Global Business Magazine - April 2011 by Corporate ABM

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INSIDE This Month:

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Business Talk The first quarter of the year has come and gone and has seen the economics of the world start to stabilise. The political arena continues to impact the business world as the Arab nations in unstable regions are voicing their discontent at the regimes that govern them. For the business world this causes uncertainty in areas such as natural resources; however on the flipside this ensures transactions remain strong in other global markets. The third largest economy and financial power-house in the world was derailed by Mother Nature as she changed millions of lives in an instant. The Japanese earthquake and tsunami of late March was one of cataclysmic proportions and here at GBM our thoughts and prayers are with those caught up in this tragic event. With some analysts reporting a total collapse of the Japanese economy and others seeing the glass as half full, it is difficult to predict the immediate future of Japan until we see how investors react to what the Japanese government plans for its country’s reconstruction. In this issue we run a special feature focusing on ‘Women in Law’ and how they are changing attitudes and opinions in the legal world. Some of the most influential women of law explain the importance of the female influence within business and how they are changing the landscape of the legal arena. From medicine to algebra and architecture to politics, Islam has changed the world over the centuries. Today Islamic Finance is making waves in the financial world and is now drawing the attention of the large financial institutes. We bring together leading experts in the sector to discuss the advantages of Islamic Finance. Our country profile looks at Russia and how its various industries are playing their role to put the Eastern giant back amongst the world’s elite nations for business. From the legal perspective, lawyers from around the world give their expertise in Health and Safety, Procurement, and International Business Crime. As well as Islamic Finance, various financial experts give their take on Capital Markets, telecoms and Wealth Management. GBM were delighted as the Formula 1 (F1) season raced off last month! And to celebrate its launch our Luxury Brand team had the envious task of reviewing the most glamorous F1 host city hotels.

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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.

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April 2011 • GBM • 03

Business News

• BP’s Russian Tie-Up Could Go Ahead

THE supremo of Russian energy firm Rosneft has revealed he wants to press ahead with its controversial plan to collaborate with BP. Chairman Igor Sechin stated he was more than satisfied to have the UK oil giant as a partner in spite of a ruling in court last week that threw the alliance into doubt. Shareholders in TNK-BP, which is BP’s current Russian venture, strongly oppose the proposed link-up with Rosneft. The shareholders are known as the Alfa Access Renova (AAR) and believe that the Rosneft deal to exploit gas and oil reserves in the Russian Arctic breaches an agreement between TNK-BP and BP. An arbitration panel sitting in London upheld AAR’s complaint last Thursday. The panel raised questions about the

judgement of Robert Dudley, BP’s chief executive, who formerly ran TNK-BP. Rosneft is seeking a partner which has the right level of expertise for drilling in the Russian Arctic. The company even had talks with both Exxon-Mobil and Royal Dutch Shell before securing the BP deal. But analysts have warned the Rosneft collaboration is still uncertain to go ahead and BP might have to fork out compensation to AAR to secure their approval.

Rosneft would accept about 5% of shares in BP in exchange for about 9% of shares in Rosneft. The share exchange is thought to have angered the Russian shareholders in TNK-BP. AAR won an injunction in the High Court in February that placed the Rosneft-BP deal on ice until the wrangle could be sorted out via arbitration. The arbitrators have now decided the temporary injunction should continue for now.

BP has announced it has been left disappointed by the court ruling but said it hoped it might still strike its proposed share swap deal with Rosneft as a part of the link-up. The UK company penned the deal with Rosneft in January to try to exploit the huge volume of gas and oil in the Russian Arctic. The two firms agreed as a part of the deal

• HMV Could Sell Waterstone’s Stores

HMV Group shares have shot up after the retail giant revealed it may sell off its Waterstone’s book shops. Russian tycoon Alexander Mamut and founder Tim Waterstone are thought to be looking to buy the chain. The HMV Group has put out two profit warnings so far this year and has stated it might be in breach of banking covenants if sales continue to slump. But it claimed that no talks over a sale of were currently ongoing. HMV warned a few weeks ago that pre-tax profits for the year would miss expectations of £45 million and that it could violate its bank loan terms and conditions. But it has repeated that its lending banks are continuing to provide support and that its banking facilities are still fully available.

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HMV has already announced that it is shutting sixty stores in 2011 due to falling sales. The firm has struggled to fight off stiff competition from internet giants including iTunes and Amazon. It will not be the first time that Tim Waterstone has attempted to renew control of the firm he began back in the early 1980s with a small redundancy pay-off from WH Smith. Waterstone is now in his 70s and has been involved in five other bids. Mamut and Waterstone have previously worked together on an ill-fated Russian book venture called Bookberry. Waterstone and Mamut have been putting together a senior management team with the aim of returning Waterstone’s to its roots as a stockholding book chain with extremely knowledgeable employees. Mamut has immense financial clout and

his fortune is poised to be boosted again by the looming stock market float of his mobile phone firm Euroset. Mamut has recruited Credit Suisse to act as advisers. Waterstone’s made a profit of £2.8 million on sales of £513 million in 2010 and it is the last remaining high street book seller. Speculation that company restructuring experts are circling has led to great alarm in the publishing sector.

• Saab Supremo Quits

SAAB chief executive Jan Ake Jonsson is resigning as the carmaker struggles to recover from poor sales and big losses.

The car-maker only sold 30,000 cars in 2010 and is aiming to increase that figure to 80,000 in 2011. But analysts believe Jonsson’s departure will make the target much harder to hit.

The company suffered a £191 million loss in 2010, according to its parent firm Spyker Cars.

AEK’s Martin Crum said: “He’s an experienced manager and it will be difficult to find a proper replacement.”

Jonsson has been employed by Saab for 40 years and as CEO in the last six years he has helped to save the firm from closing down.

Spyker purchased Saab from General Motors in 2010 after a shake-up at the American car giant. In February, Spyker revealed proposals to sell off its sports car division and concentrate on boosting Saab.

He said: “The last three years have been very demanding and forced me to focus on one thing only, my work. Now it is time for me to spend some time on other things that had to stand back for my duties to Saab.” The firm is still struggling and Spyker is due to sell its sports car arm and instead will focus on expansion of Saab.

Spyker penned a provisional deal to sell the business to Russian-owned and UKbased CPP Global Holdings for about 32 million euros.

market. Armand will also take over sales, marketing and distribution responsibilities from General Motors. Official sales are due to begin in the middle of 2011. An initial network will include a dozen dealers in big Russian cities and will form the foundation for further expansion. The car market in Russia has continued its strong recovery this year with new car sales increasing by 80% in February on the same month in 2010 to 73,588 vehicles, according to Association of European Businesses figures.

Meanwhile, Spyker has also announced that Armand Import will become its new importer and distributor for the Russian

• Hong Kong Banks in Lehman Payback

BANKS in Hong Kong are to repay thousands of investors who lost cash following the demise of Lehman Brothers. About 16 banks have revealed they will purchase back financial products that they sold to people for as much as 96% their value. Over 40,000 customers invested almost £1.6 billion in the investment bank’s products. Lehman applied for bankruptcy in 2008 after facing massive losses tied to the property market in the US. Payment of compensation has been acontinuing wrangle in Hong Kong. Mini bonds are at the centre of the controversy. These are financial derivatives usually sold to big investors. But in Lehman’s case the mini bonds were introduced for all

investors and they were priced competitively so smaller investors could buy them. But the fall of Lehman Brothers saw the value of the mini bonds plummet. Investors then accused the banks of misleading information, sparking a wrangle between banks, customers and regulators. The banks previously offered to buy back products at about 60% of their 2009 value. But the latest offer will have to be rubber stamped by at least three quarters of the investors who hold the products. They are due to organise meetings to debate the issue in future months.

fund using the commission they had earned by selling the products. The authorities said they are now satisfied with the agreement. Arthur Yuen, Deputy Chief Executive of HKMA, said: “This is an important development, which not only allows investors to avoid lengthy litigation and potentially costly fees and legal uncertainty, but also represents the concerted efforts among regulators, the participating banks and the relevant investors to recover the invested amount as far as practicable.”

The Securities and Futures Commission and the Hong Kong Monetary Authority (HKMA) had penned an agreement with the banks in 2009 urging them to make payments quickly. The banks were also asked to set up a

April 2011 • GBM • 05

cover story

The recovery: Where do we go from here? bu Simon Smith

Depending on whether you date the credit crisis as starting when Lehman Brothers collapsed (September 2008) or when inter-bank money markets started to freeze up (July 2007), it is approaching either three or four years in duration. I remember both dates because I was continuing my life-long tendency to be on holiday when momentous events happen, also including 9/11, sterling’s exit from the Exchange Rate Mechanism, the death of Diana, Princess of Wales and (a little more esoteric) the ECB’s shock rate-hike of July 2008. What I haven’t avoided though is observing the tendency of markets to believe that the good times are always just around the corner. This time last year, interest rate markets were betting that the US Federal Reserve (Fed) would be tightening rates by the end of 2010; instead it was instigating more quantitative easing. Even in mid-2009, the Fed’s benchmark rate was seen half a per cent higher by mid-2010. The ingrained thinking is that recessions are generally brief and recoveries strong, allowing the good times to roll once more. In reality, recessions initiate significant changes in the underlying economy that continue long after the downturns have technically ended (the US recession ended in June 2009) and that may last for several years. In order to understand this, I’m going to look at two features of the current recession and subsequent recovery that I believe will continue to define not only the US, but many other economies in the next few years to come. Both approaches suggest we may be only half way through some of the big changes that have to occur before this really feels like a sustainable recovery. Balance sheet recession The first feature is that markets tend to lose sight of the fact that we are in what is often referred to as a ‘balance sheet recession’. These stand out due to the

06 • GBM • April 2011

fact that balance sheet restructuring has to take place, whether it is in the household, government or corporate sectors of the economy. This process can happen in any of three ways (in order of duration): default, inflation or repayment. Default, while the quickest option, is also keenly avoided; mostly by governments (who can print money), less so by corporates (who can’t), with households having the least choice in the matter. Inflation has sometimes been the preferred way out for indebted governments, often along with default. Looking at the most recent examples of sovereign defaults, inflation has, on average, doubled in the first year afterwards, often coupled with currency devaluation (to keep exports competitive). As for paying down debt, this tends to be a protracted process, particularly if higher unemployment is constraining wage growth. Whatever the route, the common feature is an overhang of debt on the balance sheet, often the result of the bursting of a bubble of some description.

Denis Sukhotin, Founder, FxPro

Looking at the US, the previous recession was not only the shallowest in the post-war period, but also had no discernable impact on consumer leverage. As such, household debt (as a proportion of GDP) increased every year for a period of 13 years, more than doubling in nominal terms. Of course, mortgages were a major part of this increase in the burden, accounting for 85% of the increase in household debt over this period.

Denis Sukhotin, Founder, FxPro

Japan stands out as the ultimate modern example of the balance sheet recession, largely stemming from the excessive leverage in the corporate sector during the late 1980s. At the start of this period, the corporate sector savings rate was in deficit to the tune of 10% of GDP, so companies were building up debt at an alarming rate. This deficit was transformed into a surplus of 8% of GDP over a period of 13 years. The other notable factor was the relative ineffectiveness of the Bank of Japan’s policy of zero rates and quantitative easing in accelerating this process. While lower interest rates helped in terms of reducing debt-servicing costs, firms were far more focused on paying down debt, rather than increasing leverage. The point is that it was not until the corporate sector had largely got its house in order that the economy was on a sound enough footing by the middle of the last decade. While some companies did naturally default, there was also a huge period of debt repayment during which leverage fell dramatically. There was also little help from the low inflation or deflation that characterised the post-bubble period. Inflation averaged a mere 0.7% of GDP during this period, doing little to reduce the real debt burden for companies. The key observation to take out, however, is that there’s a long process that has to be completed before an economy can fully return to normal. The overall economy may grow during this period, but won’t truly return to normal until the balance-sheet imbalance is largely corrected. In the run up to the current crisis, it was not in the corporate sector where the problem lay. Companies were running comfortable surpluses, not only in Japan but in most other developed countries. It was primarily the household sector where balance sheets were stretched, certainly in the US, but also the UK, Ireland and others. Excess leverage was accompanied by a dramatic fall in asset values (in this case housing), but the underlying principles were the same.

Unsurprisingly, household debt has been falling but is down only by 4% from the peak. Furthermore, the majority of this decline is due to falling mortgage debt, with this in turn largely stemming from foreclosures. In other words, actual debt repayment has only been a minor part of the balance sheet restructuring seen to date. But how close is the US household sector to getting its house in order? To answer this, one has to take a view on where the ‘new normal’ level . may be. If it’s the levels that prevailed during the 1990s, then the deleveraging is only a quarter of the way completed, which could mean that household spending may be constrained for the coming eight years or so by the need to deleverage. On the assumption that only half of the last decade was bubble territory, then the current pace of deleveraging suggests another two-three years to go. As was the case during Japan’s period of deleveraging, low interest rates are supportive. The ability to re-finance mortgages with rates at multi-decade lows has had a substantial impact on debt servicing. Even though the household debt burden is not that far off the postSecond World War highs, the debt-service ratio (interest payments as a proportion of debt outstanding) has moved back to levels that last prevailed in 1998. This in itself can be a blessing and a curse. In the fourth quarter of last year, consumer credit rose in the US for the first time in two years. From one perspective this may be welcomed as a sign of a strengthening consumer sector. Alternatively, it can be seen as evidence that people have learnt nothing from the past three years, especially as debt-servicing costs in the future can only from their current historically low levels.

April 2011 • GBM • 07

cover story .

If you want evidence of how balance sheet recessions take longer (beyond Japan), compare the current recovery with the average of the previous three cycles. Three years after the peak in output, the US economy has just returned to its pre-recession level. If it had followed the average path of the last three recessions, it would already be some 7.5% above the pre-recession peak. The UK is currently 4% below the peak and Ireland 11%. The labour market impact This leads us into the second reason why the road ahead could be just as long as that travelled, namely labour market conditions. Just as markets have jumped the gun on predicting when central banks may start to put rates up, there has been an underestimation of the labour market impact, especially in the US. The period after the last recession (which ended November 2001) was dubbed the ‘jobless recovery’. Despite the fact that the recession was fairly shallow by historical standards, the job market took two years to reach the prerecession peak seen at the end of 2000. One of the more plausible explanations for this came from the New York Fed, suggesting that structural change was a major factor in explaining the jobless recovery (‘Has Structural Change Contributed to a Jobless Recovery’ Current Issues in Economics and Finance, Volume 9, No 8, Federal Reserve Bank of New York). Put simply, recessions destroy jobs and sometimes industries that never return, or they may return in a different part of the country. For example, during the last jobless recovery, it was the communication and electronic equipment sector in which job losses continued well into the recovery, most likely as an overhang of the tech-related bubble. We’re seeing a similar picture this time around, with housing the biggest standout. Housing-related employment fell some 20% between the peak and the end of the recession and has continued to fall even since the recession ended. It will take years, if not a decade, for housing-related employment to reach its previous peak. Meanwhile, many of those previously employed either have to retrain and/or move location to regain employment, all of which takes time.

For the US market as a whole, the current pace of job creation suggests that it would take five to six years for employment to recover to pre-recession levels. So, while the US may technically be out of recession, for many it will continue to feel like one - even for those in employment who will be experiencing low real-wage growth. Of equal concern is the fact that the participation rate (the proportion of the working-age population that is working or actively seeking work) is falling. You’d expect this during a recession; but what’s notable is that it has continued to decline since the recovery started, suggesting that stronger structural forces are at play. Unless this trend is reversed, either naturally or through government policy, then the US will suffer in terms of both productivity and also tackling the deficit with a declining proportion of workers. On any journey, knowing where you are is critical for your understanding of where you may be going next. Right now, in the US in particular, we may well only be, at best, half way through the adjustments that have to occur to allow the economy to fully recover.

FxPro are the current main team sponsor of Fulham FC, Aston Villa FC, a sponsor of the World Rally Championship and have just today announced we will be one of the sponsors of AS Monaco FC. For more information please visit www.fxpro.com Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro.

