Global Business Magazine - September 2011 by Corporate ABM

gbm September 2011

global business magazine

LEADERS OF QATAR: Cre

ating a Great Society & Impacting the World

Qatar focuS

gloBal fund SerViceS

family law

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September 2011 • GBM • 1

INSIDE This Month:

worK healthy eating right

gloBal management conSultancy

Business Talk As we dust off the memories of our summer holidays, fears of a less than positive future are continuing to affect the markets and certain world economies are still struggling. Germany’s economy, however, has proved it’s worth in recent years, and we focus on its position in the future including, among others, its energy markets, the attempts to reduce its dependency on nuclear power to zero, and whether you are up to doing business in Germany. Our cover story looks at the rich but small Qatar and its leadership and initiatives, and we also cover the latest developments in withholding tax, the ‘retention rules’ and investing in Qatar. We cover various aspects of the life sciences and pharmaceutical sector in Brazil, India and the EU, and discuss the call for change in patent litigation in the sector in Canada. And as Australia is adapting to new legal landscapes in the area of family law, Japan looks set to join the Hague Child Abduction Convention. Our ﬁnancial services section this issue focuses on the developments in the Irish insurance market, including Ireland’s Central Bank’s new approach to ﬁnancial services supervision. And as many in the private equity (PE) industry believe the economy is recovering in the right direction, we give you a snapshot of the PE/venture industry, look at the India-Mauritius Treaty, Ireland as a domicile of choice and Malta as a rising fund domicile. Given recent rocky times, we look at how the state of the management consulting industry promises a much more positive outlook for the future, and report on the PM&P General Manager Compensation Survey.

coVer Story

Qatar focuS

gloBal fund SerViceS

countdown to london 2012

country profile - germany

SucceSS Story

Our expert forum debates issues such as the future of trustees in Switzerland and transfer pricing monitoring in Brazil, and we cover the UK and International Asset Based Financial Services Report 2011.

luxury Brand SerieS - BuSineSS hotelS 44

With outsourcing still ﬁrmly on the agenda, our EU outsourcing section discusses on outsourcing in the Czech Republic, and we ask: are you are ready for business process outsourcing 2.0?

mind, Body & worK - tai chi

expert forum

eu outSourcing - cZech repuBlic

life ScienceS & pharmaceuticalS

gloBal round taBle

conferenceS & eVentS

deal directory

Finally, we profile business hotels worldwide, and, as your personal health is as important as your financial health, we look at what to eat at work and the benefits of Tai Chi.

Global Business Magazine Corporate ABM Tel. 0044 (0) 121 666 6613 admin@gbmonline.net For our full Terms and Conditions please visit www.gbmonline.net

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The opinions expressed in GBM do not necessarily reﬂect those of the editors, publishers or their agents. The information provided in GBM is general and may not be applied to a speciﬁc situation. GBM does not purport to provide legal or other professional advice and takes no responsibility for actions taken on the basis of information provided herein. Legal advice should always be sought before taking any such action. Laws and government policies are constantly changing and accordingly GBM takes no responsibility for the accuracy or currency of the information provided herein. If you require particular information you are advised to consult with the article’s author or seek legal advice.

financial SerViceS - ireland

September 2011 • GBM • 3

leaderS of Qatar: creating a great Society & impacting the world

Leaders of Qatar:

Creating a Great Society & Impacting the World Qatar has the world’s third largest proven natural gas reserves - a blessing that can fuel rapid GDP growth for decades to come. However, for years the government has recognised that long-term prosperity requires economic diversification. Approximately 300,000 Qatari citizens, accompanied by hundreds of thousands of expatriates, have turned this small nation into a thought leader in institution building, diplomacy and global engagement. Leading the way are four notable figures - the Emir, the Crown Prince, Sheikha Moza, and the Prime Minister - and a selection of their related initiatives. The ‘political reformation’ started in the mid-90s with these figures; some may even argue that the real Arab Spring started in Qatar in the 1990s.

4 • GBM • September 2011

Emir Gentle, focused and determined, H H Sheikh Hamad bin Khalifa Al-Thani has presided over a period of incredible transformation in Qatar. His vision has set the tone for Qatar’s increasingly active role in international affairs. From the Doha Development Round in 2001 to the World Cup in 2022, Qatar continues to demonstrate that a small country can have an important role in setting the agenda for global politics and culture.

Crown Prince H H Sheikh Tamim bin Hamad AlThani’s many responsibilities lie in the education, healthcare and security matters of Qataris. Young and energetic, he holds the chairmanship of the Qatar Investment Authority (QIA), the sovereign wealth fund. QIA is tasked with allocating billions of surplus oil and gas revenues to reliable investments at home and around the globe. It is an important component of Qatar’s plans for an economically sustainable future. Qatar has cultivated a multi-faceted capability to engage with the international community. On the diplomatic front, the Emir has helped Qatar chart a consistently middle path, benefitting from friendly or at least stable ties with parties on opposite sides of conflicts. This kind of foreign relations hedging may be frustrating to some countries, but for political players in Lebanon and Sudan that can credit Qatar with mediating successful peace deals, being perceived as impartial to all factions gives the country credibility as a mediator. Qatar has also honed its soft power through hosting one-off events, such as the 2006 Asian Games, to sponsoring long-term initiatives such as the Al Jazeera news network. Al Jazeera, well regarded around the world for comprehensive content and balanced perspectives, demonstrates the Emir’s comparatively liberal attitude towards press freedoms. The first written Constitution came into effect in 2005, a milestone in gradual political liberalisation.

Through its main investment arms, Qatari Diar and Qatar Holdings, QIA is probably best known for its high-profile acquisitions in Harrods, Porsche, and the London Stock Exchange. While its activities tend to be located in Asia and Europe, the upcoming CityCenterDC is an exceptional entrance into US real estate, bringing the grand scale of Gulf mixed-purpose development projects to America’s capital. September 2011 • GBM • 5

leaderS of Qatar: creating a great Society & impacting the world

Sheikha Moza With mystique and a captivating personality, the prominent public role played by H H Sheikha Moza bint nasser Al-Missned demonstrates the socioeconomic freedoms enjoyed by women in Qatar. She founded Silatech in 2008, an effort to stimulate the economic productivity of young people in the Middle East. She chairs the Qatar Foundation for Education, Science and Community Development (QF), charged with fostering the educational, cultural, and technological

conditions needed to harness human capital and fuel a knowledge-based economy. The government has made an impressive commitment to QF. Education City houses branch campuses from eight prominent international universities. Qatar Science and Technology Park (QSTP) has facilities for cutting edge research, with participants including software, medical, energy, green technology, defence and automobile

notch intellectual capability. He is also chief executive of QIA.

Prime Minister Acting both as Prime Minister and Minister of Foreign Affairs, H E Sheikh Hamad bin Jassim bin Jabr Al-Thani has led the Emir’s efforts to build Qatar’s diplomatic capability. Qatar’s chief diplomat and head of government is known as ‘the world’s most charming official’. In the words of Former US Vice President Al Gore, “HBJ can do anything!” He chairs the International Advisory Council of the Brookings Doha Center, an association that typifies the country’s efforts to build top-

The upheavals of the Arab Spring have posed an opportunity for Qatar to lead efforts towards regional stability and boosting economic development. H E Sheikh Hamad bin Jassim has continued to travel the world speaking on matters of global governance, recently promoting the creation of a development bank for struggling countries in the Middle East. He consistently demonstrates that Qatar is a willing and capable agent for peace. For a country that aims to displease no one, it has recently charted, as ever, a delicately balanced policy programme - participating in the nATO-led military intervention in Libya, as well as vocally promoting the value of democratic institutions. In 2009, H E Sheikh Hamad bin Jassim presided over the Qatar Law Forum (QLF), which was organised by Institution Quraysh (iQ) together with the contribution of Harvard Law School. This QLF was held to promote a global commitment to the rule of

Mr Malik Dahlan Principal and Chief Lawyer, Institution Quraysh for Law and Policy (iQ) info@quraysh.com

6 • GBM • September 2011

companies. The upcoming Sidra Medical and Research Center will be the first academic medical centre in the Middle East. Recently, she launched Hamad Bin Khalifa University of Education City. H H Sheikha Moza heads the Arab Democracy Foundation, which promotes the development of civil society and democratic reforms in the region. While movements towards democratic governance in Qatar are effected at a slow pace and there are no formal political parties, general political discourse is relatively free, as exemplified by the Doha Debates series, held in conjunction with the BBC World news, where topics such as democracy in the Middle East are openly discussed.

law and to discuss the role of law in solving global challenges. Attendees included chief justices from around the world, the president of the European Court of Human Rights, the president of the International Court of Justice, and the chief prosecutor of the International Criminal Court. As a rich but small country situated in an area of geostrategic sensitivity, a nuanced approach to foreign relations serves Qatar’s interests well. Some might consider Qatar to be punching above its weight class in foreign affairs. The ambitious vision and concrete achievements of its leaders, however, show that Qatar is eminently practical. The country has raised its public profile by hosting increasingly notable international events and uses natural resource revenues to fund the building blocks of a diversified economy. Few countries in the world benefit from governments like Qatar’s with the vast resources and commitment to create an economically vibrant future for its citizens. The sun is rising in Qatar!

Qatar focuS

Qatar focus History. Qatar is a Middle East country that has been inhabited for many millennia. However Qatar, as we truly recognize effectively starts in 1868 when the Bahraini rule of the Al Khalifa family ceased. At the request of the Qatari nobles of the time the British effected a settlement of the Al Khalifa reign and, in 1872, the Ottoman Turks assumed occupation. The beginning of the 1st World War saw the Turks withdraw to be replaced by the Al Thani family, who are still the ruling dynasty today. The first of these rulers was Sheikh Abdullah bin Jassim Al Thani who had his position strengthened by being recognized by the British, who agreed to offer protection form any sea based aggression, and to support any land attacks. A 1934 treaty strengthened these undertakings. The discovery of oil and its subsequent development in 1935 has been the principal factor in promoting the country’s prominence in the world’s economic field, as well as its prominence in the Middle East. The significant growth attributable to this oil was felt in the 1950’s and 1960’s when social and economic development really moved on apace, could be said to be a turning point in the country’s history. In 1971 the British protectorate agreement was annulled and Qatar gained its full independence. Since that date, and in particular with it benefiting from the everincreasing oil prices, the economy has boomed. The legacy of the British presence in Qatar is that although the country is predominantly Muslim, there are a significant number of expatriates living there on a permanent and semi-permanent basis, and this has created a legal system that has a certain duality to it.

Legal System. Qatar is unique in that it operates two legal systems, Sharia and Adlia. The Sharia system is based on the teachings of the Qu’ran and is thus Islamic in application, whilst the Adlia system is a reflection of the British influence and is civil, operating on the basis of precedence. The Adlia court stands outside of the jurisdiction of the Emir and his courts and maybe said to be independent. It deals with civil matters, whereas the Sharia court has no differentiation between civil and religious laws. The court relies purely on the Qu’ran to guide the law,

8 • GBM • September 2011

but as in all cases the interpretation is selective. The rules on neither charging interest nor paying interest are flouted on a daily basis. The other issue attached to this court is that with the growing trend in fundamentalism the interpretation is now, on occasions, excessive. For this reason the rise in civil cases being heard by the Adlia court is very evident. In taking a case to the civil courts the laws are clearly prescribed. The original purpose of the establishment of the court that was to deal in disputes between foreigners and Qatar’s nationals has been retained, but the scope of the court extended. The growth in civil, criminal and labour laws has promoted the importance of the Adlia court. The Sharia courts do however continue to grow in Family Law matters. The strength of the Sharai courts is that they do influence government decisions. As to the future in these matters there would appear to be a strong case for both courts to continue in Qatar. Whilst the Adlia court has most certainly developed a niche, in that lawyers are now well skilled in Western law and thus practice in the Adlia courts on civil matters, the strength of Islam in Qatar will allow Sharia courts to continue. The problem is that a number of decisions of the Sharia courts are seen across the world at large as excessive and not in accordance with normally accepted practices, and the rise of fundamentalism is a catalyst in these matters. Dualism will exist for many years to come and this will on occasions lead to divisions with the society of Qatar, as the decisions of the Adlia court are often seen as contravening the Qu’ran.

Political status. The political and economic future of Qatar is integrally bound into the Al Thani family. They as a family have held power since 1971 and at present that power rests in perpetuity. It is however fair to say that there is a gradual evolving from traditional society to a modern welfare state, but there are distinct limits on what one may call a democratic approach. nonetheless there are now government departments established to deal with social and economic growth. The limitations of democracy can be traced to the Basic Law of Qatar 1970 which reinforce the Emir’s power and the Islamic stronghold on the country. There is rule by consensus with the right of appeal to the Emir, but this is a last resort. In effect the Emir himself cannot contradict Islamic (Sharia), law and traditions.

The one indication of a move towards a country that wishes to listen to its people is the establishment of a Consultative assembly. At present it has some 35 members but there is a move to increase to 45. This was to be establish in 2007 but has now been deferred to 2013, thus this assembly which only has consultative powers appears to have limited significance. The claim that Qatar is developing into a constitutional monarchy does not yet pass the relevant tests.

Economy. The economy is based on oil and gas exports. The rise in the price of these commodities has given growth to the Per Capita Income (PCI) as displayed by the figures below. Year

GDP

US Dollar Exchange

Inflation Index

Per Capita Income

(2000=100) (as % of USA) 1980

28,631

3.65 Qatari Rials

266.18

1985

22,829

3.63 Qatari Rials

104.82

1990

26,792

3.64 Qatari Rials

67.85

1995

29,622

3.63 Qatari Rials

55.75

2000

64,646

3.63 Qatari Rials

100

86.03

2005

137,783

3.64 Qatari Rials

115

127.05

2010

149,995

3.64 Qatari Rials

122

145.30

The fluctuations in the commodity market does impinge on the GDP and the per capita, however even allowing for the financial crisis recently experienced worldwide, it is apparent that the position of Qatar as the country with the second highest PCI behind Lichtenstein is being upheld. Indeed that PCI is synonymous with Qatar being the richest country in the Muslim world. The economy in the 70’s had an unsustainable growth of 1,1476% which, when oil prices fell in the 80’s, saw a very considerable drop to 57%. Oil demand has now allowed the growth pattern to be around 110% at present. To support the oil exports ammonia, fertilizers, petrochemicals and commercial ship repair bolster the exports. The principal partners for Qatar are Japan and South Korea. It will be seen from the above that the country has little need for

public debt which at percent is 5.2% of GDP. Looking at revenues against expenses the latest figures show a surplus, year on year, of $13 million thus adding to a stable economy. no tax is payable on earnings generated in Qatar for the nationals of that country. Additionally no Value Added Tax or Wealth Tax is payable. nonetheless some taxes are payable as follows: a) Corporation Tax which is mainly applicable to foreign companies. This tax is payable on a scale of between 5% and 35% with 35% being chargeable on all income in excess of QR 5million. b) Import duties on essential items which is imposed at a rate of 4% on most products. c) A service tax of 10% and government levy of 5% on restaurant and hotel bills. d) Self employed foreign professionals also have tax levied on their income at 10% if they are deemed as resident, whilst all nonresidents will have withholding tax levied at between 5%-7% on their gross income.

The future. What does the future hold for Qatar? The one thing that can be said with certainty is that the troubles present in the Middle East at present will not infiltrate Qatar. However there will be a need to recognize that democracy is a growing issue in that region and that Qatar cannot claim to be exempt from that. This could well lead to a bigger call for a constitutional monarchy as well as the Consultative Assembly’s size being ratified and that body assuming more than consultative powers. The greatest threat to the social development will be the fundamentalists within the Islamic faith. As social growth develops a lot of it will be in opposition to their views and Sharia Law. Careful handling of their views is needed so as not to disturb the stability of the country. The economy in the foreseeable future is soundly based as there are sufficient reserves in terms of both cash and commodities to ensure that GDP and PCI remain at their present levels, subject to world oil prices. The country attracts many people who are not of Qatar nationality to live there thus there is no labour shortage. The only possible negative on the horizon is that the exports to Japan may take a dip for a period, as yet not ascertainable, due to the recent tsunami, but Qatar would appear to have a solid future.

September 2011 • GBM • 9

Qatar focuS

Withholding tax and the ‘retention rules’ - the latest developments Qatar currently operates a tax system that includes rules that require companies to retain some payments and withhold other payments, depending on the circumstances. Some companies resident in Qatar and non-resident companies engaged in contracts in Qatar had been uncertain how these rules affected them; but the recent issuance of the final executive regulations for the tax Law no 21 of 2009 (Law 21) and Circular 2/2011 has provided additional clarity. Law 21, effective as of 1 January 2010, introduced withholding tax (WHT) on payments for services made by Qatar resident companies to non-residents who do not have a permanent establishment (PE) in Qatar. A PE will generally be a branch office. The law specified that payments made to non-residents with respect to activities not connected with a PE in Qatar would be subject to WHT of 5% of gross payments in the case of royalties and technical fees, and 7% of gross payments in the case of interest and “other services”. The definition of ‘technical services’ in the law is broad, while the definition of ‘royalties’ is similar to that used by the OECD. There was a separate announcement in January 2010 that WHT on interest would be suspended until further notice. Prior to this law, there was a retention mechanism in Qatar whereby the final payments made to resident and nonresident entities in respect of both goods and services were generally required to be retained by the customer until the other party presented a tax clearance

certificate issued by the PRTD. With the introduction of WHT, the retention mechanism has continued, albeit in a different form. In June 2011, the Ministry of Economy and Finance issued final executive regulations for Law 21. These regulations have effect from 1 July 2011. In regard to WHT, the regulations confirm that the obligation to withhold from payments applies to all companies resident in Qatar, other than entities established in the Qatar Financial Centre (QFC), whether or not they are taxable on their own income. It also applies to PEs in Qatar. If a company fails to comply with its WHT compliance requirements, it can be subject to a penalty equal to the amount of tax that has not been paid, in addition to the payment of the tax due. non-resident companies may use gross up clauses in their contracts to protect themselves from WHT in Qatar. Qatar resident companies should be aware that if they agree to such gross ups then they may have additional costs. Other key aspects of WHT confirmed in the regulations include: Technical fees: The regulations clarify these include services of engineers, experts, technicians or consultants in artistic and technical fields. Technical fees are subject to WHT only where the services are wholly or partly executed in Qatar. Interest payments: The suspension of WHT on interest has been lifted with the application of the final

PwC Declan Mordaunt Partner, International Tax Services Tel: +974 4419 2801 declan.mordaunt@qa.pwc.com www.pwc.com/middle-east

10 • GBM • September 2011

executive regulations. However, the regulations confirm that no WHT is due on interest in most circumstances. The main exception to this is that WHT will apply to interest paid by a Qatari company to any nonresident that is not a financial institution or bank. Other services: Payments for other services are subject to WHT only where the services are wholly or partly executed in Qatar. Treaty clearance: The regulations confirm that the withholding agent is required to withhold the full amount (ie, 5% or 7%) even where it appears that a valid double tax treaty with reduced WHT rates will apply. In order to enjoy the benefits of such reduced rates, the non-resident recipient of the payment must make an application to the PRTD to obtain a refund. The Ministry of Economy and Finance issued Circular 2/2011 on 12 June 2011. The main focus being the ‘retention rules’, but also circumstances in which WHT will apply. The circular specifies that in the case of resident taxpayers and permanent branches (the activities of which are not associated with a fixed period, contract or project), the final payment should be made when the taxpayer or branch submits a valid tax card. In the case of registered branches (the activities of which are not restricted to a fixed period, contract, or project), final payment also should be made upon the presentation of a valid tax card. Tax cards are issued by the Public Revenues

and Taxes Department (PRTD) to companies resident in Qatar and to non-resident companies that have a PE in Qatar. In the case of registered branches with a period of activity of one year or more on a fixed period, contract or project, retention should be made on whichever is the higher of the final payment or 3% of the value of the contract (after excluding the higher of the value of supplies and work performed outside Qatar). The retained amounts can be released once the branch produces a no objection certificate issued by the PRTD. Interim contract payments can be made in full if a tax card is presented. The circular confirms that payments to taxpayers that do not have a commercial registration, or that are registered for an activity or project of less than one year, are subject to WHT. Also that payments to taxpayers registered in the QFC should be made once the taxpayer submits a certificate issued by the QFC confirming that the taxpayer is registered there. The WHT provisions and the retention rules are important to many Qatar resident companies and to non-resident companies that provide services in Qatar or have a PE in Qatar. Such companies should ensure that they are familiar with the final executive regulations and Circular no. 2/2011 as these provide a very useful source of additional guidance on these matters.

Paul Smith Tax specialist, International Tax Services Tel: +974 4419 2809 paul.smith@qa.pwc.com

Investing in Qatar The State of Qatar is increasingly becoming a place of focus for international companies looking to establish a presence in the Middle East. Qatar is a growing regional financial and commercial hub, and has been one of the fastest-growing economies in the world over the past few years. International companies looking to invest and establish a presence in Qatar should be aware of the operation of laws in Qatar that may impact their investment decision, and the way they choose to set up their local operations. Which Qatari corporate entity? Under the Commercial Companies Law (CCL), the main types of Qatari companies are a limited liability company (LLC) and a joint stock company (public or private). LLCs are the most common vehicle used by foreign investors. Points to note are that: generally, unless an exemption is given by the Ministry of Business and Trade (MBT), there must be a Qatari partner who owns at least 51% of the shareholding; and, the minimum share capital is QAR 200,000, or more, if a greater amount for the company’s objectives is required. The Foreign Investment Law of Qatar permits foreign investors to own up to 100% of the shares

of an LLC that operates in certain sectors, including (but not limited to) agriculture, industry, health, education and tourism, all being subject to the approval of the MBT.

Other methods of doing business are through representative and branch offices or a commercial agency relationship, each with their own specific additional requirements.

A joint stock company (also referred to as a Qatari Shareholding Company or QSC) offers limited liability to shareholders and may be private or public. In the case of private joint stock companies, foreign ownership is generally limited to 49%. For public joint stock companies, listed on the Qatar Exchange, foreign ownership is limited to 25% of the share capital (unless approval is obtained from the Council of Ministers).

Foreign ownership restrictions

Among the categories of joint stock companies is the so-called article 68 company (in reference to article 68 of the CCL). Generally, at least 51% of the shares of an article 68 company are held directly or indirectly by the State of Qatar. Subject to the drafting of their articles of association, article 68 companies are not subject to many of the requirements of the CCL.

With the exception of establishing an entity in the Qatar Financial Centre (which has been the preferred route for law firms and accountancy firms), the Qatar Science and Technology Park, operating via a branch office, a representative office (which are subject to strict requirements) or if a company has obtained a special exemption from the MBT, at least 51% of the equity of every company in Qatar must be held by one or more Qatari nationals. While not provided for in the law, it is common practice to take steps to mitigate the impact of the Qatari foreign ownership restrictions. While certain arrangements can be used both to ensure the foreign investor retains operational control and minimise the dividend ‘leakage’ to the local partner, they are far

from perfect and there is the risk that such arrangements may not be enforceable by the Qatari Courts. Please note that this document is for guidance purposes only and is a short summary of key provisions: it does not constitute legal advice and specific legal advice should always be sought. To request a complete version of Allen & Overy’s guide to doing business in Qatar, or other GCC jurisdictions, please email jodie. watt@allenovery.com Allen & Overy is one of the largest international law firms with approximately 5,000 staff, including some 480 partners worldwide, with 39 offices globally. We have had a reputable presence in the Middle East for over 30 years with established offices in Doha, Abu Dhabi and Dubai together with a successful associated office in Riyadh, Saudi Arabia, staffed in aggregate with over 100 lawyers in the region.

Comparison of Qatari corporate entities

Ownership

Commercial

Representative

agency

office

Branch

LLC

Private JSC

Public JSC

Not applicable ⎯ foreign entity

100% foreign

Generally

Foreign

ownership

foreign entity or

individual or

only has a

permitted

individual may

company may

commercial

(marketing

(purpose of

own up to 49%;

own up to 49%

own up to 25%;

relationship with

operation, not

carrying out a

exemption may

percentage may

local Qatari

permitted to

specific contract

be obtained to

be increased to

agent (up to

perform services

in Qatar)

increase foreign

49%, with the

in Qatar)

ownership to

requisite

100%, with the

approvals

commission)

requisite approvals Not applicable

Not applicable

QAR 200,000

QAR 2,000,000

QAR 10,000,000

Not applicable

Two to 50

At least five

At least 30

Paid-up capital Shareholders

For enquiries please email: jodie. Robert Porter watt@allenovery.com Managing partner www.allenovery.com Allen & Overy LLP - QFC Branch 23rd Floor, Tornado Tower Al Funduq Street, West Bay, PO Box 24205, Doha, Qatar Tel: +974 4419 4444 Disclaimer: This article is for information purposes only, and is not a recommendation in any way. When embarking on a new exercise regime, you should always consult your doctor. September 2011 • GBM • 11

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worK healthy - eating right

eating healthy at work: top 10 tips Today’s era of end-to-end work results in unhealthy lifestyles where poor nutrition and high stresscombine to form to extremes. On one end, frequent sickness and exhaustion has become commonwhile on the other obesity is emerging as a problem.

Each profession has its own set of pressures. Working in the cubicle of a clean and heated office block might seem relaxing to construction workers; but such work is demanding in its own way. Privacy and personal space is limited, telephones ring all day, photocopying machines and printers cause stress. It all ends up into nothing like heaven at all. Whichever occupation you have, adjust your diet accordingly. You are what you eat, and so having proper intake can significantly improve your performance, mental capacity and your stamina. Here are our Top 10 tips for improving your diet at Work: 1. Make Breakfast a Habit: A proper breakfast is the key to a successful day. Even if you are one of those people who have no appetite in the morning before you leave, try arranging something in the early hours at work. Every office has a staff room with a microwave and fridge. 2. 8 Glasses a day: Water is important, especially in centrally heated offices where you can get easily dehydrated. Always keep water on your desk as you work and drink regularly. Your optimum target should be about 8 glasses a day. 3. Cut down on coffee: Too much caffeine can cause nervousness and make you feel restless. If you love coffee, limit yourself to two cups a day. One in the morning and another later after noon. Herbal teas are a good alternative to coffee. These will help you improve digestion and re-stock your vitamin supplies. Chamomile, fennel and mint are good choices.

14 • GBM • September 2011

Disclaimer: This article is for general information only, and should not be treated as a substitute for medical advice. Global Business Magazine is not responsible or liable for any diagnosis based on the content of this article. Always consult your doctor before commencing any kind of dietary or health and ﬁtness regime.

4. Stay Fruity: Every morning keep about 3 pieces of fruit on your desk. You’ll eventually eat them during the day. This will save you from the vending machine and be a healthy alternative. 5. Healthy Snacks: Substitute your crisps, sweets and chocolates with healthier alternatives. Sugary snacks can be necessary at times but they are the main culprits for your bad health. Try nuts instead, or dry fruit, rice crackers, whole wheat pita, oat biscuits and sesame bars. These will help you fill the hunger gaps while saving you from getting out of shape. 6. Keep your eyes healthy: There has been significant increase in macular degeneration in young people recently. One of the main factors that lead to this degeneration of the retina is prolonged exposure to bright light, like computer screens. If you work for long hours continuously on a computer, make it a

habit to take off-screen breaks to rest your eyes. Alsotake short walks every hour to keep your limbs healthy. Increasing vitamin A and E intake is also necessary as these vitamins help keep vision sharp. 7. Oils for Headaches: Tension related headaches are very frequent in office jobs. Keep a small bottle of Lavender oil essentials to help soothe headaches. 8. Stay physically active: neck and muscle pains are common if proper exercise isn’t done regularly. Make it a habit to do neck and shoulder stretches at intervals. Leave your desk for short walks after a couple of hours. Also reduce using lifts and escalators, use the stairs instead. Arrange a physical activity like gym, swimming or cycling during your break to keep your system in tune and ease mental stress. And when at the desk, sit in a correct position to reduce stress on muscles and bones.

stretches at the desk risk inflaming their lower back tissues and joints. Constant typing can cause strain on your wrists resulting in swellings and pain. Fish oils come in very helpful in preventing joint pain. Vitamin A, C and E, and selenium foods are important in maintaining healthy joints. You can get these nutrients from fruits, vegetables, fresh nuts and olive oil. Cereals, eggs and fish oils are also rich in selenium. 10. The Dinner Trap: Avoid falling into the trap of skipping lunch in exchange for a heavy dinner. Skipping lunch can make you eat an enormous dinner and you’ll end up eating more than your daily recommended allowance. It’s better to have a decent snack in the day time to help you have a balanced dinner. Make it a habit to leave some food in your plate. That way you will always be on a healthy intake pattern.

