreign OEMs to market a country-specific basis or as a part of a 2016 requires an OEM to: their products and promote sales in the global or regional arrangement. country. It attempts to secure its primary • Disclose applicable terms of payment objective of keeping defence contracts free including details of payment made to of corruption while providing a transparent the relevant agent by the OEM in the 12 framework for bona fide arrangements, and THE DPP 2016 EXPRESSLY months preceding the tender submission; may provide a push to the Make-in-India initiative of the government. ALLOWS THE USE OF • Submit on an annual basis or upon demand It is expected that the implementation of of the Ministry of Defence (MoD), the these measures in the right spirit will help to AGENTS BY FOREIGN details of payments made to the agent develop robust anti-corruption compliance during the procurement process; programmes and agent compensation struc- OEMS, ALBEIT WITH tures in line with international best practices. • Ensure that their agents do not manipulate STRICT OVERSIGHT or in any way recommend to any function- aries of the government, whether officially ADITYA PATNI is a principal associate at AND A REQUIREMENT or unofficially, the award of the contract to Khaitan & Co’s New Delhi office, and the OEM, or indulge in corrupt and unethi- TARANG SHASHISHEKAR is an associate, TO COMPLY cal practices; also at the firm’s New Delhi office.

Khaitan & Co Contact details: Ashoka Estate, 12th Floor, 24 Barakhamba Road, Tel: +91 11 4151 5454; Fax: +91 11 4151 5318 New Delhi 110 001, India Email: [email protected] Email: [email protected] Email: [email protected]

94 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

INDIA – INTELLECTUAL PROPERTY

By Vaishali Mittal the first time, the division bench expedited the trial to be completed within four months. & D Neha Reddy This proved to be a huge victory for litigants Anand and Anand and lawyers alike at a time when the trial stage alone took several years to complete.

THE RESULTS The final judgment, by the Delhi High Court was a clear victory for Toyota, and also for the first time laid down new standards for adjudication of matters of this nature. Relying on evidence filed by the car manufacturer, the High Court recognized Trans-border Toyota Toyota as being one of the world’s leading auto and auto-parts manufacturers, trumps prior Prius recognizing its trademarks for which it also owns registrations in India. The defendants were held liable for infringement of Toyota’s registered trademarks as the manner of use of the marks by the defendants would cause One of the first and biggest trademark and the Toyota emblem for their auto parts confusion in the minds of the public as to disputes in the auto segment has come and related goods. However, the Delhi High their origin, and give an impression that they to an end after seven years, with the final Court vacated the ex-parte injunction after emanated from Toyota. Judgment passed by the Delhi High Court the defendants appeared and filed an appli- The heart of the judgment lies in the on 8 July 2016, in Toyota Jidosha Kabushiki cation for the same. This was immediately court’s findings on the mark PRIUS. The Kaisha v Deepak