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women in law

Women in Law The European Women Lawyers’ Association (EWLA) was founded in 2000 and is a Brusselsbased international non-profit association. Ever since its founding congress in Berlin, EWLA has aimed to promote fundamental rights and gender equality within law and politics. It has organised events and published statements and resolutions that highlight the issue of fundamental rights and gender equality to politicians and lawmakers. It has enjoyed major success in putting these themes at the forefront of some union policies. EWLA has become the main network of women from all legal professions all over Europe and beyond. To this end, it has status as an INGO (international non-governmental organisation) at the Council of Europe, member of the EU Fundamental Rights Agency (FRA) Platform and is asked to many meetings of the EU Commission and EU Parliament. Some of the many highlights of EWLA’s 11-year history have been the annual congresses and special conferences in Brussels and Berlin on issues of corporate governance. Every year, EWLA holds its congress in a different country. The congress attracts high ranking speakers from the EU and Council of Europe (for example: Maud de Boer-Buquicchio, deputy secretary general of the Council of Europe; Lenia Samuel, deputy director general of DG Employment, Social Affairs and Equal Opportunities, the European Commission; Diana Wallis, (first British) vice president of the European Parliament, UK MEP; Patricia Schulz, director of the Federal Office for Gender Equality, Switzerland; and, Mr Herman van Rompuy, president of the European Council, to name a few) as well as organising workshops around particular themes (for instance, company law, family law, human trafficking, and employment law) and provides a vehicle for women lawyers to network. The congress reflects EWLA’s goals and produces statements that are used in meetings with the EU Commission, EU FRA and national actors. For example, in March 2011, EWLA met with the EU Commission concerning quotas in boardrooms. Also in March 2011, EWLA attended and presented views at the launch of the Handbook on Non-Discrimination in the Council of Europe as well as at the Congress of the Council. EWLA hosts a very active website with up-to-date information of relevance to lawyers in the EU and Council of Europe (www.ewla.org) and provides a space for lawyers to advertise their commitment to gender equality.

President of EWLA Prof Dr Jur Herdís Thorgeirsdóttir president@ewla.org info@ewla.org

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women in law

UNITED KINGDOM Caroline May, Partner Head of environment, safety and planning team in London Norton Rose LLP +44 (0)20 7444 3251 caroline.may@nortonrose.com www.nortonrose.com

Women in law The Environmental Protection Act 1990 (EPA) in England and Wales was the first legislation aimed at environmental protection in England and Wales marking the first time that environmental law identified itself as a specialist practice area. Prior to that there had been different regulatory regimes for differing environmental media (e.g. air, land and water). In the 1980s, environmental law was still regarded as a little known specialism in the UK in contrast to the US, where more corporate law firms had relatively large numbers of environmental lawyers (principally due Superfund). There was a feeling that the US experience would be replicated in the UK and a number of Magic Circle firms established substantive environmental law departments in anticipation of a significant flood of instructions and large ‘toxic tort’ cases. When those failed to materialise, many wound down their departments leaving a small handful of specialists who continued to work at the development of law in this area and provide advice regarding environmental compliance and liability issues. I fell into environmental law largely by accident. I trained at a Magic Circle firm and found myself engaged in a number of ‘toxic tort’ cases that mainly revolved around ‘nuisance’ actions from industrial processes and dealing with the insurance implications of those incidents. I very quickly became the departmental expert and therefore if there were any ‘noisy’ or ‘dirty’ cases, they were soon passed to me. At this stage, the area of law in which I was working still did not have a name nor any recognised regulatory discipline. Two landmark cases changed my career. The first was an explosion of a landfill waste site in Loscoe, Derbyshire, UK - the first time it was realised that if organic matter was placed into the ground, it would produce methane that could potentially become explosive in confinement. The second was an air emissions case concerning dioxins that was a precursor to a number of the larger pollution cases, which are more commonplace today. By this time, ‘environmental law’ had been born and was a recognised specialism. However, there were only a very small number of practitioners and even less of these were women, particularly at the senior end of the profession. Most of the clients were male and in the traditionally heavy polluting industries, men significantly outnumbered women on the client side. It was something of a rarity for a female lawyer to visit a steel smelting works or a landfill waste site (I quickly learned not to wear skirts and high heels in either location!).

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Twenty years on, the landscape has changed. Environmental law has established itself as a recognised specialism (albeit that the number of full time specialist practitioners still remains small). It is seen as an increasing area of importance for corporate clients and features in boardroom discussions, and is not just the preserve of heavy polluting industries any longer. Most sectors are affected by environmental regulation, and the advent and high profile of the international climate change negotiations and various carbon-trading systems mean that the practice of environmental law is set to grow with new specialisms being identified all the time. I am pleased to see a large number of junior lawyers emerging as specialists in climate change policy, carbon trading and renewable energy. These and other emerging areas will be the future of environmental law. The evolution of women’s careers in environmental law has followed a similar upward trajectory. While it is true that a growing number of clients are now female (with a large number of female in-house counsel at senior level), within private practice, numbers of senior women are still relatively small. At the more junior end, a larger number of women are wanting to qualify into environmental law, bringing with them extra skill sets, such as degrees in environmental engineering and management. However, it still remains a challenge to bring these talented young women through to the more senior levels of the profession, particularly in private practice. For example, there are currently a handful of senior women in law firms at partner level who specialise in environmental law. I would like to see this shift and hope that changes within the profession are now encouraging more flexible attitudes towards working and recognition that different skill sets are needed for ‘newer’ areas of the law. I am often out on industrial sites dealing with technical people and working as part of a multidisciplinary team, my seniority is of less relevance to clients than my practical experience in the application of the law and my technical understanding of my clients’ needs. Moving forwards, I believe it is an exciting time for both the development of environmental law and for female lawyers. I would very much like to see some of the talented women at Norton Rose LLP rise to the top, being recognised by their colleagues, peers and clients not only for their specialist understanding of environmental law, but their all round appreciation and understanding of client needs and the practical delivery of excellent service. The future is bright for those with the necessary capabilities and tenacity to achieve their goals.

oil and Gas sector report 2011

USA Karen L Elbing Kristina Bieker-Brady 617-428-0200 elbing@clarkebing.com brady@clarkelbing.com www.clarkelbing.com.

US re-examination: Attacking patent validity Epic multi-million dollar and sometimes even billion dollar patent legal battles unfold in courtrooms throughout the US every year. These days, patent infringement suits are almost necessarily a part of doing business in high technology fields. If a company is found to infringe a patent, when the dust settles, it might not be able to sell its product, or it might be forced to pay significant royalties or scramble quickly to develop a new, non-infringing product.

that raises a substantial new question of patentability. Patent law mandates that the request be based on patents or printed publications, and nothing more.

Patent litigation is serious and the stakes are high. Besides monetary damages, patents also carry the threat of an injunction to enforce the patent monopoly. And courtroom lawsuits extract a significant cost from a company, its investors and customers. Indeed, costs to fight a claim of infringement may easily exceed $1.5m. Every executive understands patents create a landscape of risk. And to make matters worse, resolution of that risk often rests in the hands of a judge or jury who know little or nothing about the technology underlying the patent.

Re-examination is conducted under a preponderance of the evidence standard, a standard substantially lower than the clear and convincing standard required for an invalidity finding by a court. As such, less evidence is required to make a case for invalidity before the USPTO. Moreover, during litigation, a contested patent is afforded a presumption of validity. No such statutory presumption exists during re-examination.

Despite a legal presumption of validity after issuance, not all patents are created equal. A patent’s validity may be challenged in court, but it is generally an expensive and protracted proposition. Outside the courtroom, in the universe of the US Patent and Trademark Office (USPTO), self-help is available. Patent validity may be contested through a process termed re-examination, a significantly less costly and more efficient alternative to litigation with advantages worth considering. Re-examination is a USPTO administrative proceeding where any party, at any time, may seek review of the claims of an issued patent. Re-examination requests are handled by the Central Re-examination Unit (CRU, staffed by highly skilled and technically savvy patent examiners and these examiners, not juries or judges, re-examine the contested patents. To initiate a re-examination proceeding, the requester must file written evidence

Two types of re-examination exist: ex parte re-examination, a proceeding in which only the patent owner participates, and inter partes re-examination, in which both the patent owner and a third-party requester participate.

The USPTO inter partes re-examination statistics are telling. For 31 December 2010, the USPTO reported that 1,115 inter partes re-examination requests were filed since the establishment of the proceeding in 1999: 96% of these re-examination requests were granted and 70% of these patents were known to be in litigation. The overall average for re-examination pendency was 36.3 months. Importantly, only 10% of the re-examined patents during inter partes re-examination had all claims confirmed as patentable, while 47% had all claims cancelled or disclaimed and 43% had claim amendments. Third-party participation, with a seasoned patent examiner, during inter partes reexamination no doubt explains the success rate at invalidating patent claims or forcing a patent owners to change their claims. And the results are clear: cancellation or narrowing of claims is common and may eliminate the threat of infringement entirely or the need for a licence. Patent re-examination proceedings will no doubt continue to provide a valuable legal tool for executives dealing with a

competitive and uncertain patent landscape. Clark & Elbing LLP is a full-service intellectual property law firm dedicated to serving its clients. By focusing on biotechnology, medicine, and chemistry, we deal daily with the most complex intellectual property issues in these disciplines. Our extensive experience in these areas enables us to maximise intellectual property rights for our clients across the US and around the world. The firm is a woman-owned business certified by the Commonwealth of Massachusetts. Karen L Elbing and Kristina Bieker-Brady are managing partners. Both are lawyers and PhD-trained scientists, and both have represented the firm’s clients in reexamination proceedings before the USPTO. With over 20-years of experience, Karen Elbing, a recognised Massachusetts super lawyer, has worked in all phases of patent law, including prosecution, litigation, validity and infringement studies, and licensing. She has technical expertise in the areas of biotechnology, chemistry, and pharmaceuticals. Karen routinely advises clients on strategic patent prosecution matters. Kristina Bieker-Brady’s practice emphases portfolio management and analysis, due diligence investigations, and client counseling in the chemical, medical device, pharmaceutical, and life sciences areas. Kris advises clients in the preparation and prosecution of both domestic and foreign patent applications. A significant portion of Kris’s practice involves negotiating licensing agreements and transactional matters. Kris has been named to the Best of the Best Lawyers in Patent Law and Women in Business Law by Expert Guides, London. To learn more about Clark & Elbing, please visit www.clarkelbing.com. To become a client of Clark & Elbing, please call 617-428-0200 or send an email to elbing@ clarkebing.com or brady@clarkelbing.com.

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women in law

CANADA McMillan LLP Cyndee Todgham Cherniak Counsel d +1.416.307.4168 f +1.416.865.7048 c +1.647.290.4249

Cyndee Todgham Cherniak, LLB, JD(USA), LLM is counsel affiliated with McMillan LLP and is a lawyer (both barrister and solicitor) practicing in the area of international trade law. She is one of a small number of women lawyers in Canada who have gained an internationally recognised reputation in the areas on international trade, customs, export controls, anti-corruption and sales tax (eg, GST/HST/VAT) laws. Cyndee is also an adjunct law professor at Case Western Reserve University School of Law and has taught a course on NAFTA and bilateral trading arrangements for the past five years. Cyndee was a consultant to ADB in 2007 and reviewed over 120 free trade and regional trading agreements in order to write a 900-page report on free trade agreement provisions. Cyndee is a director of the Canada China Business Council and an advisory board member of the Canada United States Law Institute. Cyndee often appears on Canadian television news programmes (eg, The Agenda with Steve Paikin) and in print media as a subject matter expert. Cyndee is a problem solver. She listens to her clients and referring lawyers about their needs and provides legal solutions/compliance strategies to Canadian entities doing business abroad and multinational entities doing business in or wanting to establish operations in Canada. Based on years of experience, Cyndee is able to discuss technical and practical approaches to international legal issues involving business, economics and trade. Cyndee provides advice on customs law matters (eg, tariff classification, valuation, rules

Lawyers | Patent & Trade-mark Agents Brookfield Place, 181 Bay Street, Suite 4400 Toronto, Ontario M5J 2T3 cyndee@mcmillan.ca

of origin, consumer protection and food safety, appeals, etc), export controls, trade restrictions and economic sanctions, anticorruption, and other matters of international compliance. Cyndee assists clients in taking proactive steps to comply with Canadian laws and with the verification and audit process, and advocates on behalf of clients who have to react to differences in opinion with the Canadian authorities. Cyndee acts for respondents involved in Canada’s antidumping and countervailing duty and safeguard cases (eg, she acted for the government of China in two recent safeguard cases in Canada). Cyndee advises investors on a range of international investment arbitration matters. Cyndee advises multinational businesses and governments concerning disputes under the WTO and free trade agreements. During the Canada-EU CETA negotiations, Cyndee has provided advice to multinational entities concerning opportunities (eg, government procurement, intellectual property rights protection, geographic indications, dispute settlement, technical barriers to trade, automobile rules of origin and non-tariff barriers, etc). There are many opportunities in Canada and abroad. The key is for business to take advantage of those opportunities within the relevant laws, as mistakes are getting more and more costly. She can refer other legal matters to lawyers within McMillan, which is the 12th largest law firm in Canada. What are your Canadian legal needs and how can I help you?

MALTA Ann Fenech Managing partner Fenech and Fenech Advocates Malta ann.fenech@fenlex.com Tel: +356 2124 1232 Fax: +356 2599 0640 www.fenechlaw.com Fenech and Fenech Advocates, established in 1890, is the oldest law firm on the island. It has always been at the forefront of legal development, producing first class lawyers specialised in diverse areas satisfying the growing demands of the Maltese economy. As a result, the firm is a recognised leader in shipping, tax, financial services, aviation, information technology, corporate law and intellectual property. It is the only law firm on the island with four separate departments dedicated to the maritime sector: marine litigation, ship finance, ship registration and yachting. The firm caters for a huge variety of clients coming from the four corners of the globe. Malta’s position in the centre of the Mediterranean, a highly sophisticated workforce, English as an official language and membership to the European Union, provide the ideal base for entrepreneurs who require specialised lawyers to assist them. Fenech and Fenech Advocates and its subsidiary Fenlex Corporate Services employ 84 persons, and 56 are women. This, together with the fact that my partners elected me to be the managing partner of our firm three years ago, is proof that female lawyers are not discriminated against. On a national level, there are more females than males studying law at university and these young women are realising that, while academic achievement is crucial, they need to have the other equally important qualities - the determination and will to excel, achieve and succeed. 12 • GBM • April 2011

What is important to our demanding local and international client base is that they get the best possible advice and tailor made solutions - they want quality irrespective of whether the advice is being given by a male or female. I have spent the past 25 years working exclusively in the male dominated maritime sector. I deal with a cross section of maritime issues ranging from very serious casualties at sea, to ship repair and ship building contracts. I am also the president of the Malta Maritime Law Association and the vice chairman of the yachting trade section at the Chamber of Commerce, and I have never felt that being a female lawyer was a disadvantage. It never even crossed my mind. The women who work within our organisation are nothing short of excellent. My firm fully recognises the fact that women of this calibre should not have to choose between their profession and having a family. Therefore, as of January 2011, we took the bold step of allowing the women to bring their newborns (until kindergarten age) to work with them. This is an extremely novel concept and there is no other law firm on the island with such a policy. We do not simply talk about equality and family friendly measures, we live them on a day-to-day basis.

LUXEMBOURG Retter, Attorneys Simone Retter Founding partner Tel: +352 27 99 01 03 Fax: +352 27 99 01 039 simone.retter@retter.lu www.retter.lu At Retter, we specialise in and exclusively dedicate to private investors and international families. Our strategy is to assist a small number of ultra-high-net-worth clients with highly personalised and specialised services addressing complex needs.

very often add to their legal approach a practical approach taking into account soft aspects such as psychological profiles, relationship or family conflicts, elements that are very often key issues in these types of files.

Women lawyers are, in our view, very well positioned to be active in this practice area. Our founding partner is female and has been active in the private client sector for almost two decades, both as a partner of a leading law firm and as a founding partner of a boutique law firm.

Luxembourg is a very favourable environment for private clients. Luxembourg legal vehicles can very efficiently be used in wealth structuring. On the tax side, Luxembourg can be a country of relocation for many European families. The most significant changes affecting the private client area in Luxembourg over the past two years are the signature by the Luxembourg government of new OECD model agreements for tax information exchange (TIEAs) providing for exchange of information on request and the new Draft Savings Directive under discussion at EU level.

Our experience is that private investors open up more easily to female lawyer when it comes to their private wealth and to the personal issues to be addressed in their wealth structuring. In legal matters in general, clients normally do not take into account the gender of a lawyer when evaluating quality. Clients may, however, take into account the gender of a lawyer when it comes to availability or empathy towards a legal issue. Our experience is that clients would have a tendency to prefer male lawyers in transactional corporate activities. Private investors would, however, not mind a female lawyer when it comes to more private legal matters. In determining solutions for private clients, women lawyers

This trend to global worldwide transparency is perceived as a challenge to the Luxembourg private banking industry. To the private client lawyers, it is bringing new opportunities as it changes the way families will address their overall tax and estate planning and consider Luxembourg structuring vehicles, widely used in the institutional and private equity world, as efficient planning tools.