9. Easing Joint Pains: People who work long

September 2011 • GBM • 15

mergerSmanagement gloBal & acQuiSitionS conSultancy

gloBal management conSultancy The state of the management consulting industry: After rocky times, smoother sailing and a positive outlook As the global trade association for the industry, the Association of Management Consulting Firms (AMCF) has a board of 14 members made up of an equal number of leaders of small consulting firms (eg, with less than $100m in revenue) and large, wellknown firms (generally with revenue in the $ billions). We convene four board meetings a year. Part of each session is dedicated to discussing the external market and how respective segments, geographies and industry verticals are performing. Using this information as a proxy, it’s safe to say that revenue growth over the past 12 months aligns with growth projections between 4% and 5% for the foreseeable future, according to Kennedy Information. Almost all segments, including strategy, IT, HR, operational and business forensics consulting are doing well and growing nicely. This is remarkable, considering that Kennedy Information called 2009 the worst year in the history of management consulting with a 10% decrease in revenue across the board compared to 2008, which was already a year of negative growth rates. This does not mean that every segment and every geographical area are equally strong and given the current volatility of most of the world, things could change quickly. Whereas north American, German, French and northern European consulting businesses are robust, the problems with Greece are weighing down the banking and financial sector in many parts of Europe. The UK is also suffering in IT consulting and the public sector, which is understandable given the political winds currently blowing over that part of the world. Transportation, public sector and healthcare consulting are 16 • GBM • September 2011

growing in many parts of Europe, while manufacturing and M&A are not as strong as they could be. As expected, Spain, Italy, Greece and Portugal are very weak right now. In the US, the strongest sectors are those subject to intense regulatory scrutiny like financial services, healthcare, utilities, etc. Given the increasing uncertainty as to how Washington and other federal governments are going to regulate these and other industries, we don’t expect to see any significant change in the near future. Interestingly, public sector consulting in the US runs weak to very strong, depending on which firm you are talking to. The beginning of the year looked uncertain, given the administration’s wrangling over the budget, but once it was agreed to, many more requests for proposals (RFPs) were issued. However, competition is becoming fierce in this area and in the face of the ongoing uncertainty of federal budgets, this segment of the industry looks less promising than a year ago. Consumer products and manufacturing are weaker, although horizontals such as operations, supply chain and performance improvement are universally strong. Postmerger integration support has been in demand, especially from pharmaceutical firms. HR consulting’s growth in 2010 was less stellar than other segments and was more or less flat for the year. This year, however, we’re seeing growth driven by talent management, emerging markets and change management. For the moment, risk management is strong as clients debate whether they have a role in retirement plans

for their employees. Business forensics in the US has seen good growth and strength this year, although bankruptcy consulting has been one of the weaker businesses compared to previous years. Given the current economic uncertainty, it’s entirely possible this will come back in 2012 and beyond. We know from Kennedy Information’s research that the best growth in our industry for the next few years is expected in Latin America and Asia. This was also confirmed at our most recent board meeting. China and emerging markets in Southeast Asia and South America are becoming increasingly important for the growth of most large firms, especially IT companies that need to be able to deliver services globally. While the industry’s renewed strength is encouraging, every good story has a not so rosy side, and this turnaround has brought back the ‘war for talent’ among professional services industries. The management consulting industry is particularly vexed by problems attracting the younger generation to consulting. A recent AMCF survey of the leading MBA programmes revealed that management consulting has lost a little of its attractiveness among the best and brightest at large business schools, although it was still cited as one of the best career options available to recent graduates. The primary concern among students entering the workforce is, as always, the difficulty of maintaining a work/life balance. This is due primarily to the large amounts of travelling involved in a consultants’ life, as well as unclear career trajectories and the longer-term return on investment (ROI) on a consulting career path.

John F Furth President & CEO The Association of Management Consulting Firms Tel: 1 212 262 3055 jfurth@amcf.org

However, even if a young person decides against remaining in the profession, a stint in consulting is still seen as one of the best preparations for a career in business. Given the high importance of human capital in consulting, the serious players - both large and small - are keenly aware of these trends and individual firms are taking a series of actions to make the consultants’ life more aligned with graduates’ needs. Diversity initiatives have created career pathing and on-ramping initiatives for working parents and are serving to attract and retain more minorities into the consulting profession. Firms that organise themselves into regions that allow consultants who want to stay closer to home if they desire have also found it generally easier to appeal to young recruits. Many companies are also tapping new sources of talent to fill the demand, such as non-MBA graduate, undergraduate and PhD programmes, clients, ‘boomerang’ consultants (ie, those who left the industry who might be interested in returning), and so on. So, what does the future hold for the management consulting industry? The recent trend in M&A is no doubt going to increase rather than decrease. PricewaterhouseCoopers’ recent buying spree, as seen in the acquisitions of Diamond Technology Consulting and PRTM, will likely continue unabated. The other Big Four firms and the IT houses will likely follow suit. In HR consulting, the recent mega-mergers of Towers Perrin and Watson Wyatt, as well as Aon and Hewitt, have more or less formed a Big Three in that segment if you include Mercer. Although we are seeing a number of smaller acquisitions in this segment, it’s

doubtful that another large merger will happen in the near future. The small deals that the strategy and business forensic firms favour to fill in holes and or strengthen certain functional horizontals and/or industry verticals will continue. But what about the next big idea in consulting? That, of course, is the eternal question: We went from the first ‘big idea’ of strategic planning in the 70s to IT implementations to business process reengineering to a multitude of ideas and methodologies in the new millennium. Is business analytics and optimisation - which uses high-powered computing and thinking to make sense of the reams of data residing in companies’ IT systems - the next big new idea or is it just a good way to make money? It will most likely take a great thinker with lots of curiosity on the order of a Michael Porter, Michael Hammer or Jim Champy to identify that for us. The good news is that whenever there is uncertainty and confusion, there is a great need for consultants. That said, this is an industry that needs to innovate with new ideas and methodologies and fresh talent. Should we lose sight of that, we may find the demand for our services declining. AMCF AMCF is the premier international association of firms engaged in the practice of consulting to management. As such, AMCF helps its members cope with the rapid changes affecting their practices today. Headquartered in new York, AMCF serves as a resource for information on the management of a consulting practice. It provides a forum for the exchange of ideas, helping consultants to better understand

developments within the profession and to capitalise on new opportunities. The mission of AMCF is to be the collective voice for the community of management consulting firms from around the world, promoting knowledge exchange and high professional standards. It does this by helping members strengthen their senior management teams through value-driven programmes, research and communications. The association also promotes a better understanding of the profession among the business community, government, academia and the public. AMCF represents leading management consulting firms worldwide. Its membership is diverse: large and small firms and traditional management consultants, as well as providers of professional services, generalists and specialists, single-office firms along with multinational organisations. A principal objective of AMCF is to develop and enforce rigorous membership requirements. Members pledge to uphold a strict code of ethics in order to maintain the highest standards of professional practice. Membership in AMCF is a recognised mark of experience, stability, competence and integrity, and is limited to those firms that meet established minimum size requirements and that have been in operation for at least five years. Membership is attained by firms that meet the highest standards of professional practice, based on the recommendation and endorsement of both peers and clients. For more information and/or to discuss how your firm can get more involved with the activities of AMCF, please contact John F Furth, president & CEO of the Association of Management Consulting Firms. September 2011 • GBM • 17

gloBal management conSultancy

USA

PM&P General Manager Compensation Survey A good general manager (GM) can make the difference between success and failure. While it is a common position at large, diversified or multi-national organisations, the varied circumstances of the GM’s role and influence can have a significant impact on pay levels. The PM&P General Manager Compensation Survey provides detailed data to help organisations understand the range of pay provided for this critical position around the world. What makes a diﬀerence in GM pay? Revenue responsibility: From a role perspective, the most important factor in pay levels is the size of the business unit being managed. Within the US, for every $1 of increased revenue responsibility, incumbents receive an additional $255 in earnings (base, bonus, and LTI awards). Reporting relationships: The number of levels from the CEO also plays an important role in determining compensation. The further away the GM is from the CEO, and therefore the decreased autonomy afforded to the employee, the lower the compensation level.

A direct report to the CEO in the US is paid 33% more than a GM with the same level of revenue responsibility who is two or three levels below the CEO. Geographic Responsibility: GMs responsible for multiple countries are paid more than those managing a single country. Similarly, those responsible for an entire region (or global responsibility) receive more than those with responsibility for multiple countries.

ranging from the Fortune 500 to not-forprofits, as well as emerging high-growth companies. These organisations rely on Pearl Meyer & Partners to develop programmes that align rewards with long-term business goals to create value for all stakeholders; shareholders, executives, and employees. Pearl Meyer & Partners has offices in new York, Atlanta, Boston, Charlotte, Chicago, Houston, Los Angeles, San Francisco and San Jose.

The most recent General Manager Compensation Survey included: 14 countries; 60 participating organisations; 770 incumbents; base, total cash compensation, total direct compensation; summary results by country; and, an interactive regression tool allowing you to enter your own revenue assumptions and view predicted compensation The 2011 survey is currently underway. The full survey report will be available at no fee to participating organisations. We invite you to become a participant by sending an email to surveys@pearlmeyer.com. About Pearl Meyer & Partners For more than 20 years, Pearl Meyer & Partners (www.pearlmeyer.com) has served as a trusted independent adviser to boards and their senior management in the areas of compensation governance, strategy and programme design. Pearl Meyer & Partners provides comprehensive solutions to complex compensation challenges for companies

Pearl Meyer & Partners Ken Cardinal Managing director Tel: 508-630-1473 ken.cardinal@pearlmeyer.com www.pearlmeyer.com

18 • GBM • September 2011

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September 2011 • GBM • 19

gloBal fund SerViceS report

global fund Services report A snapshot of the PE/venture industry As we all know, trends are often born of the existing situation and coloured by current events. We continue to be regularly reminded of this fact, noting that our realities can change at any moment. In 2010, the talk was about recovery. However, in August 2011, much of the talk in the press, the workplace and at dinner parties centres around how the US and the European economies continue to struggle, how the markets continue to react to fears of new setbacks, defaults, the possibility of a double-dip recession and how China is growing as a world economic power. In recent months, the economies of the world, as well as the equity and venture capital industries, have been affected, if not directly then

Amir Gal-Or is the founder and managing partner of Infinity Group. Unit 3501 Lippo Centre, Tower 1, 89 Queensway Road, Admiralty Hong-Kong Office Phone: +852-21869016

20 â&#x20AC;˘ GBM â&#x20AC;˘ September 2011

$ $$ peripherally by both natural events (tsunamis and earth quakes) as well as manmade ones - nuclear power plant melt downs, the passionate debate and the subsequent raising of the debt ceiling in the US, the downgrading by Standard & Poor’s of the US government’s rating from AAA to AA+, the pending American presidential election and that country’s continuously staggering unemployment rate, the sovereign debt crisis in Europe and the implementation in China of a stimulus plan described as roughly $500bn (‘Economic Crisis and Market Upheavals’, nYT, 14 August 2011). Taking all of this into account, it is interesting to note that the various private equity (PE) industry reports published in the past couple of months show that although slower than most would have liked, and many had predicted in 2010, many believe that the economic recovery is in the right direction. So, let’s assume we’re in the right direction. What does this mean to the venture and PE industries in terms of investment opportunities, IPOs, M&As and prospects for the future? In January 2011, 207 PE fund managers worldwide were polled for a survey published on 18 May 2011 by Rothstein Kass entitled ‘Private Equity in 2011 Industry Trend Report’. Of the total, 80% think there will be more attractive investment opportunities in 2011 than in 2010. In addition, 67% of those surveyed think that there will be increased IPO activity by private equity portfolio companies this year as well. The respondents, to the 2011 Global Venture Capital Survey sponsored by Deloitte and the national Venture Capital Association and announced in a press release on 22 June 2011, were less optimistic about the IPO market. More than 80% of the global venture capitalists surveyed for this report believe that the current IPO activity levels in their home countries are too low to support the health of the venture capital industry in their respective countries. Mark Jensen, a partner at Deloitte and Touche LLP and national managing partner for venture capital services, stated in the press release that: “Clearly the industry continues to feel the ripple effects of the global economic downturn - most notably in the form of limited exit opportunities. However, with signs of improvement in the economy and easing of the liquidity crisis, the tide may be turning. Innovation continues to be an important drive in our economic health and a strong exit marketplace is critical to the venture capital ecosystem driving much of that innovation.” The Deloitte survey cited the IT, healthcare services and cleantech sectors as the most promising in terms of innovation. Sixtynine percent of those surveyed in the Deloitte report cited a surge in investment in cloud computing, while 65% plan to increase investment in social and new media. Moreover, 62% of those polled plan to increase investment in clean technology, while 26% plan to maintain their existing levels in this sector. M&A activity also appears to be picking up in various parts of the world. According to a 19 April 2011 report published by Roland Berger Strategy Consultants, since 2009 when the European private equity market bottomed out, it has since been gaining noticeable momentum. “M&A transactions rose 52% to EUR 36 billion in 2010, a positive trend”, that some believe will continue in 2011. Study author Gerd Sievers, a partner at Roland Berger in the Corporate Finance Competence Center, explained: “Fresh movement came into the private equity market in 2010 following the sharp downturn in 2009… (this noted)… we are still a long way from regaining pre-crisis levels.” The transaction volume on the European private equity market had reached €54bn in 2008, about 50% higher than in 2010. Long way or not, the increase of M&As sheds light on yet another emerging trend. According to the Roland Berger report: “In the crisis of 2009, it was clear that Asian investors were keeping a low

profile when it came to takeovers of European companies. By 2010, however, their interest was already rising again….the number of M&A transactions in Europe rose from 13 in 2009 to 18 in 2010.” The reasons for this? Sievers suggests: “By acquiring European companies, foreign investors gain access to important technologies and Western European customers…this is an important step toward advancing the internationalism of their business.” Let’s now take this one step further and please indulge me as I share some personal experience. In the last year, Infinity Group has witnessed a growing trend. It is a theme that we have dealt with in previous years, but not as the growing ‘trend’ we are experiencing in 2011. Chinese companies are now not only looking for innovative technology outside of China, but also for the right model to acquire such technology, the appropriate business channels to do so and the possibilities of opening corresponding research and development (R&D) centres, also outside of China. More and more companies are looking for advice on such matters, as well as access to technological innovation, know-how and, of course, a global network that reaches the world’s innovation hot spots in Europe, the US and Israel. From our understanding, the reasons for reaching ‘outward’ vary: companies are looking to create a differentiation in the global market; they are also responding to encouragement by the Chinese government documented in the 12th five-year plan; these certain companies have a drive to position their ‘product’ as global technology; technology innovation from outside of China is viewed as a source for new thinking and ideas; by reaching outside of China, these companies believe they may reduce the ‘China risk’; most of the companies are attracted to the concept of a new market and taking advantage of the low prices now available in western markets; and, finally, quite simply, they are curious about the possibilities of venturing outside of China. And again, ‘outside’ could mean any hub of technological innovation, be it the US, Israel, Europe or elsewhere. They are looking for cross border deals. not surprisingly, cross-border deals were deemed as the most attractive deal type for 2010, according to 68% of those who responded to a survey by Bloomberg and published in its 2011 M&A Outlook report. Interesting, this 68% has been proven correct: in 2010, 49% of the global M&A volume was from cross-border transactions, a significant increase from 39% in 2009, and 30% six years ago. Inside China, the M&A market boomed as well, both in the number of announced deals and the disclosed amount in 2010. 2,771 M&As were announced, posting a 13.80% sequential increase, and a total amount of US$177.21bn were involved, up 35.87% compared with the previous year. In total, 1,798 deals were completed, up 6.14% on a sequential basis, and a total amount of US$8.202bn was disclosed for the year, up 62.57% (China Venture, ‘Annual Statistics & Analysis of China’s M&As-2010’, 22 March 2011.) Today, China is an island of stability and growth. Although it can’t solve all of the global problems, it is highly likely that much of the venture activity of the future may not only be with the entrepreneurs of China, but also centred in China. In Q1 2011 alone, a total 25 new funds were closed in Q1’11, up 66.7% quarter-on-quarter and 38.9% year-on-year; the fundraising amount surged to US$8.92bn, 4.33 and 3.04 times respectively of that in the previous quarter and year. Of the 25 new funds, 18 were raised by domestic institutions and the other seven ones were launched by foreign firms. In addition to the funds closed, there were 19 new funds initiated, 15 ones of which disclosed a total of target fundraising amount of US$14.90bn. (zero2IPO Research Center, 18 April 2011). Though activity has so far been down in 2011, it is likely that China will continue to be fertile ground for the venture industry.

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gloBal fund SerViceS report

Rising fund domicile

Dr Joseph Ghio Partner Fenech & Fenech Advocates joseph.ghio@fenlex.com Fenech & Fenech Advocates 198, Old Bakery Street Valletta VLT 1455 Malta

Supported by a substantial increase in fund administration capacity, Malta is now recognised as a fully-fledged funds domicile allowing costeffective access to the European and international markets. The robust but flexible regulatory framework, supervised by a pragmatic and prompt single regulatory authority, makes the island a domicile of choice for the establishment of investment funds. not only are local set-up and servicing costs much lower than in other European jurisdictions such as Ireland and Luxembourg, but also the processing of licensing applications is quicker. In november 2007, Malta was the first EU member state to introduce UCITS III and has fully implemented MiFID. Malta also implemented the new UCITS IV Directive on 1 July 2011, enabling fund mangers licensed in one member state to manage cross- border UCITS set up in other member states. More recently, Malta is also seeking to attract Sharia-compliant funds and operators in the financial services sector as part of the government’s strategic commitment to continuing on the road to making Malta a centre of excellence for financial services, the fastest growing sector of the Maltese economy. The island’s cultural and historical links with the Middle East and north Africa also help attract more players to enter European markets through Malta. Maltese hedge funds take the form of ‘professional investor funds’ or ‘PIFs’, most commonly set up as an investment company with variable or fixed share capital with a multi-fund or umbrella fund structure, divided into three categories (targeting investors who must satisfy eligibility criteria). With demand for UCITS products witnessing unprecedented growth and the expected wideranging effect of new European regulation on the hedge fund industry, Malta’s appeal as a costeffective gateway to the EU offering unrivalled opportunities continues to increase. Approval by the EU parliament of the final text of the Alternative Investment Fund Managers Directive brought a sigh of relief to those concerned about how an uncertain regulatory environment was affecting the industry in a post-financial crises world. Although the directive is here to stay, Level II details are still being worked out by the European Securities and Markets Authority (ESMA) before implementation by member states by 2013.

MALTA

The regulatory landscape is, therefore, set to remain in a state of flux for some time to come as EU authorities transpose the AIFM framework into domestic laws. Taxation, however, will remain dependant on the jurisdictions from where and in which one decides to do business and will be unaffected by the passporting mechanisms contemplated by the AIFM rules. Fund managers set-up and licensed in Malta are subject to a standard rate of corporate tax of 35%.

22 • GBM • September 2011

While management fees and other sources of income of the fund manager will be taxed at this rate, when the fund manager distributes dividend out of profits on which it has paid tax no further Malta tax is due by the shareholder. Through a full imputation system, the only one adopted throughout the EU, shareholders can benefit from a tax credit paid by the company distributing the dividend. Shareholders can claim a refund of tax paid in Malta by the Maltese company, reducing the effective tax rate after the refund to roughly 5%. The standard refund, such as for general business profits, is 6/7th of the Malta tax at the corporate rate of 35% charged to the company grossed up with any relieved foreign tax, subject to certain conditions. The refund would be of 5/7th in the case of profits derived from passive interest and royalties, going up to 100% in the case of profits derived from a participating holding. Tax refunds are tax exempt and are payable by the Maltese authorities within a statutory period of 14 days. Income derived from a participating holding, normally a 10% or more equity holding or partnership interest, in a non-resident entity or the disposal thereof is exempt from tax subject to antiabuse provisions being satisfied. Malta has a wide network of double tax treaties, mostly based on the Organisation for Economic Co-operation and Development (OECD) Model Convention with around 60 countries including the major European trading nations, Canada and China. A revised treaty with the US is effective from 1 January 2011. Transparency of the fiscal environment is also reflected in the ability to obtain advanced revenue rulings from the Maltese tax authorities in specified circumstances to confirm certain anti-avoidance provisions would not apply to a particular transaction entered into for bona fide commercial purposes and to confirm the tax treatment of transactions involving financial instruments and international business activities. Investment funds licensed in Malta with over 15% of their assets outside Malta are tax neutral and are not subject to tax in Malta on income and capital gains (other than in the case of income from immovable property in Malta). Distributions made to non-resident investors in Maltese funds and capital gains made on redemption of holdings by non-resident investors are not subject to tax in Malta. Transfers of units in Maltese funds also benefit from an exemption from stamp duty. Fund management, fund administration and custody services are not subject to value added tax.

$ $$ Structuring an alternative investment fund in Malta

In seeking to obtain authorisation from the MFSA, the nature of the PIF, as well as its targeted investors, must be considered. All parties involved in the establishment and management of the PIF must present qualities of good standing and competence. The ‘fit and proper’ test is one of the main considerations of the MFSA when issuing authorisations. It is interesting to note that none of the service providers to the PIF (typically the manager, the administrator, the prime broker and the custodian) are required to be authorised in Malta so long as they are subject to prudential supervision in an acceptable jurisdiction. Before the PIF structure can be defined, the promoters of the fund must first identify one of the three main categories of PIFs to fit their target investor market. A PIF can be promoted to experienced, qualifying or extraordinary investors. Each category refers primarily to the quality and nature of the targeted investor based on expertise, knowledge and, in some cases, net worth. An experienced investor must invest a minimum of €10,000 (or equivalent). In the case of qualifying and extraordinary investors, the minimum quotas stand at €75,000 and €750,000 (or equivalent) respectively. The MFSA Rules generally do not impose investment restrictions, save in the case of funds targeting experienced investors (being quasiretail funds), regarding leverage, exposure to single issuers and transactions in financial derivative instruments. In the case of qualifying and extraordinary investor PIFs, no such restrictions are imposed, thus rendering them suitable vehicles for any type of alternative investment fund. The flexibility afforded to the PIF in the way its structure is constituted allows the promoters the ability to tailor the PIF according to different classes of investors and types of investments. The PIF may be formed as an umbrella structure, allowing for segregation of assets and liabilities between sub-funds having different investment strategies. A Maltese PIF is not subject to minimum share capital requirements, unless the PIF is selfmanaged. Malta does not have a ‘promoter regime’ and any interested fund promoter can submit a PIF application. PIFs are subject to tax, but are then exempt from tax with some exceptions on restricted categories

of Malta-based assets and Maltese real estate. Similarly, any capital gains made by non-Malta investors are not subject to any withholding tax. Furthermore, the fact that Malta has in place nearly 60 double taxation treaties could be beneficial in certain cases, depending on the particular treaty and the fund’s investment strategy. The PIF framework has proven to be a favourite with promoters seeking to establish private equity and real estate/property funds. Both these fund structures can make use of the SICAV or the limited partnership models, with the former being the preferred choice in the majority of cases. Typically, private equity and real estate PIFs are established as closed-ended structures requiring drawdowns on investors. Such PIFs almost invariably make use of special purpose vehicles (SPVs) as part of their investment strategies. Moreover, given the closedended structure of the PIF, the duration of the fund would be pre-defined, imposing a mandatory redemption on the investors at the end of the investment period.

Ganado & Associates, Advocates Andre zerafa Partner Tel: 00356 21235406 Fax - 00356 21225908 lawfirm@jmganado.com www.jmganado.com

Despite the tumultuous waters that have plagued the financial services markets across the world following the 2008 financial crisis, Malta has not only continued to sail unhindered but has also gained ground in its ranking in terms of financial market development from 13th to 11th (out of a total of 139 countries) in the World Economic Forum Global Competitiveness Report for 20102011. The number of PIFs registered in Malta has also increased on a year-on-year basis. This bodes well for the future, especially in the context of the AIFM Directive, for which Malta is preparing in earnest. Ganado & Associates, Advocates is currently the largest legal firm in Malta, with over 50 lawyers (13 partners) supported by over 60 staff. The firm is specialised mainly in financial services (banking, investment services and funds, insurance and trusts) and shipping (litigation, shipping companies and finance and ship registration). It has departments in other practice areas such as general litigation, general corporate, corporate secretarial and governance, taxation and labour law. new areas of development are environmental, energy and aviation law.

MALTA

The Maltese professional investor fund or ‘PIF’ is the predominant vehicle for all forms of alternative investment strategies, whether hedge, real estate or private equity. Contrary to its retail counterpart, the PIF enjoys the benefit of softer regulation by the Malta Financial Services Authority (MFSA). A PIF could take the form of a SICAV (open-ended company with variable share capital), a limited partnership, a unit trust or a foundation.

September 2011 • GBM • 23

gloBal fund SerViceS report

UNITED STATES

Michael J. Liccar & Company LLC, CPAs Michael J Liccar Director Tel: 312/922-6601 mliccar@liccar.com www.liccar.com

Fund Administration Choosing fund administrators: More to the math than just nAV Best practices suggest the fund manager engage an independent fund administrator to handle the financial reporting, banking and investor services of their funds. Some managers choose an administrator based primarily upon the administrator’s published net asset value (nAV) under management. However, the size of nAV handled may not necessarily be a good measure in determining the cost/benefit and quality of the services provided. Each fund strategy may have its own unique financial and tax reporting requirements and it is important to match up those requirements with the experience and depth of expertise of the administrator’s staff. A choice based upon ‘name brand’ recognition may not necessarily be best. Institutions may have a high turnover of staff and not necessarily deep pockets. It wasn’t that long ago that name brands like Lehman Brothers and Bear Stearns were considered beyond reproach. US hedge funds are typically formed as limited partnerships or limited liability companies, which are governed by their general partners or managing members, respectively, who are typically the fund manager. Twenty years ago, many fund managers handled fund administration internally and the choices among third party administrators were limited as the field was populated mostly by banks and a cottage industry of small boutiques. Unlike certain offshore jurisdictions (many of whom require strict licensing and net capital requirements), the fund administration business in the US is largely unregulated. The US requires no licensing, professional designations, education requirements or any other form of regulatory registration for a fund administrator. US fund administrators are not required to be audited nor are their staff required to be tested for technical proficiency. Consequently, virtually anyone in the US can designate themselves as a fund administrator, including those with little experience or whose backgrounds in the industry may be more geared towards marketing or operations side of the industry. Check the business backgrounds of the administrator’s principals and professional staff. Look for CPAs and MBAs with significant experience in fund accounting, brokerage operations and financial reporting. If the hedge fund is regulated, look for professionals with experience in Commodity Futures Trading Commission (CFTC)/ national Futures Association (nFA) or US Securities and Exchange Commission (SEC) reporting. The US tax regulations affecting hedge funds are onerous and contain pitfalls for costly errors. If the fund administrator is handling tax reporting for the fund, look for professional tax staff (preferably CPAs with advanced degrees in taxation) with considerable tax experience in the fund and securities/commodities area. As a fund’s auditors may require that the administrator prepare workpapers and draft the fund’s annual financial statements and footnotes, the administrator’s staff must be knowledgeable in US GAAP and IFRS.

24 • GBM • September 2011

If you are operating a regulated business, it may be important to consider whether your administrator is within easy reach of your time zone and domicile. For example, being subject to a surprise regulatory exam when your administrator’s accounting staff is in a time zone 12 hours away may be more than an inconvenience. To the extent that the administrator is involved with trade reconciliation and balancing, their staff should include those with significant backgrounds in similar back office operations of a hedge fund or brokerage firm. Beware of potential conflicts of interest. As fund administrators are unregulated, certain arrangements may be legal, but contain inherent conflicts nevertheless. If a fund administrator is affiliated with an existing fund manager, then determine whether there are adequate safeguards in place to negate any potential conflicts between administrator (with access to its clients’ confidential trading and investor information) and the affiliated fund manager. Also, be wary of administrators who introduce investors for a fee. Most fund administrators traditionally charge their fees based on a percentage of the fund’s nAV or a minimum, whichever is greater. However, there is not necessarily a relationship between the size of the fund’s nAV and the amount of work necessary in providing its accounting and administration. For example, a $500m low-turnover value fund with 100 investors may involve significantly less staff time than a $50m multi-strategy fund with 50 investors; such differences should be priced accordingly. As to the suite of services provided, some fund administrators offer an ‘all-or-none’ package rather than price and offer services on an à la carte basis. Thus, the fund may be subject to paying for services that it really doesn’t want or use, which can be especially difficult for new fund managers. Some attributes to look for in an administrator include: professional staff with many years of experience in the industry; location and time zone commensurate with manager; flexibility in scope of services; pricing commensurate with the work required; robust financial and investor reporting systems; and, whether the administrator has received a satisfactory SSAE no. 16 Report (formerly SAS 70). Some warning signs may include: slow turnaround; inexperienced staff; difficulty in accessing senior decision makers; high turnover of staff or clients; short time in business; majority of assets centred around a few client relationships; reporting systems not flexible or require excessive time or expense to customise needs of the fund; issues with regulatory agencies or taxing bodies; outstanding litigation; or, a poor credit rating. Obviously, much more can be said, but overall, know your administrator even better than you know your clients.