Mangal & Others, in favour corrected by the division bench of Delhi High court held that in addition to the evidence of Toyota. Court in an appeal by Toyota. filed on court record, the fact that the Toyota In 1994, Toyota’s team designed the world’s The division bench passed an order PRIUS was the world’s first hybrid car was a first concept car with a hybrid engine for the restraining the defendants from using matter of history and an undeniable fact. 1995 Tokyo Motor Show. The vehicle was In light of the fact that the defendants named “PRIUS”, derived from the Latin word failed to provide any justification for their for “prior” or “before”. The first PRIUS went on use of the mark PRIUS since 2002, it was sale in December 1997, in Japan. The present THE DEFENDANTS held that it was immaterial that the defend- battle in India began in 2009, prior to the ants used the mark and had registrations in launch of Toyota Prius in India in 2010, when HAD APPLIED FOR AND India prior to the launch of Toyota’s PRIUS Toyota filed a case against Prius Auto Industries in India, as Toyota was the first to adopt the and Prius Auto Accessories Private Limited for SECURED REGISTRATIONS mark in 1995 and use it internationally. The use of its trademark, PRIUS. The defendants court also held that PRIUS was a well-known were also selling indigenously manufactured FOR THE MARK ‘PRIUS’ trademark in India, warranting the highest spare parts under the trademarks TOYOTA, its form of protection – a rare finding when a emblem, INNOVA and QUALIS. IN INDIA mark is unregistered in India. The defendants had applied for and The court directed the defendants secured registrations for the mark PRIUS to stop using the mark PRIUS as part of in India. In addition to filing rectification Toyota’s registered trademarks INNOVA, their trading name within a period of two petitions for cancellation of the defendants’ TOYOTA and the Toyota emblem in months. Having found the defendants’ registrations for the mark PRIUS, Toyota filed relation to their products in the same font conduct to be dishonest, the court was a lawsuit for infringement and passing off the and manner as Toyota’s trademarks, and also of the opinion that Toyota must be plaintiff’s trademark and trade name in Delhi permitted them to use these marks only for compensated for the loss of goodwill over High Court, convinced that the defendants the purposes of identification of auto parts the years as a result of the defendants’ use, had taken unfair advantage of the reputation manufactured by them. However, as the and directed the defendants to pay Toyota of its vehicles to expand their business. defendants owned registrations for the mark `1 million (US$15,000) in damages. In December 2009, when the lawsuit was PRIUS and were prior users in the Indian first filed by Toyota, it emerged victorious, territory, the court permitted the defendants having secured an ex-parte ad-interim to use this mark with a condition that they VAISHALI MITTAL is a partner at injunction restricting the defendants from would file a statement of accounts of its Anand and Anand, and D NEHA REDDY using the marks PRIUS, INNOVA, TOYOTA business every six months. Additionally, for is an associate at the firm.