INDIA AZB & Partners Mrs. Zia Mody Senior Partner Tel+91 22 66396880 Fax +91 22 66396888 zia.mody@azbpartners.com

AZB appears to have more women than the average Indian law firm, especially at a partner level. We believe this is a function of the leadership that basically understands the problems faced by young women at crucial stages in their lives. However, women lawyers do suffer some discrimination, both internally and externally, even today in terms of the legal cases they received from clients. We also believe much more could be done by the industry to promote equality in the legal fraternity. Some clients definitely have a gender bias in favour of men when selecting a lawyer. The women lawyers are mostly selected only by virtue of their superior dominance in the field and the position they command by virtue of their excellence - they are fewer in number. Although we have no specific career development and recruitment programmes designed for women lawyers, we certainly keep their issues and aspirations in mind during such programmes. We believe that AZB nurtures women lawyers both at a junior stage and at a senior stage more than other firms simply because we have more of an understanding of the problems that they face. However, there is still very much a perception issue and a sense in the industry that men can sometimes do the job better than women just because they are men.

But the future is reasonably positive, at least in the near future. Women are now recruited more in the initial stages than before. But they need to be offered a far more nurturing environment where they feel they are respected for their intellect and given a level playing field. Women who are guided through their priorities of maternity and parental commitment come back as much stronger and loyal resources for the firm and more than make up the time that they spend away from the workplace for the family. AZB is one of Indiaâ&#x20AC;&#x2122;s prominent law firms with approximately 225 lawyers and offices in Mumbai, Delhi, Bangalore, Chennai and Pune. We specialise in M&A, private equity, securities law, litigation, banking and finance, and project infrastructure. The Foreign Exchange Management Act keeps on changing from time to time and is one of the key legislations for our M&A practice. One of the key statutes that will soon come into full force and effect is the Competition Act, which will have a huge impact on M&A activity. A current trend we note is a growing concern amongst our clients of regulatory uncertainty.

April 2011 â&#x20AC;˘ GBM â&#x20AC;˘ 13

HealtH and safety law report

news bulletin are also active in keeping members briefed on new developments. Speakers have included eminent members of the judiciary. Examples include Mr Justice Mackay, who provided members with a fascinating insight into the court’s approach to the management of complex cases, and voiced opinions on a jury’s ability to understand the issues arising in such cases. Similarly, The Right Honourable Lord Justice Scott Baker, who spoke to members about the court’s view of the use of the criminal courts for dealing with breaches of H&S requirements and the response judges expect to see from those responsible for major disasters.

Health and Safety Law Report The Health and Safety Lawyers’ Association (HSLA) is a national organisation aimed at practitioners and academic lawyers with an interest in an area of law that is rapidly increasing in scope and importance. The HSLA’s aims and objectives include: promoting the development of health and safety (H&S) law; furthering research and educating and training its members in the discrete area of H&S law; and, promoting the expertise of its members in dealing with issues of H&S law. It aims to place emphasis on the increasing awareness of legal H&S duties and the way in which they are complied with, investigated and ultimately form the basis for action in court. The HSLA was established in 2005. Its founding members were nine leading lawyers in the field of H&S enforcement, a mixture of barristers and solicitors, from both the prosecution and defence. They wanted to create a platform of learning and debate in an area of law that they recognised was rapidly increasing in scope and importance. The HSLA’s honorary president is the Right Honourable Lord Justice Scott Baker, Roger Henderson QC the honorary vice president, senior partner of niche H&S firm Osborn Abas Hunt, Madeleine Abas as chair, and Richard Matthews QC as vice chair. Unlike many other legal associations that further the interests of parties on one side of litigation, the founding members wanted to ensure that its membership would be diverse and well balanced, increasing our ability to become recognised as the sensible voice of practitioners in relation to the development of the law. That vision became a reality and the HSLA’s membership consists of academics and the whole ambit of practitioners including some of the finest legal minds in the field of H&S. Clients will be well served by choosing lawyers who are active members of the HSLA, as they will have been offered unrivalled training and debate opportunities. Madeleine has been determined to stage events with speakers of the highest calibre, thereby equipping members to provide expert advice and information to their clients. Events range from conferences and seminars to discussion groups and policy forums. A members’ website and 14 • GBM • April 2011

Numerous eminent barristers at the top of the field have also addressed the members on a variety of topics from Richard Lissack QC and Gerry Forlin QC, Ian Burnett QC and more recently James Maxwell Scott. Committee members have also spoken on a variety of topical issues. The calibre of members also means the HSLA is often inviting its members to speak at such events and host seminars in all corners of the country. Academics such as Professor Frank Wright have shared both the fascinating history of H&S law and the development of today’s agenda, and international speakers from various jurisdictions have addressed the membership on comparative laws, thereby enabling members to gain a wider understanding of the topic. Regulators too have addressed HSLA members on policy and procedure, including Sir Bill Callaghan then chair of the Health and Safety Commission, Phillip White HSE’s head of construction sector, and Bernard Hogan-Howe then chief constable of Merseyside Police. In recent years, there have been a number of significant proposed reforms of the law. The introduction of the Corporate Manslaughter and Corporate Homicide Act 2007 was very significant, as was the Sentencing Guidelines Council Guideline for sentencing of cases prosecuted under that legislation and other death related H&S cases. The HSLA provided numerous members events to follow the development of both, and Madeleine and Richard attended numerous policy making governmental and industry meetings to debate proposals. Other significant new changes include the increase in availability of custodial sentences and higher fines for those who breach the law, with the implementation of the Health and Safety (Offences) Act 2008, and the proposed changes to the Coronial system. The HSLA’s success has extended to the establishment of a Scottish branch, with a dedicated Scottish events committee, and a sister organisation has been established in Ireland. Madeleine’s plans for the HSLA 2011 include reflecting the increasing international recognition of the importance of H&S by the formation of links with lawyers further afield so that members are able to offer their clients an even more comprehensive understanding of policy and development of H&S law. The ultimate objective is for the HSLA to play a part in improving H&S in the workplace through the creation and development of clearly defined workable legal requirements, the dissemination of accurate advice and information to our members and through them their clients, and fair enforcement. Osborn Abas Hunt Solicitors Madeleine Abas, chair HSLA Senior partner www.oahlaw.com

UK Gerard Forlin QC Barrister 2-3 Gray’s Inn Square Tel: 0207 421 1848 Fax: 0207 242 3911 gerard@gerardforlin.com www.gerardforlin.com

International trends We have recently seen the first successful prosecution of a company under the Corporate Manslaughter and Culpable Homicide Act 2007, which may well herald the launch of more prosecutions. Further, given that the small defendant company, Geotechnical Holdings Co Ltd, were fined 116% of turnover, this may indicate the shape of things to come in other large organisations, companies and sectors. In terms of international trends in health and safety (and in regulatory law generally), there have also been some significant changes. Before briefly looking at these, it is important to reflect on what recently occurred in a decision in the English Court of Appeal (Criminal Division). This appeal arguably represents a significant shift in the approach of the UK courts and has many ramifications for all the incorporated businesses doing business outside of the UK and, logically, those foreign registered companies doing business within the UK. In the case of R v Bodycote HIP [2010] EWCA Crim 802, which involved a double fatality, the Court of Appeal took into account what the defendant company had failed to do in a sister company in California, despite it being a completely different legal system. The Court of Appeal said: “.... the serious aggravating feature in this case was that a similar incident has led to the death of two employees at a HIP plant operated by another company in the same group that occurred in May 2001 in Tarzana, California. These two employees had also died from asphyxiation as a result of inhaling argon and nitrogen. That may have prompted the appellant to either adopt or to expedite the introduction of its present system, but, as the prosecution was able to show, not with the rigour that the dangers demanded and the appellant allowed the other defaults in its safety procedures to continue on to get worse.” They also specifically stated that “the other aggravating features of particular note were that there had been two deaths and the appellant had not adequately heeded the warnings from the failures in the Californian plant”. This development will be seen as ominous by many as it signifies an intention by the English courts to take into account conduct in other jurisdictions (even if they have different operational approaches and laws). Further, there has been a recent increase in coroners utilising rule 43 and

making reports after the completion of inquests. These are reports made to various government bodies (with copies to the interested parties and the Lord Chancellor) in the hope that they will prevent future deaths (see ‘Come in Rule 43’ by Forlin QC and Smail, New Law Journal, 4 March 2011). Ignoring such recommendations by individuals, corporations and industries may mean that in the event of similar future occurrences such previous conduct may well be put before juries as part of a ‘bad character’ application by the prosecution. On an international front, many other jurisdictions also have stringent laws. Additionally, within the EU there has recently been much greater use of European warrants. To take a couple of examples, Ireland has recently announced they are intending to implement two new offences: corporate manslaughter and grossly negligent management causing death for which directors and senior managers could be imprisoned for up to 12 years. The Australians are just about to implement the Safe Work Act 2009 that will have stringent consequences for any organisation falling short of the mark. Further, taking aviation as an example, there has been an explosion in the number of investigations and prosecutions in the aftermath of aircraft crashes, including the Linate Airport disaster, the DHL Cargo jet collision over Überlingen in Germany, the Concorde crash, the GOL crash in Brazil, the recent incident at Madrid airport and the Helios investigations in Greece and Cyprus, to name but a few. This trend is set to increase and intensify. Global organisations need to be aware that conduct in one country is increasingly being examined by plaintiff lawyers, regulators and prosecutors in other countries. The forthcoming UK Bribery Act is yet another example of this phenomenon and an illustration of an ever increasing march towards extra-territoriality and the inclusion of international conduct. Health and safety is no exception to this rule and we will continue to see more and more investigations (and possibly prosecutions) in the aftermath of accidents and incidents; whether they be natural (New Zealand and Japan), deliberate (New York and London) or accidental. Global organisations need to be aware of this shift in emphasis. The days of splendid isolation are long gone; the prosecutors wait in the wings!

April 2011 • GBM • 15

Health and Safety law report

UK and International Guy Bastable Partner +44 (0)20 7430 2277 gbastable@bcl.com www.bcl.com

The Investigation of fatal accidents in the UK Recently, the health and safety sector has been dominated by criminal enforcement, particularly legislation and prosecutions focused on organisations and directors. In 2008, the Corporate Manslaughter and Corporate Homicide Act (CMCHA) came into force. Previously it had been notoriously difficult to convict large companies of the common law offence, although there had been a number of convictions of small companies. The CMCHA removes the necessity to identify and establish the guilt of a “directing mind”. In a large or medium-sized organisation, such an individual is often far removed from the events surrounding the death, making establishing his guilt unlikely. Instead, the CMCHA concentrates on the concept of a “management failure” and allows the aggregation of failings by a number of individuals. The CMCHA adds to the range of offences available to the police and the Crown Prosecution Service (CPS) when investigating an organisation and its employees following a fatal accident. An investigation is now undertaken with a view to prosecuting an organisation for corporate manslaughter and breaching health and safety legislation; an individual for gross negligence manslaughter; a director for secondary liability in relation to a breach by the organisation; and an employee for breach of the Health and Safety at Work Etc Act (HSWA). The main sanction on conviction for corporate manslaughter is an unlimited fine. In addition, following the recent Health and Safety (Offences) Act, individuals can now be sentenced to imprisonment if convicted of one of a number of health and safety offences. This includes secondary liability for breaches by the organisation by reason of the senior individual’s consent, connivance or neglect. The guidelines for sentencing organisations for corporate manslaughter or health and safety offences that cause death provide that there will inevitably be a broad range of fines, but go on to specify that fines for organisations found guilty of corporate manslaughter may be millions of pounds and should seldom be below £500,000. For health and safety offences that cause death, fines from £100,000 up to hundreds of thousands of pounds should be imposed. The guidelines also provide that, while a fine is intended to inflict “painful punishment”, it should be one that the defendant organisation is capable of paying. In the case of a large organisation, the fine should be payable within 28 days. In the case of a smaller or financially stretched organisation, it is permissible to require payment to be spread over a much longer period. However, while the courts should have regard to a number of factors when assessing the financial consequences of a fine, the guidelines provide that in “some bad cases” it may be acceptable that the fine will have the effect of putting the defendant out of business. In February 2011, Cotswold Geotechnical became the first company to be convicted of corporate manslaughter under the CMCHA.

16 • GBM • April 2011

As well as corporate manslaughter, the company was originally also charged with an offence under the HSWA and the director was charged with gross negligence manslaughter and an offence under the HSWA. In the event, Mr Eaton was too ill to stand trial and the HSWA offence against the company was discontinued. Nonetheless, Cotswold Geotechnical shows that the CPS is willing to deploy the full arsenal of applicable criminal offences following a fatal accident and will undoubtedly continue to target senior individuals. Cotswold Geotechnical was fined £385,000, which amounted to 115% of its turnover for the year of the accident, to be payable over ten years. This was notwithstanding the fact that the sentencing judge considered that the fine and payment plan might well cause the company’s liquidation, stating that it was an unfortunate but unavoidable consequence of the serious breach. It remains to be seen whether this will amount to the end of the company. Bearing in mind the small size of Cotswold Geotechnical, in cases of serious breach, large organisations can expect much larger fines and very large organisations can expect fines in the millions. This expectation is borne out by the sentences following the successful prosecution of five organisations for the Buncefield explosion. Significantly, in the absence of any serious injury or death, one organisation was ordered to pay fines and costs totalling £6.2m and another £2.4m. Fire safety is another significant area that has recently come to the fore. The Fire Safety Order created for the first time a single legal framework regarding fire safety and imposes strict, onerous and non-delegable duties. Following a number of high profile fires, fire authorities have taken an aggressive approach to enforcement, with significant fines resulting: a total fine of £400,000 against New Look, Shell was fined £300,000, and the Co-operative Group was ordered to pay almost £240,000. In addition, in New Look, the Court of Appeal stated that “the court does not have to wait until death or serious injury has occurred to express its displeasure at wholesale breaches of the defendant’s responsibilities under the Order”. In the current climate, organisations and their directors operate in an increasingly regulated environment with an emphasis on corporate liability and the very real threat of imprisonment and significant financial penalties if things go wrong, particularly although not exclusively where a death occurs. BCL Burton Copeland is a market leading law firm in the UK providing specialist advice nationally and internationally to corporations and individuals in the area business crime and regulation, including fatal accidents, corporate manslaughter, Coroners’ inquests, health and safety, and fire safety. In the words of Chambers UK, “BCL's business crime and regulatory team is a formidable presence in the health and safety market, bringing the firm's experience in criminal law to bear on its defence work”.