$ $$ India-Mauritius Treaty: The haze continues

However, Mauritius as an investing jurisdiction has not found favour with the Indian Revenue authorities (IRA), which have identified scores of entities lacking substantive presence in Mauritius, but using the Mauritius Treaty to claim waiver from capital gains tax in India. When the controversial Mauritius Treaty was examined by the Supreme Court of India in the matter of Azadi Bachao Andolan v Union of India, it was clear that it was for the parliament to take appropriate action in the matter and, in the absence of a prohibition, one could not deny the benefits of a treaty on the basis of the belief that ‘treaty shopping’ was not permissible. While there was enough comfort on the eligibility of benefits under the Mauritius Treaty based on a ‘tax residency certificate’ issued by the Mauritius Revenue Authorities (including the ruling of the Authority of Advance Rulings (AAR) in the case of E*Trade Mauritius), there have been rulings that seem to raise a number of questions around the substance and business presence of the entity in Mauritius, which has resulted into uncertainty. The IRA has also filed a special leave petition (SLP) before the Supreme Court challenging the AAR’s decision. At this stage, a notice has been sent to E*Trade Mauritius seeking its response to the SLP filed by the IRA. In addition, recently, the Bombay High Court denied eligibility of the Mauritius entity to claim benefits of the Mauritius Treaty citing inadequate substance in Mauritius. However, it may be pertinent to note that the aforesaid rulings are not in the context of FIIs. Over the past few years, it has often been reported in the media that the Government of India (GOI) has sought to review the Mauritius Treaty. Accordingly, any news on the re negotiation of the Mauritius Treaty evokes a chain reaction involving the IRA, investors, stock markets followed by clarifications from the government. Recently, a similar reaction to the potential renegotiation of the Mauritius Treaty (to eliminate the capital gains tax exemption for investors) demonstrated a negative impact on the stock markets, which ultimately required pacification from the Finance Ministry. In any case, the attempts to renegotiate the Mauritius Treaty have so far not resulted in a new or revised treaty.

To prevent Mauritius Treaty abuse, India may also seek to include a limitation on benefits (LOB) article specifying conditions for claiming the benefits of the exemption, such as in the treaties signed with US or Singapore. The possibility of a unilateral termination in the case of a bilateral treaty (that too with a preferred investment partner like Mauritius) looks remote. With talks of renegotiation of the Mauritius Treaty on the one hand, the Indian government is taking measured steps to tackle this issue in one of the most controversial proposal on the policy front, the proposed introduction of the Direct Taxes Code Bill, 2010 (DTC), which seeks to overhaul the Indian tax system. The DTC, which introduces the General Anti-Avoidance Rules (GAAR), had been tabled in the Indian parliament in August last year and was subsequently referred to the Parliamentary Standing Committee on Finance and is pending their approval. The much-debated GAAR under the DTC provides a lever to the IRA to ignore the treaty if tax avoidance is the prime objective. The government is likely to issue guidelines for invoking the GAAR, but the approach to be adopted is unclear and the implementation timeframe has not been defined as yet.

Mr Sameer Gupta Partner – Financial Services Ernst & Young Private Limited Tel: +91 22 6192 0480 Mob: +91 98201 55059 sameer.gupta@in.ey.com Ms Avan Badshaw Partner – Financial Services Ernst & Young Private Limited Tel: +91 22 6192 0700 Mob: +91 98201 27520 avan.badshaw@in.ey.com

While the DTC was proposed to be brought into effect from 1 April 2012, recent press reports suggest that actual implementation may not take place until 1 April 2013. Although there is no certainty on the timing or scope of the renegotiation, any change in the capital gains tax exemption or inclusion of a LOB article in the Treaty could have a significant impact on structuring of investments into India through Mauritius. It is also important to note that even though the India-Singapore Tax Treaty also provides for a similar capital gains exemption, subject to LOB conditions being satisfied, the status of the exemption is linked to and is co terminus with the continuity of the exemption as under the Mauritius Treaty. In the meantime, uncertainties will continue to increase the ambiguity that currently prevails over the matter. FIIs are advised to watch the development carefully and, at the same time, assess the impact on their current and future structuring of investments into India, especially given the proposed introduction of GAAR as part of the DTC, or perhaps earlier under the current tax law in case the DTC implementation date is delayed.

INDIA

Mauritius has noticeably been the most prominent jurisdiction for inbound investments in India, particularly under the foreign institutional investor (FII) route. Among others, a key factor leading to preference of this island nation for India-bound investments over other investing jurisdictions is the beneficial India Mauritius Tax Treaty (Mauritius Treaty) signed in 1982, which exempts capital gains from tax upon exit from Indian investments.

September 2011 • GBM • 25

gloBal fund SerViceS report

Overview of establishing a private equity fund

Jeremy Bell and Piers Warburton Ashurst LLP Broadwalk House 5 Appold Street London EC2A 2HA T: +44 (0)20 7638 1111 jeremy.bell@ashurst.com piers.warburton@ashurst.com www.ashurst.com

UNITED

Fund counsel will need to be appointed to advise and guide the fund manager through each of these stages. Below, we explain briefly each of these stages in turn. Structuring and key terms: Structuring requires tax and regulatory advice to determine the optimum management structure, vehicle and jurisdiction for the fund. Relevant factors will include: where the management team is based; the jurisdiction(s) of the proposed investments; anticipated tax status/jurisdictions of investors; and, how the carried interest participants are taxed. For example, a typical private equity fund structure targeting European investments that is managed by a team in London may comprise an English limited partnership as the fund vehicle with the management team operating as an FSA authorised English limited liability partnership (LLP). The key terms of the fund, which will form part of the marketing documentation, will concern, among others: the investment objective of the fund; maximum size of the fund; management fees; carried interest; investment period term; maximum fund life; permitted reinvestment of proceeds; and, the allocation policy of the manager among funds under its management. Production of a private placement memorandum (PPM): The PPM is usually the key marketing document for the fund. It will set out: the investment objective and strategy; the experience and track record of the management team; how the decision making process will run; the key terms; risk factors and taxation matters that investors need to consider before making an investment (although investors will need to take their own tax advice). All statements of fact or opinion made in the PPM will need to be carefully checked by the fund manager who will normally retain detailed evidence of the basis on which the statements have been made. Interested investors can be expected to undertake due diligence on the manager and the investment proposition and then make their in principle decision of the amount they wish to commit, often before they instruct their own lawyers to review the detailed documentation for the fund.

KINGDOM

The process of establishing a private equity fund is usually divided into five stages: structuring and key terms; production of a private placement memorandum and commencing marketing to prospective investors; drafting the constitutional documentation and establishing the structure of the fund; negotiations with prospective investors; and, accepting investors at a closing.

Drafting the constitutional documentation and establishing the structure of the fund: This stage can be undertaken during the marketing stage, or delayed pending sufficient indications of investor interest. For an onshore UK limited partnership, the main documentation will usually be: a limited partnership agreement (or agreements if one or

26 â&#x20AC;˘ GBM â&#x20AC;˘ September 2011

more parallel vehicles are being formed to cater for particular investor issues); a general partner partnership agreement (often the general partner itself is a limited partnership); a management agreement appointing the FSA authorised manager; application forms for the investors (comprising detailed information gathering representations about the status of the investor); and, legal opinion(s) concerning the constitution of the fund. Establishing the structure itself will involve registering new corporate vehicle(s) and the partnership and making necessary filings. negotiations with prospective investors: Investors in private equity funds are typically sophisticated and experienced. The fund manager should expect a reasonable level of negotiation both on the main fund documents and by way of side letters. In an era where investors may have more negotiating power than in previous years, side letter requests are becoming more detailed. Significant investors may seek, for example, bespoke fee arrangements or their own detailed reporting requirements. Accepting investors at a closing: Fund managers need to judge the appropriate threshold at which they will hold a first closing. It should be sufficient to allow the fund to fulfil its investment objective even if no further investors are admitted at a subsequent closing, and also show some momentum to the fund raising to increase the appetite for second close investors. Some investors have a policy of participating only at subsequent closings, giving them the opportunity to see who has committed to the fund and what investments have been made during the early life of the fund. Subsequent close investors will participate on terms that they will share in investments already made (subject to paying a premium for the benefit of existing investors whose interests are being diluted). At a closing, the general partner and the manager of the fund will hold board meetings resolving to admit the investors and accept their side letters, legal opinions will be issued and filings made. The above is a brief overview of a process that is often complicated and has many permutations. The key, we believe, to a successful fund is to invest time and effort in the structuring and documentation of the fund. Going to the market with a position that has been carefully thought through and is within accepted market parameters can pay dividends later in terms of negotiation with investors on that fund, operational ease of the fund and also setting the parameters for successor funds. Ashurst has a substantial international funds team backed by years of experience, and we are delighted to meet and talk with fund managers about how we can help with their business.

$ $$ The domicile of choice for regulated funds Ireland has worked hard over the past 20 years to become one of the leading international centres for the establishment, servicing and domiciling of a broad range of funds (including ETFs, money market funds, UCITS which are complex users of derivatives and alternative funds) that are distributed internationally. Its position as one of the leading fund centres is reflected in industry facts and figures. All the major international custodian and administration companies have substantial operations in Ireland to service both Irish domiciled and non-Irish funds. As at May 2011, the total value of Irish domiciled funds was approximately €987bn. The total value of all assets administered in Ireland as at the end of April 2011 was approximately €1.8trn. The factors that have enabled Ireland to become such a successful fund centre include the support of the Irish government, complemented by the balanced approach that the Central Bank of Ireland (CBI) has taken in relation to the supporting regulation. In 1989, the Irish government was one of the first EU member

states to transpose the original Undertakings for Collective Investment in Transferable Securities (UCITS) Directive into its national law. Successive Irish governments have transposed each of the updating UCITS Directives and other funds related legislation in a timely and efficient manner. This government support has facilitated the growth of Ireland as a domicile for UCITS funds. In May 2011, the total value of assets in Irish-domiciled UCITS funds was €780bn reflecting the fact that UCITS has become the leading global brand for regulated funds. Irish UCITS are distributed in over 70 countries around the world.

is already sold successfully on a private placement basis in various jurisdictions. While we wait to see the final EU Level 2 implementing legislation for the alternative investment managers directive (AIFMD) later this year, it is expected that the QIF product will meet the new regulatory requirements. Accordingly, once AIFMD becomes effective, QIFs should be suitable for the EU fund passport that will be available under AIFMD, enabling QIFs to be sold to professional investors in EU member states similar to the way UCITS may already be passported into the retail and professional markets in other EU member states.

The Irish government also introduced legislation that facilitated the growth of the nonUCITS funds industry in Ireland. The principal non-UCITS Irish regulated fund is a qualifying investor fund (QIF). Subject to adequate disclosure in a QIF’s prospectus, very few investment restrictions or borrowing limits are applied to it. QIFs are authorised by the CBI within a day of the necessary filings being made. The QIF product

If you are considering establishing a regulated fund for distribution in Europe or other global markets, Ireland is an ideal location in which to domicile such a fund as it has the necessary legal and regulatory structures, as well as the service provider expertise to service the full spectrum of regulated funds.

of the Irish Funds Industry Association’s Legal & Regulatory Committee. Jeff Mackey is a lawyer in the financial services department of Dillon Eustace.

Brian Higgins is a partner in the financial services department of Dillon Eustace and is a member

The source for the industry figures referred to in this article is the CBI.

Brian Higgins Partner, Dillon Eustace Tel: 00353 1 667 0022 brian.higgins@dilloneustace.ie Jeff Mackey Lawyer, Dillon Eustace Tel: 00353 1 667 0022 jeff.mackey@dilloneustace.ie www.dilloneustace.ie

IRELAND

SFT Fund Administration - nestled in the cradle of fund administration The story of fund administration services began on the island of Curacao in the late 1960s. The pioneers of the industry, like Soros and Robertson, incorporated their first offshore funds in Curacao. The driving forces that made Curacao the jurisdiction of choice, first for fund domiciliation and later for administration services, still exist today. A favourable tax treaty with the US and the resulting growth in the Eurodollar market created a situation where, by the mid-80s, virtually every major US corporation had at least one finance subsidiary there. This trend brought with it an influx of financial professionals and industry know-how that still exist today. With the growth of the hedge fund concept, savvy fund managers sought to incorporate their offshore hedge funds in low-tax jurisdictions to avoid taxation at multiple levels. In response, the Internal Revenue Service (IRS) created the so-

called ‘ten commandments’ - rules designed to ensure that offshore structures were legitimately offshore and not set up there to evade US taxation. The ten commandments spurred the growth of offshore fund administration, with the largest hedge fund administrators setting up substantial operations in Curacao. Curacao provided a well-established financial services infrastructure and under the auspices of the Kingdom of the netherlands, provided a stable legal and economic climate perfect for fund administration. The introduction of the ten commandments was a boon for the fund administration business in Curacao, and the hedge fund industry has been the beneficiary of the island’s exceptional level of expertise and sophistication. While the favourable tax treaty with the US and the ten commandments have since been repealed, what remains of a long and venerable history of top-notch fund administration

in Curacao is the personnel and collective experience to provide premium fund administration services. This history is personified in the form of SFT Fund Administration. nestled in the cradle of fund administration, SFT brings to bear a dedicated team of highly qualified investment professionals providing a complete range of hedge fund services including: fund accounting and valuation; fund administration; investor relations services; and, corporate secretarial services to small-and midsized hedge funds. SFT prides itself on true flexibility and customised reporting solutions designed with the needs of the innovative manager in mind. Catering to onshore and offshore funds, SFT’s fully integrated accounting platform boasts a powerful multi-currency general ledger module, which combines all components of multiple processing systems into one, thereby increasing

Sft Fund Administration Danique Sprock Director of Global Operations Tel+599-9)732 286 dsprock@sftfunds.com www.sftfunds.com

CURACAO efficiency, reducing risk of human error, and enabling faster valuations. For SFT true flexibility and timely delivery are key when providing nAV calculations, financial statements and investor reporting. September 2011 • GBM • 27

PR I VAT E & C O R P O R AT E B A N K I N G / W E A LT H M A N AG E M E N T / C u S TO dY

Speed. Agility. Teamwork. A Winning combination for Fund Custody Services.

Our Fund Custody Service is designed for the niche / boutique fund manager. We offer a tailored and cost effective custody solution for UCITs as well as Professional Investor Fund (PIFs) structures. At Sparkasse you will find a highly dedicated and qualified team ready to support your requirements. Our services include: Subscription and Investment accounts / Portfolio Accounts / Trade desk (including access to over 16,000 sub-fund) / Settlement / Custody (safe keeping & monitoring of portfolio). Other services including on-line access / automated e-mail confirmation reporting and more. For more information on our Execution, Settlement and Custody services contact our support team on 2133 5705 or e-mail to tradedesk@sparkasse-bank-malta.com

Sparkasse Bank Malta plc 101 Townsquare, Ix-Xatt Ta’ Qui-Si-Sana, Sliema, SLM 3112 – Malta

Tel: +356 2133 5705 • Fax: +356 2133 5710 • info@sparkasse-bank-malta.com • www.sparkasse-bank-malta.com Sparkasse Bank Malta plc is authorised to conduct Banking business and to conduct Investment Services business by the Malta Financial Services Authority (MFSA).

12031_SBM_FTSE_WHITE_FP.indd 1

05/11/2010 18:20

london 2012: progress made and work to Be done On Friday 27 July 2012, the XXX Summer Olympic Games will take place in London, England. London is no stranger to hosting the Olympic Games, having had the honor in both 1908 and 1948. However, in both cases, London served as a “substitute” of sorts, standing in for Rome following the eruption of Mount Vesuvius in 1908 and stepping up in the aftermath of WWII in the 1940s. 2012 is London’s first chance to really showcase itself during an Olympic Games and it comes at an uncertain social and economic time when the city and its people could use the boost that derives from international focus.

Since the acceptance of its Olympic bid for the 2012 Games on 6 July 2005, the people of London, the whole of the United Kingdom and the committee responsible for the creation of its Olympic venues (known by their brand: London 2012) have been diligently at work. As of 27 July 2011, all major sporting venues have been reported as complete and ready for testing. Yet there are still a few areas under construction that will be completed before the torch is lit in less than a year. East London Transformed In preparation for the Games, the east end of London has undergone a total transformation for the benefit of its international guests. The city has built up the infrastructure in this formally-undeveloped part of town and turned it from a development “potential” to a full blown, modern wonder. East London will be home to most of the venues of the 2012 Games as well as the athletes in Olympic Village. Stratford, East London will host most events in its new Olympic Park in one of five main venues: Olympic Stadium, the Aquatics Centre, the Basketball Arena, the Handball Arena and the Velodrome. Most of these buildings represent permanent structures set to serve the community of East London after the Games pack up in September 2012. In addition, they all boast the title of the most sustainable buildings ever erected for Olympic use. The City even constructed a wind turbine for Olympic Park designed to provide renewable energy. Another great improvement has taken place at the Stratford Regional Station of the London Metro. Here, improvements to infrastructure for the benefit of the Games have already been felt. The Stratford Station is to be the main gateway for the Games and as a result approximately £125 million was invested in its expansion and improvement. This will have a lasting effect on rail users in the City and help many of those living in East London continue to get around for years following the 2012 events.

Work Yet to Be Done There are two final pieces of the main Olympic puzzle yet to be fully completed, though they are on schedule to finish by the spring of 2012. The first is the bulk of Olympic Village – the place where athletes live for the duration of the Games. As of 27 July 2011, London 2012 reported that three quarters of the structural work had been completed in the Athlete’s Village, meaning that bulk of the work over the next few months will take place here. In addition, the Athlete’s Village will include the construction of Chobham Academy, which is structurally still incomplete, to be used in legacy after the Games. In addition, all the structures completed for Athlete’s Village will be converted into housing for East Londoners (1,379 of which will be designated affordable housing). Chobham will serve as a new educational campus for 1,800 students who range in age from 3 through 19. Finally, London 2012 has completed its construction of the International Broadcast Centre (IBC) to be used both by the press as well as a 12,000 square foot catering village for the preparation of meals. The adjoining Main Press Centre (MPC) is where most media outlets will be stationed, though, and it is complete only in structure. Where to Go from Here In less than one year the world’s focus will come to London, UK and the 2012 Olympic Games. In an epic quest to provide sustainable, beautiful venues with a focus on the positive legacy of the Olympic Games, London is set to stun the world in a few short months. September 2011 • GBM • 29

country profile - germany

Country Proﬁle - Germany Steffen Ehninger London Representative Germany Trade & Invest Tel: +44 20 7976 4130 steffen.ehninger@gtai.de www.gtai.com

Media Contact: Andreas Bilfinger P. +49 (0)30 200 099-173 F. +49 (0)30 200 099-111 andreas.bilfinger@gtai.com www.gtai.com

Germany: Europe’s economic engine Germany’s economy is the foundation of Europe. The country is growing at a rate not seen in 20 years, unemployment is at a record low, and ‘made in Germany’ products are in demand worldwide. Despite global economic turbulence, Germany has managed to be a pillar of stability and an unexpected growth driver for the developed world. Thanks to strong exports of high-quality goods to emerging markets and a stable domestic economy, Germany’s economy is well positioned for the future. An issue of Time Magazine earlier this year touted the ‘German model’ of economic growth as a “road map for the US and other countries”. Time explained how Germany managed to rebound from the economic crisis quicker than any other industrialised nation and what this means for its competitiveness: “While […] other Europeans were gorging on debt, building too many houses and giving themselves fat pay raises, Germans were busy fixing their economy. German companies poured money into R&D and cut expenses. Loosening up the tightly regulated labor market to make it easier for firms to hire and fire helped. Union cooperation meant Germany was the only major European economy that reduced labor costs for several years after 2005. Germany churns out specialized products of such superior quality, from BMW sports cars to Kärcher cleaning equipment, that customers will pay extra for the “Made in Germany” label.” (‘How Germany Became the China of Europe’ Time Magazine, 7 March 2011.) How Germany went from one of Europe’s sluggish economies to a nimble model is remarkable. GDP growth in Germany was 3.6% in 2010, the strongest since German reunification in 1990. And despite the ongoing crisis of confidence in the US and eurozone economies, Germany’s growth for 2011 is projected at 2.6%, although many economists expect it to be even higher. Germany’s growth is led not only by the country’s ongoing export dominance, but also by strong consumer spending. The current business and investment climate has not gone unnoticed by foreign investors. Investors praise Germany as an investment location Germany’s economic boom continues to receive international attention. The assessments made by foreign investors and business leaders during and after the crisis

30 • GBM • September 2011

provide a strong indicator for the investment climate in 2011 and beyond. Each year, executives across the globe are surveyed and the latest figures are analysed. And each year, Germany comes out near the top across a wide range of categories. Countless reports confirm Germany’s attractiveness among international managers. American business executives ranked Germany the top business location in Europe for the third year in a row in the American Chamber of Commerce (AmCham Germany) Business Barometer 2011. For 2011, 87% of top American companies in Germany expect revenue growth and over half plan to hire new workers. Germany’s rapid rebound from the global economic crisis was named as a key to business success. Most recently, the 14th Annual Global CEO Survey 2011 ranked Germany fourth after China, the US and India as nations among the most important for global growth. Most impressively, Germany ranked at the top for those who prioritised quality and innovation, confirming Germany’s role as a global heavyweight. Why Germany thrives With its strategic position between the markets of Western and Eastern Europe, Germany serves as an ideal European headquarter location for global companies. Firms here can benefit from Germany’s market, the largest in Europe, and efficiently reach growing markets across the globe. This geographic advantage is backed by what the World Economic Forum has selected as the world’s runner-up for the best transport and telecommunications infrastructure, behind only the Asian hub of Hong Kong. This infrastructure allows highly innovative small and medium-sized enterprises (SMEs) to be successful. These constitute 99.6% of all companies that account for 79.5% of all employees in Germany. Many of these SMEs are surprisingly present on international markets given their size. Before they are able to succeed in international markets, SMEs have to construct solid products and deliver reliable services. Germany’s Mittelstand has been so successful at its core business that these companies have built a reputation for the entire country. The ‘made in Germany’ brand has now been a seal of quality and innovation for decades. Especially in research and development (R&D), Germany creates unique opportunities for the commercialisation of innovative processes and products. R&D in

Germany is backed by major funding. This commitment has made Germany Europe’s number one innovator, registering more than double the amount of patents as France and the UK combined. During the economic crisis year of 2009, the number of foreign direct investment (FDI) projects declined slightly, as realising new projects became increasingly difficult, due primarily to bottlenecks in global financing. Emerging from the crisis in 2010, FDI projects look to be returning to growth, as companies recognise the advantages of a large and stable low-risk market. Broken down by sector, Germany relies on a unique mix of classic heavy industry, future sectors, and services. The automotive and machinery industries are known worldwide, while the country has managed to build the most extensive renewable energy industry in the world. Photovoltaics and wind energy have been extremely successful. Given the political consensus among all major parties that renewables are the path of the future, companies have been able to thrive and find a well-developed market in Germany. The German photovoltaics market is the largest in the world, accounting for nearly one of every two solar panels installed worldwide, and the country’s wind industry is the strongest in Europe. In the wake of the Fukushima crisis in Japan, Germany decided to accelerate its exit from nuclear power, creating a number of opportunities for the further development of renewable energy. Billions will be invested in the coming years in the energy supply, including new smart grid technology and energy efficiency. Germany is the ideal market for these future technologies. Germany Trade & Invest Germany Trade & Invest (GTAI), the foreign trade and inward investment agency of the Federal Republic, assists investors with its free of charge consultancy services. Each year hundreds of potential investors come in contact with the federal agency through the German Foreign Chamber network (AHKs), at trade fairs and through word of mouth. The organisation also provides information on foreign trade to German companies that seek to enter foreign markets. Looking forward, Germany will continue to consolidate its position as the economic motor of Europe. 2011 is sure to be an exciting year, as the ‘German model’ is no longer a secret.

Company Contact Details Bettina Kertscher Managing director Phone: 49 40 325525 13 Fax: 49 40 325525 20 bk@fix-services.com www.fix-services.com

Are you up to doing business in Germany? The challenges of communicating with Germans Is Germany part of your company’s internationalisation strategy? Are you planning to distribute your products on the German market, establish long-term cooperation with German partners or work with German staff? When doing business across borders, communication becomes a critical success-factor; so it is important to get your ideas across and that people understand each other. Having marketing materials and company guidelines translated into German is a good start. Most companies do this in order to be well prepared. But are you also ready for complex intercultural encounters, such as live presentations, heated negotiations and international working groups? When you speak directly to your German counterparts, will they understand what you really mean? Don’t we all speak English? now, you might be wondering why you should bother about ‘language’ so much. German business people generally speak fluent English, so talking to German clients, business partners and colleagues should be a piece of cake. As an international lingua franca, English makes cross-border communication easier than ever; but it may also entail a certain risk. You might be surprised to know that interaction with nonnative English speakers is sometimes affected by their limited ability to express thoughts and ideas in a foreign language. This often creates a feeling of insecurity and inferiority. In international negotiations or meetings, this can cause to them misunderstand native English-speakers. Some people might even think: ‘English native speakers have a natural language advantage. They end up dominating meetings and influencing decisions unfairly.’ Misconceptions like this create misunderstandings and, at worst, could even scuttle a deal. Interpreters and translated presentation materials can help ease the tension and makes everyone feel at ease. Interpreters and translators build bridges Much successful business interaction is essentially about communicating clearly

and avoiding misunderstandings. Modern management jargon is very technical and is about communicating strategies, concepts, company values, facts and figures that are all easy to ‘translate’. But in order to establish long-term cooperation and close workingrelationships, you need people to open up, be creative and discuss innovative ideas. Communication is then all about making your opposite number feel confident and trusted, and creating trust differs from one culture to another. Did you know that German business people notice academic qualifications and the amount of time your company has been in business? We are very detail-oriented, and high-pressure tactics and confrontational speech are perceived as very negative and counter-productive. So in important meetings, it is a good idea to hire an interpreter and have every detail of your company presentations translated into German. Qualified and experienced interpreters help avoid misunderstandings and ensure that each side understands what the other side really means. Diﬀerent communication styles aﬀect how we work Communicating in or with foreign countries is not like communicating at home. Culture involves everything we say or do. Language is not the only success factor when dealing with people from a different cultural background; behaviour also differs from one culture to the next. Whether your actions are accepted or misinterpreted depends on the social and cultural codes of a given society. In this respect, Germany and your own country are quite alike. In Germany, communication can be quite formal and direct, sometimes to the point of bluntness. We value logical thinking and planning and we usually get down to business quickly. This all leads to meetings that adhere to strict agendas and a forwardthinking working attitude, which can be a major challenge for people from more relationship-focused and less deal-focused cultures, unless you are acquainted with these differences.

Intercultural training can help you prepare for the German stage Most Germans rigidly separate work and their private lives, and people that do not follow this ‘rule’ can sometimes be perceived as being intrusive and disrespectful. When doing business in Germany, outsiders find interpersonal rules and regulations often difficult to follow and understand. To make sure that you don’t put your foot in it by committing the odd faux pas, it is essential to be well acquainted with the German mentality. Training courses on intercultural communication are very useful here. Professional training courses offer more than know-how of German etiquette and customs. They raise awareness and offer training in certain behaviour to help business people and employees to work efficiently. People are thus able to avoid misunderstandings, partners can cooperate better and sales personnel are more attentive to their German clients’ needs. All this will go a long way to increasing your company’s productivity and efficiency. And a company that is on the ball with intercultural skills will always have the edge over its competitors. Company profile Fix International Services is a professional, family-run service provider for premier language solutions and media localisation. Based in Hamburg, we have been serving people and companies since 1946. With a network of 400 native-speakers, we are well positioned to serve your translation or interpreting needs. As a provider of intercultural training competence, we also offer innovative, high quality, customised courses that prepare people for their international roles. Fix International Services - understanding each other across cultures.