Anand and Anand Contact details: Noida office: First Channel Building, Plot No. 17A, Tel: +91 120 405 9300 Sector 16A, Film City, Noida 201301 (UP), India Fax: +91 120 424 3056-058 Email: [email protected] www.anandandanand.com Email: [email protected]

95 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

INDONESIA – CORPORATE & COMMERCIAL

submitted by the opposing parties, and based By Mohamed Idwan (Kiki) Ganie on this procedure, courts may examine and Lubis Ganie Surowidjojo determine whether the documents, the legality of which is being questioned, may or may not be used as evidence. Indonesian courts also have the power to summon witnesses to give testimony or to order the submission of certain documents to be entered as evidence.

APPEAL, CASSATION, CASE REVIEW An appeal can be filed by a party whose interest is harmed as a result of a first-instance decision. An appeal process is a re-ex- Focus on dispute resolution amination of the first-instance court decision and will cover the factual and evidentiary issues, as well as questions of law. At appeal, process in Indonesia the parties may present new evidence and submit a memorandum/counter-memorandum, however the High Court is not com- pelled to consider the appeal memoranda. The dispute resolution process in ARBITRATION Cassation to the Supreme Court is the third Indonesian civil proceedings follows the Indonesia has a special arbitration act that stage of the judicial process. Dutch civil law tradition. There are no enables arbitration proceedings and medi- In the context of civil procedure, the discovery proceedings and the principle ated settlements to be enforced through Supreme Court is competent only to exam- of stare decisis does not apply. Both the Indonesian district courts. In recent times ine cases falling within general civil matters. winning and the losing party bear their own there has been an increase in confidence Unlike appeal at High Court level, the Supreme legal costs except unless otherwise agreed. that in case of breach of an arbitration Court’s competence in a cassation is limited to Injunctive measures are possible but, except award or mediated settlement, remedies ensuring that the material and procedural for security attachments, rare. are now enforceable through Indonesian laws are applied consistently. As such, the courts, which in the past remained a crucial court will not entertain evidentiary questions COURT SPECIALIZATION question mark. and will focus on the application of the law by Indonesia has specialised courts and pro- the lower courts, including resolving any ceedings for bankruptcy, antitrust, anti-cor- EVIDENCE unsettled questions of law. ruption, tax, military, religious, fishery, and Documentary evidence is the most com- Case Review is the re-examination of labour matters. mon. The parties are, however, free to sub- a decision by the Supreme Court and is Domestic arbitral awards are enforced mit various forms of other permitted types available to the appellant after a decision by district courts where the losing party of evidence that support their positions. on cassation has been rendered. There are is domiciled, while foreign arbitral awards The parties may, for example, submit expert several grounds available to apply for case must be registered with the Central Jakarta testimony, which can provide evidence to review: fraud, new evidence, lack of basis, District Court for enforcement by the the judicial panel on matters that are tech- contradiction, judicial error, etc. district court located where the losing party nically complicated, and may be subjected is domiciled. to cross-examination. Indonesian courts ENFORCEMENT OF DECISIONS do not recognize a “pre-trial discovery A judicial decision may only be enforced if MANDATORY MEDIATION procedure”. such decision is either: (1) final and bind- The majority of civil disputes are subject to However, the rules of civil procedure permit ing, or (2) if by virtue of a court order the a mandatory round of mediation proceed- the parties to obtain specific evidence submit- decision may be executed notwithstanding ings supervised by the mediator and the ted by the opposing parties. If the opposing appeals or other legal processes. A decision is concerned court. Proceedings on merits will parties disregard these orders, then a court considered final and binding if the parties do only commence once the mandatory round may draw the conclusion that such items of not appeal the decision, or available appeal of mediation has failed. evidence are not favourable to the parties avenues are exhausted. Note that a party The disputing parties, based on their who disregard such orders. Even though there that has not resorted to case review does not mutual agreement, can also go for an is no pre-trial discovery, the parties have the prevent a decision from being executed. out-of-court settlement for their dispute opportunity to examine the evidence submit- during the appeal, cassation or case review ted by the opposing parties during the evi- stages, as long as the dispute has not been dence stage. The possibility exists to question MOHAMED IDWAN (KIKI) GANIE is the adjudged with a final and binding decision. the origins and legality of written evidence managing partner at Lubis Ganie Surowidjojo.

Lubis Ganie Surowidjojo Contact details: Menara Imperium, 30th Fl. Jl. H.R. Rasuna Said Tel: +62 21 831 5005/5025 Kav. 1 Jakarta 12980, Indonesia Fax: +62 21 831 5015/5018 Email: [email protected] www.lgsonline.com

96 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

OFFSHORE FINANCE

the two outcomes 75%/25% in favour of By Aisling Dwyer the DCF valuation. Maples and Calder The court held that the fair value of Integra was higher than the offer price and higher than the highest estimate of the range of valuations provided by Integra’s expert. As such, the dissenters’ valuation evidence was preferred, with the court discounting the valuation in places to reflect the conclusions it had reached as to how to assess “fair value”. The court valued Integra at US$105 million, with fair value of each of Integra’s shares being US$11.70. The Cayman court ensures fair court ordered payment of that amount, plus interest, to be made to the dissenters. The Court took into account guidance value in shares dispute from similar statutory merger regimes in the US state of Delaware, and in Canada, and concluded:

Investors await with interest the outcome of approximately 45% over the average trading (1) Fair value is the value to the share- new cases involving fair value petitions filed price of the GDRs for the prior 30 trading holder of his or her proportionate share of by dissenting shareholders of Cayman Islands days, and which valued Integra at US$90 the business as a going concern without any companies, which are being taken private million. The merger was adopted by special minority discount or any premium for the using the Cayman Islands merger regime. resolution and duly approved. forcible taking of his or her shares; Shareholders of a company being taken Three dissenting shareholders (holding (2) Assessing fair value is a fact-based private pursuant to part XVI of the Cayman about 17.3% of Integra’s issued GDRs) exercise and requires an important element Islands Companies Law (2013 Revision), took the view that the offer price was too of judgment by the court; who dispute the fairness of the offer low. They converted their GDRs to shares, (3) Where a company’s shares are listed received, may ultimately seek an order of opposed the merger at the extraordinary on a major stock exchange, this does not the Grand Court of the Cayman Islands general meeting (EGM), and triggered the mean that a valuation methodology based determining the “fair value” of the compa- dissenters’ rights process. This resulted in upon its publicly traded prices is necessarily ny’s shares and recover the duly appraised the court being requested to determine the the most reliable. It will depend on whether fair value of their shares. The court’s power fair value of Integra’s shares. there is a well informed and liquid market to reach its own conclusion on fair value The court directed that a full valuation with a large, widely held free float; and require payment of a different amount process be conducted, with each side (4) The date for determining fair value to dissenting shareholders is critical for the appointing an independent valuer. A trial was the date of the EGM. protection of minority shareholders. then took place in which the expert valuers As yet, the only Cayman Islands decision were cross-examined on their opinions The fact that the court was prepared on this appraisal process is Integra Group. regarding the value of the shares. to come to its own conclusion about fair Integra was a Cayman Islands incorporated Applying a market valuation approach value, taking into account the views of both company, which operated as an independ- and a control premium to the publicly experts, and that the dissenting sharehold- ent Russian oilfield services business. In traded share price, which was then cross- ers received a higher price than the offer 2007, it listed its global depository receipts checked against a discounted cash flow price, should be encouraging to minority (GDRs) on the London Stock Exchange. (DCF) valuation, Integra’s expert submitted shareholders. It remains to be seen how After mid-2012, the listed price of Integra’s that fair value was somewhere in the range the law will develop in the context of listed GDRs significantly diminished. In December of US$70 to US$100 million. Valuers in Cayman Islands companies that are taken 2013, Integra’s management proposed future cases should take heed of the court’s private, because bidders recognize that the a management buyout, structured as a indication that it was not helpful to be given publicly traded price reflects a discount on merger under the Companies Law. a range of values in this imprecise way. value, especially in light of gains that can be Integra appointed a special committee of The dissenters’ expert valued Integra at made by a re-listing on a different exchange. independent directors and obtained a fair- US$135 million at the date of the EGM, ness opinion as to the proposed offer. In April using a market valuation approach based on 2014, the special committee recommended a combination of a DCF valuation and the that investors accept an offer of US$10 guideline public companies method valua- AISLING DWYER is an associate at the per share, which represented a premium of tion. The dissenters’ expert then weighted Hong Kong office of Maples and Calder.

Maples and Calder | Hong Kong Contact details: 53rd Floor, The Center, 99 Queen’s Road, Tel: +852 3690 7449 Central, Hong Kong Email: [email protected] www.maplesandcalder.com