UK QEB Hollis Whiteman Chambers Adrian Darbishire 1 Laurence Pountney Hill, London EC4R 0EU 0207-933 8855 adrian.darbishire@qebhw.co.uk

Health and safety enforcement: Away we go? In the two years after April 2008, about 500 people were killed in accidents at work. The Health and Safety Executive starting point is that all workplace deaths are preventable, and it is unusual for such a death to occur and for no fault to be found in the conduct of the relevant undertaking. In some such cases, there may be no fault at a senior management level; in others, the degree of fault will be trivial. But even if only half of cases involve fault on the part of senior managers, and if in only one in ten of those is the consequence a serious breach of duty, that leaves us with 20 or 30 potential corporate manslaughter prosecutions. And a year is long enough to make a charging decision in all but the most complex of cases. But there has been just one prosecution. So, where have all the manslaughters gone? First, there is the hangover from the pre-Corporate Manslaughter and Corporate Homicide Act 2007 (“the Act”) days, when corporate manslaughters were regarded as ambitious, inherently difficult and prone to expensive failure. With the Act attracting criticism for failing to address all of the problems with the common law, the sense that corporate manslaughter contains traps for the unwary has persisted, and must have put off many prosecutors inclined to caution. A related factor may be a reluctance to be the first. It seems to have been assumed that the Act would need a disaster or other high-profile case to launch it. The very ordinary, sadly ordinary, Cotswold Geotech case was dismissed by some as a bit disappointing, almost as if it was unworthy to be the first case under the Act. It was (rightly) pointed out that this was a case that could just as well have been prosecuted under the common law, and (wrongly) suggested that it was not what the Act was intended for. The Act repealed common law corporate manslaughter, and the section 1 offence is intended to meet any case in which such a charge could have been brought, as well as some in which it could not. It was always envisaged that it would be used most on the most common kind of case, where death has resulted from the dangerous activities of a small company run by a few individuals who are close to the action. Now there has been a conviction, what will change? Take a moment to consider the Cotswold Geotech case: as things turned out, the trial was of the company alone, without a human defendant. Although in fact the company’s guilt was based on the actions of one person, it was not necessary in law for the jury to convict him before convicting the company. And the trial was neatly conducted, occupying a total of just 13 sitting days, with a significant fine at the end of it.

are the ‘senior managers’ and other legal matters, but those will be few. And of course, when the Act comes to be employed in a case involving a large company, like the great train crash cases, the trial will be long, difficult and expensive. But those cases will be rare. For the vast majority of prosecutions arising from the sadly ordinary workplace death, the Act is workable and effective. This conviction will give heart to prosecutors to charge when the facts suggest a falling far below the required standard in a workplace death. Indeed, some decisions (one hopes not many) may even have been awaiting the outcome of the case. Not a stampede of such cases, but five or ten a year at least. And more convictions will follow. Finally, while the Corporate Manslaughter and Corporate Homicide Act 2007 was the single most over-hyped piece of legislation (at least until the Bribery Act), the Health and Safety (Offences) Act 2008 was one of the most overlooked. On the very same day that Cotswold Geotech was convicted in Winchester, at the Chelmsford Crown Court another little bit of history was quietly made. Phillip Dutton, a former health and safety manager, became the first person to receive a custodial sentence for a breach of section 7 of the HSWA. On 3 February 2009, just three weeks after the custodial penalty became available, he had poured an accelerant onto a skip fire that caused an explosion in which he suffered serious injuries, for which he was sentenced to four months’ imprisonment, suspended for two years. Consider this as the shape of trials to come: a company charged with manslaughter, with two or three of its senior managers facing prison for simple breaches of duty. That is a newly available and highly attractive proposition to a prosecutor trying to balance the desire to hold a company to account, while recognising the difficulties of proving against decent men and women the fault necessary send to constitute gross negligence. Adrian Darbishire is a well-known criminal barrister specialising in defending health and safety cases. He has successfully defended in many corporate and gross negligence manslaughter prosecutions, including the Hatfield rail crash, as well as other health and safety matters. He acted for the prosecution in the Cotswold Geotech case. He can be contacted at QEB Hollis Whiteman Chambers, 1 Laurence Pountney Hill, London EC4R 0EU, 0207-933 8855, adrian.darbishire@ qebhw.co.uk. He accepts direct access instructions and would be delighted to offer advice and assistance to any company interested in the issues raised in this article.

That case shows that the Act works perfectly well for what will continue to be the most common type of case. Without a human defendant, the charge is simply of a managerial fault for a bad breach of duty that caused death, and experience shows that to be routine. Of course there will be cases that explore the limits of who

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Health and Safety law report

Dean Norton, Senior Clerk Temple Garden Chambers 1, Harcourt Buildings Temple, EC4Y 9DA 020 7583 1315 dnorton@tgchambers.com www.templegardenchambers.com Temple Garden Chambers, formerly known as 1 Temple Gardens, is a long established set of Barristers’ Chambers in London with particular expertise in the field of health, safety and regulatory law. We are recognised as one of the leading chambers in this field by Chambers and Partners and Legal 500 for both our advocacy and advisory skills. The following individual members of Chambers are recognised in these publications as leaders in the field: Andrew Prynne QC, Keith Morton, Dominic Adamson, Fiona Canby, Tim Sharpe and Kevin McLoughlin. Members of chambers have a wealth of experience and handle some of the most high profile, complex and important cases in the field. Keith Morton (who was nominated for Health and Safety Junior of the Year in 2010) was instructed in the first prosecution under the Corporate Manslaughter and Homicide Act 2007 (R v Eaton and Geotechnical Holdings Limited). Several members of chambers (Keith Morton, Andrew O’Connor, Fiona Canby and Benjamin Hay) appeared in the inquests arising out of the London Bombings of 7 July 2005. Other recent significant cases include: Bampton & Others v Powertrain & Others (Andrew Prynne QC and Dominic Adamson acted for the defendant) which concerned bacterial pollution in a car plant; Commission v United Kingdom (David Barr acted for the UK in the challenge by the Commission over whether the Health and Safety at Work etc Act 1974 implemented the Framework Directive on Safety and Health); R v Commissioner of Police of the Metropolis (Keith Morton acted for the defence in the prosecution arising out the Stockwell shooting); R v Corus UK Ltd (Hugh Carlisle QC and Dominic Adamson acted for the defence in the prosecution arising out of the explosion in a blast furnace at Port Talbot resulting in multiple fatalities); R v Balfour Beatty and Others (the prosecution arising out of the Hatfield rail crash; John Bate-Williams, Fiona Canby and Tim Sharpe acted); R v Southampton University Hospital Trust (Keith Morton acted in first ever prosecution of a hospital under health and safety legislation arising out of the standard of clinical care); and, R v Bulmer Ltd and Nalco Ltd (Mark Bishop and Keith Morton each acted for the defendants in a prosecution arising from a legionella outbreak in Hereford resulting in the death of two members of the public). 18 • GBM • April 2011

Norton Rose LLP Caroline May Partner and head of environment, safety and planning group Tel: +44 (0)20 7444 3251 caroline.may@nortonrose.com David Beckenham Associate (environment, safety and planning group) Tel: +44 (0)20 7444 5197 david.beckenham@nortonrose.com www.nortonrose.com

Just enough red tape? Health and safety (H&S) is never far from the headlines. Whether its international issues, sparked by high profile accidents, or more local concerns, such as the amount of H&S red tape in the UK, it’s an issue that sparks almost constant debate. Much of the policy activity (and the media commentary it influences) is based on the premise that H&S red tape in the UK provides a serious hurdle to business. H&S practices are often presented as onerous and damaging to innovation. Is that really the case though? At the end of 2010, we undertook a wide-ranging survey of H&S professionals in the UK to find out just that. We found that they are very aware of the cost and time issues involved, both with managing H&S and with claims and litigation; but in many cases, the concerns are not as endemic as public opinion might have us believe. Our survey highlighted the continuing importance of H&S to the business and public sector community. On the one hand, employers have a moral as well as legal obligation to ensure they provide a safe working environment; on the other, there are an increasing number of factors that affect their ability to do so. This is why the flexibility inherent in the UK legislation is so important and so popular among practitioners. Managing H&S effectively takes up management time, while the lack of a proper audit trail can increase claims costs and make it more likely that organisations have to settle claims that they might otherwise have been able to defend. In addition, the potential for adverse publicity ranks almost as high as the operational needs of the business when it comes to managing H&S. High-profile accidents, like the Hatfield train crash, and the introduction of the Corporate Manslaughter and Corporate Homicide Act 2007 (with its powers for the courts to make publicity orders) have led to firms viewing reputational risk as just as much of a concern as financial risk. Even organisations in less overtly highrisk sectors are increasingly concerned about the bad publicity and reputational damage that can arise from employee litigation. None of this is to say that H&S is likely to drop off the policy or media radar any time soon. Further cutbacks are likely at the Health and Safety Executive, and the government will continue to digest the review delivered by Lord Young towards the end of 2010. However, the picture is perhaps not as bleak as some would have us believe. We work alongside clients every day on the full range H&S issues, and rarely do we come across any major causes of discontent with the current regime. Red tape may occasionally interfere with business, but thankfully it doesn’t appear to be strangling it

Greenwoods Solicitors LLP Kathryn Gilbertson Head of Business Defence Tel: +44 (0)1733 887621 Fax: +44 (0)1733 887875 Mobile: +44 (0)7841 732561 www.greenwoods.co.uk Legionnaires’ disease is a form of pneumonia. It mainly affects people over 50 years of age and generally men more than women. Infection is caused by inhaling Legionella bacteria, which is in an aerosolised form in the air. A contaminated source, such as a shower, hot water tap or poorly maintained air conditioning systems, is often the cause of infection. The South Wales Legionnaires’ disease outbreak in 2010 resulted in 22 people requiring hospital treatment, of which two died. Epidemiological investigations identified a close link to retail premises. Inspection and sampling of cooling towers and industrial processes in the outbreak area resulted in closures and service of improvement and prohibition notices. Prosecutions may follow. The Health and Safety Executive (HSE) inspected all registered cooling towers and evaporative condensers. They assessed their operation, technical management and competency of safety systems. Unsurprisingly, the inspectors found a number of premises where cooling towers and/ or evaporative condensers were not registered. The UK’s worst ever outbreak of legionnaire's disease was identified as emanating from an arts centre owned and operated by Barrow Borough Council. At least five people died as a result of the incident and there were 172 confirmed cases of the disease. Both the Council and its design services manager, Gillian Beckingham, were charged with manslaughter and safety offences as a result of the poorly maintained air conditioning system. More individuals died and were injured as a result of the Barrow incident than were hurt or killed in the Hatfield train crash. Greenwoods Solicitors LLP represented Ms Beckingham, architect, in her appeal and subsequent retrial following this outbreak. Ms Beckingham was acquitted of all seven manslaughter charges. The safe operation of air conditioning systems and water supplies requires a detailed knowledge of the approved code of practise L8. Many organisations erroneously rely on their maintenance contractor to manage these risks for them, whereas the duty rests firmly with the business. Our clients are reassured by the distinct, strategic and tactical advantage offered by our lawyers, who have significant experience as prosecutors and now thankfully act for the defence. This expertise is invaluable when advising and defending companies and/ or their directors following workplace accidents and incidents. We are renowned for advising clients in the construction, manufacturing, agriculture, retail and leisure sectors. Our team offers time critical solutions to allow you to achieve your corporate aims without compromising your compliance needs. Legionella outbreaks, like all workplace incidents, have ramifications for everyone who manages safety. If you are unfortunate like Ms Beckingham, then your business, your livelihood and even your professional status could be at risk should you be charged and convicted of a safety offence.

Gavin Anderson Advocate Westwater Advocates Edinburgh 0131 260 5700 gavin.anders@btinternet.com www.westwateradvocates.com

Health and safety law Gavin Anderson is an Advocate with Westwater Advocates, Edinburgh. He practices at the Scottish Bar. He has been instructed for the defence in many prosecutions involving health and safety offences, where he has acted for limited companies, partnerships, individual directors and sole traders. He has also acted in fatal accident inquiry proceedings following prosecution. Mr Anderson has acted in a considerable number of high-profile health and safety prosecutions, including the Rosepark Nursing Home case (a fire in which 14 residents of a care home died). Within the past year, he successfully defended a sole trader following a fatal incident in a stores yard. He also defended in a prosecution following workplace electrocution, as well as in a range of non-fatal cases that included traumatic amputation in workplace machinery and a dockside fall from height into water. As well as conducting trials, Mr Anderson appeared for Discovery Homes (Scotland) Limited in the most recent fatal health and safety case to come before the High Court of Justiciary Appeal Court on a question of sentence - the case set a precedent by directing that Scottish Courts should in future have regard to the English Guidelines on Corporate Manslaughter and Health and Safety Offences Causing Death when imposing sentence. Mr Anderson is retained to act for several private companies and public authorities in relation to pending prosecutions across a range of sectors, including healthcare, heavy industry, renewable energy and maritime, where incidents include workplace machine injury, drowning and the contracting of Legionnaires’ Disease. Mr Anderson commented: “During a time of economic hardship, there may be a temptation by business to cut corners regarding health and safety issues; the work of the courts continues to demonstrate that to be a false economy, especially where the focus is increasingly upon individual director prosecution, where the courts now enjoy a power to sentence directors to periods of imprisonment.” April 2011 • GBM • 19

HealtH and safety law report

HEALTH AND SAFETY GROUP The Chambers of William Clegg QC at 2, Bedford Row is the country’s premier criminal set of chambers with a specialist Regulatory and Health and Safety Group, appearing before all levels of Courts in cases that range across the whole breadth of industry and work. As well as appearing in cases brought by The Health and Safety Executive, chambers specialise in advising in corporate manslaughter investigations, appearing at Inquests and Public Inquiries (for Individuals and the bereaved as well as for corporate clients) and advising pre-charge in long and complex investigations. Recent high profile cases include The Buncefield Explosion trial and Festival Fireworks but members of chambers have featured in the vast majority of the leading cases of the past decade. Chambers have wide ranging experience of advising in cases involving fatalities in the workplace, on railways, asbestos cases, cases involving falls, fires and explosions, improvement notices and other HSE regulatory matters. In November 2010 Oxford University press published the 3rd edition of Health and Safety Enforcement Law and Practice by Richard Matthews QC and Jim Ageros, the premier text book on this increasingly important area of law.

CHAMBERS & PARTNERS: Crime Set of the Year 2006 and 2009

2 BEDFORD ROW LONDON WC1R 4BU Telephone 020 7440 8888 Fax 020 7242 1738 www.2bedfordrow.co.uk 20 • GBM • April 2011

The Legal 500 opined “There is unanimous agreement among solicitors that 2 Bedford Row is ‘as good as it gets’”. Enquiries should be addressed to: John Grimmer, Senior Clerk at jgrimmer@2bedfordrow.co.uk or Paul Rodgers at prodgers@2bedfordrow.co.uk or telephone 020 7440 8888.

UNEP Finance Initiative | Global Roundtable | Washington, D.C. | 19-20 October 2011

unep fi Gl0Bal round taBle

THE Tipping poinT Sustained stability

in the next economy

UNEP FI produces its large scale, high profile Global Roundtable event for its Signatories and the broader stakeholder community on a biennial basis. The Global Roundtable is a key platform for the financial sector to engage with UNEP FI Signatories, partner organizations, government, and broader stakeholders. The Roundtables typically attract 500-600 participants from across the globe. CEOs, heads of sustainability departments, risk departments and business units from the banking, insurance and investment sector are in attendance, as well as high-level representatives from environment, energy and finance ministries (or their equivalent). Representatives from academia, civil society and other business sectors are also present. UNEP FI Roundtables travel the globe and have previously been held in 11 different cities, including Cambridge, Chicago, Frankfurt, Rio de Janeiro, Tokyo, New York, Melbourne and, most recently, Cape Town, South Africa, in October 2009.

Coming just a few months ahead of the landmark United Nations Conference on Sustainable Development (UNCSD) in Rio de Janeiro, Brazil, UNEP FI’s 2011 Global Roundtable is the perfect opportunity to cast a spotlight on what the sustainable development agenda means for the world’s finance, investment and insurance sectors.

The 2011 Roundtable will be an exclusive platform where the global financial sector will have a unique opportunity to define what it expects to achieve in Rio. The 2011 Global Roundtable will seek to:

n Provide an in-depth analysis of the most pressing sustainability issues facing financial institutions today.

n Expose the linkages between achieving sustainability for the planet and stability for the markets as the cornerstone of the ‘next economy’.

n Foment dialogue between financial sector representatives and policy-makers in an effort narrow the gap between these two key communities.

www.unepfi.org/washington April 2011 • GBM • 21

UNEP FI FI Gl0bal Gl0bal Round Round table table UNEP

A new era in sustainable finance: Dealing with human rights Businesses are increasingly required to demonstrate sound understanding and good practice around human rights standards and issues, both in managing their risks and impacts and as an indicator of good corporate citizenship. This focus will intensify as John Ruggie, Special Representative of the UN SecretaryGeneral on Business and Human Rights, finalises and submits the proposed ‘Guiding Principles’ for implementation of the UN ‘Protect, Respect and Remedy’ Framework for business and human rights. This document, which provides concrete and practical recommendations for states and business on corporaterelated human rights impacts, will be presented in his final report to the Human Rights Council in June 2011. Ruggie’s work is intended to clarify and elaborate on the roles and responsibilities of states and businesses with regard to human rights. His work emphasises that human rights are not only the responsibility of governments, but also that business enterprises have responsibilities to ensure their activities do not negatively impact human rights. The UN Framework and Guiding Principles, if adopted by the UN Human Rights Council (as currently seems likely), will be used to benchmark corporate conduct, regardless of whether or not businesses formally adopt its philosophy and content.