September 2011 • GBM • 31

country profile - germany

norton Rose LLP Dr Rüdiger Litten, LLM Partner ruediger.litten@nortonrose.com

Basic legal aspects in respect of German companies and banks in financial diﬃculties The international financial crisis has hit hard and is not over yet. German companies and banks are also affected. This article provides an insight into questions that are typically raised when investors are exposed to insolvency situations that have a connection to Germany. Application of German insolvency law Whether or not German insolvency law applies in an international situation is to be decided on the basis of conflict of law rules. There are two distinct sets of conflict of insolvency law regimes that coexist in Germany, each of which apply to different categories of entities and different cross-border scenarios: the German Insolvency Code (applicable to financial enterprises, such as credit institutions and insurance companies) and the EU Insolvency Regulation (applicable to all entities except for certain financial enterprises). The principle that is common to both legal regimes is that international jurisdiction is derived from the “centre of commercial interest”, which is the place where the interests of the insolvent entity are managed (often the country where the insolvent entity is domiciled). Objectives of the German Insolvency Code The objective of German insolvency proceedings is to satisfy creditors either by liquidation of the insolvent entity’s assets and distribution of the proceeds (liquidation proceedings) or by reaching an arrangement by means of an insolvency plan procedure in order to restructure the insolvent entity (insolvency plan proceedings). These two types of proceedings (insolvency proceedings) are not identical to proceedings under US insolvency law. But the concept of the liquidation proceedings can be compared to chapter 7 of the US Bankruptcy Code, whereas the insolvency plan proceedings are more akin to proceedings under chapter 11. In contradistinction to its US counterpart, the German insolvency plan proceedings are not frequently employed. Insolvency proceedings Insolvency proceedings can be initiated against an entity for illiquidity, over-indebtedness (balance-sheet insolvency) and imminent illiquidity. Both the insolvent entity and any creditor can file in the case of illiquidity and over-indebtedness, and only the insolvent entity in the case of imminent illiquidity. Insolvency proceedings are formally initiated if the competent local court is satisfied that the entity in question is in fact insolvent. Upon initiation, the court appoints an insolvency administrator which leads to a freeze of the insolvency estate’s assets. Only the insolvency administrator has the right to dispose of and administer the insolvent entity’s assets. Secured creditors have a right to separation if they can prove that title to a specific asset lies with them and not with the insolvent entity (and therefore is not part of the insolvency estate). They have an in

32 • GBM • September 2011

Matthias Bell MJI Associate matthias.bell@nortonrose.com Tel: +49 69 5050 96 277 www.nortonrose.com

rem claim for return of the asset that is enforceable independently from the insolvency proceedings by means of individual enforcement. Rights giving rise to separation include, inter alia, ownership and reservation of title. A second group of creditors who enjoy insolvencyspecific privileges are creditors who may demand that a particular asset is disposed of separately and that the proceeds realised are preferentially used to settle their secured claims. Rights entitling to separate satisfaction include transfer by way of security, liens and land charges. Unsecured creditors are the last group of creditors to receive distribution from the insolvency estate and are bound to accept their respective portion of the surplus proceeds of the liquidation after the secured creditors and all costs in connection with the proceeding have been paid. As a general principle, the insolvency administrator can decide whether it wants to honour or terminate any bilateral contract that has not been performed completely by either party. If the insolvency administrator opts for continuation, both parties are obliged to meet their obligations. Should the insolvency administrator decide to terminate, the counterparty can only seek compensatory damages due to non-performance. Such claim is to be filed as an ordinary insolvency claim. Special provisions apply to particular types of contracts (such as loan agreements and financial derivatives contracts). The latter are subject to the statutory close-out netting regime, which shall prevent the insolvency administrator from cherry picking. The insolvency administrator is entitled to challenge transactions entered into prior to or after the filing for insolvency where the transaction in question has an adverse effect on creditors. As a rule of thumb, the crucial period examined by the insolvency administrator is three months prior to the filing for insolvency proceedings. Specific rules for credit institutions and financial services institutions In addition to and partially deviating from the general principles described above, credit institutions and financial services institutions must comply with specific insolvency rules in order to avoid a domino effect on the overall functioning of the financial sector. The German Banking Act provides for certain notification requirements at an early stage of financial difficulties and confers powers on the Federal Financial Supervisory Authority (BaFin) to initiate and control insolvency proceedings. Such powers comprise, inter alia, the competence to: restrict or prohibit any withdrawal of cash or any granting of loans; prohibit transactions or payments of or the acceptance of cash; close the institution’s business; appoint a special representative; and, transfer assets of a credit institution to a state run bridge bank. Furthermore, since January 2011, German law provides two procedures that can be initiated by a credit institution in trouble by filing an application with BaFin: the recapitalisation procedure (first tier) and the reorganisation procedure (second tier). The reorganisation procedure is similar to the insolvency plan proceedings and, inter alia, provides for debt-equity-swaps.

Oppenhoff & Partner Ronald Meissner, Partner +49 221 2091 414 Ronald.meissner@oppenhoff.eu www.oppenhoff.eu

German energy markets enter a new era Joint ventures as a vehicle for development and distribution cooperations With the political decision to pull out of nuclear power until 2022, a new era of power generation has started in Germany. Chancellor Angela Merkel said the phase-out of plants would give Germany a competitive advantage and the transformation would bring opportunities for exports, developing new technologies and jobs. The race for developing new technology of power generation, storage and transport, as well as power efficiency measures and, in particular, bringing them to the market, will now be critical for the success of the market players. Enterprises are often unable to achieve this with only their own areas of competence; in this case a joint venture (JV) with a partner can be the method of choice. However, countless legal aspects have to be taken into consideration in this respect. Financing and the JV are frequently only inadequately regulated The requirements placed upon the contractual structuring of the cooperation between the partners of a JV increase parallel to the degree of consolidation of the collaboration and are at their strictest if the cooperation is to take the form of a separate corporate legal shell, irrespective of the legal form. In this case, not only is a detailed agreement required on which assets or financial resources should be made available to the JV by the partners and in what manner, but also on how the operative management of the JV and its monitoring should be organised. One must ensure that none of the partners is in a position to hinder the development of the JV. The boilerplate catalogues of consent and veto rights that tend to be agreed only inadequately accommodate this. Also, the JV’s financing above and beyond the initial capital and liquidity funding is often regulated only inadequately . Usually during the initial phase, none of the partners will be willing to commit themselves to unlimited

future financing. The lack of a binding agreement, however, harbours considerable potential for dispute. Especially in the structuring of JVs between industrial partners, one can frequently observe a certain reluctance to address the event of the collaboration’s failure. On the one hand, however, the partners should consider possibilities of alternative dispute resolution, such as mediation proceedings, for example. On the other hand, the structures should allow a partner who is no longer willing or able to promote the JV company in a reasonable manner to be bought out of the JV in return for an appropriate compensation. Agree on practicable IP protection The protection of know-how and intellectual property rights (IP) plays an important role. Things can turn malicious if one partner contributes already existing IP and at a later date wants to ‘retrieve’ this IP and the newly developed IP from the JV. The IP at issue must be described as precisely as possible: who may do what with such IP, for what purpose and for how long, and what the other party is to receive in consideration. A clear regulation is also required as to whether and which use of third-party IPs may also be undertaken after the contract expiry. When structuring contracts one must bear in mind how the actual collaboration can work. The use of drawings, for example, beyond the term of the JV may be contractually excluded. However, this is not necessarily of any help if the partner actually has the possibility of using the drawings. Frequently, the knowledge, evidence and/or possibilities of legal protection are lacking. Outside the scope of research and development projects, the risk of the outflow of know-how also exists in case of distribution and production cooperations. Disputes frequently arise after the end of JVs. A sensible measure would be to agree on contractual penalties or at least lump sum damages in the event of infringements of IP rights after contract expiry. The damage arising from the infringement of IP rights is

often difficult to determine. Antitrust examination as early as possible In particular, JVs between competitors should be checked as early as possible as to their permissibility under antitrust law. A JV must be notified to the German Federal Cartel Office (Bundeskartellamt) if the joint worldwide turnover of the controlling parent companies during the last business year exceeds €500m, one shareholder in Germany has generated turnover of over €25m and the other of over €5m. This also applies if the JV itself had not generated any own turnover to date. JVs between competitors can also restrict the competition between the parents. A restriction of the research and development competition can also violate antitrust law if it is not justified by so-called efficiency advantages. This is generally the case if the joint market share is no greater than 25%. Think ahead in terms of tax law The chosen tax structure should ultimately accommodate the expected developments. Specifically in the research sector, it can be beneficial to attribute the customarily accruing initial losses to the partners of the JV via a partnership . Since this is not possible for trade tax purposes, however, a precise assessment is required. The participation of each partner in the JV generally exceeds the threshold of 25%. For this reason, special requirements for cross border service relationships between the JV and the JV partners apply. All services must be reasonably remunerated; and such remuneration must also be documented. Ronald Meißner, Georg Lecheler, Dr Marc Hilber, Dr Maxim Kleine und Dr Gunnar Knorr are lawyers at Oppenhoff & Partner. They are members of a team that has already advised numerous JV structures in various lines of business.

September 2011 • GBM • 33

country profile - germany

TBF Global Asset Management GmbH +49 (0) 77 31 / 1 44 66 – 0 info@tbfglobal.com www.tbfglobal.com

After the events in Japan, Germany decided to fast track its change in energy policy called ‘Energiewende’, and the German government decided to abandon all nuclear power production by 2022. Currently, Germany runs seventeen nuclear power plants and receives 22% of its power production from this energy source. The question worldwide is whether Germany can succeed in being the first country in the world to reduce its dependency from nuclear power to zero in such a short time frame, as new sources of energy have to be added.

Common sense says that Germany will replace nuclear power by solar and wind, so-called renewable energy sources. But it might be to naive to think that Germany will be able to significantly increase the already highest power production from renewables in the world. Germany produces 17% of its energy supply from renewables already and it is questionable whether a country with just medium size sunshine hours on average per year should increase the very costly solar energy source beyond its current size. It is far more economically sensible if southern countries like Portugal, southern Spain and southern Italy, as well as Greece, were to install utility style solar parks. The increase in efficiency by up to 30% could be enhanced further with sun tracker systems. Also, wind can function as a reliable energy source in costal regions of Portugal and the hills of southern Spain and Italy. As good and logical this sounds, there is one major problem involved with this set-

up: electrical power cannot be delivered over long distances above 1,500 km with the current transmission and distribution grid system in place. Loss of energy is too high combined with a structural problem that electrical power cannot be transported over and above a distance of 1,500 km as electrical power drops to zero on traditional energy cables. Basically, to have the ability to transport energy from renewable utility parks in southern Europe to the major cities in mid-Germany or Scandinavia, new thermal power cables have to be installed. Those new thermal power cables can transport electrical power over long distances and with a far lower loss of power rate than current power cables in usage. By having those new thermal power cables in place, a new structure and management of the electrical grid in Europe can be achieved - the so-called ‘super grid’. Software management systems and other hardware technology are also key to a next generation electrical power network that can be run like the Internet on ‘IP (Internet protocol)’ base. Utility companies all over

SMART GRID

(Technical terminology: SUPER GRID)

Functionality of an intelligent grid

BATTERIES + 0%

100%

WIND POWER

SOLAR

Highly efficient smart grid through communication between generators and consumers

Home Efficiency Recharging infrastructure for electric vehicles

CONSUMER CONSUMER

Home Efficiency

CONSUMER Demand Response

OIL / GAS / COAL

Production regulated according to demand

Adjusting produced power volumes to consumption by way of data reconciliation using smart metering and communication systems via the power grid

CONSUMER CONSUMER CONSUMER

With information on the current energy volume of all consumers, power production can be adjusted individually according to each situation. As a result, power will hardly have to be overproduced any more (conservation of resources and the environment); regional, individual adjust-ment of feeds will eliminate the losses arising through long transport routes.

+ 0%

This provides relief for conventional power plants and increases energy yields (efficiency), as energy does not have to be transported over long routes.

100%

BATTERIES

Renewable, decentralized energy will be fed in regionally in those places where there is a high level of consumption.

HYDROPOWER

These energy sources also conserve resources and the environment, as less oil, gas and coal have to be burned.

34 • GBM • September 2011

Investing in the next generation Smart Grid and Power Management globally.

4Q-SMART POWER FUND

#1 fund in its segment for 12 months in a row.

TBF Global Asset Management Europe would be enabled to ‘shift’ electrical power from one place in Europe to another place in a very short time frame and without losing lots of power on transportation. A strategic change of direction in Brussels with responsible EU commissioners is visible and the first laws have been changed in Germany to enable a fast track on installing a ‘super grid’ first in Germany and then all of Europe. This new electrical power transmission and distribution network will allow renewable energy sources to be increased significantly. But the master key lies in the network, which has to be built before any renewable energy sources can be added. Brussels, on a EU basis, and a lot of other single countries have understood this systematically need for network construction and shifted additional federal money to support the building of such a smart grid. It will take up to 25 years for all countries to build such a global energy grid, which will finally help reduce the dependency on fossil fuels and ultimately drive global GDP.

www.tbfglobal.com

Necessary Investments in Power Grid Infrastructure for the next 25 years (by country) ($ billions)

China

$ 2222

Western Europe

$ 1774

North America

$ 1624

Other Asia Pacific

$1278

India

$ 967

Eastern Europe

$ 665

Latin America

$ 403

Middle East

$ 358

Africa

$ 344 $0

$ 500

Power Infrastructure Investment 2010 - 2035

$ 1000

$ 1500

$ 2000

$ 2500

Source: WEO 2010, Copyright Organisation for Economic Cooperation and Development (OECD) / International Energy Agency (IEA), 2010; Table 7.2, page 228, modified

Total estimated investments of about 10 trillion, with about 68% of expected investments in China, Europe, North America and India. September 2011 • GBM • 35

country profile - germany - recommended hotel

The Hotel im Wasserturm - a round solution for every occasion Unique, exclusive, a one-of a kind experience - this international luxury 5-star superior hotel is among the most extraordinary hotels in Germany. The 130-year-old listed building with surrounding garden and individual architecture were built by the English architect John Moore between 1868-1872.With a diameter of 34 m and a height of 35.5 m, the former water tower used to be the largest in Europe. The impressive structure on the ground floor with 1.25 m thick masonry was an essential design feature in the new hotel planning. The 88 stylishly furnished rooms and suites provide spaciousness and comfort, completed by a charming, personal and courteous service, reflected in many loving small gestures. On the 11th Floor of the tower, with impressive views over the roofs of Cologne, the Michelin starred gourmet restaurant ‘La Vision’ and the accompanying ‘Private Dining Room’ welcomes demanding gourmet guests. Chef de Cuisine Hans Horberth surprises with his newly interpreted German gourmet kitchen. Upon request, the delicious creations are served in the exclusive ‘Private Dining Room’ with direct view to Cologne Cathedral and access to the surrounding roof-top terrace. Water has always been the source of life and youth, and inside the historical building guests find an exclusive day spa on the 5th floor. A pleasant atmosphere invites with well-sounding melodies and highly qualified therapists for a relaxing break. Our excellent personal trainers in the adjacent gym make sure that you keep in shape. In the city centre in a green oasis, the restaurant ‘d / \ blju'W '’ presents itself on the ground floor of the water tower. Almost a firm culinary size, it used to be a secret recommendation and is now explored and appreciated by the Cologne society. Mathias Maucher, a chef of the new generation, gleams with his regional and contemporary dishes. On sunny days his luscious creations are served among the trees in the garden lounge, giving a cool shade on hot summer days. The ‘d / \ blju'W '’ is flooded with day light and small pieces of art - the perfect location for a business break or the extended “Free Flow Kölsch brunch” on Sundays. The water tower offers the perfect ambiance for every occasion. With a total of 550 sqm, the event area offers space for up to 400 guests with 36 • GBM • September 2011

its seven function rooms. For big events or celebrations with over 500 guests, the floor-to-ceiling windows of the completely event area, embedded in the perfectly aligned park, can be opened. Individual meeting rooms are flexible for meetings from two persons up to dinners or parties with 220 guests. All rooms are fully air conditioned, equipped with modern conference technology, WiFi and direct access to the terrace in the garden. This, coupled with the historical ambience of the water tower, creates the perfect frame for weddings and parties. The day finds its perfect finish in the classic bar ‘Harry’s Lounge’, with direct access to the garden lounge. Enjoy a coffee during lunch breaks, short recreations or a digestive in the evening for a Mediterranean feel-good experience. Equipped with a selection of homemade vodka flavours and the finest spirits, ‘Harry’s Lounge’ is a meeting place for prominent guests from business and media, as well as for friends and business associates. www.hotel-im-wasserturm.de +49 (0)221 2008 0

SucceSS StorieS

Success Stories Rudolf August Oetker of

Oetker-Gruppe

“

Quality is the best recipe Oetker Group

Rudolf August Oetker was a very successful German entrepreneur, often called the pudding king, who became a billionaire running his private food company Oetker-Gruppe. Born in the culture center Bielefeld, Rudolf graduated in Hamburg with a banking degree. An interesting fact is that during World War II he served in the Waffen-SS. After it ended in 1944, he inherited from his grandfather August Oetker their family food business due to his death during an air raid on Bielefeld in 1944. At this time the company had sold all sorts of baking products as well as frozen pizza, beer and champagne, but was most famous for August’s biggest invention – the readyto-use baking powder that was storable and didn’t change the taste of baked goods. Rudolf August Oetker elevated the company to a household name not only in Germany, but across the world. He was also the man, who diversified the family food business into shipping, banking and hotels.

After being at the helm of the company for nearly forty years, Oetker retired as executive director in 1981. He turned the position over to his son August Oetker, who still runs the group. Since 1963 Rudolf had been married to his third wife Maja von Malaisй; he has a total 8 children from his three marriages. He sadly passed away as the 61st richest man in the world on 16th January 2007 from pneumonia. Today Rudolf’s family wealth has been calculated to over 4.35 billion euros. Beside their food business, they also own 5 five-star hotels, a grocery chain, a publishing company, insurance groups and a maritime freight business.

September 2011 • GBM • 37

family law

FAMILY LAW

Family can be the source of some of our greatest joys and successes, sadly they can also be the source of our sadness and failures. Various surveys have revealed that a substantial majority of professional individuals believe their families are more important to them than their jobs and or status.

In Huang v Secretary of State for the Home Department 3 the House of Lords emphasised the importance of families to individuals: Human beings are social animals. They depend on others. Their family, or extended family, is the group on which many people most heavily depend, socially, emotionally and often financially. There comes a point at which, for some, prolonged and unavoidable separation from this group seriously inhibits their ability to live full and fulfilling lives. Family law is a practice area that encompasses the legal issues that face families. These issues include: divorce, spousal support, child support, custody, division of assets and liabilities due to divorce, adoption, termination of parental rights, paternity, dependency and child neglect and protection from abuse. Collaborative law and litigation are both effective methods of finding a resolution when dealing with a family law case. Hiring the right firm or individual to represent you is essential, not only for the success of the case but to make the whole process as easy as possible. A highly skilled family lawyer will represent any area of family law and is an invaluable source of advice during a complex or sensitive case. A family law firm can also help with cases that might reach further than the family home, such as family owned businesses that need assistance resolving internal issues or high net worth individuals who have personal issues and need legal help in different countries and jurisdictions. The fees for a family lawyer vary and the level of service is largely dependent of the complexity of the case and the level of mediation required between the parties involved. The general recommendation is to employ the most reputable and experienced family law firm you can afford to ensure you benefit from the broadest range of services and get the best possible results from the case. 38 â&#x20AC;˘ GBM â&#x20AC;˘ September 2011

Adapting to new legal landscapes - Watts McCray Family Lawyers A specialist and leading provider of family law services in Australia, Watts McCray Family Lawyers has been providing family law services and expertise to clients for over 25 years. Combined, Watts McCray lawyers have over 400 years of family law experience. Their experienced team includes a professor in family law who is a former chair of the Family Law Council, and some of Australia’s most respected and well-regarded family lawyers and partners. Additionally, two Watts McCray solicitors are fellows of the International Academy of Matrimonial Lawyers (IAML). This worldwide association of practicing lawyers award this status to only the most experienced and expert family law specialists. As part of the firm’s commitment to providing the best family law services and helping clients receive the best possible outcomes, Watts McCray recently hosted the 12th Australian Family Lawyers’ Conference in Sentosa Island, Singapore. In this tropical setting, high calibre speakers including judges, federal magistrates, senior practitioners and experts discussed the latest advances in family law and shared practical experiences and advice. The conference agenda included topical issues such as promoting meaningful relationships between non-resident fathers and young children, international alternative dispute resolution, binding financial agreements and the effect of social networking on litigation. By facilitating and taking part in such discussions, Watts McCray lawyers are able to hone their expertise and adapt to the ever-changing family law landscape. Watts McCray provides a range of services across all areas of family law, including separation, divorce, parenting arrangements and child support. Watts McCray’s services also extend to domestic violence laws, binding financial agreements, property and financial settlements, de facto relationships, legal wills and spouse maintenance. Every client has a unique set of circumstances, and Watts McCray lawyers provide individual consideration when advising the most appropriate legal action.

As the incidence of family breakdowns in Australia increases, many are feeling the emotional and financial stress of legal action. Watts McCray offers an alternative to litigation through alternative dispute resolution (ADR), which offers a variety of ways to resolve family law disputes without a conventional court hearing. This not only saves clients time and money, but also avoids the potential for confrontational court cases. Watts McCray has some of the most highly regarded mediators in family law in Australia today. Specialisation in family law is also complemented by expertise in commercial, corporate, property and estate law, which allows Watts McCray lawyers to offer clients additional legal services when needed. What really sets Watts McCray Family Lawyers apart is the clarity with which they understand the changing nature of Australian family law and the need for open communication with both existing and potential clients across a number of platforms. Watts McCray lawyers are sensitive to the fact that with the need of legal services will also come difficult times and considerable changes to your life - a split family, new financial situations and house and property adjustments to name a few. Watts McCray has taken advantage of the opportunities the Internet and social networking sites provide to communicate and interact with Australians who are experiencing the social change that accompanies changing family situations. The Watts McCray blog (www.wattsmccray. com.au/blog/) is a forum through which Watts McCray lawyers can tap into debates and conversations regarding family law. It’s also a channel through which Watts McCray can be a thought leader and communicate important family law changes and news to Australians. Watts McCray is also present on the social networking site Facebook and the professional network LinkedIn. Watts McCray understands the digital landscape and how it provides important platforms through which lawyers can make family

law more accessible and easy to follow. By providing relevant articles, commentary, news and asking questions of Australians affected by family law, Watts McCray is helping to unlock complicated law-lingo and foster communities of those experiencing change. Currently, proposed changes to the Australian Family Act (1975) sit before the Australian parliament. The proposed changes place more focus on the best interests and safety of the child, and include a new definition of family violence with a list of examples of the kind of behaviour that might fall into that definition. The Watts McCray blog and Facebook page have been important channels through which Watts McCray can communicate these changes and provide updates on their progress in parliament to relevant communities. In Australia (and a number of other countries), the courts have also developed an understanding of social networking sites such as Facebook and Twitter. Increasingly, comments and photos posted on these sites are being used as evidence in family law proceedings. This shows a growing appreciation of social media to act as a useful communication channel between a wide and diverse group of people. Social networks have also been used to serve documents when other traditional methods were unsuccessful. Watts McCray remains at the forefront of these changes and is actively engaged in discussions on how social networks and digital communication are affecting or changing family law processes. Watts McCray is committed to providing expert family law services for their clients. An integral part of this commitment is open communication and discussion about the intricacies and ongoing changes to family law. Please feel free to contact Watts McCray Family Lawyers should you seek legal advice or further information regarding our services or wider Australian family law.

September 2011 • GBM • 39

family law

Hong Kong & China - Divorce and family law In terms of stressful events, divorce undoubtedly figures in the top three. At Oldham, Li and Nie (OLN), we pride ourselves on working with clients through this emotional and financial upheaval, minimising its effect on the parties, children and finances. Hong Kong (HK) raises specific issues in matrimonial matters as international elements probably feature here more prominently than anywhere else in the world. This international element has now become the norm, whether due to the husband or wife (or both) hailing from different countries or because joint property and assets are held outside of HK. With offshore companies, overseas properties, conflicts of laws, international custody and schooling, it is more critical than ever to ensure your lawyer is familiar with every aspect of your matrimonial situation. At OLN, we understand and focus on the challenges provided by this international element and concentrate on providing practical legal solutions. OLN advises on many matrimonial disputes involving complex financial structures, in particular in relation to timing of various international matrimonial applications, the feature of financial settlements and the tax implications in different jurisdictions. OLN is increasingly consulted in respect of prenuptial agreements involving substantial assets and can advise on the choice of jurisdiction and the applicable law most appropriate to facilitate their enforceability. OLN advises on all aspects of children cases, with particular experience in applications to remove children temporarily or permanently from HK, prevent wrongful removal of children from HK and obtaining the return of those wrongfully removed. OLN has a highly regarded matrimonial and family law (MFL) practice. Set up by Stephen Peaker in 2000, the practice quickly expanded with Paul Firmin in 2002 and Pamy Kuo and Kenneth Yung in 2006 and 2008 respectively. All members of OLN’s MFL practice are members of the HK Family Law Association

40 • GBM • September 2011

and, in accordance with the Hong Kong Family Law Association’s Code of Conduct, are committed to a conciliatory and constructive approach, rather than a hostile or confrontational one. OLN's MFL members have access to top matrimonial lawyers worldwide via the International Academy of Matrimonial Lawyers (“IAML”) and in the UK through the UK Solicitors Family Law Association (Resolution). We have the assistance of colleagues in the firm’s commercial and litigation departments and through our membership of Globalaw, access to major law firms in most cities worldwide. Members of the MFL practice have expertise and a wealth of experience in many areas touching on family law, including (among many others): divorce and nullity, prenuptial agreements, disputes involving children, adoption, financial orders following divorce, trusts, and tax and immigration issues consequent on divorce.

united kingdom Manches LLP | Amanda Nelson | Partner | Tel +44 (0)20 7404 4433 | www.manches.com

Advising The Family Family governance and succession planning is a hot topic. Individuals now, more than ever, recognise the need to enhance and protect family wealth for current and subsequent generations, and avoid the erosion of the wealth (and family harmony) caused by costly disputes along the way. Many families are developing a family governance structure as a pre-emptive strike, in order to provide practical core guidance as to how the family should operate their succession and business matters through the generations. Succession issues within a family structure may be relatively straightforward, but equally can be emotive and complex. These issues can be complicated by the existence of rules, based upon an individual’s domicile or religion, which hinder that individual’s right to leave his entire estate as he wishes on death. An added layer of complexity arises where a key family member has built up a business by him or herself and is now concerned with business succession planning as well as the wider aspects of the family’s global estate and succession planning. This is particularly important where some (if not all) of the core family members are involved in the running of the business. Different family members may have competing interests within the business, and will often have different expectations regarding the inheritance of the business. Where a family business exists, the succession issues for the family and the business are often linked. Ideally, these two issues should be reviewed together, with the more complex decisions regarding the management of the family business being made in light of the overall succession strategy for the family as a whole. A balance must often be struck between ensuring the continuity of the family business, preservation of the business and family assets, and protection of the family members, particularly if any are vulnerable. Potential conflicts between siblings must also be managed - a son might expect to

inherit a greater share than his sister, or a daughter might have greater business skills than her brother who may wish to simply “cut and run” with his share of the company. Further problems arise when a child is unwilling to join the family business when expected to do so, when family members wish to leave the business, or when children of the family marry and there is an expectation that the new spouse (who might have greater business skills than the patriarch’s own bloodline) might join the business. What is that spouses’ interest to be, pure remuneration or an equity stake? What happens when a child of the family leaves the jurisdiction? What happens when there is a relationship breakdown, e.g. as a result of divorce or family dispute, or where a child of the family becomes vulnerable to third party creditors, or is simply a frivolous spendthrift by nature and needs protection from him or herself? Solutions to any possible problems must be bespoke and relevant to the family. No assumptions should be made. There should be no discussion of solutions until all the issues have been identified. It is tempting for a lawyer, when meeting with a family for the first time, to roll out a series of documents designed to deal with all possible scenarios. Nothing is more important than the facilitation of an open forum for discussion between the family members, with a platform for each of the key family members to raise their own particular concerns and issues. Some families may not require any formal documentation whatsoever. The process of discussion, facilitated by the independent lawyer, might be enough to set in place that family’s unwritten, but nevertheless effective family governance structure. Other families might simply want a basic ‘Heads of Terms’. Alternatively a family might want a full bible of documents to deal with every eventuality that might be envisaged. At first glance, this seems like the ideal solution, but in practice could be dangerous if the family then places too much reliance on the documentation,

and is then unequipped to deal with an unforeseen eventuality. The ideal solution is often somewhere in the middle, i.e. a governance structure that is both detailed enough to provide clear and concise guidance, but wide and fluid enough to enable flexibility and change within the family unit and dynamics of the often complex family relationships. At the very least, all of the adult family members should have a Will in place. Trust structures are still commonly used for succession planning (and particularly where and individual wishes to segregate funds for charity), and carefully worded letters of wishes should sit alongside these documents. For unmarried couples, a cohabitation agreement might be useful. For married couples there is an increasing use of prenuptial agreements (and often post-nuptial agreements for couples moving in and out of new jurisdictions). Where a family business structure is in place, there may be a number of business documents that would be useful, such as partnership or shareholders agreements etc. It is important that these documents are not seen as stand alone documents, but are integral to the overall family planning structure in order to avoid potential conflict and contradiction between them. It is not uncommon for an individual to prefer that the spouse and children ‘sort it out amongst themselves’ after his death, and this approach keeps our Litigation and Dispute Resolution colleagues busy, but it is without doubt best avoided. A carefully configured bespoke governance structure, achieved as a result of continuing collaboration by the family, should be the favoured choice.