97 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

PHILIPPINES – CORPORATE & COMMERCIAL

acquisition does not violate the PCA. Mergers By Francis Lim and acquisitions that have been approved ACCRA Law offices by the PCC can no longer be reviewed, except when the ruling was obtained on the basis of fraud or false material information. The PCA adopts the concepts of relevant geographic market and relevant product market to determine whether an entity commits an anti-competitive conduct in violation of the law. The new law adopts voluntary compliance as its main implementing mechanism. Examples are: (1) a request for a binding New competition law in ruling; and (2) a concept of consent order. Likewise, an entity may provide justification to the commission after receiving a effect in the Philippines show cause order why it should not be made to cease and desist from continuing with an identified business conduct, or pay the administrative fine, or readjust its busi- The Philippine Competition Act (PCA) went production, abuse of market dominance and ness practices. Resort to these remedies into effect on 5 August 2015. Its implement- prohibited mergers and acquisitions. must be made before any administrative, ing rules and regulations became effective Per se violations are subject to criminal civil and criminal actions are filed against on 18 June 2016. The law applies to acts sanctions, while sanctions for non-per se the parties concerned. committed in the Philippines and those done violations are limited to administrative fines The PCC can, after a public hearing, offshore that have direct, substantial and and civil liability for damages. exempt certain acts from the provisions of reasonably foreseeable effects in the country. The PCA does not prohibit monopolies the law for a limited period. Also available is The implementing authority for the or dominant players. What it proscribes is a leniency programme in the form of immu- new law is the Philippine Competition abuse of dominant position. An entity that nity from suit or reduction of fine, upon Commission (PCC). The PCC has original has at least 50% market share is presumed compliance with certain conditions. and primary jurisdiction to enforce and to be a dominant player. The law specifically The new law follows the “hit where it implement the law, even with respect to enumerates the acts considered as abuse of hurts” principle by prescribing heavy admin- entities that are under the regulatory juris- dominant position, e.g., predatory pric- istrative fines for violators. For the first diction of specialized government agen- ing, barriers to entry and expansion, tying offence, the fine can be as much US$2.2 cies. It has the power to stop a merger or arrangements, price discrimination, and million and up to US$5.4 million for a sec- acquisition, issue divestiture and adjustment exploitative or excessive pricing. ond offence. Where the violation involves orders, impose administrative fines, and The PCA prohibits mergers or acquisitions the trade or movement of basic necessi- deputize government agencies and enlist that substantially prevent, restrict or lessen ties and prime commodities as defined by their assistance, as well as that of private competition in the market. Mergers and Philippine law, the fine will be tripled. institutions, to implement the law. acquisitions (including joint ventures) with A private party who is injured by a vio- Its orders, rulings or decisions are a transaction value exceeding PHP1 billion lation of the PCA may file an independent immediately executory, unless otherwise (US$21 million) require compulsory notifica- civil action for damages. restrained by the Court of Appeals or the tion to the PCC, otherwise the transaction is If there is any business structure, conduct Supreme Court. void and the parties subject to hefty fines. or practice existing at the time the law Violations of the PCA may either be per The PCC has a maximum period of 90 became effective that is in violation of the se or non-per se violations. Per se violations days to review the proposed merger or law, the concerned entity has two years are limited to price fixing and bid rigging acquisition. During this period, the parties from when the law took effect to cure the between or among competitors. All others are prohibited from consummating the violation. If the violation continues after are non-per se and must be subject to the transaction. If no decision is promulgated that period, the guilty party will be sub- rule of reason analysis. by the PCC within the period, for whatever jected to administrative, civil and criminal Non-per se violations include agreements reason, the merger or acquisition must be liabilities under the law. by or among competitors, other than price deemed approved. fixing and bid rigging, “which have the object A favourable recommendation or no-objec- or effect of substantially preventing, restrict- tion ruling from specialized regulatory agencies ing or lessening competition”. Examples to the PCC must give rise to a disputable FRANCIS LIM is a senior partner at are market allocation, limiting or restricting presumption that the proposed merger or ACCRA Law Offices in Manila.

ACCRA Law Offices Contact details: Manila office: ACCRALAW Tower, 2nd Avenue corner 30th Tel: +632 830 8000 Street, Crescent Park West, Bonifacio Global City Fax: +632 403 7006/7009 0399, Taguig City, Metro Manila, Philippines Email: [email protected] www.accralaw.com