22 • GBM • April 2011

Financial institutions (FIs) are important actors in the globalised business community and are often closely associated, through lending and investment, with the activities of the businesses they support. With growing human rights accountability being placed on business, a sound human rights record has become a material risk element to FIs - as participation in or association with human rights violations can negatively affect a company’s profitability or reputation. In response to these developments, the United Nations Environment Programme Finance Initiative (UNEPFI) - the oldest and largest partnership between the United Nations and the finance sector, with close to 200 members from the global financial services sector across the banking, insurance and investment industries - is creating a multi-year programme that goes in-depth on the implications the Framework and the Guiding Principles have for the financial industry, thus contributing to improved understanding within the FI community of related risks and practical means of demonstrating respect for human rights. The changing landscape Connecting finance to human rights is not new. In 2004, KPMG released a report ‘Banking on Human Rights’ in which it cooperated with nine of the leading international banks at the time, researching the relationship between the banking industry and human rights. Also, in 2006, UNEPFI members, aware of growing human rights concerns, approved the establishment of the human rights working group. Over the past five years, human rights have been discussed increasingly in the corporate community. Nevertheless, the practicalities around how businesses should deal with human rights issues has remained a challenge; only a few internationally operating companies have developed and implemented comprehensive human rights policies. The Business and Human Rights Resource Centre website reports that out of 80,000 multinationals, only 300 companies (25 banks) have a policy on human rights. The political landscape is changing. In 2008, the UN Human Rights Council unanimously endorsed a policy framework to better manage business and human rights challenges. This framework, written by John Ruggie, rests on three pillars: the state duty to

protect against human rights abuses by third parties, including business, through appropriate policies, regulation, and adjudication; the corporate responsibility to respect human rights, which means to act with due diligence to avoid infringing on the rights of others; and, greater access by victims to effective remedy (John Ruggie, ‘Engaging business: Addressing respect for human rights’, Atlanta, 25 February 2010). The framework provides guidelines for business in general on how to deal with human rights abuses. One of the elements Ruggie uses for the Framework is the Corporate Law Project. Ruggie asked 20 leading corporate law firms from around the world to identify whether and how corporate and securities law in over 40 jurisdictions encourages companies to respect human rights. Quoting from his research: “…where human rights impacts may harm the company’s short or long term interests if they are not adequately identified, managed and reported, companies and their officers may risk non-compliance with a variety of rules promoting corporate governance, risk management and market safeguards. And even where the company itself is not at risk, several states recognize through their corporate and securities laws that responsible corporate practice should not entail negative social or environmental consequences, including human rights.” (SRSG, ‘Corporate law project: Overarching trends and observations’, July 2010) Moreover, Ruggie wrote to the Human Rights Council in 2008: “…there is increasing encouragement at the international level, including from the treaty bodies, for home States to take regulatory action to prevent abuse by their companies overseas.” (John Ruggie: HRC, 2008) In addition to the changed political landscape, societal perceptions of human rights and business are changing, too. Some stock exchanges have reacted to the demands by an increasing number of social responsible investors to take account of environmental social governance (ESG) issues in their inclusion criteria: the FTSE4Good Index requires companies in particular sectors to have a human rights policy or risk delisting; and the Dow Jones Sustainability Index has also placed significant focus on human rights policies and performance indicators in its questionnaire (John Ruggie: HRC, 2008).

Moving ahead The financial industry needs to be aware that, while there is likely to be a low risk of direct association with any material violations of human rights, there is significant potential for indirect association through client or procurement business relationships. The UN Framework and Guiding Principles will apply equally to the finance sector and all other sectors. FIs, as they are associated with all industry sectors, will need to take account of the human rights risks and issues of each sector when evaluating financial propositions. While FIs are not competent to ‘police’ human rights related client activities, they will be expected to conduct appropriate due diligence to avoid or mitigate adverse human rights impacts associated with the provision of financial services to clients. In this respect, the responsibilities of the finance sector are broader, more indirect and more diffuse than almost every other sector. Hence, the challenge for FIs is to create strong and effective management tools to deal with human rights related issues. Only with strong policies and practises can FIs avert potential (non-legal) complicity - even perception of complicity (in the absence of legal action) is a material risk for banks, particularly those with retail networks that are more sensitive to public opinion. This means that for most FIs, much work is ahead in increasing their knowledge and improving the risk models to take account of this changing landscape. Even though this might not be an easy task for FIs, they cannot sit by and wait while the train is moving along. In 1978, when David Rockefeller, then CEO of Chase Manhattan, was asked over his links to the dictatorial regime in Argentina, he responded by denouncing President Carter’s human rights policy and argued that financial institutions should not be impeded from doing their ‘normal business’ regardless of the governments they were engaged with (Juan Pablo Bohoslavsky, 2010) In the 21st century such a response would no longer be conceivable. Michel Crevecoeur Project manager Finance and Human Rights United Nations Environment Programme Finance Initiative

The inclusion of ESG issues in stock exchanges, the Human Rights Council’s extensive work on the human rights responsibilities of nonstate actors, growing (awareness of) legal accountability, and the growing number of social responsible investors, are all proof that human rights will not easily be removed from the corporate agendas. This has serious implications for FIs.

April 2011 • GBM • 23

asset and wealth management

Asset and Wealth Mangement The wealth management industry provides the infrastructure for individuals to invest in their financial future by appropriately utilising the financial markets in search of capital growth. Today, more than 12 million people in the UK directly hold stocks and shares. Wealth management firms and stockbrokers provide a full range of services to individual investors (or private clients), from execution-only broking (for clients who only want to transact) to discretionary investment services (for clients who want full management of their portfolios). The Firms in this industry endeavour to work with individuals to create the right portfolio for them and provide guidance on how best to manage their investments. The vast majority of these firms are members of The Association of Private Client Investment Managers and Stockbrokers (APCIMS). APCIMS is a trade association formed in 1989 with the blessing of the then Prime Minister Margaret Thatcher. The need for APCIMS arose largely because of the changes in the London Stock Exchange known collectively as the ‘Big Bang’. Although more than half of the Stock Exchange transactions were (and still are) undertaken by private investors, their interests were being increasingly overlooked. With so much change in the operation of the Stock Exchange, there was a real need for a trade association to represent the interests of firms specialising in providing services for private clients; and to balance the dominant influence of the major investing institutions. As a trade association APCIMS represents the industry by acting as an intermediary between the wealth management community and its regulators (both in the UK and in Europe) to ensure that its members’ (and their clients’) interests are appropriately voiced.

Dr Tim May

24 • GBM • April 2011

Today, APCIMS has 186 member firms from the wealth management and stockbroking community that employ approximately 30,000 staff at more than 500 sites across the UK, Ireland and beyond. It works closely with the authorities in the EU and UK and lobbies to achieve appropriate and proportionate regulation for the industry.

It also endeavours to provide information and assistance to its members across a wide range of regulatory, market and business issues. At the helm of APCIMS is the recently appointed chief executive officer Dr Tim May (pictured). Dr May has been involved with APCIMS since the beginning, initially through committee work and, over the past decade, as a serving member of the APCIMS board. With over 30 years of industry knowledge, including experience gained as COO of Carr Sheppards, Gerrards and then executive director of Euroclear SA/NV, he is ideally placed to assist APCIMS members with meeting the challenges posed by the current, and future, regulatory landscape. The turbulent events of the recent financial crisis and its far reaching consequences have left the industry reeling from scandals, investment losses and clampdowns from governments and regulators. Although APCIMS members do not, as a matter of course, lend money and were not involved in the kind of debt or other products at the heart of the recent financial crisis, the main challenge is for the industry as a whole to meet these issues, deal with the fall out and rebuild investor trust. Therefore APCIMS & its members (being from a sector based on client relationships) are by no means complacent and will do all they can to promote recovery in the UK economy and to ensure consumers

are protected. Indeed all its members are subject to extensive supervisory control; in the UK this is via the Financial Service Authority (FSA). Also, the firms make large contributions to the Financial Services Compensation Scheme (FSCS) (as well as carrying their own insurance), in order to protect clients interests at all times. Further the Financial Ombudsman Service (FOS) seeks to provide a mechanism for clients wishing to seek redress. If the key players, ie governments, regulators, firms, professional bodies and trade associations, all work together to get things back on track, the positive impact we can contribute to the UK economy will be substantial. For example, within the wealth management sector a recent Compeer survey reported sector asset growth of 14.7% on the previous year and a return to managing more than £400bn of client money, even at a time of great global economic uncertainty, which we consider to a success. APCIMS feels that a timely and proactive way of helping to rebuild investor trust is through greater financial education. For instance, in the private client world, many people, even in the financial community, do not fully understand what APCIMS firms ‘do’. As Dr May states: “Before we can lobby, we need to educate governments, regulators, financial institutions and consumers. By doing this we can raise awareness of the needs of our industry to those who create the rules and also equip the consumer with essential knowledge before they begin to buy or sell a security (equity, bond etc).” Another challenge for the industry is to deal with impacts of both vast and increasing amounts of regulation, and also the changing UK regulatory architecture. As these changes develop APCIMS, on behalf of its members and their clients, is keen to work proactively with governments and its regulatory bodies to assist in the construction and implementation of regulation (both in the UK and Europe). A key point is to ensure that while protection remains key to lawmaking, we all take time to stop, think and evaluate along the road so that the heavy stream of regulation continues to be appropriate and proportionate. An important pitfall APCIMS particularly wishes to avoid is the investment community being hit with a ‘one-size-fits-all’ approach that is not proportionate and does not reflect or consider each financial sector's ‘individual differences’, as this would likely be to the ultimate detriment of consumers. By the end of 2012 the FSA will be phased out and replaced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). This ‘Twin Peaks’ structure is a dramatic change and brings with it many questions over what the future may hold. Will the two bodies exhibit a coordinated and consistent approach? Will investment firms be in any way disadvantaged, or could it be a real opportunity? Will there be unnecessary overlap? Will there be excessive bureaucracy, the cost of which will have to be borne by the financial services industry as a whole and obviously to some degree by consumers of the services? Alongside this is also the important consideration of the shift of power towards Europe. The European influence on the UK financial services community is becoming ever greater, especially following the creation of the three European ‘Super Regulators’ - the European Securities & Markets Authority (ESMA), the European Insurance & Occupational Pensions Authority (EIOPA) and the European Banking Authority (EBA) - set up to ensure consistent implementation of European Regulation across all member states. As this becomes ever more apparent, the UK will need strong representation to these bodies, via trade associations such as APCIMS, to ensure that the UK’s unique retail investment model is championed and that its voice is heard. Especially in the consideration that European states operate on a different model.

A couple of current examples of where this will be important are in the FSA’s work on the Retail Distribution Review (RDR) and the European Commission’s work on Packaged Retail Investment Products (PRIPs). Both policies cover a host of similar points and harmonisation of goals and timelines is essential to ensure the industry does not make a key change to accommodate one policy that may then be dramatically altered again by the implementation of the second. Other European regulation, such as the Markets in Financial Instruments Directive (MiFID) Review, will also have a huge impact on the UK. This will likely transform trading and post-trading transparency and reporting, and impact on investor protection in the form of the provision of investment services (in the reporting requirements of more ‘complex’ products). Alongside this, there is also much work on issues such as remuneration, treating customers fairly and taxation. Therefore, we foresee that the financial landscape of 2011 and beyond will be full of challenges and changes as it continues to evolve. Several pieces of regulation in development, such as the RDR and the MiFID, will have substantial impacts on how the industry works, how firms must operate and of course, on the consumer. APCIMS will be there every step of the way, to provide input and reflection on these events, to represent its members and provide support and guidance wherever possible so that consumers are fully assisted and protected appropriately.

FACTFILE ¾ APCIMS is a trade association that represents private investor companies that act on behalf of investors in the stock market. ¾ APCIMS’ role as an intermediary between the regulators and our member firms seeks to ensure that regulation from the UK and Europe is appropriate and proportionate for the investment community.

¾ If you buy or sell securities at any time, then you are likely to deal with a firm that is a member of APCIMS. ¾ Our member firms deal primarily in stocks and shares for individuals, trusts and charities and offer a range of services from execution only through to full discretionary management of a portfolio of stocks and shares. ¾ We currently have 186 member firms. These firms operate from more than 500 sites in the UK, Ireland, Isle of Man and Channel Islands, and employ circa 30,000 regulated staff. ¾ Around £400bn of the country’s wealth is under the management of our members. ¾ Our sector makes a considerable contribution to the UK by providing investment opportunities that help grow the British economy. As well as investing in both UK and UK-based international companies, we invest in SMEs that often depend very much on local investors and are in close proximity to our firms and their branches. ¾ All the members of APCIMS are fully regulated and our firms do not, as a matter of course, lend money and are not involved in the kind of debt or other products at the heart of the recent financial crisis. ¾ To find out more about APCIMS please visit our website: www.apcims.co.uk

April 2011 • GBM • 25

Micro and asset Finance wealth Investment management Vehicles

Singapore The Singapore-based Asiaciti Trust Group is an independent trustee and fiduciary services business group offering a range of international financial planning services designed to facilitate the accumulation of income and the preservation of wealth through tax effective offshore structures. Having established its corporate identity in 1978, Asiaciti Trust has its foundations in chartered accountancy practices dating back to 1886. With operations in the Cook Islands, Hong Kong, New Zealand, Nevis, Samoa, Singapore and Uruguay, Asiaciti Trust is now one of the leading international trust groups in the Asia Pacific region. Asiaciti Trust is headquartered in Singapore, and through its network of subsidiaries and associates, is able to offer a global service capability to its clients. At Asiaciti Trust, we emphasise the valueadded concept by adopting a creative but practical approach to our clientsâ&#x20AC;&#x2122; financial and fiscal planning needs. Being independent we are frequently engaged by other professionals or private banks to provide specialist services to their clients. These services may cover such issues as international tax and estate planning, asset protection planning, strategic corporate planning, retirement planning, premigration planning, succession planning, international trading and investment

structures and licensing and royalty structures.

retirement planning and pre-migration planning.

Asiaciti Trust Group has carried on business operations in Singapore since 1981 and provides a complete range of international fiduciary services for clients who wish to use Singapore as a base for their international investment activities.

Singapore offers non-resident investors a number of structural options in which to hold international investments and private assets for the tax effective preservation of private wealth.

We are a licensed trust company in Singapore. Our services in Singapore principally comprise international trustee and trust administration services for foreign trusts and non-resident Singapore trusts, the provision of company formation, corporate secretarial and corporate management services for Singapore companies, and the formation and administration of Singapore limited liability partnerships. We also provide offshore corporate services, corporate secretarial, domiciliary or administration services. The Singapore office also offers consultancy services for international tax planning, asset protection planning, private client succession or

Sean A Coughlan Managing Director Asiaciti Trust Singapore Pte Ltd 163 Penang Road #02-03 Winsland House II Singapore 238463 (65) 6533 2611 (65) 6532 5092 Sean.Coughlan@asiacititrust.com 26 â&#x20AC;˘ GBM â&#x20AC;˘ April 2011

For further information, please visit our website at www.asiacititrust.com or contact the following: Sean A. Coughlan Managing Director Asiaciti Trust Singapore Pte Ltd 163 Penang Road #02-03 Winsland House II Singapore 238463 Tel: (65) 6533 2611 Fax: (65) 6532 5092 singapore@asiacititrust.com

Cara L Briggs Manager, Client Services Asiaciti Trust Singapore Pte Ltd 163 Penang Road #02-03 Winsland House II Singapore 238463 (65) 6533 2611 (65) 6532 5092 Cara.Briggs@asiacititrust.com

New Zealand Asiaciti Trust New Zealand Limited is the New Zealand subsidiary of the Singapore-based Asiaciti Trust Group. Asiaciti Trust is an independent trustee and fiduciary services business group offering a range of international financial planning services designed to facilitate the accumulation of income and the preservation of wealth through tax effective offshore structures. Having established its corporate entity in 1978, Asiaciti Trust has its foundations in chartered accountancy practices, which date back to 1886. With operations in the Cook Islands, Hong Kong, New Zealand, Nevis, Samoa, Singapore and Uruguay, Asiaciti Trust is now one of the leading offshore trust groups in the Asian Pacific region. Asiaciti Trust is headquartered in Singapore and through its network of subsidiaries and associates is able to offer a global service capability to its clients. At Asiaciti Trust, we emphasise the value-added concept by adopting a creative but practical approach to our clients’ needs. Being independent, we are frequently engaged by other professionals or private banks to provide specialist services to their clients. Asiaciti Trust Group has carried on business operations in New Zealand since 1996. The Asiaciti Trust New Zealand office operates from Auckland and provides a complete range of international fiduciary services for clients who wish to use New Zealand as a base for their international investment activities. The New Zealand foreign trust ranks as one of the most prestigious international private-client planning vehicles available today. Although based in a high tax jurisdiction rather than a traditional offshore jurisdiction, it offers tax-effective wealth preservation benefits for the non-resident high-net-worth individual private client. New Zealand is a sovereign state that enjoys political and economic stability. It has a well-developed legal system founded on English common law and equity. Trust law is therefore supported by both statute and the decisions of the common law courts.