September 2011 • GBM • 41

family law

South africa Miller du Toit Cloete inc | Office 1002, 10th Floor, 80 Strand Street, Capetwon, 8001 | Tel: +27 21 418 0770 | www.millerdutoitcloeteinc.co.za

Miller du Toit Cloete Inc deals exclusively with family law matters and related constitutional law matters. The firm, in conjunction with the University of the Western Cape Faculty of Law, annually presents a conference on developing family law in South Africa and internationally. Developing law is debated in a robust manner at the conference and it is attended by interdisciplinary interest groups. National and international experiences are shared and the development of family law stimulated.

The firm has been involved in a number of groundbreaking cases in family law. It has a strong international profile. It deals with divorce and related commercial matters, civil unions, domestic partnerships, universal partnerships, marriage regimes, ante-nuptial contracts, childrenâ&#x20AC;&#x2122;s rights, co-parental rights and responsibilities, mediation/facilitation, gender issues, family violence, surrogacy and constitutional issues. Members of the firm present papers at international conferences such as, for example, the International Bar

Association, the Family Law Department of The Centre for Family Law and Practice (London) and other forums. It is a specialised dynamic firm and encourages its younger lawyers to develop individual fields of expertise within the firm.

Stevenson Wong & Co is a well-established Hong Kong (H.K.) law firm with a representative office in Guangzhou, China. The firm has 23 lawyers and over 60 support staff. Since 1978, we have been providing and developing legal services, and offering pragmatic and global solutions in many specialised practice areas. In 1991, the firm incorporated Helen A Lo & Co, a specialised family law practice in HK. Through our H.K. and China offices, and worldwide associated offices (through Interlaw - an international association of law firms in more than 120 cities worldwide), we provide a full range of legal services to our clients, including specialist matrimonial advice to private clients. We are widely recognised as having a leading matrimonial and family law practice. Our reputation is based on our expertise in dealing with all aspects of family matters. Three of the Family Court Judges were former partners of this firm.

42 â&#x20AC;˘ GBM â&#x20AC;˘ September 2011

In the family department, we aim to provide efficient, professional and effective advice to our clients, responding quickly where urgency is required. In a conciliatory manner, we are appropriate and sensitive to the emotional issues often involved, never forgetting the longer-term interests of our clients and their children. We fully support mediation as an alternative to resolving family disputes. Our main areas of practice are divorce, child custody and financial disputes, Hague Convention abduction cases and wardship matters. We also have a mediation practice; two of our team members being accredited mediators. We advise on reconciliation and cohabitation issues, prepare pre-nuptial and post-nuptial agreements, and make urgent applications, for example, to prevent the disposal of assets or their removal abroad. We also handle Hague Convention child abduction cases (often a complicated area of family law in H.K.) and cases with an

international dimension, especially those involving disputes over jurisdiction and relocation of children. Catherine Por is the head of the family department at Stevenson, Wong & Co. She is also an accredited mediator, an arbitrator and a notary public. Catherine is a governor-at-large of the International Academy of Matrimonial Lawyers. With six solicitors, we have one of the largest family law departments in H.K. with a multilingual team working in English, Cantonese and Mandarin. We also provide services to our private clients on trusts and estate planning. Wendy Lam is head of our wealth protection, succession planning and probate services department.

Japan to join the Hague Child Abduction Convention Family law is an important legal practice as it concerns persons, their family and domestic relations as well as property rights within those relations. We offer a wide range of legal services in this area, including in matters of divorce, division of assets, wills and succession, as well as corporate matters, such as family business and joint property ownership by family members.

possible. At the same time, Japan will have a conciliation system to encourage the parents to settle the case of custody and visitation amicably. Our experience in family law practice will allow us to assist clients in this regard to seek the best possible results.

If a family law matter is in some way related to Japan, such as Japanese real properties, shares of a Japanese company or a Japanese resident, knowledge of Japanese law and procedures may be decisive in the successful conclusion of the case. For example, a lawsuit in a foreign country may not be recognised in Japan if the proper steps under Japanese law were not taken. We work closely with foreign attorneys in determining the best way to proceed with a case that has a Japanese aspect in order to ensure a most efficient resolution. One contentious issue in Japan is child abduction, as Japan is not a party to the 1980 Hague Child Abduction Convention, a fact that has been criticised by other countries. The Convention seeks to protect children from the harmful effects of abduction and retention by providing a procedure to bring about their prompt return. Currently, a Japanese parent sometimes takes the child to Japan and would not return to their habitual residence in a foreign country. The parent left behind typically has difficulties in securing the return of the child to the habitual residence. The Japanese government has recently decided to join the Convention and is now preparing a law to implement the Convention in Japan. This law is expected to be passed early next year and to take effect shortly thereafter. When Japan becomes a party to the Convention and its implementing law comes into force, the prompt return of the children would be September 2011 â&#x20AC;˘ GBM â&#x20AC;˘ 43

Luxury Brand Series â&#x20AC;&#x201C; Business hotels

Luxury Brand Series

Business Hotels of the World Businessmen and women no longer look for hotels from which they can conduct business, send emails and sleep. The business world is changing, now a hotel must have so much more. Eating and drinking in ample surroundings, where the food and drink is to a standard that is fit for royalty. Business facilities that take away the stress of work and make the whole experience a more enjoyable one. Stunning environments that allow colleagues and clients to lounge when not working. Finally a place where friends and family can indulge themselves for the weekend. We take a look at some of the leading hotels from the main business cities of the world.

44 â&#x20AC;˘ GBM â&#x20AC;˘ September 2011

Red Carnation London UK Your choice of London Residence by Buckingham Palace Two of London’s best loved, adjoining hotels; the five-star “41” and four-star Rubens at the Palace, opposite The Royal Mews at Buckingham Palace, share an unwavering commitment to delivering outstanding hospitality and exceptional value, whether travelling on business or leisure. Both are within easy reach of Victoria station, The Royal Parks, Westminster Abbey, Downing Street, the Houses of Parliament, Trafalgar Square and the theatres of London's West End. The capital’s finest shopping in Knightsbridge and Kensington is also just a short bus or taxi ride away. The intimate 30-bedroom “41”, is a delightfully secret establishment effortlessly combining informal luxury with round-the-clock personal service. The chic black and white décor throughout is strikingly elegant, while the cosy mahogany-panelled Executive Lounge is instantly welcoming where guests are invited to “plunder the pantry” at any time, day or night, with a tempting range of complimentary snacks and light bites in the well-stocked fridges. Rooms and suites include an array of thoughtful touches, state-of-theart technology and complimentary wireless Internet. The glass roofed Master Suite and two executive Hospitality Suites offer the perfect space for mixing business with pleasure. Two nearby splendidly furnished, serviced, 1- and 2-bedroom apartments are fully equipped for extended stays, perfect when travelling with colleagues or family. Just next door the larger 161 bedroom Rubens at the Palace is the epitome of traditional British hospitality with glistening chandeliers, rich furnishings and welcoming staff to make guests feel like royalty. Dining options include the Old Masters Restaurant - a buffet style carvery famous for its huge breakfast selection whilst fine dining in The Library Restaurant offers an intimate atmosphere in which to enjoy award winning English and international cuisine accompanied by the finest wines. The Palace Lounge, with its panoramic view of the entrance to The Royal Mews, is where friends and colleagues meet for drinks, snacks and afternoon tea and leads through to the popular, warm and inviting Cavalry bar. The safari-chic Leopard Champagne Bar is ideal for a more intimate occasion or when closing that all important business deal, whereas the lively bbar continues the South African theme with an inspired menu and wide range of wines and cocktails, just a few steps from the hotel entrance. “41” guests are also free to use any of these dining facilities, which can be charged to their room. Nine elegant function rooms cater for a wide variety of special occasions or meetings and conferences for up to 150 people. Both properties are part of the award-winning, thirteen-strong, family owned and run luxury Red Carnation Hotel Collection where “no request is too large, no detail too small.” Visit us at www.redcarnationhotels.com/gbm for an exclusive offer

41 Buckingham Palace Road, London, SW1W 0PS, United Kingdom Tel: +44 (0) 20 7958 7730 book41@rchmail.com www.41hotel.com

The Rubens at the Palace Hotel 39 Buckingham Palace Road, London, SW1W 0PS, United Kingdom Tel: +44 (0) 20 7958 7730 bookrb@rchmail.com www.rubenshotel.com September 2011 • GBM • 45

luxury Brand SerieS – BuSineSS hotelS

Storchen Zurich Zurich, Switzerland Storchen zürich – history of hospitality The hospitality at the Storchen zürich has been famed for more than 650 years. The origins of this historic building date back to 1357. In 1938 the hotel was completely rebuilt and has since then been continually adapted to the requirements of the most discerning clientele. Alongside the traditional atmosphere of well-being, the Storchen zürich offers its guests the newest in technology, first class service and incomparably breath-taking views of the River Limmat and the heart of the old town. The Storchen zürich is the only building with its own landing stage for the Limmat boat. From April through October the Storchen guests can be transported directly from zürich’s main train station to the hotel or be taken to the Opera House or other places of interest by the Limmat boat or a special water taxi. The open and friendly Storchen hotel in the 46 • GBM • September 2011

midst of the old city offers a total of 67 rooms, among them one Storchen Suite and five brand new junior suites. All rooms are comfortably furnished and fitted with the latest technology. The junior suites all have floor to ceiling French windows for maximum light and unforgettable views. The Storchen Suite has a living room and separate bedroom with private marble bathroom as well as a guest bathroom. Both rooms have access to the private terrace with its unique view of the River Limmat, lake zürich and the Swiss Alps. The dining experience at the Hotel Storchen is a reason in itself to visit the hotel. In summer the exclusive Storchen Terrace, also known as zurich's most beautiful terrace, adds a delightful dimension to the Restaurant Rôtisserie, offering superb views of the River Limmat, the Grossmünster Church, Lake zürich and the Alps beyond. The Storchen Bar is a popular meeting place for local people as well as for international guests – relax with a cocktail and a light snack to the charming music played by the hotel pianist. The Barchetta (little boat) is the hotel’s small

café, which directly leads out to the river. Hotel guests and locals alike enjoy the views over a cup of coffee, a morning snack or a special Barchetta-Cocktail. In summer the Boulevard Café on Weinplatz is also a favorite place to enjoy a refreshing ice cream or a delicious cappuccino. For further information please visit: www.storchen.ch Storchen zürich Weinplatz 2 8001 zürich Switzerland T +41 44 227 27 27 F +41 44 227 27 00 www.storchen.ch info@storchen.ch

Rocco Forte Hotel Villa Kennedy Frankfurt, Germany The Rocco Forte Hotel Villa Kennedy is set in the exclusive neighbourhood of Sachsenhausen, nestled just off the Main River and close to both the financial and commercial district as well as Frankfurt International Airport. An award winning building inviting to uncommon architectural luxury, the hotel is composed of the historical, neo gothic Villa Speyer, dating back to 1904 and seamlessly enclosed by three newly built wings that wrap around the supremely restful and sun filled, and private hotel garden. Villa Kennedy invites to impeccable attention to detail and a level of personalized service ensures hotel guests enjoy the high standards synonymous with the Rocco Forte Hotels brand. Each of the spacious 163 bedrooms including 35 suites and a presidential suite (326 m²/3509 ft²) provide the maximum comfort and ease for our guests with a quietly elegant combination of neutral tones and sleek, natural furnishings. The relaxed and stylish ambience of restaurant GUSTO and JFK’s BAR reflects the sophisticated feel of a fresh, unpretentious approach to top quality dining. The 1000 m² Spa including a private garden invites to a wide selection of treatments specifically designed to restore mind and body, together with the 15 meter pool, gym, yoga room, saunas, steam baths, lounge area and eight treatment rooms. As well as offering the ultimate in comfort, cuisine and leisure, Villa Kennedy provides the perfect venue for your next Frankfurt conference, meeting or event for up to 300 people. Rocco Forte Hotel Villa Kennedy Kennedyallee 70 60596 Frankfurt am Main Germany Tel.: +49 69 717 120 Fax: +49 69 717 122 000

info.villakennedy@roccofortehotels.com www.villakennedy.com www.roccofortehotels.com

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Luxury Brand Series – Business hotels

The Peninsula Tokyo Tokyo, Japan With luxury hotels opting to be part of highrise office buildings or multi-use complexes, The Peninsula is the only free-standing luxury hotel to be built in Tokyo in more than a decade. Majestically standing 24 storeys high and superbly located in the prestigious district of Marunouchi, The Peninsula has fast become Tokyo’s landmark hotel, offering commanding city views, luxurious comfort, sophisticated facilities, extraordinary dining options and the legendary Peninsula service. Located between Tokyo and Yurakucho JR train stations, opposite the Imperial Palace and a three-minute walk from the shopping capital of Ginza, Marunouchi has attracted a wide selection of the world’s top luxury fashion brands, turning Marunouchi Nakadori avenue into the Rodeo Drive of Tokyo. Theatres and museums make the district rich in culture and leading Japanese and international corporations located nearby make The Peninsula Tokyo the ideal place to stay for both leisure and business. The iconic faces of The Peninsula for decades, Peninsula Pageboys welcome guests upon arrival at the hotel’s sweeping main entrance, conveniently located at the crossroads of Hibiya-dori and Harumi-dori avenues, the gateway to the Marunouchi and Ginza districts. From B1 level, the hotel connects to the Hibiya, Chiyoda, Toei Mita and Yurakucho train lines, making The Peninsula the most accessible luxury hotel in Tokyo. Modern and contemporary with Japanese accents, the hotel offers 314 spacious guestrooms, including 47 suites. Each guestroom and suite blends traditional Peninsula standards of comfort and innovative technology with elements of Japanese heritage and culture. Taking the design brief “international in design, but Japanese by inspiration”, interior designer Yukio Hashimoto intertwines rich earth tone colors, woods, lacquer, marble and stone with design and functionality to create a luxurious living environment. Rooms are among the largest in Tokyo and have stunning views of the city, Imperial Gardens and Hibiya

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Park. The room interiors dissolve boundaries between inside and outside elements and allow the living spaces to flow from one to the next. From the chestnut wooden doors, to the deep red lacquer elm-working desks to the woven-cedar ceiling fixtures, the rooms bond nature’s elements to provide a tranquil and serene setting. Completing the hotel’s sophisticated facilities are five unique restaurants, including Michelin starred Hei Fung Terrace, a modern lounge bar, two ballrooms, six elegantly

designed function rooms, a wedding chapel, a Japanese ceremony room, a fitness center offering the latest equipment for weight training and cardio strengthening, and The Peninsula Spa by ESPA with nine treatment rooms, separate changing rooms, saunas and relaxation areas for men and women, a 20 m / 66 ft indoor heated swimming pool, Jacuzzi, and outdoor terrace with views of the Imperial Palace Gardens. The Peninsula Tokyo 1-8-1 Yurakucho Chiyoda-ku, Tokyo, 100-0006 Japan Tel: +81-3-6270-2888 Fax: + 81-3-6270-2000 Reservations (Hotel Direct): +81-3-6270-2288 Reservations (UK): (00-800) 2828-3888 www.peninsula.com

Four Seasons Hotel George V Paris, France Opened in 1928 in a typical art deco style, the George V became Four Seasons Hotel George V after a two year renovation from 1997 until 1999. The elegant hotel offers 245 rooms including 59 suites decorated to resemble small French apartments. The guestrooms are resplendent with Parisian flair, some with furniture in the style of Louis XVI, all with modern bathrooms of polished marble, and with separate showers and tubs. Each room also features the most cuttingedge telecommunications and entertainment technology. Four Seasons Hotel George V, Paris is also renowned for its fine dining. Its centrepiece restaurant, Le Cinq, is rewarded two Michelin stars. Executive Chef Eric Briffard creates an authentic French menu delivered to tables in a sophisticated and intimate dining room. Another fascinating feature of the restaurant is the wine cellar nested 14 meters below ground and hosting over 45,000 bottles. Classic French style is also ever-present in the decoration of the spa reminiscent of Marie Antoinette’s boudoir. The Spa offers beauty and relaxation treatments carried out with expert care and was voted best hotel Spa in Europe by Travel and Leisure. Four Seasons Hotel George V 31, avenue George V, Paris 75008, France Tel: +33.1.4952 7000 • Fax: +33.1.4952 7010 Website: www.fourseasons.com/paris Email: reservation.paris@fourseasons.com

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luxury Brand SerieS – BuSineSS hotelS

InterContinental, Toronto, Yorkville Escape to the InterContinental Toronto Yorkville, located in the fashionable and exclusive neighbourhood of Yorkville. Our boutique hotel redefines luxury standards with sleek, crisp, yet warm and invitingly designed interiors, a uniquely personal touch to service and an approachable elegance. You will be amongst high end restaurants, boutiques, and art galleries that are only a short stroll away, as well as the University of Toronto and major museums such as the Royal Ontario Museum right across the street. Unwind in elegant, contemporary, spacious rooms with four piece marble bathrooms, fine linens, pillowtop mattresses and bay windows that open for outstanding views of the city. Upgrade to an executive suite that also feature iPod docking stations, separate seating areas, rich touches such as mohair throws, wet bars and additional bathrooms in some. At our AAA Four Diamond award-winning hotel, we're dedicated to unsurpassed personal service. International guest will feel at home: our staff speaks nearly three dozen languages. For special requests, consult our Clefs d'Or Concierge for everything from restaurant reservations to theatre tickets and Toronto tour arrangements to babysitting services.

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From small executive retreats to companywide banquets for 260 guests, our sophisticated meeting facilities set the stage for success. Our boutique size and services will help set events or meetings apart and ensure they are impeccably planned and executed. Treat your guests to creative banquet cuisine and stylish facilities appointed with every modern luxury. The mezzanine level is dedicated exclusively to conferences, with eight, state-of-the-art, pillar-free conference rooms featuring the latest technology and natural light from spacious windows with inspiring downtown views. Our captivating 8th Floor Terrace lends an alluring backdrop for outdoor affairs and Toronto events. Savour marvellous cuisine and stylish settings within each of the restaurants and bars at the hotel. Chef Joe Rabba's culinary artistry can be sampled in the main dining room or the bistro-style lower level. To complement the cultural influence in our cuisine, unique photographs of Toronto's landmark neighbourhoods decorate the walls of our restaurant. The swanky styling’s of Proof Vodka Bar and lounge draw a smart clientele from all over the city. Those attending a performance at the TELUS Centre for Performance and Learning, located just across the street, will find our atmosphere the city's chicest spot

for a pre- or post-theatre drink. Choose from a vast selection of vodkas from around the world and an excellent collection of bespoke cocktails. SkyLounge patio restaurant is a delightful oasis just steps from the buzz of Bloor Street; a perfect spot to enjoy Mediterraneaninspired tapas or a cool cocktail. Open May to October, weather permitting, daily from 4 pm. Toronto is one of the most multi-cultural, international cities in the world with friendly, vibrant neighbourhoods, unique attractions and museums, celebrity chefs, and a prolific theatre and shopping scene. Do you live an InterContinental Life? InterContinental Toronto Yorkville 220 Bloor Street West, Toronto, Ontario M5S 1T8 416-960-5200 Fax: 416-960-8269 toronto.intercontinental.com/

Crosby Street Hotel New York Tim and Kit Kemp, perennial darlings of the London hotel world, have finally crossed the pond: the Crosby Street Hotel marks the first American venture of their celebrated Firmdale hotel group. The impressive 11-story construction was built from scratch on the site ofRELATED NEWS Sneaker Con 2011 Via Hypebeast: Having gained massive amounts of traction through only a few shows, ... Read more The Andy monument in Union Square All hail Andy… From Hypebeast: For the unaware, Broadway and East 17th in New ... Read more a former parking lot in downtown New York, right in the heart of SoHo, famed epicentre of Manhattan chic. The interior look is classic Kit Kemp – elegant and quirky yet entirely cosy. Each of her 86 individually designed rooms and suites comes fully equipped with flat screen LCD television, DVD/CD player, iPod docking station, WiFi and custommade Miller Harris bath products, while the top-floor headline suites offer the additional luxury of uninterrupted, 360-degree skyline views. Further highlights include a leafy courtyard garden, ground-floor bar and restaurant, well-appointed gym, guestonly drawing room and several private event spaces, all impeccably designed and peppered with art works selected by Kemp

herself. This impressive list of facilities is rounded off by a luxurious private screening room – a perfectly-executed Firmdale trademark sure to be as big a hit in New York as it has been in London. The Crosby Street Hotel is nestled in the centre of SoHo, between Spring and Prince Streets and one block behind Broadway. The Crosby is surrounded by shopping and entertainment opportunities in all directions as well of some of the best galleries in New York. 79 Crosby Street New York 10012-3905 USA www.designhotels.com

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mind Body and worK - tai chi

mind Body and work tai chi

Tai Chi (sometimes spelt Taiji, or fully as Taijiquan) is perhaps the most effective way to develop balanced health for the body and the mind. It develops: • Improved overall health • Calmness and focus of mind • Increased energy • Suppleness, strength, co-ordination, balance, and agility • Relaxation and freedom from stress • Strengthening of the internal functions of the body, such as the immune system, metabolic functions, and cardiovascular system • Understanding of the body’s processes and self-healing

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Students develop increasing physical and mental skills, as awareness and understanding of all aspects of their self, increases. You can learn and practise Tai Chi at your individual pace, and, as there are ever-new levels, throughout the rest of your life. These disciplines rely on a mindful re-discovery of the body to enrich and inspire one’s experience of any aspect of life. Within the workplace Tai Chi skills and principles can be practised to enhance team development by increasing mental flexibility and adaptability, and by improving interpersonal skills and empathy with others. Tai Chi can also be invaluable for leadership and management development, allowing managers to observe themselves with more clarity and insight, thus understanding their need and potential to change, create and

inspire themselves and others. Throughout history, Tai Chi was used by Chinese scholars, monks, sages, artists, intellectuals, emperors and their imperial guards, princes and commoners, because of its extraordinary versatility and proven effectiveness. It is an ancient, time-tested traditional Chinese method of self-development, and is a subtle blend of the most refined traditional Medical, Meditative and Martial knowledge combining self-discipline, graceful movement and effortless power. How is Tai Chi practised? Tai Chi consists of “Four Pillars”, or types of practise: Qigong, Form, Pushing Hands and Application.

www.meiquan.co.uk/index.htm www.meiquan.co.uk/beginners.htm www.meiquan.co.uk/contact.htm http://www.meiquan.co.uk/index.htm http://www.meiquan.co.uk/beginners.htm http://www.meiquan.co.uk/contact.htm

teach the basic, original Long Form, and often a variety of abridged forms for beginners. More advanced students learn the sabre, straight-sword, staff and spear Forms, all of which use traditional weapons to provide an exciting, artistic and satisfying level to the training. Pushing Hands (Tui Shou) is a kind of partner exercise, where 2 people develop sensitivity and co-ordination together. This is a very enjoyable, playful and free-flowing kind of exercise. Application is the most advanced aspect of physical training –and in some ways the most rewarding. In application the student explores the deeper subtleties of the Form’s movements, in a dynamic fashion -as applied Martial- with a training partner. Application tests and perfects the student’s understanding of the movements, developing high levels of mind-body co-ordination, awareness, sensitivity, and confidence.

Each Pillar develops the ability to coordinate the body, internal energy, and sensitivity to oneself, the space around, and other people, to a higher degree. Qi Gong is the foundation of Tai Chi, wherein the student learns to move their body and feel their internal energy (Qi), through simple, relatively static movements, and the use of the will (Yi) to guide the energy as it flows through its natural channels (known as jing-luo, or meridians.) The main exercise used in Tai Chi is called the Form. This is a flowing sequence of movements, lasting from 5 to 20 minutes. The Form very effectively develops physical skill and health, and constitutes a very enjoyable kind of moving meditation. Each movement can be practised at increasing levels of depth as the student develops. There are many variations of the Form within the different Tai Chi lineages and their schools, but they are all derived from the same original Form, and the principles of movement are always the same. Traditional Tai Chi schools nearly always

As well as the Four Pillars, students practise a variety of exercises to develop key physical skills, and different kinds of meditation to focus the mind, increase self-understanding and develop internal energy. Various cultural and artistic concepts and activities complete the full milieu of traditional Tai Chi. What would I learn as a beginner? As a beginner you should look for a class where you can learn the basic elements of Tai Chi in a relaxed and enjoyable way, whilst also enabling you to overcome any anxiety or particular difficulties you may have.

Warm-up and conditioning exercises, basic stepping exercises, and the basics of stance and body-mechanics, would complete the overall picture to give a well-rounded and satisfying introduction to Tai Chi. Content from and copyright of Mei Quan Academy of Tai Chi Mei Quan Academy of Tai Chi (London) Mei Quan Academy (pronounced “May Ch-one”), established in 1990, is comprised of a number of local branches throughout London. We have developed a warm and friendly atmosphere, and a group of long-established, highly-trained and well-supervised teachers. We teach all aspects of Yang Style Tai Chi to a mixed and good-humoured group of students, from beginners’ classes through to advanced. Classes usually have a 50/50 male/ female mix of students who come from all walks of life and around the world. The atmosphere is relaxed and supportive and our teachers pay close attention to the students’ progress as a class and individually. There is time for laughter during classes, and for sociable tea breaks afterwards; learning and training require a balance of enjoyment, focus, relaxation and connection. We run extensive special events, class outings, seminars, parties, dinners and excursions, in and around London. We focus on the key aspects of Taiji: • Becoming calm, centred and grounded

Most Tai Chi schools would concentrate on learning the Beijing 24-step Short Form, which provides an ideal and relatively quick way to acquire the basic skills.

• Co-ordination, balance, suppleness and skill

Students can also learn a variety of easy but highly effective Qi Gong exercises, primarily from the famous “8 Pieces of Silk Brocade” sequence, and the zhan zhuang, 28 Steps and Taijigong sequences. These sequences help to improve health and develop awareness of the body’s energy.

• Self-knowledge, confidence, self-discipline

Simple and highly enjoyable partner exercises are used to develop balance co-ordination, spatial awareness and sensitivity.

• Harmony of body, mind and spirit, and harmony with natural cycles • Developing increased energy We practise all elements of the traditional Yang Style syllabus. Our training encourages a high level of excellence and achievement in all aspects of life.