98 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

SINGAPORE – CORPORATE & COMMERCIAL

short-to-long-term impact on its Singapore By Ronnie Tan office to be minimal. The firm’s priority on Central Chambers building its legal business in Asia remains Law Corporation largely unaffected and it expects to expand its regional presence by establishing more law alliances in Singapore and Malaysia. DAC Beachcroft’s vote of confidence is still for Singapore to weather any headwinds flowing from Brexit. Likewise, business associations and manufacturing associations in Singapore have taken stock of the Brexit vote. The overall sentiment is one of expected confi- Brexit: minimum impact dence in that some impact will be felt, but would not be severe. Business will be as normal in Asia, but with heightened interest likely for Singapore in burgeoning economies like Myanmar and Vietnam; this development complements Singapore law practices that have formed alliances with foreign counterparts to meet Brexit has dominated the world’s attention they remain confident that they would the legal demands of emerging markets in and street vocabulary. The British referen- be shielded from any fallout. This firm’s the region. dum on 23 June triggered a chain of events clients have not said anything about slowing It is safe to say at this point that there will and reality that the “Stay” and “Leave” down their business or their legal work in not be any sudden changes to the Singapore camps had not, and probably could not Singapore. The Republic has a reputation legal industry. It remains very much aligned have, foreseen. Watching the turmoil that as a robust financial hub, and investor with English law, having its roots as a former Brexit breathed into European and world confidence at the time of writing is still with British colony. However, while UK and events was like peeling a new layer daily to Asia, and particularly Singapore. European firms will have to contend with see what the British vote really meant. Surprisingly, there may be a trigger effect untangling contractual obligations governed In Singapore, the immediate mood was of more funds flowing into Singapore, by the law of the EU, agreements formed in one of wide-eyed wonder, but staying moving investment-related legal work into Singapore and parts of Southeast Asia will calm and watching developments unfold higher gear, and more interest from enquiries present fewer such realities for Singapore – from the tumbling pound to the sombre into Asian markets, and particularly into law practices to address. reception then British PM David Cameron Singapore since Brexit, is gradually being Singapore has for two decades embarked received at his final working meeting in noted. It would appear that Singapore might on the shaping of its own laws and legal Brussels after the vote. Following Cameron’s inadvertently benefit from the calamity that system, with considerable progress. On the resignation, new leader Theresa May has had originally characterised the Brexit vote. employment front, Singapore law practices kept mum about the specifics of negotiating External funds have been coming in to scout are no longer likely to be confined to luring Britain out of the EU as everyone faces the new inventions, technologies and the “next foreign-trained lawyers versed in EU law. reality of an EU without the UK, or rather a big thing” to invest in, representing a boost For these graduates, the subject is likely to UK without the EU. to the start-up ecosystem that the Singapore recede into the background as a study into What does Brexit hold for Singapore government has been nurturing for years. the history of the EU. businesses? The widespread prognosis is These generally upbeat views have been The days ahead will probably see the UK’s one of uncertainty. On the one hand, the borne out of confidence in our tiny island triggering of article 50 of the Lisbon Treaty, geographical distance does not entirely state in Southeast Asia from funds search- terms which may dominate the world’s insulate us from the structure and workings ing for ideal alternatives to park themselves. attention for some time as the UK braces of an intertwined global economy. On the It all stems from a government that respects for life outside the EU. For Singapore, it will other hand, it has been a few months since the rule of law, and from removing any hint be a time to watch the events again. the UK referendum, but commerce in Asia is of corruption. When you have that, investor business as usual. confidence at the very basic level is obvious. Singapore has witnessed minimal eco- The UK alliance partner of Central nomic repercussions arising from the Brexit Chambers, DAC Beachcroft, is similarly RONNIE TAN is managing director of vote. This is at least the sentiment of the pragmatic on the impact of Brexit on Central Chambers Law Corporation. senior management at the author’s firm. its global offices from Europe to Latin TWANG KERN ZERN and SARA LIEW, Singapore law practices have been watching America. Practising in Singapore since both equity directors at the firm, also developments in Europe, but by and large 2011, DAC Beachcroft anticipates the contributed to this article.

Central Chambers Law Corporation Contact details: 150 Cecil Street #03-00 Tel: +65 6538 0810 Singapore 069543 Email: [email protected] www.centralchambers.com.sg