The New Zealand foreign trust is a New Zealand trust, settled by a settlor or grantor who is a non-resident of New Zealand, with a New Zealand resident trustee, and beneficiaries who will typically be nonresidents of New Zealand. The trust is an integral part of the legal system of New Zealand, as it is with most jurisdictions deriving their legal system from the common law and equity. However, New Zealand has developed its own approach to the taxation of trusts, based not on the residence of the trustee or of the beneficiary, but on the source of the trust funds taxation based on the residence of the settlor (or grantor). Since the introduction in 1988 of a more rigorous regime for the taxation of trusts, particularly trusts with non-resident trustees, the New Zealand tax legislation has specifically codified the New Zealand foreign trust - a New Zealand trust settled by a settlor (grantor) who is a non-resident of New Zealand. A foreign trust that is established in New Zealand will not be taxable in New Zealand on any non-New Zealand sourced income. Importantly, New Zealand is not seen as a tax haven or an offshore financial centre. The tax exemption for the non-New Zealand sourced income derived by New Zealand foreign trusts has been part of the New Zealand tax legislation for over 20 years and resulted from the rules that were introduced for domestic purposes - it was not enacted to target the foreign market. Generally speaking, New Zealand is seen as a comparatively high taxing jurisdiction with extensive tax legislation in place. New Zealand is also an Organisation for Economic Co-operation and Development (OECD) compliant jurisdiction that was

immediately placed on the OECD ‘white list’ following the April 2009 G20 meeting in London - an important consideration in today’s climate when choosing a jurisdiction to locate a trust. The New Zealand foreign trust provides non-resident investors with a globally recognised structure in which to hold international investments and private assets for the tax effective preservation of private wealth. In addition to the New Zealand foreign trust, New Zealand has also enacted limited partnership legislation that can be a highly used as a highly effective tool for international tax planning and wealth management structuring in a highly respect and well-regulated environment. The New Zealand limited partnership is deemed at law to be a separate legal entity from the partners that form the partnership and, generally speaking, it will have full capacity to carry on any business or activity. However, unlike most separate legal entities, the New Zealand limited partnership is a fiscally transparent entity for New Zealand tax purposes. This opens up the potential uses of the New Zealand limited partnership as, in effect, the tax status of the partners will govern the way the partner is taxed in New Zealand. For example, if a person/entity is a non-New Zealand resident, they will not be taxed in New Zealand on any non-New Zealand sourced income. Therefore, any non-New Zealand sourced income of a New Zealand limited partnership that flows through to a non-New Zealand resident partner will not be taxed in New Zealand.

Asiaciti Trust New Zealand Limited Lauren Williams General manager Tel: +649 302 0140 Fax: +649 302 0150 new_zealand@asiacititrust.com www.asiacititrust.com

April 2011 • GBM • 27

asset and wealth management

Mauritius The use of the Mauritius private trust company for family offices Most high-net-worth individuals or families of substantial net-worth structure their wealth for estate and tax planning, and at the same time they want to maintain a certain degree of control over their wealth. A private trust company (PTC) is the ideal vehicle for this purpose. The high-net-worth individual or family of substantial wealth may set up a PTC that will act as trustees of their own assets that are settled in a trust or several trusts. A PTC is very often a key element within the arrangement and structuring of family offices. A PTC is a regulated structure in Mauritius. In September 2004, the Mauritius Financial Services Commission set up new licensing conditions and requirements governing PTCs. A PTC can be incorporated either as a global business category I or II company. Before the change in licensing conditions, PTC was set up only under the International Companies Act 1994, now deemed to be category II global business companies. The Mauritius Financial Services Commission will normally grant a licence to a PTC on the basis that the management company (eg, CKLB) that set up and

CKLB Mauritius Christian Li Group CEO christianli@cklb.com

28 â&#x20AC;˘ GBM â&#x20AC;˘ April 2011

administer the company, will be responsible for the PTCâ&#x20AC;&#x2122;s conduct of business and who will also be accountable to the Financial Services Commission. The management and administration of the PTC are undertaken by the licensed management company under a management agreement. The board of directors of the PTC may comprise of a combination of local directors from the licensed management company, family members and advisers as appropriate and subject to any tax or legal implication. Benefits of a PTC A PTC can provide families with substantial wealth with a solution to their family generation planning needs. There is therefore a long-term planning approach. Because of the fiduciary responsibilities and risk placed upon trustees, some trustees are not willing to act as trustees over assets such as boats, aircraft, art or jewellery. A PTC would be an ideal vehicle that a wealthy family can use to act as a trustee for those assets.

The family members on the board of the PTC can have a close involvement in the management and administration of the family trust. Under a traditional trust structure, the involvement of the family members in the administration of the trust might not be desirable and careful attention needs to be given so that the trust and trust funds/assets are not effectively under the control of the settlor or any of the beneficiaries. CKLB arrange for the establishment of PTCs, manage and administer the PTC, which acts as trustees, set up underlying companies and administer the complete structure.

British Virgin Islands Why the British Virgin Islands? A guide to setting up business Why the BVI? The British Virgin Islands (BVI) is a British Overseas Territory and is the world’s pre-eminent corporate domicile. Since the adoption of its pioneering Business Companies Act 2004, over 500,000 companies have been incorporated in the territory. Approximately 850,000 companies have been registered since 1984. The BVI has a sophisticated and innovative legislative framework. This has made it a popular jurisdiction to incorporate private and holding companies, as well as public companies prior to admission to international stock exchanges. Companies incorporated in the BVI can list on the London Stock Exchange (LSE), LSE’s AIM, the New York Stock Exchange, NASDAQ, the Hong Kong Stock Exchange, the International Securities Exchange and the Toronto Stock Exchange. Key facts · The BVI is the world’s leading offshore centre with more offshore companies than any other country. · The jurisdiction appears on the OECD’s “white list” reflecting a high level of tax transparency, regulatory and compliance standards. ·

The BVI is recognised as a leading financial centre. The BVI was 34th in the list of leading G2 international financial centres in the Global Financial Centres Index (GFCI) published by the City of London ranked above Shanghai, Bahrain, Qatar, Milan, Madrid and Mumbai.

· A Financial Times survey confirmed the BVI as the second largest source of international foreign direct investment globally, with upwards of US$125 billion invested through the BVI each year. · The BVI has zero-rated corporation tax, with no wealth, capital gains or estate tax for offshore entities. ·

The administrative burden and costs of incorporating or maintaining a company in the BVI are low. BVI companies are operationally flexible. Corporate governance can be adapted to suit the structure.

· The BVI has a familiar and established legal and court system based on English common law. This offers a stable and certain framework for investors. · The BVI has no exchange controls. The local currency is the US dollar. Incorporating a company International investors are attracted to the BVI by the strong regulatory framework, low tax and an established legal system,

which ensures that the territory is a neutral and safe place to pool capital. This neutrality of venue makes it an appropriate place for outside investors to establish a holding company or to invest into markets where there may be political risk or legal barriers that deter direct investment. BVI companies are often used by individuals to hold real estate or assets because the ongoing costs and administrative burden of running a BVI company are comparatively low. A recent trend has been the number of Chinese based companies that have used BVI vehicles to float on NASDAQ and AIM as a means of raising funds. The ability for BVI companies to list in Hong Kong provides an important exit route enabling private equity investors to realise their holdings in China and other emerging markets. BVI companies are often used as joint venture vehicles in Asia and Russia as a result of the protection given to shareholders and the ability to ring fence liabilities. There is no double layer of taxation beyond those that may exist in an investor’s home country. The BVI provides flexibility in structuring mergers and acquisitions, which enables a BVI company to merge with a foreign company. It is also possible to redomicile an existing foreign company into the BVI, or to redomicile an existing BVI company overseas. Hedge Funds The BVI is popular with Hedge Fund managers and is the third largest Hedge Fund domicile in the world. Insurance The BVI is the world’s fourth largest captive domicile for enhanced insurance products and services. The BVI has introduced a new Insurance Act 2008, Insurance Regulations 2009 and Regulatory Code which came into force on 1 February 2010, replacing the Insurance Act 1994 and the Insurance Regulations 1995. This new legislative framework ensures that the BVI remains an attractive environment for a range of business. Jon Wall is a partner in the Litigation and Insolvency team at the law firm, Withers LLP. The firm has approximately 330 lawyers, spread across offices in London, the British Virgin Islands, Geneva, Zurich, Hong Kong, Milan, New York, Greenwich (CT) and New Haven (CT). Withers LLP is regarded as a leading international firm, with a particular reputation for litigation, wealth planning, trust and tax advisory work. The firm alone acts for nearly a quarter of the Sunday Times Rich List. The firm is the only onshore international law firm with an offshore presence in the British Virgin Islands. Further information can be found at www.withersworldwide.com

Jon Wall, Partner jon.wall@withersworldwide.com Tel: + 1 284 494 4949 Withers BVI PO Box 2424 Road Town Tortola British Virgin Islands

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asset and wealth management

30 • GBM • April 2011

International Business crime report

International Business Crime Report Fraud is a growing problem with no signs of reduction. Organised criminal gangs around the world see fraud as the soft underbelly of crime; the sentences for fraud crimes, as compared with other offences, are more lenient, and the rewards are often greater. World economies are weak, unemployment is growing and political and social unrest are spreading at the speed of Twitter, Facebook, email and a myriad of other social networking methods. Criminals exploit all weaknesses and take every opportunity to dishonestly create wealth no matter how morally repugnant. For example, take the growing number of natural catastrophes: Within 24 hours of the Haiti earthquake disaster, scammers criminally created websites that fraudulently appealed for aid. Fraudsters mutate crimes to take advantage of the latest technologies. Consider the well-known 419 fraud — so called because much of this crime originates from Nigeria where fraud fighters use section 419 of the Nigerian Penal code. Originally, the fraudsters would send letters to intended victims saying the senders had been left large sums of money, and they would share it with the letter recipients if the intended victims would just assist in the process. The fraudsters had to incur the cost of paper and envelopes (though they normally used false stamps for delivery). However, with the advent of e-mail they could now send millions of messages every day to intended victims at no cost. A success rate of anything greater than zero is a profit for the criminals. The same is true of multi-marketing scams in which the fraudsters tell recipients they are the winners of lotteries - though they have never entered them - and that for a few pounds for ‘administration fees’ their princely prizes will be forwarded to them. Again, any amount of money sent to the fraudsters is profit. Another worrying concern is the increase of employee internal fraud. Many companies hire individuals without extensively checking their backgrounds or performing other due diligence. An early investment could eventually save thousands. And these same companies lack adequate internal controls to deter fraud. Nearly all forms of fraud cross international boundaries; either fraudsters commit offences in several jurisdictions or launder the proceeds in foreign countries. So what recourse do victims have in

Tim Harvey, JP, CFE Director of UK Operations, Association of Certified Fraud Examiners

the face of complex crimes? Thankfully, the Association of Certified Fraud Examiners (ACFE), a global organisation with nearly 55,000 members in more than 125 countries, offers the Certified Fraud Examiner (CFE) credential. You can be sure that a CFE is capable of detecting and identifying any fraud, investigating it efficiently from cradle to grave and implementing processes and procedures to deter it. The ACFE, founded in 1988 by Dr Joseph T Wells, CFE, CPA, has a global network of CFEs who connect to each other anywhere in the world. Visit www.acfe.com to not only find a local CFE but numerous antifraud resources, including ‘Managing the Business Risk of Fraud: A Practical Guide’, which covers everything to help protect your business, from a fraud prevention check to implementing antifraud policies and procedures. On its website, the ACFE offers the ‘Report to the Nations on Occupational Fraud and Abuse’, which is perhaps the most comprehensive study of actual fraud cases. Every two years, the ACFE provides hard data culled from a survey of CFEs, including the most common types of fraud by industry sector, the average value and cost of a fraud, details on offender profiles and how frauds were detected. On the website you can also find information about EthicsLine, ACFE’s official hotline (hotlines, according to the Report to the Nations, are still the most common method of detection). With companies facing challenging circumstances, it is the duty of every competent director and manager to assure their companies are protected from fraud in all its guises. This is not rocket science, but it does require leadership to provide the tone at the top and an environment in which everyone has the responsibility to stop fraud - now.

tharvey@acfe.com Tel: 0207 692 1888 Mob: 00 44 (0)7891 567654

Tim Harvey is a member of the British Society of Criminology and a member of Transparency International. April 2011 • GBM • 31

International Business crime report

France Some aspects of French criminal law: A critical overview French criminal law no longer fulfils the necessary objectives of prevention and sanction of reprehensible behaviours in a modern world. Investigation issues

White collar crimes

As of today, the investigation can be carried out either by the prosecutor, in which case no one may access the investigation file, or by an investigating judge (juge d’instruction), in which case, parties to the proceedings may access the file.

An end should be put to the excessive criminalisation of business life, which, contrary to what the public is led to believe, has never stopped. Corporate criminal liability has been generalised, and become nearly automatic. Moreover, one of the essential conditions for a corporation to be held criminally liable (the characterisation of a fault committed by an organ or representative of the company) has been almost abandoned by judges. Finally, the number of lawsuits has drastically increased.

Following the Outreau case, and given its considerable impact on the public opinion, the elimination of the existing investigating judge was considered, in order to create a new ‘judge of the investigation’ (juge de l’instruction), who would only control the investigation without leading it anymore, and to strengthen the role of the prosecutor. However, the European Court of Human Rights (ECHR) ruled that the prosecutor was not a judicial authority pursuant to article 5§3 of the European Convention on Human Rights (see ECHR, n°37104/06, Moulin v France, 23 November 2010; see also ECHR, n°3394/03, Medvedyev v France, 29 March 2010). As of today, no reform has been implemented and the issues that came into light with Outreau remain unanswered. Custodies The increasing number of custodies (over 800,000/year for minor offences) and the way they are carried out (lawyers cannot access the file of the person held in custody, nor can they be present during hearings, etc) have trigger an impetus for reform. France had indeed been convicted by the ECHR on the basis of article 6 of the European Convention on Human Rights, which sets out the right to a fair trial from the start of the proceedings, therefore including custodies (see ECHR, n°1466/07, Brusco v France, 14 October 2010). The French Constitutional Council (Conseil Constitutionnel) has also ruled that the current regime of custody was contrary to the Constitution and has given the legislative power until 1 July 2011 to reform the Criminal Procedure in accordance with the ECHR (see Cons Const Decision n° 2010-14/22 QPC, 30 July 2010). A bill is currently under review by the parliament and the Senate. However, at this stage, it remains unsatisfactory. Indeed, under the bill, the prosecutor has the power to postpone the arrival of the attorney for up to 12 hours. He may also ask that the attorney be discharged and that another be designated if, according to the police officers, the attorney’s behaviour “seriously disturbs the conduct of the hearing”. In addition, police officers themselves have the power to ban certain questions the attorney seeks to ask if they consider that the questions “may trouble the conduct of the investigation or harm the person’s dignity”.

Further, we believe that public independent authorities (in particular the Autorité des Marchés Financiers (AMF), the French equivalent of the US Securities and Exchange Commission) should be remodelled, and especially their role, powers of investigation and sanction, which exist in parallel to those of the criminal judge. The French guilty plea Under French law, the guilty plea, which is only applicable if the party admits its guilt, is limited to a certain number of minor offences (fines or sentences that do not exceed five years imprisonment, some offences among these ones being also excluded from the process). In order to avoid excessive delays in financial proceedings (which is per se, contrary to the right to be trial within a reasonable delay), it would be necessary to extend the French guilty plea to all financial offences. In this respect, our system would certainly be more efficient if some mechanisms, such as the US nolo contendere, were introduced. It would also be desirable to extend the right to settle before the Autorité des marchés financiers (AMF), which is currently impossible for market abuses. Finally, it would be appropriate to introduce a part of ‘soft-law’ within our legal system, in particular regarding corporate criminal liability. In summary To quote Louis-Ferdinand Céline, “the worst is never certain”. Yet it is desirable that a modern reform takes place in France in these fields. Such reform will have to take into account both the defence and the victim’s rights and balance out the role of the parties to the proceedings (prosecutor, investigating judge, civil parties, defendant), which would respect the core idea of justice. In any event, the new system will need important financial resources to function efficiently, which, in view of the available human and financial resources, seems difficult.