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country profile - ireland

financial services - ireland Ireland’s export economy still shines

In the midst of international turmoil, the temptation is to paint with broad brushstrokes. In dealing with its own fiscal situation, however, Ireland has set itself apart. While the financial crisis that it has endured over the past three years has been the most severe in its history, the country has led the way in taking the steps to stabilise its public finances. Exceptional political will has been shown to implement a painful but necessary fiscal adjustment. This adjustment is being achieved while maintaining an absolute red-line around any increase in the 12.5% corporation tax rate. At the same time Ireland’s exporters have become dramatically more competitive, and the country has been quietly strengthening its position as a financial centre. As one of the most open economies in the world, a distinction needs to be drawn between Ireland’s international and domestic economies. This distinction is perhaps sharpest in financial services. While the domestic banking sector has borne the brunt of a housing market collapse, service exports have remained strong, and the international sector has been largely insulated from the slowdown in domestic demand. In fact, the easing of commercial property (25%+) and labour markets (15% relative to EU

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average) has reduced costs for many firms. Ireland’s International Financial Services Centre (IFSC) was launched in 1987, and 24 years later has built an industry that ranges from major full-service banks to world-leading positions in fund administration, aircraft leasing and securitisation. Behind the financial institutions, an eco-system of professional and technical service providers has emerged to rival any of the more established centres. With total employment at over 33,000, almost every major international firm has a presence. This activity has remained resilient, and with a global trend towards ‘on-shore’ centres, there is a renewed confidence in future growth. There is also strong political support: in July, Ireland’s Prime Minister Enda Kenny launched a strategy for the IFSC that targets job growth of 30% over 5 years, stating “at a time when priorities cannot be set lightly, this is an explicit affirmation of Ireland's commitment to being a truly global financial centre.” Recognising the challenges that are facing all financial centres, the strategy highlights the risks

inherent in “disproportionate or inappropriate regulation” and it sets as its foundation a pro-enterprise tax framework, and a credible, responsible and proportionate regulatory regime, committed to rigorously controlling business costs. It also commits unequivocally to the fulfilment of the country’s international obligations. A number of initiatives reflect the importance of growth in areas beyond traditional ‘balance-sheet’ activities and leverage natural strengths. Ireland has a world-leading position in ICT, and this has supported the development of global shared services centres for leading institutions. The strategy sets as a key priority the development of Ireland as a ‘Green’ financial centre, built on three strands: carbon markets, green finance and investment management, and world-class education and training. A

Government commitment of €6.8m has been made to support and accelerate growth in the area. With renewable energy investments in Western Europe alone forecast at €300bn over the next 20 years (Siemens, 2008), Ireland’s abundance of untapped renewable energy resources has encouraged its positioning as a hub for ‘GreenTech’ firms. With this body of expertise, it is now rapidly becoming a leading location for investment managers. This depth of expertise will grow in coming years, and a sustainable finance programme developed by industry leaders has already been launched by one of Ireland’s leading universities. The strategy also reflects the collaborative approach taken to policy development for the industry in Ireland. Since the inception of the IFSC, formal links have been maintained between the public and

private sectors to ensure that the business environment remained responsive and that changes were made in order that first-mover advantages could be gained. This is particularly evident in the speed in which EU measures have been implemented in the fund administration sector, and Ireland has led the way in managing the business implications of the Alternative Investment Fund Managers Directive. With regard to the domestic banking sector, 2011 has been a clear turning point. Under the agreement with the EU and the IMF, the Financial Measures Programme (FMP) published in March 2011 implemented Ireland’s obligations and comprised 3 key elements, with an independent loan loss assessment exercise performed by Blackrock, a capital stress test based on extremely severe scenarios, and funding targets for banks in order to reduce leverage and meet new liquidity standards. The prudential capital adequacy (PCAR) process represents the application of the most stringent international capital

requirements and has stood up to market scrutiny. The recapitalisations in progress will result in a pro forma CT1 of 20.5% plus a further 1.5% of contingent capital which will make Irish banks among the best capitalised in Europe. While deleveraging will involve significant downsizing, the focus has been on overseas assets to avoid a negative feedback loop.

and training have provided a workforce that is flexible, skilled and resilient. While it is unrealistic to believe that the country’s international reputation has not suffered from recent events, there is both the political and popular will to do what it takes to quickly return to sustainable growth.

A concrete indication of investors’ renewed confidence in the Irish market has been the significant fall in Irish bond yields. Politically speaking, the renegotiation of Ireland’s EUIMF bailout terms was reflective of a very positive reaction to Ireland’s management of its public finances.

Financial Services Ireland Brendan Bruen Director Tel: +353-1-6051537 clare.hayes-brady@ibec.ie www.fsi.ie

Risks remain, however, particularly on a European level. While the euro zone’s total debt levels are sustainable, a framework which enables all member states to regain market confidence is nonetheless needed to demonstrate coherent political leadership. The coordination of the response to the sovereign debt challenges must be better than that to the credit crunch of 2008. Similarly, it simply makes no sense for the EU to make a solo run on a Financial Transaction Tax that would drive business outside of the Union. Ireland’s location and demographics are among the most favourable in any developed nation, and longterm investment in education

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country profile - ireland

Central Bank’s new approach to supervision - understanding the metrics The events of recent years have seen increasing pressure from various different quarters put on regulators to move away from the essentially passive and reactive regulation that has characterised the approach to date and towards more intensive and intrusive regulation. How do regulators with finite resources, large numbers of regulated entities and increasing complexity of product and services meet these challenges? The Central Bank of Ireland (CBI) has felt this pressure as much as, if not more so, than many other regulators. In an attempt to address these issues, the CBI issued a consultation paper earlier this year indicating how it intends to allocate its resources to regulating financial institutions in the future. According to the Probability Risk and Impact System (PRISM), due to be implemented by the end of the year, financial institutions will be assessed on two levels: the probability that problems will arise and the impact that the firm would have on the economy or consumers if such problems did arise. A key concern for the CBI going forward will be high impact events and firms, even where the probability of the event occurring is low, because of the size of the impact on the consumer or Irish economy in general. They will work to not only minimise the risk of failure in such firms but also to minimise the impact of any such failure. Under the PRISM system, firms will be classed as high impact, medium high impact, medium low impact or low impact. The key focus of the CBI in assessing firms will be business models, financials and governance of the firm. The types of risk that will be looked at include market, credit, insurance and liquidity, among others. Four engagement models have been developed by the CBI; one for each of the risk categories.

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For low impact firms, the CBI is devising an automated programme for the receipt and analysis of financial returns. The returns will be sent to triage teams to be assessed if a low impact firm fails to meet the minimum requirements. According to Mr Elderfield, head of financial regulation at the CBI, about half of the retail intermediaries who are obliged to file annual returns in Ireland, do not do so. To address this, an electronic filing system is to be provided. If the returns are not filed, the CBI will issue fines or revoke authorisations. Because of the lack of resources available to the CBI, supervision of low impact firms will tend to be reactive. Probability assessments will not be conducted but rather the firm will be dealt with only when something comes to light that requires the CBI to intervene. The consultation paper makes it clear that the CBI does not have and does not intend to create a “no failure” regime for smaller firms. Assessments of medium low impact firms will be conducted on a sampled basis, intended to encourage these firms to conduct their operations in a compliant and prudent manner without the intervention of the CBI. Full risk assessments will be conducted on each of the medium high impact firms on a rolling cycle; a relationship manager will meet with management and review the financial returns. Each firm will be allocated a supervisor, who may also supervise other entities, and will be subject to a regular programme of engagement that may require certain remediation steps to be taken. High impact firms will generally be large but not all will be systemic. Each firm will have a dedicated supervision team that will work to understand it, its products, business model and quality of governance and pro-actively supervise it. The supervisors will want to see that the firm has sufficient

capital to cover the risks they are taking and that prudent, fit and responsible individuals are in charge of decision-making. In conjunction with other bodies such as the national Consumers Agency, there will be ‘targeted thematic’ visits to firms in all four categories. In terms of penalties and other enforcement tools, the CBI will conduct assessments on such a level as to highlight the seriousness of the breach and also to act as a deterrent for others. It is clear that the CBI will not tolerate firms merely identifying and analysing problems that arise. The risks must be assessed and action taken to manage and mitigate that risk effectively. Mr Elderfield provided that, “… if you identify a risk, you must make sure that your mitigation is strong and conclusive enough”, and that the overall attitude of the CBI will be “to look at the right risks in the right way with the right resources”. It is clear from the consultation paper and Mr Elderfield’s speeches on the matter that all Irish regulated firms will be subject to more intense supervision going forward. The nature and intrusiveness of that supervision will depend on the categorisation applied to the firm. By understanding the metrics by which financial institutions will be judged by the CBI, firms should be able to take appropriate measures to manage this risk. Failure to do so may result in additional regulation and the accompanying costs and time that it involves. Over the long-term, it would also be important that the metrics be considered when strategic decisions are being made

by financial institutions; in particular, an impact assessment should be carried out before introducing new business lines, extending services, entering new markets and so forth to examine if they will result in any change to the firm’s categorisation under the PRISM approach. Deloitte have extensive experience in assisting their clients manage risk and regulatory risk. These considerations will become increasingly important as firms seek to address the challenges that the new regime will provide. Deloitte Sean Smith Senior manager Tel: +353 1 417 2306 seansmith1@deloitte.ie www.deloitte.com/ie

Developments in the Irish insurance market The insurance industry in Ireland is in the process of adapting to the many changes that are bringing about both business opportunities and regulatory challenges in the market. In this article we set out some of the issues that we have experienced to be most relevant to insurance undertakings either operating in Ireland or considering redomiciling to Ireland. Increased regulation Following its introduction of the Corporate Governance Code for Credit Institutions and Credit Undertakings in November last year, the Central Bank of Ireland recently issued the Corporate Governance Code for Captive Insurance and Captive Reinsurance Undertakings, which imposes minimum statutory requirements as to how captives should organise the governance of their institutions. The Codes specify the rules on matters such as the membership of the board of directors and the role and responsibilities of the chairman. We have experienced a significant increase in the number of clients being subjected to Central Bank themed inspections, reflecting the enhanced resources that have been made available for its enforcement strategy. These inspections, of late, tend to focus on issues such as risk management and corporate governance. The Irish government recently published draft legislation that,

if enacted, will provide the Central Bank with significantly increased supervisory and enforcement powers in respect of regulated financial service providers. It will also provide vital protection to persons who act as ‘whistleblowers’ in respect of such an entity. Financial sanctions are expected to be increased, and the Central Bank is to have the power to require the provision of a report concerning any aspect of a regulated financial service providers’ business. The underlying objective of the proposed legislation, once adopted, is to enhance legal certainty in the marketplace to the benefit of all stakeholders. On a European level, the Irish insurance industry is preparing itself for the introduction of Solvency II (in late 2012), which will impose significant additional reporting requirements on insurance undertakings. From an Irish prospective, however, Solvency II is likely to have some positive implications, as discussed below. In light of these developments, the need for an effective compliance structure for individual undertakings has never been greater. We have advised a wide range of clients on how best to establish such a structure. Government strategy The Irish government recently launched its ‘Strategy for the International Financial Services Industry in Ireland 2011-2016’ (the Strategy). The Strategy (which aims to create over 10,000 jobs in Ireland’s international financial services sector) earmarks the insurance industry as having potential for large growth and identifies specific

opportunities therein. It anticipates that Solvency II will prompt a significant number of insurers changing from a multi-subsidiary structure to a head office/branch structure. In addition, non-EU insurers offering services in the EU will be obliged to adopt equivalent provisions to Solvency II. In light of this, it is thought that many such entities will seek to re-domicile to the EU. As alluded to above, this development has been identified as having significant potential for Ireland as it is anticipated that, as it is one of the EU’s head-office locations of choice, Ireland will attract many of these entities to its shores. Ireland has proved particularly attractive to US insurers seeking access to EEA states operating on a freedom of services basis. In addition, we have advised an increasing number of EU insurers seeking to re-domicile to Ireland. The Strategy identifies further potential through the expansion of established business lines of Irish-domiciled insurance undertakings so as to take full advantage of the EU’s freedom of services regime. It specifies capital protected products as a business line with the potential for significant growth as it believes Ireland has a competitive advantage having already gained a reputation for providing such products on the European market.

other than health insurance, VHI Healthcare has breached the terms of its exemption, which must therefore be ceased. If the ECJ is to rule against Ireland, VHI Healthcare’s solvency level will need to be raised to normal market levels. In reality, it is likely that VHI Healthcare will be significantly restructured so that it may maintain the exemption. In March 2010, joint administrators were appointed to Quinn Insurance Limited. Since then the joint administrators have indicated that there is likely to be a call in excess of €600m on the Insurance Compensation Fund in order to plug the company’s solvency deficit. In its Programme for Government, the Irish government proposes the establishment of a universal, single-tier health service and we await further developments in this area. Dillon Eustace Tom Carney Partner Tel: +353(1)6670022 enquiries@dilloneustace.ie www.dilloneustace.ie

Developments in the health insurance market The European Court of Justice is expected to make a ruling as to the legality of Ireland’s less stringent regulation of VHI Healthcare this autumn. VHI Healthcare currently benefits from a conditional exemption under the first non-life directive with the effect that its solvency requirement is half that of its competitors. This exemption has enabled it to maintain a dominant position in the market (current market 59%). The European Commission is arguing that by operating in markets

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expert forum

expert UK and International Asset Based Financial Services Report 2011

The challenging international economic backdrop of recent years has been particularly demanding on the working capital needs of many businesses across the globe. nevertheless, asset based finance products have continued to grow and prosper due to their low risk, flexible nature and the additional support that many of the products can offer growing businesses. Asset based finance is also becoming more widely used internationally as it is a product that is fit for purpose. Cashflow is a revolving requirement and asset based finance solutions are based upon funding a business’s revolving assets. It is not like a loan that will amortise over a set period. Asset based finance is flexible enough to be able to meet the changing cashflow requirements of a business as it grows and changes. This is a huge benefit to many businesses that find other types of financial products too inflexible. Most asset based finance products (invoice finance, factoring and asset based lending) offer the client an immediate availability of funds, normally around 80% to 85% of the asset value. Unlike an overdraft, products such as factoring will also offer the user additional administrative support. A factor will provide funds against outstanding invoices

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together with a debt collection and ledger management service. Bad debt protection is also available if required. Factoring has the dual benefit of improving cashflow and reducing administration overheads. This can be a huge benefit for smaller businesses who need to focus on delivering their offering and growing their business. Additionally, export businesses often find the additional support of factoring a huge help when they need someone on the ground who can speak the local language. With invoice discounting, the financier will advance cash against outstanding invoices in much the same way as the factor, but the management of the ledger and collection of the debt remains with the client. As a result, the invoice discounter will wish to satisfy itself that there are good credit control procedures in place before an invoice discounting facility will be made available. Invoice discounting can be offered on a confidential basis with customers unaware that the supplier has the facility in place. Asset based finance solutions are seen as less risky for the financier and are more flexible for businesses, which gives the product a two-way appeal where the provider and the customer both benefit. Furthermore, with the new capital efficiency of banks under scrutiny, the asset based finance industry offers the

ability to banks to keep lending to businesses, but in a way which feels more comfortable for them as they address their own balance sheets. The UK and wider market The asset based finance sector is very well established in the UK and has had many years of uninterrupted growth, with the exception of 2009 when most key indicators fell. nevertheless, 2010 saw a return to growth in most of the key areas, including a record client turnover of £212.3bn. This return to record highs in client turnover was achieved partly as a result of the modest growth in the economy, but also the continued switch away from traditional bank lending. While 2009 saw a severe dip in the UK’s economy, since then the picture has become a bit more positive, with growth in both the factoring and invoice discounting industries, plus the wider economy. Admittedly, the UK’s growth has been extremely limited, but this contrasts sharply with that of the asset based finance industry, which has almost returned to pre-recession levels of lending and activity. Export finance is another area within the industry that is becoming increasingly popular. Client sales in this area have increased by 39% to £3.5 billion over the past year. This growth has most likely been assisted by the sluggish UK economy, as many businesses look to

exports as a way of exploiting the growth opportunities abroad, a trend that’s set to continue. However, faster economic growth is likely to be hard to achieve with the huge cuts in public expenditure that the present coalition government believes are necessary to bring down the budget deficit. The flow of finance to personal and business borrowers also remains well below its peak, although ‘Project Merlin’, the agreement between government and the major banks to increase lending to SMEs, opens up opportunities for asset based finance to assist the banks in meeting their agreed lending quotas. So far this year, the Asset Based Finance Association (ABFA) has released two sets of quarterly figures, both showing a return to strong growth within the industry. The first of these was in March, which showed total lending growing by 8% year on year, and with advances from members at the end of 2010 totalling £14.9 billion. The very latest figures from June 2011 show this growth has continued, and indeed is actually outperforming all other types of business lending. Total advances from members last quarter has seen growth of 9% year on year (see chart 1), whereas wider bank lending actually contracted by 2.5% in the same period. The figures also show turnover growth of 15% year on year, with total client sales in the quarter of £55.8 bn (see chart 2). These latest statistics show just how successful the industry is, with very positive sales growth for companies using invoice finance, plus there is no shortage of available funds. Compared to other major forms of business lending, asset based finance has grown the most, as both clients and lenders realise its inherent strengths in these unpredictable economic times. The ABFA has also for the first time calculated that clients actually have sufficient funds in place and are now actively not choosing to access all the finance available to them. From the most recent figures in June 2011, total funding available was £21.1bn, yet only £14.8bn was utilised by clients, meaning there were £6.3bn of funds still available. The international market Growth within the asset based finance sector has not been confined to the UK; it is also continuing to grow internationally. In Europe, the industry saw 19% growth in 2009-2010, north and South America saw

31% growth and Asia saw an incredible 69% growth over the same period. This rapid international growth demonstrates the global embryonic nature of the industry and its products. As the benefits of products, such as factoring and invoice discounting, continue to be acknowledged and become more established across the globe, this growth should begin to plateau as the products reach their natural market penetration. This strong growth does, however, contradict the international economic climate. With much of Europe still in recession during 2009-2010, the asset based finance industry still managed to grow a defiant 19%. The challenging financial climate has actually assisted in increasing the popularity and awareness of asset based finance. With many countries struggling to stabilise their economies, they have increasingly turned to asset based finance products as a lower risk business lending alternative. Furthermore, traditional forms of funding have been drying up, but firms still need working capital to fund and grow their businesses, and asset based financiers have often been able to bridge this gap in the market.

that these products are the way forward for growing businesses across the globe. Chart 1: Advances at quarter end Source: ABFA Q1 2011 statistics

Chart 2: Total client sales Chart sales statistics Chart 2: Total Source: ABFAclient Q1 2011 Source: ABFA Q1 2011 statistics Source: statistics

As more and more markets become aware of the benefits of asset based finance, we will begin to see increased visibility of the products, which in turn should result in the continued global growth within the industry. In summary Right now, the international invoice finance and factoring industry is uniquely placed to assist small businesses with cashflow requirements. The banks are clearly struggling to reconcile a number of conflicting issues. The legacy of the recession is a dampened risk appetite, and, rightly so, some lessons need to be learned. This is coupled with a legislative requirement for banks to hold greater levels of capital, while at the same time they are being encouraged by governments to lend more. Asset based finance has proved to be a very capital efficient and low risk product. By using asset based finance methodologies, greater levels of finance can be made available to good businesses across the globe that may have been hampered by a lack of liquidity. The above evidence suggests that asset based finance will be a key product for the international economy and its recovery. Plus, with firms using invoice finance seeing their sales rise, even in the face of a sluggish economy, it’s clear

Asset Bases Finance Association (ABFA) Kate Sharp ABFA CEO Address: ABFA, 3rd Floor, 20 Hill Rise, Richmond, Surrey, TW10 6UA

Tel: 020 8332 9955 Fax: 020 8332 2585

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expert forum

Trustees in Switzerland: Do they have a future?

Baker & McKenzie Geneva Stephanie Jarrett Principal, head of wealth management group of Baker & McKenzie Geneva, member of Baker & McKenzie Global and EMEA wealth management steering committees, admitted to practice in England & Wales, former chairman of STEP Suisse Romande, member of the Advisory Board of the Swiss Association of Trust Companies Tel: +41 22 707 9821 stephanie.jarrett@ bakermckenzie.com www.bakermckenzie.com/ stephaniejarrett

There are thousands of professional trustees carrying on business in Switzerland, by which I mean individuals or entities in some form holding themselves out as trustees (and protectors) for third party business (as opposed to a family member acting as trustee of a family trust). There is a full range on offer, from the very competent and knowledgeable downwards. Ownership of entities in the business ranges from large financial institutions to individuals. Apart from supervision for compliance with the anti-money laundering legislation, there is no licensing or regulation of trustees in Switzerland, and hence it is difficult to identify the number of professional trustees. Trustees in Switzerland are taxed on their profits as trustees, although not on the assets they hold on trust. Trusts managed from Switzerland will be settled with a governing law of a jurisdiction with a developed trust law, as there is no trust law in Switzerland. Swiss legislation does, however, expressly recognise the validity of foreign trusts. So, for example, should a Swiss court be confronted with a trust in the course of litigation or of a prosecution, expert evidence may called from the relevant jurisdiction on the validity or otherwise of the trust in question. However, change is afoot due to a number of developments, most notably: an increased number of attacks by the Organisation for Economic Co-operation and Development (OECD) and the Financial action Task Force (FATF); increased pressure on the Swiss Financial Market Supervisory Authority (FInMA) to regulate financial intermediaries; and, an everincreasing number of changes in tax legislation outside of Switzerland that makes trustees responsible for tax reporting and potentially for taxation, the latest example being the French tax legislation, which entered into force on 30 July 2011. The trust industry in Switzerland will be facing many challenges over the coming months and

60 â&#x20AC;˘ GBM â&#x20AC;˘ September 2011

years. Too often trusts have been sold as account wrappers with little regard for the true role of a trust in tax and estate planning, business succession, financial transactions, investment structures, charitable endeavours and its fundamental role of asset protection in the widest sense. Furthermore, little regard has been had for the risks being assumed by the trustee and the appropriate fees to be charged for the responsibilities and risks taken on by the trustee. As a consequence, only a small percentage of trusts, and the invariable underlying companies holding the investments, have full sets of accounts. Trustees are accountable to the beneficiaries (in some cases a protector or enforcer) and should be able to produce, within a reasonable time, accounts to demonstrate their good stewardship of the trust assets; if they are found to be in breach of trust, they may be sued. A good trustee will: be able to provide accounts on a monthly basis, preferably attuned to the tax reporting peculiarities of the beneficiariesâ&#x20AC;&#x2122; jurisdiction(s) of residence; carefully select the investment managers and monitor their performance; and, ensure that the trust continues to be in the best interests of each and all of the beneficiaries (reporting, taxation, confidentiality for family members and so on). Keeping complete records and accounts is a primary obligation of any trustee. So, what can be done to ensure that standards in the industry are raised to attract the complex and highly valuable trust business to Switzerland? The following are some of the more important, but by no means exclusive, items to consider. Licensing of trustees: FInMA needs to consider seriously a step process to introduce the licensing and on-going supervision of trustees whose fiduciary obligations differ considerably from the responsibilities of a financial intermediary involved in investment management. When you consider the responsibilities of a trustee and

the legal control a trustee has over the assets held on trust, the supervision of trustees should be similar to that of a bank (ownership, control, client money procedures, business practice, insurance coverage and so on). Certainty in taxation: While the cantonal and federal circulars on the taxation of trusts and trustees published in 2007 and 2008 respectively were a step in the right direction, it is now time to review developments and eventually consider the introduction of tax legislation or an update of the circulars. It would also be useful to have an alignment of the VAT treatment of services provided by trustees for trusts with the tax treatment of trustees and trusts in the circulars. Training: There needs to be more training on trusts and on trust administration, be it for the judiciary, prosecutors, civil servants, lawyers, notaries, trust administrators or private bankers. International negotiations: There needs to be a thorough understanding of trusts by Swiss representatives involved in discussions and negotiations in international fora. There continues to be considerable potential for a quality trust industry in Switzerland. Political stability still counts for a lot with families. Along with the private banks, there will be consolidation of the trust industry during the short to medium term as families and their advisers insist on having a quality trustee care for the family assets.

Transfer pricing monitoring is a key for mitigating the Brazilian corporate tax basis The introduction of a formal transfer pricing legislation (TP legislation) in Brazil occurred upon the enactment of Law 9,430/96. It defined in its statement of purpose that it had as objective to avoid tax evasion through mechanisms that, in accordance with the legislator, followed the principles set forth by the Organization for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines (OECD Guidelines). Despite the indication that such mechanisms followed the OECD Guidelines, the differences between the Brazilian

TP legislation and the OECD Guidelines are significant. Among such differences, the Brazilian TP rules require transfer pricing analyses to be conducted on a product-byproduct, service-by-service and/ or right-by-right basis, which generally generate burdensome tax adjustments, especially when considering that most Brazilian TP methods establish significant statutory gross profit margins to be earned by Brazilian taxpayers in their intercompany transactions. Additionally, the Brazilian TP legislation does not allow for the offsetting of any positive TP adjustments with negative TP adjustments between different products,

services or rights. Consequently, many could infer that most of the Brazilian TP methods were designed to increase the Brazilian Revenue Service’s need for tax income by means that their application usually results in tax adjustments. Economists have long known that establishing pricing takes into consideration the profit margin companies intend to earn. If a company intends to increase its market share, it may decrease its intended profit margin in regards a certain product as a way to increase sales return in different products (eg, product mix). Unfortunately, the commercial aspects that generally keep companies’ sales

and marketing groups busy were not taken into account by the Brazilian TP legislation, which penalises taxpayers with heavy TP adjustments. In such an environment, we often notice that even those taxpayers that do not intend to shift profits abroad through intercompany transactions and generally earn operating profit levels consistent to their third-party competitors, may be required to incur into additional taxes for having a portion of their cost base associated with import costs considered non-deductible for tax purposes. Similarly, the application of a Brazilian transfer pricing method may conclude the taxpayer did not earn the minimum acceptable gross profit margin in its export transactions and, therefore, generating export transactions TP adjustments. Although Brazilian transfer pricing analyses should be conducted annually, the facts discussed above coupled with other particularities of the Brazilian TP legislation, require taxpayers to act proactively, monitoring and tracking their intercompany pricing on a product-by-product, serviceby-service and right-by-right basis around the clock. This has so far been the only available tool taxpayers have to mitigate their TP exposure in Brazil. It is important to note, however, that this process is time consuming and has to be performed carefully as a way to meet, to the extent possible, both the Brazilian and foreign TP requirements while avoiding double-taxation issues. In that sense, it is important that such an analysis be conducted in way to both meet the Brazilian and foreign TP requirements. The question is: is that possible? Yes. It is possible, but it does require a certain amount of time and planning.

Carlos E Ayub is a tax partner at Deloitte Brazil Deloitte Brazil + 55 11 5186-6686 comunicacao@deloitte.com www.deloitte.com

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eu outSourcing - cZech repuBlic

outsourcing in the czech republic Czech Republic is certainly one of the favourite countries for the outsourcing investor. The increasing amount of foreign investments into the outsourcing field, and also the number of newly established outsourcing centres in the area of Czech Republic, is proof of that. Highly developed infrastructure, and the sufficiency of educated and language skilled specialists, are for the companies a guarantee that their investment will bring expected results - professional services for reasonable price.

There are many examples of successful outsourcing in the Czech Republic. The results of research made by Infosys BPO Company last September prove that the value of the strategic services centre sector, composed of shared services centres, business process outsourcing and information technology outsourcing, raised up to $2bn last year and even bigger numbers are expected for this year. Concrete examples are those companies that placed their outsourcing centre in the Czech Republic, such as IBM, DHL, Accenture, Infosys, ExxonMobile, HSBC, Skype, eBay and Tesco. The possibilities of Czech market in the outsourcing field are not proven only by investors. The domestic IT services providers are also successful for both the internal and foreign customers, including subsidiaries of many eminent companies. According to the research made by Czech ICT Alliance, the amount of Czech providers increases 10% yearly. The clients from abroad comprise the majority share. The important point is the aspect of price - these customers do not run only for the bargaining the cheap purchase. They likewise value the reliability and the quality of their suppliers. The impact of the Czech schools is also not negligible, mostly the colleges and universities. The mutual cooperation (not only in the field of information technologies, but also in other disciplines, such as human resources, finances and accounting, etc) between the universities, companies and foreign partners brings constant improvement of education and training system. Many years ago, the majority of universities adhered strictly to the teaching plan, which did not take in consideration the needs of future employers. Currently, many companies, mostly from the services sector (therefore potential outsourcing suppliers), actively cooperate with tuition. Concretely

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speaking, they cooperate not only with the teaching plans but also prepare many additional activities, concerning internships. According to the Infosys BPO survey, moreover 30 thousand of experts work in the centres of strategic services in the Czech Republic; and this number is constantly growing. The majority of employees come from the Czech Republic. The value of $2bn and more than 30 thousand experts in the outsourcing segment establish the Czech Republic as one of the most successful company in the region. Those numbers and analytic statements show that the importance of Czech Republic in the outsourcing area will continue increasing. The intention of strategic investors in the outsourcing industry has been detected in business strategy services segment analysis. Most of them ground their development on long-term investments into the human resources (meaning professional education of employees and above mentioned cooperation with universities). This is the way the quality of the employees is increasing from a longterm point of view and evolving into a group of regional experts with both practical and theoretical knowledge. These experts have huge importance not only considering the investors’ decision-making process regarding staying in a chosen location but also the effort of long-term and strategic growth of existing units and moreover for other possible investments into the local economy. Over and above, these experts dispose of wide scales of experiences that may, and in many ways do, be handed to next ‘generations’. Services importance increasing In 2000, 98% of all foreign investments in the Czech Republic headed into the production industry, but recently the situation in

Why is the Czech Republic interesting for the investors?

the market has changed. In 2008, only 37% of all investment was invested in manufacture production. This trend was still deepening over the past three years. The Czech economy is proving to be the kind of economy that is based on experience and knowledge. Because of this, more and more investments go into the corporate services. What caused such a big change over the past few years? There are many reasons for this. Since 2004, the Czech Republic, as a member of European Union, has been trying to implement an economy development strategy based on knowledge in specific part of services. Increasing global competition and the economy depression caused a necessity for many companies to quickly relocate their centres to countries with lower labour costs in comparison to countries in Eastern Europe or in the US. Middle and Eastern Europe were found interesting mainly because of their ability to offer highly educated workers and quality services. The advantage of the Czech Republic is also in its locations between the West and the East. More and more European companies discovered the many benefits of outsourcing, such as business optimisation, lowering costs and effectiveness rising. The increasing demand for outsourcing services brings the outsourcing providers into middle and Eastern Europe and also closer to the customers. According to the report of Investment attraction by Ernst & Young, over the next three years middle and Eastern Europe will become the third most popular region for foreign investments with an orientation on building centres for supporting companies services and head offices for outsourcing. The first position in investment attraction is taken by Poland, but this value is just a little higher than in the Czech Republic despite the fact that Poland has a four times larger population than Czech Republic and, according to the results of analysts, the positive investment period for Poland is ending. The statement of the Polish government about the planned reduction of investment incentives considerably alarmed investors and logically caused a quick reaction, including the warning that this plan could lead to reallocation of supporting services from Poland into neighbouring countries.