99 ABLJ ⁄ SEPTEMBER – OCTOBER 2016 CORRESPONDENTS

THAILAND – CORPORATE & COMMERCIAL

without BOI promotion intending to engage By Harit Na Pombejra in cash pooling will require an FBL. Silk Legal Recently, government policy regarding cash pooling has become quite stringent, as in certain cases foreign companies used cash pooling techniques as a means to shift earnings out of Thailand. Therefore, the MOC will carefully examine information regarding the borrowing and the lending company, such as the financial status of the parties, the amount of the loan, the source of the loan (since it may only be made from retained earnings in Thailand), repayment terms, Check legal issues f irst for interest rates and market references. Transfer pricing. Although there are no official transfer pricing regulations in Thai cash pooling option Thailand, the Thai Revenue Code and the Thailand Transfer Pricing Guidelines require that the interest rate on such loans not be lower than market rate, unless there are “jus- Since the global economic downturn, Two or more companies are considered tifiable grounds”, otherwise revenue officers cash pooling has become an increasingly to be affiliated if: (1) one company has have the power to assess additional tax. relevant option for multinational corpo- authority to control the appointment and For companies based in Thailand, cash rations (MNCs) as a cash management removal of directors with total or primary pooling is not a new concept. The most technique. In general, cash pooling is used authority over the other company; or (2) one notable example of a Thai company using when MNCs wish to reduce their external company holds shares in the other company a corporate treasury centre is that of PPT financing needs and allow one company, in excess of 50%. The term “group company” Exploration and Production (PPTEP). As a “corporate treasury centre”, to manage generally refers to a company with a lesser one of the first adopters of a cash pooling, inter-group financing. degree of ownership by the parent company, it is estimated by their treasury team that As each group company normally has i.e., between 25% and 50% ownership. US$300 million in working capital is availa- its own accounts, these separate accounts Foreign business licence. Foreign compa- ble on a daily basis as multiple accounts are are “pooled” together and managed as one nies, i.e., companies with at least 50% of total pooled together to increase liquidity and net account, allowing group companies shares held by non-Thai nationals or a non- free up idle cash. to operate under a single financial policy. Thai entity, are prohibited from engaging in In April 2015, the Bank of Thailand, Through this method, each group com- businesses in Thailand unless a foreign busi- with support from the BOI and Revenue pany needs less cash and can decrease its ness licence (FBL) is granted by the Ministry Department, formally introduced the con- working capital. of Commerce (MOC) or an exemption is cept of a corporate treasury centre through As cash pooling schemes are often applicable, such as BOI promotion. Included regulation relaxation that permits compa- implemented by MNCs with subsidiaries among prohibited businesses is generally any nies registered in Thailand to be eligible for worldwide, in the case of foreign companies status as a “treasury centre” with the ability operating in Thailand that have cash pooling to manage its group of companies payment, accounts set up outside Thailand, the fol- collections, foreign exchange as well as lowing legal issues arise under Thai law. RECENTLY, GOVERNMENT liquidity of its subsidiaries in Thailand and Definition of “affiliated” or “group” overseas. This concept was introduced companies. Foreign companies operating in POLICY REGARDING CASH in conjunction with the BOI’s efforts to Thailand – under the Board of Investment rebrand the regional operating headquarters of Thailand (BOI) promotion – as the inter- POOLING HAS BECOME into the IHQ in which the treasury centre is national headquarters (IHQ) of their group listed as a sub-category. may carry out various financial-related QUITE STRINGENT As discussed, the legal issues regarding services, including cash pooling in respect of the practice of cash pooling by MNCs in loans, without being subject to usual restric- service business – except services relating to Thailand are complicated and the advice of tions under the Foreign Business Act (1999). financial and investment consultation, and legal counsel is indispensable. Nevertheless, it must be noted that the securities trading. In this case, cash pooling IHQ is permitted to provide such financial is deemed to be a type of service whereby services, including lending, to affiliated or a loan is made by a company to its affiliated HARIT NA POMBEJRA is a partner at group companies only. or group company. So a foreign company Silk Legal in Bangkok.

SILK LEGAL Contact details: RSU Tower, 8th Floor, Suite 805, 571 Sukhumvit Road Tel: +66 (0) 2107 2007 (Soi 31), North Klongton, Watthana, Bangkok Email: [email protected] www.silklegal.com

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ASIA BUSINESS LAW JOURNAL SEPTEMBER – OCTOBER 2016