Linklaters LLP Kiril Bougartchev Partner, head of litigation/arbitration, Linklaters, Paris Tel: +33 (0)1 56 46 56 43 Fax: +33 (0)1 43 59 41 96 kiril.bougartchev@linklaters.com www.linklaters.com 32 • GBM • April 2011

USA The UK Bribery Act (BA) is currently scheduled to take effect later this year. It casts a wide net, applying to acts occurring in the UK and acts undertaken elsewhere by persons with a “close association” to the UK, including UK citizens and nationals, any individual “ordinarily resident” in the UK and any entity incorporated under UK law. The BA also applies to any entity that “carries on a business, or part of a business” within the UK. And because the BA criminalises conduct permissible under the American Foreign Corrupt Practices Act (FCPA), multinational corporations (MNCs) whose anti-bribery efforts have been shaped by the FCPA will be required to revisit their compliance programmes, in order to ensure that they are sufficiently robust to address the BA. Key differences between the statutes include the following: Commercial bribery: The FCPA penalises payments made to government officials, but the BA also punishes bribes paid to any “person”, including commercial employees, in connection with “any activity connected with a business” or “performed in the course of [that] person’s employment”. Receipt of bribes: While the FCPA penalises only the payment of a bribe, the BA punishes its receipt. Thus, corporations may be liable under the BA for payments received by their employees. Strict liability for corporations: Prosecutors must prove some degree of corporate knowledge before convicting a corporation under the FCPA. The BA, however, makes corporations strictly liable for failing to prevent bribery, unless they can show that they had in place “adequate procedures” to prevent bribery. The UK Ministry of Justice is developing guidelines for such procedures. No exceptions: The FCPA excepts from its coverage “facilitation payments” (made to facilitate or expedite routine government action) and reasonable and bona fide payments directly related to promotion, demonstration, or explanation of products or services. The BA makes no such exceptions. In addition to these differences between the statutes, corporations subject to the BA should bear in mind that it is much harder to resolve criminal matters short of conviction in the UK than it is in the US, where FCPA investigations are frequently resolved through deferred- or non-prosecution agreements. A broad range of MNCs will be swept within the BA’s broad reach. Those corporations must review and enhance their compliance programmes to ensure that they are “adequate” to prevent violations of the new law. Brown Rudnick’s white collar defence and government investigations group represents businesses and individuals in a wide range of civil, criminal, regulatory and legislative forums. We seek to avoid investigations or enforcement actions by developing and implementing compliance programmes and internal safeguards designed to meet individual clients’ needs. Our attorneys have drafted and helped implement compliance programmes for some of the world’s largest corporations. When potentially improper conduct is identified, our attorneys conduct internal investigations of potential wrongdoing, evaluating and making recommendations for addressing the conduct, including whether and how a

voluntary disclosure should be made. When a client must react to a governmental investigation, we design a comprehensive strategy for managing the investigation and achieving the most favourable terms possible for our clients. We work closely with the firm’s other departments, including our government contracts and government relations groups, to ensure the best possible resolution of all consequences of the investigation, criminal or civil, direct or collateral. When a negotiated resolution is not possible, our seasoned trial lawyers mount an aggressive defence at trial, on appeal, and before relevant administrative agencies. Our people: Our attorneys have successfully represented clients in avoiding, or minimising the consequences of, investigations and enforcement actions involving (among others) accounting impropriety, antitrust, bribery, computer crime, Congressional investigations, environmental violations, export control violations, extradition, false claims, fraud, health care fraud and abuse, money laundering, procurement fraud and securities fraud. Mark H Tuohey, III (Washington, DC): A former federal prosecutor and a principal deputy independent counsel, DC Bar president, Washingtonian of the Year and DC Lawyer of the Year, Mr Tuohey is a fellow of the American College of Trial Lawyers who has represented clients in investigations by the United States Department of Justice, the US Securities and Exchange Commission (SEC) and other federal regulatory agencies, and Congressional oversight committees, as well as investigative agencies in Europe, Africa, Asia, the Middle East and Latin America. He is regularly selected to be included in Best Lawyers in America, Chambers USA, and Leading Lawyers for Business Litigation. Paul F Enzinna (Washington, DC): Recipient of the National Association of Criminal Defense Lawyers, District of Columbia Chapter, Lawyer of the Year Award, Mr Enzinna represents clients in domestic and international white collar criminal investigations and extradition proceedings. Steven Friel (London): A solicitor-advocate admitted to practice in England and Wales, Mr Friel has represented clients before a number of English courts, including the High Court and Court of Appeal, and international tribunals in The Hague and elsewhere in Europe and North America. Lauren Curry (Washington, DC): Ms Curry is experienced in conducting internal corporate investigations and representing clients in domestic and international white collar criminal matters.

Brown Rudnick LLP Mark H. Tuohey III (202) 536-1740 mtuohey@brownrudnick.com www.brownrudnick.com

April 2011 • GBM • 33

International Business crime report

UK and International Business crime in the UK Serious fraud and corruption (and more recently, UN sanctions busting) are investigated by the Serious Fraud Office (SFO); other key areas of business crime, namely cartel activity and insider dealing/market abuse, are investigated by the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) respectively. This is an uncertain time for the SFO, OFT and FSA following the announcement of possible plans for the creation of the Economic Crime Agency (incorporating the SFO and the criminal enforcement division of the OFT) and the Financial Conduct Authority (taking over the criminal enforcement work of the FSA). The most significant development for the SFO has been its approach to corporate offending and overseas corruption. Its guidelines on overseas corruption emphasise corporate self-reporting with the prospect of a civil outcome and the attorney general’s guidelines on plea discussions appeared to herald a more formalised approach to plea agreements. In the SFO’s first corporate plea agreement, Mabey & Johnson had to pay the agreed sum of £6.6m having pleaded guilty to overseas corruption and breaching UN sanctions. The SFO obtained its second civil recovery order when AMEC agreed to pay £4.95m following “irregular payments” made in relation to the Incheon Bridge project in South Korea. However, the SFO’s approach ran into trouble in Innospec and Dougall. Innospec, under a global settlement, agreed to plead guilty in the UK to corruption in Indonesia and, in the US, and to sanctions busting in Iraq. Due to weak finances, the amount available was $40.2m, split $12.7m/$27.5m in the UK and the US; the SFO agreed to apportion the $12.7m between a confiscation order for the Indonesian corruption and a civil recovery order for the Iraqi sanctions busting. However, the court took a different view and fined Innospec $12.7m with no confiscation or civil recovery; in the absence of the US having adopted the global settlement and the limited funds, the fine may well have been much higher. In addition, the court made a number of observations: sentence remains a matter for the court; there is no reason to differentiate between the level of financial penalties in the UK and the US; and the SFO’s approach of seeking to deal with self-reporting companies by way of civil settlement will “rarely” be appropriate. How the SFO proposes to accommodate these comments remains to be seen, but given the size of financial penalties regularly imposed in the US, fines of an unprecedented scale in the UK in the future seem likely. In Dougall, the SFO plea agreement was criticised for going too far in seeking to prescribe the sentence. Mr Dougall, formerly of DePuy International, pleaded guilty to conspiracy to corrupt, entered into a co-operating defendant agreement, and co-operated fully with the joint SFO/US investigation. Although it was jointly submitted that a suspended prison sentence was appropriate, an immediate prison

sentence was imposed. Even though the Court of Appeal substituted a suspended sentence, this case is a reminder that, whatever consensus is reached between the parties, the court remains the arbiter of sentence. Nonetheless, this was the first case to use the innovative combination of a plea agreement and a co-operating defendant agreement in an overseas corruption case, which avoided a significant prison sentence in the UK and the risk of prosecution and lengthy custody in the US. It also established important principles for the sentencing of those who plead guilty to and assist the investigation of business crime. For the OFT, the most significant event was the collapse of the first contested prosecution - alleged price fixing between British Airways and Virgin Atlantic. Some three weeks into the trial, the OFT was obliged to offer no evidence following the late disclosure of substantial electronic material held by Virgin, which neither the OFT nor the defence had been able to review. The collapse raised significant questions about the OFT’s handling of criminal investigations. After Virgin blew the whistle (obtaining civil immunity for itself and criminal immunity for its employees), in common with its approach to civil investigations, the OFT relied on Virgin to identify and collate much of the evidence and accepted assurances that the previously undisclosed material was corrupted. But, the material could be read and arguably the reliance on Virgin caused the late identification of disclosable material. Nonetheless, the OFT has recently begun separate criminal investigations into price fixing in the automotive components sector and the commercial vehicles sector. Meanwhile, the FSA has stepped up its prosecutions for insider dealing with a number of convictions and significant sentences. Christian Littlewood, a senior investment banker and former approved person, was sentenced to three years and four months imprisonment following guilty pleas. In addition, his two coconspirators also received custodial sentences. Further, the FSA also obtained sentences of imprisonment for seven convicted defendants in six other insider dealing prosecutions, and the FSA is currently prosecuting 12 other individuals for insider dealing. It is clear that the investigation of business crime is high on the agenda in the UK. In addition, there remains the constant threat of extradition to the US with the DoJ’s ever-present aggressive pursuit of UK executives involved in corruption and cartel activity. BCL Burton Copeland is a market leading law firm in the UK providing specialist advice nationally and internationally to corporations and individuals in the area of business crime and regulation, including serious fraud, corruption, breach of international sanctions, cartel activity, and financial regulation, as well as anti-money laundering and anti-corruption compliance. In the words of Legal Business, “as far as the white collar crime and regulation sector goes, you name it, BCL Burton Copeland has advised on it”.

Richard Sallybanks/Guy Bastable Partner +44 (0)20 7430 2277 rsallybanks@bcl.com/gbastable@bcl.com www.bcl.com

34 • GBM • April 2011

India Bribery laws in India Corruption laws in India are applicable to Indian citizens across the Indian Territory and do not have the far reaching extra territorial approach of either the UK’s Bribery Act or the US Foreign Corrupt Practices Act. The focus of Indian law is on the public sector and does not extend itself to the private sector. Effectively, Indian law seeks to prosecute the receiver of the bribe or the public official - the act of the bribe giver is only seen as an abetment to the main crime of bribery. The primary legislation in this context is the Prevention of Corruption Act 1988 (the Act). Sections 171B and 171E of the Indian Penal Code also penalise bribery within a limited electoral context, as does the Representation of People’s Act 1951. Who is a public official? The definition of a public official under the Act, key to prosecution of the bribe receiver, is wide, capturing a whole range of persons including those in government service, judicial capacities and officers of registered local authorities. This definition includes any person who holds office by which they are authorised or required to perform a public duty. Offences under the Act are also widely worded and construed. Protection of whistleblowers Unfortunately, enforcement of the Act has been unsatisfactory with very prosecutions. Consequently the obvious question that is raised is that of whistle-blower protection. Currently, there is no law on the point, although there has been much discussion on the subject and a Bill (based on the recommendations of the Law Commission of India) is pending before Parliament. It should be noted that since 2004, the Central Vigilance Commission (CVC) has powers to act on information obtained from whistleblowers, providing an avenue for disclosure of acts of bribery. Statistical analysis of the complaints received by the CVC shows that there is a long way to go in extending such protection. Investigation authorities To enforce the provisions of the Act, a number of authorities have been established. The Central Vigilance Commission Act 2003 constituted the CVC. The CVC specifically has powers to examine acts of corporate entities, societies and local authorities established by or connected to the government. Various states have enacted a ‘lokayuktha’ empowering appointed officers to improve governance and public administration at the state level, which includes bribery investigations. Local Police, the Central Bureau of Investigation and other authorities have similar powers. More positively, Indian private industry has slowly but steadily evolved internal best practices and investigation mechanisms to curb corrupt practices by their employees and officers within India and abroad. Hopefully this will change the existing landscape in the public sector.

Narasappa, Doraswamy & Raja, Advocates & Solicitors Ms. Poornima Hatti Partner Tel: + 91.80.4268 6000 Fax: + 91.80.4268.6031 poornima@narasappa.com www.narasappa.com April 2011 • GBM • 35

Luxury Brand Series â&#x20AC;&#x201C; Formula 1 host city hotels

Luxury Brand Series

Formula 1 Host City Hotels The corporate world prides itself on living life in the fast lane. From big business deals to meeting clients across the globe, everything moves fast but none more so than the cars of Formula 1! The Formula 1 calendar is one of the most anticipated schedules and many individuals not only plan their holidays around the events but even wine and dine their business clients at these exclusive occasions! Continuing the luxury series, we look at premier luxury hotels that each F1 host city has on offer, giving you an insight into pure elegance, luxury and glamour!

Whenever the F1 bandwagon rolls into town, tickets for the race become gold, the city takes centre stage, the elite of society want to be seen rubbing shoulders with the drivers, and glamour takes on a new meaning. One of the glamorous elements of the F1 experience is the hotels and during this period accommodation becomes premium. Those attending each event want to stay in places that enhance their F1 experience and the hotels featured do just that. They offer only the best service, the best rooms, the extra pampering and the highest of standards. Many business individuals use the Formula 1 calendar as a way of getting to meet clients and associates from around the world, closing business deals, creating networks and affiliates, but more importantly getting to taste the F1 experience. During this time, executive boxes are booked, restaurants are filled out but most importantly the finest hotels are quickly snapped up. Ensuring that right accommodation is booked in advance, could be the difference in signing off an important deal or missing out altogether. From the Malaysian Grand Prix to the finale in Sao Paulo, we go through every bend and chicane of exclusive hotels in the host cities to get you in the mood for the fastest show on earth!

36 â&#x20AC;˘ GBM â&#x20AC;˘ April 2011

The Gardens Hotel & Residences Kuala Lumpur, Malaysia The Gardens Hotel & Residences, Kuala Lumpur is a 5-star hotel strategically located in The Gardens, Mid Valley City which is a modern and integrated development combining retail, leisure, dining, entertainment and hospitality. The Hotel offers 448 Deluxe to Executive Premier rooms with sizes ranging from 38 to 40 sq.m. The luxurious Residences range in size from the 1-bedroom units of 79sq.m, to 216 sq.m for the 3-bedroom residences. The Executive Lounge located on level 29 of the hotel is an exclusive retreat for Executive room guests, offering complimentary breakfast, evening drinks, personalised check-in and check-out services inclusive of free broadband internet access and complimentary usage of boardroom. Conference and meeting facilities include The Gardens Ballroom and 9 other function rooms aptly named Skyview Rooms which are located

on the 28th & 29th floors of the Hotel. For your dining pleasure, The Spread, an all day dining restaurant features local and international specialties with live cooking stations. Awardwinning Sage Restaurant & Wine Bar offers nouvelle cuisine of French-Japanese. Ri-Yakitori Bar serves skewered Japanese BBQ delights whilst you can enjoy evening drinks at the Lobby Bar. For guests who just prefer to relax in the embrace of our ultra-pleasing rooms, you may opt for “Cuisine on Call”, featuring a 24hour in-room dining service. For the health-conscious, recreational facilities include a well-equipped gymnasium and the Infinity Pool. The Gardens Hotel & Residences is the first hotel in Malaysia to offer a totally nosmoking environment in all its guestrooms and enclosed public areas. The Gardens Hotel & Residences Jaclyn Low (Communications Manager) Tel: 603 – 2268 1188 Ext 6215 Fax: 603 – 2287 0289 Email: commkul@gardenshtlres.com race 02 2011 formula 1 petronas malaysia Grand prix (kuala lumpur) 08 - 10 apr

Grand Mecure Shanghai, China Well located in the business and exhibition district of Hongqiao, Grand Mercure Hongqiao is a part of the international collection of Grand Mercure Hotels – each expressing the spirit of their location. Its close proximity to downtown Shanghai and the Hongqiao International and Domestic Airport makes the hotel a highly popular choice for both business and leisure travelers. Enjoy contemporary design and spacious living, where the perfect Grand Mercure room is about a good night's sleep. Designed for genuine comfort this hotel is ideal for extended business stays and family trips. With 484 rooms, including a choice of one bedroom suites and two bedroom suites, each offers superior facilities and services from quality bedding, broad band internet access, LCD TV, 24 hour room service and kitchenette facilities to private balconies. A professional level of business support services, Clefs d’or concierge assistance and a fully equipped gym are also available to guests.