First of all, the Czech Republic wins above its regional ‘competitors’ due to the amount of highly skilled employees located therein and its convenient location in the centre of Europe. The leading features of Czech experts are language skills, expert knowledge and growing experience in the outsourcing. Czech outsourcing occurs in the ascending phase. The past ten years brought practical experience and expert knowledge about many specifics of strategic services centre functioning. Those built up the stable base for further development. The sector is developing towards more and more specialised services providing, complex company processes (end-to-end services) and high added-value processes. We are reaching the stage from simple processes (eg, process billing or ordering) to more complex practices from different fields, such as finance, logistic, banking, customers or business services or information technologies. Controlling, supply chains management, customer process harmonisation or market studies and analysis are other examples of those projects, which apply for higher requirements of labour force and qualification. High levels of labour attract the technological centres Over the course of past few years we have seen the prominence of the business strategy services sector in Czech Republic services connected to the information technologies. According to the Czech state agency CzechInvest figures, approximately 30% of investors invested in software development. This extremely positive result, according to analysts, is due to well-educated college and university graduates. According to the Czech Statistical Office, there are more than 380 thousands of students from the state owned universities. Almost 70% of them are focusing on such branches as informatics, engineering or economy - branches that are in high demand from services oriented companies. One of the most significant centres of information technology in the Czech Republic is the branch office of IBM in Brno. Other important entities in the Czech IT market are companies such as Asseco Central Europe of German Siemens. Cities are fighting for investors The main localities for investments in the business strategy services sector in the Czech Republic are Prague and Brno. These two cities took the 6th position from an investment security point of view. It is not only the political and economical stability that is enough for investors; there are other factors that are important too, such as labour costs, supportive infrastructure costs, office availability, quality and rate of telecommunication network, the city’s transport availability, the public support

system and the HR pool, among many others. It was mainly the ease of hiring the highly skilled human resources that was the basis of the decision to place the Infosys BPO delivery centre in Brno. From a European outsourcing market point of view, we consider this a huge success because it is the first subsidiary of Infosys in Europe. The Czech market in 2011 In 2011, we are expecting business strategy services market to strengthen. These expectations are not only for foreign investments but also for the inner market. Czech companies are more and more taking an example from foreign companies and start to benefit from firms’ process centralisation and outsourcing. The Czech business strategy services sector will develop towards a highly sophisticated service, with an important share of research and development or knowledge process outsourcing services. From this point of view the Czech Republic has a chance to become an innovative back land for European and global companies. The data from the Economist Intelligence Unit has also assigned an optimistic prediction. According to the analysts, in 2011 the value of foreign investments per capita (foreign direct investment) will be $528 in the Czech Republic. That is the highest number in the whole region. For comparison, in Slovakia it will be $406, and in Poland - one of the front countries in the region from a strategic services centres investment point of view – only $311. Outsourcing companies are actively innovating, getting accustomed to constantly growing customer needs and regularly increasing efficiency. The market is continuously demanding. Customers expect flexibility and tailor-made solutions to their specific needs; quality is crucial. Customer services in their native language, the availability of a strategic service centre 24 hours a day seven days a week and excellent data security are a matter of course. And all of this can be delivered by strategic service centres.

Czech ICT Alliance Studenikova Marketing Director Telephone - 00420 733 713 702 Fax (Optional) info@czechict.cz www.czechict.cz

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eu outSourcing - cZech repuBlic

PRK Partners s.r.o. advokátní kancelář Jaroslav Škubal, partner and Tereza Erényi, attorney Partner Tel: +420 221 430 111 jaroslav.skubal@prkpartners.com tereza.erenyi@prkpartners.com www.prkpartners.com

Outsourcing from the perspective of Czech labour law It’s a common practice in the Czech Republic that companies tend to outsource some services to external providers rather than performing them in-house. The past few years have seen also an increasing number of cross-border outsourcing projects, moving services from the Czech Republic further east. Despite the relatively high number of outsourcing projects, many companies still seem insufficiently aware of the legal requirements for such transactions. Transfer of undertaking First, most outsourcing falls under transfer of undertaking protection as defined by Czech and European labour law. This is because under Czech law (Section 338 of the Labour Code (Act no 262/2006 Coll, as amended)) the transfer of undertaking applies when a new employer takes over the current employer’s activities and tasks (or their part). We may, therefore, say that the Czech implementation of the Acquired Rights Directive (Council Directive 2001/23/ EC of 12 March 2001 on the approximation

of the laws of the member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses) is quite broad since it does not require transfer of an economic entity (unit) retaining its identity within the meaning of European law and case law, but emphasises as essential the transfer of tasks and activities. We can find a somewhat similar approach under UK law. Consequences In practice, this means that the employees performing the relevant outsourced activities in-house are transferred by operation of law from the original employer to the outsourcing provider. Thus, the original employer should not terminate employment contracts with the transferred employees and the outsourcing provider should continue employing the employees under the same conditions as the original employer (including salaries, benefits or other entitlements arising from individual or collective agreements, as well as internal policies adopted by the original employer). Of course, this basic situation makes outsourcing more expensive, as the outsourcing provider is forced (at least for some period) to have the same employment costs as the original employer. This also usually results in differences between the entitlements of transferred employees and rest of workforce of the outsourcing provider. This must be carefully handled so that the principles of equal treatment, as well as the transfer of undertaking rules, are satisfied (which is not always so easy). The increase in costs for salaries and other benefits is not the only impact. For example, if the transferred employees include any trade union members, this trade union is automatically established at the outsourcing provider on the date of the transfer (regardless of whether there were previously some employee representatives at the outsourcing provider). Some procedural steps must also be followed, eg, the duty to inform and consult employees (or employee representatives) about the contemplated transfer (outsourcing). Cross-border outsourcing Cross-border outsourcing is even more complicated. Although Czech law does not expressly regulate cross-border transfers, at the European level cross-border transfers are generally recognised as falling within the scope of the Acquired Rights Directive. In cross-border transactions, employees

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generally do not consent to being relocated to the outsourcing provider’s country; thus, a termination reason - organisational reasons - is given. But the foreign outsourcing provider can terminate the employment relationships just after the employees are transferred (ie, it is just a ‘legal’ transfer, not a ‘physical’ one). The foreign outsourcing provider must then employ the transferred employees until the notice period lapses. It must also register with the Czech authorities as a Czech employer (for social security and health contributions, etc,), which is clearly a complication. It can happen that some employees will agree to a physical relocation (eg, it can be attractive for young people to work under Czech salary level in a country with a lower cost of living). Under this scenario, the outsourcing provider has some employees working under Czech contracts with different entitlements than the rest of the workforce employed under local law. In addition to difficulties in execution, this may result in unequal treatment issues. How to proceed with outsourcing? From the above examples, outsourcing can be problematic from a legal perspective. If the rules on transfer of undertaking are not followed, the main risk is that employees could claim continuous employment at the outsourcing provider, including salary compensation for the previous period. Such proceedings can be extremely difficult and costly. On the other hand, the number of litigations on transfers of undertaking in the Czech Republic is small; almost none deal with outsourcing. As such, especially in cases of cross-border transfers employers quite often risk ignoring transfer of undertaking rules rather than getting involved in the related difficulties. nevertheless, when an outsourcing project is intended, management should be aware of the legal background and potential consequences, so that, after evaluating the risks, the most feasible solution can be taken. The law firm PRK Partners (formerly Procházka Randl Kubr) is one of the best and largest law firms in Central Europe. It was established in 1993 in the Czech Republic as an independent law firm. PRK Partners provides its clients, major domestic and international companies, with comprehensive legal services through its specialised team of more than 100 legal practitioners and many tax advisers in its four offices within three countries (Czech Republic, Slovakia, and Hungary). PRK Partners serves and accompanies its clients on their business journey around the world.

Are you ready for BPO 2.0? Economic growth is not a combination of words that we’re hearing as often as we would like lately. The world rather fears another wave of economic or financial crisis and bankrupting states. But there is a growth you can hear about - shared service centres (SSCs) and business process outsourcing (BPO) centres are still on their way up. Today’s turbulent economic climate has started a new boom for business process outsourcing and internal shared services. Expectations of new outsourcing clients are, however, much higher than ever before. Labour arbitrage is not the only benefit outsourcers are looking for. Demand is not driven only by the transactional, low costs solutions provided from Asia and Pacific, but required ‘BPO generation 2.0’ must provide more than this! The profile of new wave outsourcers has dramatically changed, so did the complexity of required support. Great process expertise, excellent language skills and the ability to truly understand and help develop your business are nowadays an absolute must for any new outsourcing deal. A strategic location in the middle of Europe, great infrastructure, cosmopolitan culture, excellent language skills, high educational standards, outstanding business acumen and the ability to understand and comply with different legislative requirements are major reasons why the Czech Republic has been starring the list of preferred outsourcing locations for more than ten years.

All of these benefits lead many global companies to the idea of establishing their internal global, or at least European, centre of shared services in the Czech Republic. Unfortunately, not all of these centres have received enough of a focus while starting up as they deserved. Some of our clients have approached us with request to help them stabilise and improve their already established SSC. The screenplay is often very similar - processes have been transitioned from its original location, but there aren’t any cost savings. On the top of it, processes do not seem to be working well and the trust into SSC support among the corporation is at very low level. The usual root-cause of this situation is often same: underestimated importance of planning and architecture of the shared centre, insufficiently managed transition and a lack of internal communication. Obviously, it is much more difficult to repair an already running centre and gain back the trust of stakeholders. It takes time and money. The first step, however, is very clear - a quick diligence audit, for which our company has developed unique methodology. You can forget about long auditor reports with unclear recommendations. The outcome of our work is simple, structured and pragmatic. We are very proud that our consulting expertise in the area of BPO and SSC has been gained not only in the position of an independent consultant, but mainly throughout the experience of ‘hands-on’ roles in management of an outsourcer or as part of operational management in global outsourcing companies and in different locations across globe. The diversity of our experience and our genuine and deep knowledge of outsourcing and shared service agenda help us truly understand our client needs and deliver tangible results. And that’s definitely more important than just a beautiful power point presentation. Our team is able to provide full support while establishing new SSC, including development of strategic plans, business case, location choice or creation of global network of regional centres. Our footprint goes beyond Europe; we successfully delivered projects in India, Philippines, Mexico and US. To those companies looking for external outsourcing provider, we offer outstanding knowledge of the Eastern European outsourcing market and strong support in the BPO vendor selection process. We’ll help you choose the right partner not only among big BPO players, but also among strong and reputable local providers, that would surprise you by their level of competency, professionalism and global references. So are you ready for outsourcing or shared services? We are ready for (any) business support you may need!

Consulting - Accounting - Learning - Services

R4B consulting s.r.o. Lenka Rechkova Partner Tel: +420270007307 lenka.rechkova@r4bgroup.com www.r4bgroup.com

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England and Wales Arnold & Porter Dr Christopher Stothers & Paul Abbott Counsel & Associate Tel: +44 (0) 20 7786 6226/6234 christopher.stothers@aporter.com paul.abbott@aporter.com www.arnoldporter.com

Supplementary protection for pharmaceutical products in the EU Supplementary protection certificates Patent protection in Europe can last up to 20 years from the date of filing. However, pharmaceutical innovators find that much of this term of protection is lost due to the lengthy regulatory processes required to obtain a marketing authorisation (MA) to place a new product onto the market. In order to compensate for this, the EU introduced supplementary protection certificates (SPCs) designed to allow innovators an extension of protection equal to the period from patent filing to MA grant, less five years (subject to a maximum extension of five years).

There are essentially two approaches: the ‘infringement’ test - would the product infringe the basic patent (for instance, where the patent covers one part of a combination product); and the narrower ‘express disclosure’ test - does a claim of the basic patent, properly construed, disclose the entire product. It is the latter test that has been adopted by the English courts, while, eg, the German courts adopt the ‘infringement’ test.

use patents would be “unfortunate”. A reference to the ECJ has been made in a case that concerns a medicinal product for the treatment of insomnia in humans that was denied SPC protection due to the active ingredient having previously been approved for use in improving the reproductive performance of sheep.

Where the product authorised under the MA is broader than that disclosed in the patent, the ‘express disclosure’ test cannot be circumvented by applying for an SPC that is limited to the scope of the basic patent because the SPC must also have the same scope as the MA. The table below summarises the differences in approach under the two tests.

In order to encourage pharmaceutical companies to test their products for safety in children, the EU provides for a six-month paediatric extension (PE) to the SPC term provided certain conditions are satisfied. However, without an SPC there can be no PE.

However, recent court decisions have highlighted problems with the SPC framework and raise questions Combination products summary as to whether the system is even fit-for-purpose. Following inconsistent decisions of courts Basic patent MA claim across Europe, several cases have been referred to the Court of Justice of the EU (ECJ). In order A A+B to steer the right path through A A+B the unclear landscape, innovators need commercially aware advice Product A+B covering both pharmaceutical ‘comprising’ A regulation and intellectual property.

Conditions of grant

A+B

SPC application

A A+B A+B

This has become an issue where an MA is granted four and a half to five years after patent filing, where an SPC itself would not provide any benefit. The UK courts (unlike, eg, those in Germany) allow the grant of SPC granted? ‘negative-term’ SPCs, which may be pushed into positive territory Infringement Express disclosure test test by the addition of the sixmonth PE. The ECJ is currently No No considering the legality of this approach: indications are that the Yes No UK approach will be approved, providing a boost for innovative Yes No pharma. Yes (only if indirect infringement is accepted)

Four conditions need to be A+B A+B A+B Yes satisfied in order to obtain an A plus optionally SPC: the product is protected any other A+B (a A+B (a Yes by a “basic patent” in force; a (unidentified) therapeutic agent) therapeutic agent) therapeutic agent valid MA has been granted; the product has not already been the subject of an SPC; and the MA is the first authorisation to market the product Several cases have been referred to the ECJ as a medicinal product. for preliminary rulings as to which tests are Particular problems arise when considering correct. The eventual decisions will have products containing combinations of active huge consequences for innovative pharma. ingredients. These products have been Second medical uses treated differently in different EU countries, leading to a confused state of affairs. The “product” is defined as “the active

Key problem areas

“Product protected by a basic patent” and “valid authorisation” The question of what is “protected” by a basic patent is not harmonised at European level. The ECJ has held that this is a matter for national law. Courts in different countries have adopted different tests.

Paediatric extensions

ingredient or combination of active ingredients”. The ECJ has taken a very narrow interpretation of the “product”, denying SPC protection for reformulations of existing active ingredients. Similar issues arise for second medical use patents. The English Court of Appeal has recently expressed concern that a blanket denial of SPC protection for second medical

Yes

In summary Given the identified problem areas and pending ECJ references, the SPC landscape remains blurred. The key for pharmaceutical innovators is to manage the uncertainty by considering SPC availability during patent drafting and prosecution and ensuring close co-operation between IP and regulatory functions. Foreseeing and avoiding the problem areas is the best way to ensure full protection for the blockbuster drugs of the future. Taking advice on the best and worst case scenarios is particularly necessary in uncertain times. Arnold & Porter’s London practice includes innovative work in the intellectual property and life sciences areas. We count some of the world’s largest global pharmaceutical and medical device companies among our clients, and our practice is recognised for its leadership in this arena. The firm’s life sciences regulatory practice was described by Chambers UK 2011 as “second to none”.

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Life Sciences & Pharmaceuticals

Canada

Baker & McKenzie LLP Bill Richardson, Partner Tel: (416) 865-6937 Fax: (416) 863-6275 Bill.Richardson@bakermckenzie.com www.bakermckenzie.com

Patent litigation in the pharmaceutical and life sciences sector in Canada - a call for change A new era is dawning for patent litigation in the pharmaceutical and life sciences (P&LS) sector in Canada. As a patent litigator who appears regularly in the Federal Court to enforce and defend clients’ drug patents, it has become increasingly apparent that the litigation process must evolve to reflect changes in the industry if it is to be truly purposeful. The changing landscape of the P&LS industry is having a profound impact on the manner in which patent litigation is conducted in Canada. These changes (the so-called ‘patent cliff’ and the demise of new block-buster drugs, to name two) coupled with the weakening of the patent linkage regime described below, have meant a significant drop in the number of new patent cases in Canada. The situation is exacerbated by the fact that the scope of the Patented Medicines (Notice of Compliance) Regulations has been narrowed to the point where the Regulations afford only limited protection to patent holders and the fact that the Federal Court has routinely refused to grant interim or interlocutory injunctive relief in pharmaceutical patent infringement cases (paradoxically, one of the main reasons why the government introduced the Regulations originally). The fear is that the global P&LS sector will choose to reduce or eliminate their research and development (R&D) investment in Canada, and elect not to bring their innovative products to market in this country, unless we can offer a viable, efficient and economic means of protecting their investment. The solution is, in my view, to build an efficient and economic means of protecting and enforcing patent rights in Canada. The purpose of this article is to look at how this can be accomplished.

Injunctions: The Federal Court should reconsider its long established practice of denying interim and interlocutory injunctions in pharmaceutical patent cases. The test for relief is simply too high and unrealistic. How one can establish irreparable harm that will occur in the future with evidence that is not speculative defies

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logic. The admonishment that it is only about money ignores the reality that when a generic product enters the market, the innovator’s position is irrevocably altered, and is of little comfort to employees who are displaced and shareholders who have lost value. With the Federal Court (FC) now advertising a ‘quick to trial’ procedure where patent cases will reach trial within 2 years of filing, the risk of granting an interlocutory order restraining a generic coupled with the patent holders undertaking in damages should be sufficient reason to loosen the FC’s judicial strings.

in relation to the use of expert witnesses: limiting the number of experts who can testify and requiring experts to commit to a code of conduct, so that they understand their duty is to the FC and not the party paying their account. It is suggested more can be done, such as providing for pre-trial motions to strike an expert’s report where the expert is unqualified or where the expert’s report does not meet the standards of scientific verity required by the FC. Leaving these issues to the trial inevitably adds to the length of trial and the proliferation of experts.

Discovery Process:

Summary Judgment:

The single most expensive aspect of the trial process in patent infringement litigation in Canada is the discovery process. The discovery process can last for years as the alleged infringer delves into every aspect of the patented invention’s history and, not infrequently, the patent holder’s product development. Added to this is the ability of a defendant to examine the assignor of the patent (ie, the inventor(s)), which becomes an entire second round of repeat examination, of decidedly little use since the transcripts cannot be used as evidence at trial. Then there are the interminable ‘refusals motions’, which, due in part to a lack of judicial resources, can extend the discovery process by years. e-Discovery has added to the length of the documentary and oral discovery phase of patent litigation, compounded by the risk of an accusation of ‘spoliation’. The FC must come to grips with the discovery juggernaut or patent litigation will continue to march at a leisurely pace. Fixed, immutable deadlines are important as is timely access to a judge or prothonotary who can break the frequent log-jam of refusals. One recent practice that is useful is the ‘answer subject to objection’, which gets over many discovery objections and reserves a party’s right to object to the use of the discovery at trial. In practice, very few such objections are maintained at trial.

Summary judgment proceedings can be an effective means of rendering justice in a more timely manner. Unlike our provincial courts, the FC has been either unwilling or unable to employ the summary judgment procedure in intellectual property cases. This is surprising given that the FC has been deciding patent issues using the summary proceedings of the NOC Regulations since 1993. The time is now to dust off the Rules and put them to proper use. Not every patent case requires or deserves a trial. The FC might reconsider its position refusing to adopt Markman-type motions as are done in the US (Markman v Westview Instruments, Inc [1996]), where a court can determine claims construction before the trial (sometimes before discovery), which often leads to an earlier resolution of the case.

Experts: Limit the use of expert witnesses at trial. The FC has already taken several steps forward

Conclusion: Changes in the P&LS sector require a change in the way in which we litigate patent disputes. Improving access to the effective judicial determination of patent disputes is key if we are to remain relevant globally. Otherwise, P&LS companies will choose to invest in R&D elsewhere and elect not to bring their products to market in Canada, with obvious negative consequences for Canadians. With respect, we need to sharpen our judicial tools to make our legal system more effective, efficient and fair.

InDIA The Indian pharmaceutical and life sciences sector as it stands today Globally, the pharmaceutical sector is undergoing drastic transformation and facing unprecedented challenges. With major blockbuster drugs going off patent, and fewer new drugs in the pipeline, the demand for research and development (R&D) and production of generic drugs is rapidly increasing. Multinational pharmaceutical companies are seeking opportunities for effective and cost efficient sources of generic drugs, as well as innovative scientific manpower at lower costs. Therefore, it is the emerging markets that will account for more than 40% of the growth in the global pharmaceutical sector over the next decade (IMS Health, ‘Pharmemerging Shakeup’ (2010)). India has ensured growing compliance with internationally harmonised standards such as good laboratory practices (GLP), good manufacturing practice (GMP) and good clinical practices (GCP), and is well on track to becoming one of the most favoured destinations for collaborative R&D, bioinformatics, contract research and manufacturing and clinical research. As party to the TRIPS agreement, India has made its intellectual property rights regime stricter in order to comply. All these factors continue to contribute towards the strengthening of the pharmaceutical sector in India. The Indian pharmaceutical industry is growing at a rate of 8-9% annually, has expanded considerably over the past years and today ranks 3rd in the world in terms of volume and 14th in terms of value (‘Annual Report 2009-10’, Department of Pharmaceuticals (DoP), Ministry of Chemicals & Fertilizers, Government of India). The market has further potential to reach an estimated $70bn by 2020 in an aggressive growth scenario, reflecting immense potential for investment. The Drugs and Cosmetics Act 1940 regulates the manufacture, import, distribution and sale of drugs in India. Schedule Y governs the procedure for clinical trials. Drugs to be distributed in India have to follow specific labelling and packaging requirements as per part IX of the Drugs and Cosmetics Rules 1945. Further, the price of certain bulk drugs is also regulated, as per The Drugs Price Control Order (DPCO) 1995 under the Essential Commodities Act 1955. The Foreign Trade Policy, as amended from time to time

governs the import and export of products. The EXIM Policy provides restrictions on the import of certain items, including compounds relevant for the pharmaceutical sector. The Ministry of Health and Family Welfare (MoHFW), along with the Drugs Controller General of India (DGCI) and Indian Council for Medical Research (ICMR) have formulated GCP for research on human subjects. These are compliant with the Declaration of Helsinki, World Health Organization guidelines and International Conference on Harmonization requirements for good clinical practice. Various other guidelines have been formulated by regulatory bodies to facilitate manufacture, import, etc, of drugs and cosmetics in India. MoHFW is the chief regulatory authority in the Indian pharmaceutical sector. The main agencies of the Department include the Central Drugs Standard Control Organisation (CDSCO) and the Drugs Controller General of India (DCGI). The Ministry of Chemicals and Fertilizers (MoC&F) is responsible for policy making, planning and development aspects of chemicals, petrochemicals and pharmaceuticals. The Department of Biotechnology, Ministry of Science and Technology has formulated guidelines for stem cell research and therapy. The advantages of India include: one of the fastest growing economies in the world with a 9.66% GDP growth; a growing middleclass population with purchasing power to afford world class medication; 67% of India lives in rural areas, representing a huge untapped market for pharmaceutical companies; a rich pool of highly skilled, English speaking human capital; a self reliant pharmaceutical sector, with low costs of production and extensive R&D/IT/ITES opportunities; and, a diverse population providing an excellent centre for pre-clinical and clinical trials. Global pharmaceutical companies have been facing difficulties over the past decade in terms of declining productivity of R&D, expiry of blockbuster patents, pricing issues, etc. Pharmaceutical companies are seeking to outsource manufacturing and development work to emerging economies, and while India has the potential to harness this opportunity, there are challenges that the country must overcome to do so, including:

India’s strict price control regime; Indian infrastructure (building, energy, transport, etc) poses a major barrier to development; and, India’s healthcare insurance industry is very limited, meaning that most of the healthcare expenditure is paid out of people’s pockets. ‘Pharma Vision 2020’ prepared by the DoP aims to make India one of the leading destinations for drug discovery and innovation, by providing infrastructural and other requisite support. The Indian government has been making efforts to improve healthcare nationwide through various policies aimed at improving the infrastructure, providing easier and affordable access to high quality drugs through tax incentives, etc. Recently, the DoP has issued an expression of interest inviting bids for the selection of global level consultants for the preparation of a detailed project report aiming at the development of India as a drug discovery and pharma innovation hub by the year 2020. The DoP has also invited proposals from private Venture Capitals for the creation of funds to invest in innovation and drug discovery in the pharmaceutical and biopharma industry. 100% foreign direct investment (FDI) is allowed in the pharmaceutical sector through the automatic route, which does not involve the necessity of obtaining approvals from the Indian government, or any department thereof. This enables foreign companies to invest in Indian companies, form joint ventures and even set up their wholly owned subsidiaries in India. The Indian pharmaceutical industry has shown impressive growth in the recent years. However, for the trend to continue and to capitalise on the emerging issues in the global pharmaceutical markets, the government must address the issues of infrastructure and price control at the earliest. The Draft Pharmaceutical Policy 2006 has set a positive and ambitious goal for the Indian pharmaceutical sector. India has the potential to become a global hub for pharmaceutical and life sciences research, manufacturing, and export and health care services within the coming years.

J. Sagar Associates Sajai Singh Position : Partner Telephone : +91 9845078666 sajai@jsalaw.com www.jsalaw.com

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Life Sciences & Pharmaceuticals

Brazil Momsen Leonardos & Cia Otto Banho Licks Attorney at Law otto@ottolicks.com

Patent protection for pharmaceutical inventions in Brazil did not exist until 1994. This scenario changed with the incorporation of the WTO Trips Agreement in 1995 and the establishment of the Intellectual Property (IP) Law in 1996. According to what is stated in the WTO Declaration on the TRIPS Agreement, IP protection is important for the development of new pharmaceuticals (WT/MIN(01)/DEC/W/2). However, Brazil explicitly infringes data package exclusivity (DPE) rights, despite of the host of laws and enforcement mechanisms available in Brazil for the protection of these rights held by foreign and domestic IP owners. Art 195, XIV, Law 9,279/96 and article 39.3 of the TRIPS Agreement are the basis of the legal framework needed for the enforcement of DPE rights. The first provision does not set a term for such exclusivity, but states that the disclosure, use and exploitation by unauthorised third parties of a human drug data package presented by the originator company to the Brazilian Food and Drug Administration (ANVISA) constitutes an act of unfair competition. ANVISA, on the other hand, has taken a very different approach, disregarding its obligation to enforce the laws and to respect DPE rights in the data packages that are submitted to the agency. On 9 May 2011, 16 years after the implementation of the TRIPS agreement, Brazil had its first final decision on the merits concerning the enforcement of DPE rights of an originator’s drug for human use. In this decision, the Federal Court recognised that in the marketing approval proceeding held by the ANVISA there was an undeniable reliance on the originator’s data package. Taking into account the non-existence of a specific provision stating the term for human drugs DPE, federal judge Jose Marcio decided, by analogy, to use the term applicable to veterinarian drugs, granting ten years of data package

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protection to the originator’s company. IPR owners and investors must realise the importance of this first step, bearing in mind that their future in Brazil will be defined by this and other decisions on DPE enforcement litigations in Brazil. It’s important to notice that what is discussed on the DPE protection is not the simple prohibition of physical access or consultation of non-authorised parties to the data submitted to the ANVISA by the plaintiffs, but the use of this information to produce and obtain a marketing approval for the generic or similar version of the reference drug. The tests necessary to have a marketing approval granted for a reference drug are the result of years of research and investment of economic resources, effort that is not required from the laboratories that want generic or similar marketing approval. It’s easy to conclude that the use of the tests performed and presented by the reference drug owner to the ANVISA by the generic and similar owners is not intended to protect the public, but only exempt these laboratories from presenting their own tests to demonstrate the safety, effectiveness and quality of their products. Otto Banho Licks is an attorney at law in Brazil. He can be contacted at: otto@ottolicks.com

US TAX

precision amidst complexity For over 25 years, US Tax & Financial Services has provided US and UK tax compliance and consultancy advice and services for US / UK individuals, corporations, partnerships and trusts throughout Europe. Meet us in our London, Zurich and Geneva offices for expert advice on multi-national tax issues.

ZURICH US Tax and Financial Services Sàrl US Tax and Financial Services Sàrl PO Box 1367 Löwenstrasse 28 CH-8021 Zurich Switzerland T: +41 (0) 44 387 80 70 F: +41 (0) 44 387 80 79 GENEVA US Tax and Financial Services Sàrl Boulevard Helvétique 36 (entrance Rue Petit-Senn 2) CH-1207 Geneva Switzerland T: +41 (0) 22 700 25 00 F: +41 (0) 22 700 25 26 LONDON US Tax and Financial Services Ltd Magdalen House 136 Tooley Street London SE1 2TU United Kingdom T: +44 (0) 20 7357 8220 F: +44 (0) 20 7357 8225

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unepfi - gloBal round taBle 2011

Sustainable investment has come a long way since the ethicallymotivated boycotts of apartheid and the application of religiouslymotivated “black lists”. But, unfortunately, sustainable investment still appears to borne the stigma of its largely exclusionary past. A constant barrier to the widespread acceptance of sustainable investment has been the misconception that it automatically translates to underperformance. The common school of thought is that a limited investment universe, as a result of a negative screening approach, entails a performance penalty. This has been the subject of much debate through the years, particularly in the context of fiduciary responsibility. Yet, naturally, performance speaks as loudly to sustainable investors as it does to other investors. Today, an increasing number of investors use information on companies’ environmental, social and governance (ESG) performance as indicators of management quality and integrate them into the investment process in the context of financial materiality and as part of fiduciary responsibility. The aim of this mainstream sustainable investment approach is to focus a brighter light on the impact of all material considerations on investment value, which is different from traditional negatively screened ethical investment approaches, often in the form of industry or sector exclusions. Such integration of ESG issues is therefore not an ethical or mission-related preference, but a fundamental tool to improve decision-making and enable outperformance. Sustainable investors are more concerned about the long-term performance of their funds rather than short-term trends and quarterly earnings. Sustainable investors are also active and responsible owners, and seek to engage with companies to improve their ESG performance. Furthermore, the owner of an index fund or an investor holding many companies naturally wants to maximize performance of the entire portfolio.

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Research shows that it is not in the investor’s best interest if one company profits by polluting the environment and at the expense of other portfolio companies. In the long-term, large investors have a financial interest in the wellbeing of the economy as a whole. By exercising ownership rights and through constructive dialogue with companies and policy makers, large investors can encourage the protection of the environment needed to maintain the economy and investment returns over the long term. UnEP FI has in several research reports shown that ESG issues such as climate change, energy efficiency, labour rights and work place safety have or can have a material impact on share and fund performance and should be taken in account by any professional investor. The Deepwater Horizon oil spill and Tepco’s failing security systems are events that investors remember all too well.

Sustainable Finance 2.0: Reinventing the recipe to financial performance The financial materiality of ESG issues is linked to fiduciary responsibility. A UnEP FI report on the complex relationship between fiduciary law, ESG issues and institutional investment, often referred to as the ‘Freshfields Report’ , covered nine major capital market jurisdictions and concluded that ‘...integrating ESG considerations into an investment analysis so as to more reliably predict financial performance is clearly permissible and is arguably required in all jurisdictions.’ The 2009 follow-up report, ‘Fiduciary II’ , went on further and concluded that in order to achieve the vision of the original Freshfields Report, where trustees integrate ESG issues into their decision-making, ESG issues should be embedded in the legal contract between asset owners and asset managers, with the implementation of this framework being governed by trustees via client reporting. Equally, the report includes legal commentary that asset managers and investment consultants have a duty to proactively raise ESG issues with their clients, and that failure

to do so presents ‘a very real risk that they will be sued for negligence on the ground that they failed to discharge their professional duty of care to the client...’. A joint report by UnEP FI and Mercer on 20 key academic studies shows evidence of a positive relationship between ESG issues and portfolio performance in 10 studies, and 7 studies reporting a neutral effect and 3 a negative association. On balance, the evidence suggests that there at least does not appear to be a performance penalty from taking wider factors into account in the investment management process. Further, as more research resources are allocated to this field and data comparability improves, it is anticipated that evidence supporting the integration of ESG issues will become more robust. From 19 to 20 October 2011, UnEP FI will welcome over 500 delegates from the global financial sector and its stakeholders to showcase the latest trends and best practices in sustainable investment at its Global Roundtable in Washington D.C. In one of the most exciting sessions of the Global Roundtable, UnEP FI will explore how sell-side analysts and investment managers use sustainability data to generate better returns in their investments and research. It will also provide key insights on how investment firms can train and incentivise their managers to employ sustainable investment strategies and practices. Curtis Ravenel, Head of Global Sustainability Initiatives Bloomberg, Erika Karp, Head of Global Sector Research UBS, Steve Waygood, Aviva Investors and Bob Dannhauser, CFA Institute are some of the featured experts. For more information, please visit: www.unepfi.org/washington. Par Lopving, Programme Officer, UnEP Finance Initiative’s Investment Commission investment@unepfi.org Butch Bacani, Programme Leader, UnEP Finance Initiative’s Insurance Commission insurance@unepfi.org

September 2011 • GBM • 73

conferenceS

corporate and Business conferences Corporate and business conferences take place all over the world at various times of the year covering nearly all aspects of business life. It is a great opportunity to find out latest news, information, updates, the latest innovations and inventions and what the future holds for a particular industry.

In recent years, more and more firms are taking up the opportunity to host and deliver conferences as the benefits certainly outweigh the cost and organisation. Businesses have networked and found vital links and partners that can help to improve the services that they provide. However, issues that many people find is what conferences to attend and when. GBM have researched and compiled a list for you to see what events are taking place in the near future…

FT Global Investment Series: Focus on Canada Friday, September 23, 2011 - W Hollywood, Los Angeles At a time of continuing uncertainty and fragile recovery prospects, Canada’s economic performance stands out among advanced economies. Having posted the strongest growth among G-7 countries between 2008 and 2010, the Canadian economy is forecast to grow in the order of 3 per cent, on average, between 2011 and 2012, the second-fastest in the G-7, aided by an increase in investment of 6.1 per cent1. In a bid to draw more investment into Canada, the Government of Canada has committed new resources and programs to support leading-edge research and international collaborations to bolster the country’s competitiveness in ICT, clean energy, life sciences, and other innovation-intensive sectors. This drive is being supported by Canada’s economic stability, healthy fiscal position, robust banking system, low corporate tax rates, favorable R&D tax incentives and highly-educated workforce.

What are the most promising opportunities and key challenges for businesses looking to establish or expand their operations in Canada? What can Canada do to be more competitive in an increasingly globalized business environment, to attract the interest of US and foreign companies? The Financial Times, in partnership with the Government of Canada, will bring together senior policy-makers and business leaders from the US, Canada and abroad for a series of six conferences in Los Angeles, Dallas, Minneapolis, San Francisco, Miami, and Washington to discuss the latest sector trends, the key areas of growth, and factors relevant to considering Canada as a place to invest. If you would like to attend or receive more information, please contact Chrissy Sexton at chrissy.sexton@ft.com or +1 212-641-6369.

Innovative Lawyers 2011 Wednesday 5 October 2011 Science Museum, London The Financial Times is delighted to announce that the 5th Annual FT Innovative Lawyers Awards will take place on 5 October 2011 at the Science Museum, London. The theme of this year’s FT Innovative Lawyers Report and Awards is ‘Taking Bold Decisions’. now in its sixth year of publication, the FT Innovative Lawyers

Report has become one of the top legal rankings in Europe and the accompanying awards are widely regarded as the best researched in the market. It presents a unique analysis of the legal industry and is the only ranking of lawyers by innovation. We base both the report and awards on thorough research and robust journalism. For table bookings: Aliki Varsamides +44 (0)20 7873 4109

FT Commercial Property Conference 2011 28th September 2011|Millenium Mayfair Hotel, London

international, and in retail, prime units continue to thrive.

In 2011, the commercial property market continues to be challenged by ongoing weakness across the economies of Europe. Banks with large numbers of distressed assets on their books must weigh up the merits of enforced sales versus workouts, while cautious institutional investors are demanding greater transparency and more active management from their chosen fund managers.

The FT Commercial Property Conference 2011 will bring together the leading investors and developers in UK and European real estate to share their forecasts for the market over the next five years, identify which sectors of the market are emerging most rapidly from the financial crisis, and determine how to maximise returns in a new era for property investing.

At the same time, hotspots such as the City of London are still attracting competition between investors both domestic and

www.ftconferences.com/property/

Hedge.funds World Latin America 2011 4-6 November 2011 Eventi Hotel, New York Hedge Funds World LatAm 2011 is the only hedge fund conference bringing together LatAm and US end investors to review LatAm investment opportunities 74 • GBM • August September 20112011

now in its 7th year, Hedge Funds World LatAm 2011 remains the industry’s definitive hedge fund conference for the LatAm investment community, bringing together US and LatAm investors, and featuring end-investor case studies, lively debates and networking opportunities.

2nd Annual Business Performance Summit 2011 12-13 September 2011

Book now to secure your place at BPS Summit 2011.

Maritim proArte Hotel Berlin, Germany

Be Part of It!

Event Summary

180+ attendees

The Business Performance Summit 2011 showcases the latest strategies and operating tools through a two day programme of keynote sessions, streamed focus groups and interactive workshops designed to assist you and your stakeholders in:

120+ business performance experts

The latest measurement and process improvement techniques to drive business performance

A variety of interactive workshops

Integrating your performance information to execute change and reach your corporate goals. Adopting new management models and technologies. Bringing together the leading heads of business performance, change management, operational excellence, continuous improvement, six sigma and quality, you can examine different perspectives from a variety of public and private sector performance improvement case studies.

15+ real-life case studies presentations including Yorkshire Building Society, Pfizer, Statoil, A variety of interactive workshops Variety of networking drinks receptions, lunches and refreshment breaks 17+ strategic business process specific media partners and supporting associations View 2011 programme here If you are interested in becoming a part of The Business Performance Summit 2011 in a sponsorship or delegate capacity, please contact simon.baxter@wtgevents.com www.performance-summit.com/index.asp

Agile Business Conference 2011 Agile Grows Up: Coexistence ~ Scalability ~ Governance 4th, 5th & 6th October Previews of this year’s event The Agile Business Conference 2011 is the major Agile conference for Europe and for the last 9 years has provided a single Forum for everyone who is interested in the effective application of Agile. This year the Agenda has been extended to 3 days – we invite you to attend 1, 2 or all 3 days.

entry for an entire Agile audience, with the option for pre-registered attendees to attend selected Agile Training and Workshops from real-world experts on the first day. • Meet the experts with real-world experience in delivering Agile across organisations in the Public Sector and to numerous organisations and business areas in the Private Sector. • Learn how organisations have adopted Agile, how they overcame the challenges and how Agile can work effectively even in highly regulated sectors.

The theme for this year’s extended Conference focuses on the maturity and acceptability of Agile – as evidenced by recent significant successes and developments across the Public and Private Sectors.

• Discover how successful organisations are reaping the benefits of Agile through improved ROI.

We have expanded the Conference to provide a simple point of

www.agileconference.org/

• network with leading Agile Practitioners, learn new skills and discuss their real-world Agile experience.

Ship Management Business Conference 2011 27 - 28 September 2011, Radisson Blu Royal Hotel, Copenhagen Ship Management Business Conference: Meeting the Commercial and Management Challenges for Shipping Today This important industry event will take place in Copenhagen for the first time! Expert speakers will explore how owners and managers can best approach today’s key shipping business challenges and opportunities. Take advantage of the workshop on Monday 26th September, Crisis Management: Protect Your Assets, led by international maritime law firm, Ince & Co. LLP. This practically focused session offers an excellent chance to improve and expand your knowledge and

understanding of strategies to identify, manage and maximise the chance of protecting your assets as a result of a maritime crisis. Full details of the Ship Management Business Conference Workshop can be found here. Endorsed by key international shipping organisations including Danish Shipowners Association, WISTA Denmark, InterManager, norwegian Shipowners Association, Swedish Shipowners Association and BIMCO, this year’s conference boasts a high level programme which focuses on meeting the commercial and management challenges for shipping today. Sponsorship and exhibition opportunities have been created alongside this event to give your organisation first class access to our distinguished gathering. www.informaglobalevents.com/event/shipmanagement

Hedge.funds World Asia 2011 6-9 September 2011 Harbour Grand Hotel, Hong Kong Hedge Funds World Asia 2011 is back for its 14th year with even more features and a brand new structure. Featuring pre-conference

masterclasses and three days of sessions on the most pertinent issues affecting the hedge funds industry, this year’s event’s focus is three tier: investor allocation, hedge fund strategies and the latest opportunities in emerging markets.

August 2011 2011 •• GBM GBM •• 75 75 September

deal directory

deal directory Anglo Paciﬁc Group PLC: Acquisition of Chromite Royalty On 2 August 2011, the Anglo Pacific Group PLC (Anglo Pacific) announced the purchase of 7207565 Canada Inc. from KWG Resources Inc. for US$18m. 7207565 Canada Inc. owns a 1% net smelter royalty interest in the Black Thor, Black Label and Big Daddy chromite deposits, owned and operated by Cliffs natural Resources, in the Ring of Fire region of northern Ontario, Canada.

Commenting on the acquisition, Peter Boycott, chairman of Anglo Pacific, said: “Anglo Pacific is pleased to have agreed the acquisition of another high quality royalty on a project in Canada being developed by an internationally recognised operator. The acquisition fits well with our strategy for growth and demonstrates strong synergies with our existing royalty portfolio which

has a significant focus on steel making raw materials. The Group anticipates that the royalties from these chromite deposits, the largest known deposits of chromite ore in north America, will provide long term cash flows and continuing revenue growth for shareholders.”

Archer completes acquisition of Great White Energy Services Group On 23 August 2011, Archer Limited, through a wholly owned subsidiary (Archer), concluded satisfactory due diligence and obtained antitrust approval for its announced acquisition of the Great White Energy Services group of companies (Great White). In light of recent development in the financial

markets, Archer and Wexford Capital LP have agreed to reduce the purchase price for Archer’s acquisition of Great White from US$742m to US$630m on a cash- and debt-free basis. Archer’s president and CEO, Jorgen P Rasmussen, said: “We are pleased to be able to

complete this transaction despite recent events in the stock market as the strategic fit with Archer is fantastic, and we are still maintaining our positive view of the business in 2011 and 2012. With this acquisition we have further improved the value for Archer shareholders.”

AREOF: Acquisition of ERA Shopping Parks, Romania On 5 August 2011, Argo Real Estate Opportunities Fund Limited (the closedended investment company formed for the purpose of investing primarily in the commercial property markets of Central and Eastern Europe) announced its intention (subject to shareholder approval) to acquire the ERA Shopping Park, Oradea, Romania and the ERA Shopping Park, Iasi, Romania,

from funds managed by Argo Capital Management Cyprus Limited (ACMCL). The aggregate consideration for which is to be satisfied by the issue of 298,041,718 consideration shares, representing 49.0% of the Company’s enlarged issued share. David Clark, chairman, AREOF commented: “Once this transaction is complete, we will have added another two quality retail park

shopping centres in the cities of Iasi and Oradea in Romania, ensuring that AREOF is the largest listed retail property company operating in Romania. This aligns with our ongoing commitment to become the dominant developer, owner and operator of international-quality retail parks and shopping centres in Romania and the surrounding regions.

Aufeminin.com: Acquisition of Netmums.com On 1 August 2011, aufeminin.com, the no 1 publisher of women’s websites worldwide, acquired 100% of netmums.com, a leading British parental website. While aufeminin. com is already present in the UK with sofeminine.co.uk, the acquisition reinforces its position as the leading website for women. Established by three founders in 2000,

London-based netmums.com is a parental website “designed for mums by mums”, its main features being editorial content, discussion forums and chats. The netmums. com website operates on the basis of contributions from its users, and has a UK audience of 0.7 million unique users (seven million page impressions)( Comscore, June 2011),showing a growth of 36% compared to

the previous year. On the basis of this successful, profitable business model, netmums.com generated in the fiscal year ending April 2011 a turnover of €3.1m. netmums.com will be consolidated in the group’s accounts as of August 2011.

Balfour Beatty acquires leading ofﬁce ﬁt-out contractor On 22 August 2011, Balfour Beatty, the international infrastructure group, announced that it had acquired Office Projects Group Limited (OPL) for a consideration of £8m. OPL manages and delivers commercial interior and exterior fit-out and refurbishment projects for a range of blue-chip UK customers. The acquisition represents a strategic fit with Balfour Beatty’s

76 • GBM • September 2011

existing capabilities, further extending the company’s skill base within the fit-out market. Balfour Beatty is a world-class infrastructure group with capabilities in professional services, construction services, support services and infrastructure investments. Key infrastructure markets include: transportation (roads, rail and airports);

social infrastructure (education, specialist healthcare, and various types of accommodation); utilities (water, gas and power transmission and generation); and, commercial (offices, leisure and retail). OPL Group specialises in designing, building and furnishing workplaces throughout the UK. The company delivers inspirational working environments for customers including BAA and Virgin Group.

Brooks Macdonald Group: Acquisition On 5 August 2011, Brooks Macdonald Group Plc, the AIM listed integrated wealth management group, announced that its wholly owned subsidiary, Brooks Macdonald Asset Management Ltd had signed an agreement to purchase the investment management activities of national law firm, Clarke Willmott LLP, based in Taunton, Somerset, for an initial

consideration of £1.56m in cash which has already been paid from the Group’s existing resources. It is intended that the transaction will complete on 31 October 2011 once legal formalities and client communications have been completed. The activities will be integrated into and rebranded as Brooks Macdonald

Asset Management Limited, the Group’s discretionary investment management business. Clarke Willmott’s in-house investment management team of eight staff, including five investment managers and three support staff, currently manage approximately £120 million of discretionary client assets.

Capita to acquire AIB International Financial Services On 2 August 2011, The Capita Group Plc (Capita) agreed to acquire the international financial services business of AIB (AIBIFS) for a cash consideration of £29m, on a cash-free, debt-free basis. Owned by the AIB Group, AIBIFS provides outsourced services, including corporate

administration, treasury management, securitisation and middle and back office services to financial institutions and corporate clients. On completion, the business will integrate into Capita’s investor and banking services division. Commenting on the acquisition, Paul Pindar,

chief executive of the Capita Group Plc, said: “The acquisition of AIBIFS is an excellent strategic fit for Capita. It fully complements our existing business in terms of services, client base and professional staff, while also providing Capita with the opportunity to further develop its client proposition within the financial services industry.”

Centaur Media plc: Acquisition of specialist information and events business On 22 August 2011, Centaur Media plc, the business information and events group, acquired Investment Platforms Ltd (IPL), a specialist information business in the retail financial services sector. The purchase price is £1.8m, payable in cash at completion, and a further payment in cash subject to IPL’s profits in the year to 30 June 2014. The total purchase

price will be capped at £6.3m. IPL provides research data, analysis and advice on the subject of retail financial distribution and fund platforms. It also organises events for product providers and intermediaries. Geoff Wilmot, CEO of Centaur, said: “This

market is in a period of significant change following the completion of the Retail Distribution Review and IPL is the leading expert information provider in the field. Given our strong position in this market, we are ideally placed to provide IPL with full market distribution of its services.”

Costain Group PLC: Acquisition of Promanex Costain Group PLC: Acquisition of Promanex On 22 August 2011, Costain, one of the UK’s leading engineering solutions providers, announced that it had acquired 100% of the issued share capital of Promanex Group Holdings Limited, an industrial support services business providing facilities management, installation, repair and maintenance and general asset management

in a number of high growth, specialist markets, such as power, petrochemicals and nuclear. The consideration for the acquisition, together with management retention payments, is £16.4m. In addition, the business is being acquired with normalised net debt of £2.4m. The acquisition is being funded from the Group’s existing cash resources.

Commenting on the acquisition, Andrew Wyllie, chief executive of Costain, said: “We are delighted to have completed the acquisition of Promanex, which represents a further important step in the implementation of our strategy of broadening our existing front-end consultancy and care and maintenance operations in order to meet customers’ requirements.”

Frutarom Industries: Acquisition of the ﬂavours company Aromco On 21 August 2011, Frutarom Industries Ltd. (Frutarom) announced that it had signed an agreement , on 19 August 2011 (through a subsidiary in the UK) to acquire 100% of the share capital of the UK company Aromco Ltd. (Aromco) for approximately US$24.7m (£15m). Aromco’s annual sales turnover in 2010 totalled approximately US$12.7m (£7.7m).

Founded in 1985, Aromco develops, manufactures and markets flavours for the food and beverage industry. Aromco is active in developing markets with high growth potential in Eastern Europe, Africa and Asia, as well as in the UK. Acquiring Aromco will enable Frutarom to

broaden its activity and market share in the developing markets in which Aromco acts, which enjoy high growth rates, as well as to strengthen its current products supply and its research and development by renovating and advanced solutions, which were developed by Aromco.

HMS Group to acquire Belarusian pump manufacturer On 5 August 2011, HMS Group, the leading pump manufacturer and provider of flow control solutions and related services in Russia and the CIS, announced that it had entered into a share subscription agreement: the company undertakes to subscribe for 100% of newly issued shares equal to 57% of a share capital of Bobruisk Machine Building Plant located in Bobruisk, Belarus for a total cash consideration of US$9.6m.

Completion of the agreement is conditional upon actual holding of the Plant’s shareholders meeting and their approval of the public offering, as well as upon permission and state registration of the offering on behalf of an authorised governmental body of the Republic of Belarus. Artem Molchanov, managing director (CEO) of HMS Group, commented: “We continue our

development in accordance with the strategy, presented during the IPO. With the intended acquisition, taking into account our marketing and R&D capabilities, HMS Group will be able to substantially increase revenues of the Plant, to broaden our company’s product portfolio, and to provide our clients with more integrated solutions in oil refining and petrochemicals.”

September 2011 • GBM • 77

Deal Directory

Imerys completes the acquisition of Luzenac Group On 1 August 2011, Imerys completed the acquisition of 100% of the Luzenac Group from Rio Tinto. With sales of approximately US$395m in 2010, Luzenac Group is the world leader in talc processing. This mineral is used in many technical applications such as polymers, paints, ceramics and paper, in a wide range of end markets (industrial equipment, construction and consumer

goods, etc). It will therefore strengthen Imerys’ leadership and product offering. This acquisition has been paid in cash for an enterprise value of US$340m (€232m), representing a multiple of EBITDA in line with historical multiples paid by Imerys. Luzenac Group will be part of the performance & filtration minerals business

group. Current market conditions prevailing, this transaction is expected to create value by achieving a return on capital employed above the Group’s weighted average cost of capital from 2013 onwards.

Mears Group PLC: Acquisition On 4 August 2011, Mears announced the acquisition of the Supported Living division (SLD) of Choices, a leading provider of Social Care services in Scotland and the North of England. The main business of Choices is the provision of a supported living service to adults with learning disabilities, autism and mental health needs, in their own homes. Mears has acquired the trade and certain assets of the SLD for a total cash

consideration of £7.40m. The consideration is being satisfied from the Company’s existing debt facilities. The gross assets of the business being acquired are £150,000, and the annualised operating profit associated with the assets being acquired is estimated to be in the region of £1.50m.

strategy to develop a broader care offering to our clients. The Social Care market has significant opportunities for organic growth and for further acquisitions.”

Commenting, David Miles, chief executive, Mears Group, said: “This acquisition is the first step towards implementing our stated

Resaca Exptn Inc: Property acquisition On 5 August 2011, Resaca, the oil and natural gas production, exploitation, and development company focused on the Permian Basin in the US, announced that it had entered into an agreement to purchase Permian Basin oil and gas properties for $4.4m in cash and 841,308 shares of newly issued Resaca common shares for total consideration of approximately $5.7m based on the closing price of the Company’s

shares on 4 August 2011. The properties comprise the Langlie Jal Unit (LJU) in Lea County, New Mexico, near city of Jal and the Company’s largest property - the Cooper Jal Unit. Resaca will acquire a 73% working interest and a 57% net revenue interest in the LJU. The properties are being acquired from Wind River Petroleum, LP, a private company owned by Richard Counts.

Commenting on the acquisition, J P Bryan, chairman and CEO of Resaca, said: “We believe this acquisition is a very important step for Resaca to maximize shareholder value.”

Sound Oil PLC: Acquisition of further shares in Consul Oil & Gas On 22 August 2011, Sound Oil, the upstream oil and gas company with assets in Italy and Indonesia, announced that it had compulsorily acquired the remaining 2% of the ordinary shares in its subsidiary Consul Oil & Gas Limited (Consul), which is now wholly-owned. Consideration for the acquisition has been satisfied by the issue of 5,555,555 new

ordinary shares of 0.1p each in Sound Oil and the payment of a cash sum of US$46,667, being the same terms and conditions under which the other Consul shares were acquired by the Company earlier this year. Application has been made for the admission to trading on AIM of the consideration shares. Subsequent to

admission of the consideration shares (expected on 26 August 2011), there will be 1,621,945,310 Ordinary Shares in issue with each share carrying the right to one vote. There are no shares held in treasury. The total number of voting rights in the Company will therefore be 1,621,945,310.

Strategic Minerals: Proposed acquisition of Ebony Iron Ltd On 23 August 2011, Strategic Minerals Plc (SML) announced that it had entered into a heads of terms agreement with Ebony, a privately held Australian mining company, for its acquisition. The acquisition is subject to the completion of satisfactory due diligence and Strategic Minerals agreeing a sale and purchase agreement (SPA) with the shareholders of Ebony.

78 • GBM • September 2011

It is intended that under the SPA, SML will acquire 100% of the issued share capital of Ebony for a consideration of £10m to be satisfied by the issue of 100 million new fully-paid ordinary shares in SML to Ebony at an issue price of 10 pence per share. Ebony shareholders will, in aggregate, receive a further consideration of 50 million new ordinary SML shares subject to the

confirmation of an Australasian Joint Ore Reserves Committee Code indicated resource of a minimum of 200 million tonnes of iron ore by Ebony.

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September 2011 • GBM • 79

metals, mining, & minerals

global Roundtable 2011 Washington, DC, USA 19-20 October 2011

THE Tipping poinT

Sustained stability in the next economy

Tipping point (physics): the point at which an object is displaced from a state of stable equilibrium into a new, different state. Tipping point (sociology): the event during which a previously rare phenomenon becomes dramatically more common. Tipping point (climatology): the point at which global climate changes irreversibly from one state to a new state.

What is the next tipping point...? Join world-class experts to hear (and debate) their answers: gordon Brown, former Prime Minister of the UK, current MP nassim Taleb, author of best-selling book The Black Swan James Balsillie, co-CEO of Research in Motion and member ofÂ the UN High Level Panel for Global Sustainability

UNEPFI_GRTAd207x277Q150611

Yvo de Boer, former Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) and KPMG Global Advisor on Climate Change and Sustainability.

For more information and to register, visit www.unepfi.org/washington Proudly sponsored by:

UNEPFI_GRTAd207x277MonoQuadri.indd 1

15/6/11 3:39 PM