The multifunctional area is more than 1000 square meters, including one grand ballroom, 13 multi functional meeting rooms with various configurations which are available to meet different needs. Engage in the hotel’s international food and beverage experience from the cosmopolitan Le 98 Lounge, the contemporary Lv Feng Chinese Restaurant offering fresh and delicious Cantonese cuisine, to the l’Atrium restaurant, the global cuisine with French touch, featuring international breakfast fairs, themed buffet, French fusion a la carte services, and a handpicked selection of wine with distinctiveness and style. General Manager: Mr. Benoit AMADO 369 Xian Xia Road Shanghai 200336, P.R. China Accor Reservation Hotline: 400 818 2688 www.grandmercurehongqiao.com www.grandmercurehotels.com.cn

race 03 2011 formula 1 uBs cHinese Grand prix (shanghai) 15 - 17 apr

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luxury Brand series – formula 1 Host city Hotels

A’jia Hotel Istanbul, Turkey If outstanding luxury hotels do not instantly spring to mind when you think of Turkey, think again. Just outside Istanbul, the A'jia stands as a jewel in the crown of stately waterside residences lining the Kanlica shore. A 5-star boutique hotel set in a 19th century mansion that has been fully renovated to offer the highest level of modern comfort. This is a fairytale place where dreams come true. Prepare to be pampered in this gorgeous setting for relaxation, with the stunning blue Bosporus as your enchanting backdrop. A private hideaway with easy access to Istanbul's wealth of historical and cultural attractions, the A'jia will ensure that your stay here is absolutely unforgettable. An ideal marriage of past and present. The stately empire exterior makes way to a soothingly minimalist interior. Each room is uniquely designed and furnished for your utmost wellbeing and contentment, with all the latest modern conveniences and amenities blending in perfectly with the timeless elegance from the 1800s. Many rooms have private balconies and most have lovely views on the Bosporus. Service is flawless, from the twice daily maid visit to the delicious meals in the restaurant, best appreciated al fresco. The attention to detail here is exemplary. A must for discerning travellers seeking the exceptional. T 90 216 413 93 00 info@ajiahotel.com Istanbul (35 minutes) www.ajiahotel.com race 04 2011 formula 1 turkisH Grand prix (istanbul) 06 - 08 may

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Crowne Plaza Istanbul, Turkey Walking distance to F1 İSTANBUL PARK Our valuable guests will enjoy the luxury and comfort with 336 luxury guest rooms, including 229 Deluxe rooms, 28 Corner rooms, 3 Handicapped rooms, 34 Connecting rooms, 24 Club rooms, 14 Junior suites, 2 Ambassadour Suites, 2 Presidential Suites. Club rooms and suites offer access to the Club Lounge. Belvedere Restaurant & Bar with International Cuisine, Çeşni Restaurant with Turkish Cuisine, 9.840 m2 Convention Center and 3.500 m2 Health Club area. Additionally 250.000 m2 open air shopping pleasure 185 store including international famous brands.

Ergün DEMİRAY Hotel Müdürü / Hotel Manager ergun.demiray@cpistanbulasia.com www.cpistanbulasia.com

race 04 2011 formula 1 turkisH Grand prix (istanbul) 06 - 08 may

The Ohla Hotel Barcelona, Spain The Ohla Hotel is a new five-star hotel located in the heart of Barcelona, an ideal setting for tourists, shoppers and business people offering a world of experience, service and wellbeing. The calmness and serenity of the hotel combined with the hustle-and-bustle of downtown Barcelona offers a unique blend. The Ohla Hotel is built on the site of a former Roman water canal and the palace of the first Count of Barcelona, Guifré el Pilós. The current building dates back 20

years and was initially the site of Barcelona’s first department store (Casa Vilardell). The building was renovated under the direction of Alonso, Balaguer y Arquitectos Asociados with artistic assistance by Frederic Amat. During the renovation, the historical building facade and other historical elements of the initial building have been preserved in their entirety, whilst the interior design of the building is avant-garde in its approach, combining different white and black textures with oak wood.

The end result is a 74-room boutique hotel with conference facilities, a wellness centre, sundeck and a variety of dining options which, among other proposals, including Saüc Restaurant with a Michelin star. All in a luxurious setting with all of the details and personalised service one would expect from an establishment whose goal is nothing short of excellence.

Vía Laietana, 49 08003 Barcelona - Spain Telephone: +34 933 41 50 50 info@ohlahotel.com www.ohlahotel.com

race 05 formula 1 Gran premio de espaÑa 2011 (catalunya) 20 - 22 may

April 2011 • GBM • 39

www.groupecomplus.com - 07100812

luxury Brand series – formula 1 Host city Hotels

Réservations +377 92 05 92 22

www.columbusmonaco.com 23 Avenue des Papalins MC 98000 Monaco race 06 formula 1 Grand prix de monaco 2011 (monte carlo) 26 - 29 may

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Hotel Le Crystal Location: Montreal, Canada A Jewel in Montreal At Hotel Le Crystal nothing is impossible, so everything becomes simple. A step away from Montreal’s business center, boutique hotel Le Crystal also brings you near the city’s best dining and, of course it’s signature nightlife. Details can breathe inspiration into life, a moment or a hotel stay (boutique, small or however big it is). It is in the smaller things that we tend to find peace. Like knowing that, you can rely on our C3 Executive Conference Center because from the high

speed connection, to the conference rooms amenities, you can concentrate on your business rather than whether you can work efficiently. Or knowing that you will not only sleep soundly in an incredibly comfortable suite, but that you are also close to urban life: it waits right outside our doors. If this is only a stop to see Montreal’s unique flair on your way to New York, for one night or a few more… A jewel of a boutique hotel in the heart of Montreal, Hotel Le Crystal offers everything you expect and much more. Le Crystal is a place where, from the warm

welcome to the numerous amenities we offer, you know one thing: we make sure you can let yourself go. We are here to cater to your every wish and whim, however many there are. You can trust us to keep our eye on the ball while you shut yours for a good night’s rest. Staying at a Five Star boutique hotel means the possibility to have it all, from the Executive Suites to the Penthouse, to the conference center, French restaurant or our urban day spa and beauty center. Because when we make sure nothing is impossible, everything becomes simple for you.

Tel : (514) 861-5550 info@hotellecrystal.com www.hotellecrystal.com

race 07 formula 1 Grand prix du canada 2011 (montreal) 10 - 12 Jun

Las Arenas Balneario Resort Valencia, Spain Las Arenas Balneario Resort was built on the site of the traditional 19th century balneario and it is the first grand hotel in the Valencia region. The hotel’s privilege beachfront location offers impeccable sea views and a state-of-the-art spa with an extensive treatment menu. Just a short distance from Valencia vibrant city center and Ciudad de las Artes y las Ciencias. Rooms and suites have private balcony or terrace, spectacular garden and sea views, complimentary mini-bar and Wi-Fi, CD players, plasma TVs, in-room safes, and bathrooms equipped with bath tub and separate hydro-massage shower cabin Las Arenas Convention Center located within the two colonnades offers 11 rooms with capacity for 2000 people and an auditorium for 500people. All rooms benefit from natural light and unobstructed sea views, excellent for hosting meetings, social occasions, and incentives.

race 08 2011 formula 1 Grand prix of europe (valencia) 24 - 26 Jun

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luxury Brand series – formula 1 Host city Hotels

The Savoy United Kingdom The Savoy, A Fairmont Managed Hotel is now accepting reservations. Following the most ambitious hotel restoration in British history, The Savoy once again takes its place at the heart of London. To make a reservation at The Savoy and experience the true character of London, please call +44 (0)207 420 2300 or email savoy. reservations@fairmont.com.

The Savoy continues the tradition of culinary excellence started by Auguste Escoffier with the return of Gordon Ramsay to the Savoy Grill and the reopening of the beloved River Restaurant. Legendary bartender Harry Craddock’s classic cocktails are still served in the newly renovated American Bar and the new Beaufort Bar offers one of the finest selections of Champagne in the city. The Savoy has played host to many historic events and the restored Banqueting and Private Rooms will once again see the great and the good return to The Savoy.

A British icon since 1889, The Savoy has once again taken its place on the world stage after over a £100 million restoration. The hotel seamlessly blends elements of the original and the new while the stunning English Edwardian and Art Deco interiors sparkle with timeless elegance and glamour.

With an enviable location on the River Thames, the London hotel is literally steps away from some of the world’s finest theatres, museums and opera houses. Its proximity to the City means The Savoy is ideally placed whether you are coming to London for business or pleasure.

The 268 guestrooms and suites are the last word in style, luxury and discreet technology with stunning views of London and the River Thames. Nine ‘personality suites’ have been styled after some of The Savoy’s most high profile guests while a newly created 2-bedroom Royal Suite is truly a suite fit for a King.

www.fairmont.com/savoy

race 09 2011 formula 1 santander BritisH Grand prix (silverstone) 08 - 10 Jul

Excelsior Hotel Ernst Germany This 5-star hotel is located opposite the famous Dom cathedral in Cologne. It offers elegant rooms with a free minibar, free use of the fitness facilities, and award-winning cuisine. The Excelsior Hotel Ernst am Dom offers a range of spacious rooms and suites. All feature high-quality fabrics, satellite TV and a choice of pillows. Excelsior’s fitness facilities include a gym, a sauna and a steam room. There is also a quiet relaxation area. Headphones, a TV, fresh fruit and mineral water are provided. The Ernst am Dom's Hanse Stube restaurant serves French cuisine with local influences. Guests can also enjoy a wide range of Far Eastern food in the taku restaurant.

Tel +49 (0) 221 270 1 www.excelsiorhotelernst.com

race 10 formula 1 Grosser preis santander von deutscHland 22 - 24 Jul

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Art’otel Budapest, Hungary Located on the bank of the River Danube, the Art’otel offers a staggering panorama of the Chain Bridge and Parliament and also of the Buda Castle, declared a world-heritage site. The building itself is a standing proof of architectural imagination, as it combines a modern, seven-story building overlooking the Danube, and four old, Baroque Buda townhouses originating back to the 18th century. Thanks to this original and unique architectural combination, guests can choose between a room or an apartment in the modern main building, or one in the Baroque wing, evoking the atmosphere of the turn of the century with stylish furniture. Living up to its name Art’otel - the hotel resembles a gigantic art gallery. Donald Sultan, the noted American artist, created more than six hundred paintings, drawings and other artworks to outfit the 164-room hotel. The lobby, Domino Bar, Chelsea Restaurant, corridors, rooms, and conference rooms all bear his unique aesthetic stamp. Sultan’s extensive body of work has placed him at the forefront of contemporary art worldwide. Art’otel Budapest features 164 rooms, including 7 executive rooms and 9 art suites. All rooms are airconditioned and supplied with IDD telephones, voice mail, PC/Modem hook ups, and satellite TV. Make-up mirrors, luxury bath amenities, personal safe and mini bar further enhance the quality of the rooms. Non–smoking rooms and disabled access are also provided. The seven conference rooms are located on the –1 and lobby levels and are suitable to accommodate a wide variety of functions. The rooms are fully air-conditioned with remote controlled state-of-the-art lighting system and soundproof dividing walls. tel: +361 487 9487 fax: +361 487 9488 mail: budapest@artotel.hu race 11 formula 1 eni maGyar naGydÍJ 2011 (Budapest) 29 - 31 Jul

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luxury Brand series – formula 1 Host city Hotels

Manoir de Lébioles Belguim The inscription on the crest of Manoir de Lébioles perfectly reflects the philosophy of the house. Nestling majestically between the woods of the Ardennes, Manoir de Lébioles welcomes its guests with pristine nature, discreet luxury, private atmosphere, and first-class service. After extensive renovations the "small Versailles of the Ardennes" shines in new splendour since 2006. The aspirations of the team of international architects for state-of-the-art comfort and classical lines could be satisfied without obscuring the soul of the almost 100 year old house. The basis of the renovations was the vision to create a place of quiet and remoteness, where recreation and relaxation of our guests is the ultimate aim. A key component of this concept are the individually furnished and luxurious rooms and suites. Another outstanding aspect is the excellent cuisine of our chef, Olivier Tucki, which is honoured with a Gault-Millau score of 15. Moreover, our spa area offers various possibilities of relaxation and recreation. Special emphasis, however, is put in the familiar hospitality with which we indulge our guests. Our claim for our guests to feel comfortable – lean back, leave the rest to us. Whatever your wishes – please let us know, we are happy to fulfil them.

+32 (0) 87 79 19 00 manoir@manoirdelebioles.com www.manoirdelebioles.com

race 12 2011 formula 1 sHell BelGian Grand prix (spa-francorchamps) 26 - 28 aug

44 • GBM • April 2011

Park Hyatt Milan Milan, Italy Whether you head to Milan for business or leisure, Park Hyatt Milan represents the perfect spot for a lovely short break in Italy! Shopping, Art and Music for your week ends! The Park Hyatt Milan is perfectly located in the very heart of it all, a few steps from the worldwide famous Alla Scala Opera House, the beautiful Gothic Duomo Cathedral and and the city’s financial district. Close to the hotel are the elegant boutiques on via Montenapoleone and via della Spiga, as well as some of the finest Milanese restaurants, making this hotel the perfect base for a long weekend in Milan. The 108 guest rooms are decorated according to the canon of contemporary-meets-classical style, and the 30 suites demonstrate original architectural and design details that distinguish the Milanese architecture. Every room is pleasantly spacious and features high ceilings and spacious bathrooms. The rooms are bathed in natural light and come fully equipped with deep walk-in closets, a safe and, unexpectedly, a mini bar. Each bathroom features a separate toilet, deep soaking baths and octagonal-shaped rain showers. Park Hyatt Milan has 30 splendid suites of varying sizes and categories, which can be configured with either one or two bedrooms and a large living room that looks out onto a spacious private terrace offering breathtaking views of Milanese rooftops and the Cathedral spires. The lobby leads out onto the hotel’s Cupola Lobby Lounge. This spacious area is dominated by a huge nine-metre-high glass dome that allows natural light to spread evenly throughout the area. The lobby, enriched by the presence of a precious Lucio Fontana sculpture, “The Medusa’s Head”, has recently undertaken some refurbishment to the cupola, making it one of the most popular meeting places in the city.

The Park Bar is cosy and spacious, with two rooms where enormous floor-to-ceiling windows look out onto the Galleria. Guests can also relax in the discreet and elegant Dehors that typifies the city. The hotel signature restaurant, The Park Restaurant, is open for lunch and evening meals. This year started with a renovation of the restaurant and its furnishings. Today, The Park Restaurant is filled with the warmest colours and new materials, creating a calm ambience and giving the venue that has become a landmark in the city a brand new atmosphere. The renewed design is reflected in new menus that establish a dialogue between colours and flavours. The Chef has interpreted the aesthetic seduction of the new Park Restaurant with a range of dishes that are inspired directly by the shapes and colours of the new decor. The menu, which changes according to the seasons, focuses on these experiences, offering dishes that combine innovation and tradition, with particular attention paid to seasonal products from different Italian regions. An intimate space, the Spa instantly calms and soothes the senses, with its mellow atmosphere, clean lines and subdued lighting, offering a tranquil escape from the hectic outside world.

Mr. Claudio Ceccherelli General Manager claudio.ceccherelli@hyatt.com www.milan.park.hyatt.com

race 13 formula 1 Gran premio santander d’italia 2011 (monza) 09 - 11 sep

April 2011 • GBM • 45

luxury Brand series – formula 1 Host city Hotels

Marina Bay Sands Singapore Towering over the bay, this iconic hotel offers luxury with a rooftop infinity pool, 20 dining options and a world-class casino. It has direct access to Singapore’s premier shopping mall. Fitted with modern dark wood furnishings, rooms at Marina Bay Sands come with flat-screen cable TVs and carpeted floors. Stunning views of the Singapore skyline can be enjoyed from floor-to-ceiling windows.

an observation deck. Lounge by the infinity pool with a cocktail in hand, or enjoy soothing massages at worldrenowned Banyan Tree Spa. Featuring famous celebrity chefs, fine dining options at the Marina Bay Sands include Waku Ghin and Guy Savoy. Party the night away at the dance club, or unwind at any of the 3 lounges. www.marinabaysands.com

Set on top of 3 towers, a Sky Park features landscaped grounds and

race 14 2011 formula 1 sinGtel sinGapore Grand prix (singapore) 23 - 25 sep

Hilton Nagoya Nagoya, Japan Hilton Nagoya. At the centre of it all. Centrally located with easy accessibility to all entertainment and business hubs, Hilton Nagoya has 450 rooms with the latest entertainment equipment and high-speed Internet access. Complete with an extensive world-class banquet facilities, an indoor swimming pool, sauna, a tennis court and a 24/7 gym. With 6 restaurants and bars to serve an exclusive selection of international cuisine, you will certainly be spoilt for choice. Enjoy a complimentary shuttle to JR Nagoya Station and close-by attractions such as Nagoya Castle and the Aichi Arts Centre.

race 15 2011 formula 1 Japanese Grand prix (suzuka) 07 - 09 oct

46 • GBM • April 2011

Complimentary bicycle rental service is also available for eco-conscious travellers. 460-0008, Nagoya, Naka-ku, Japan Telephone: 52 212 1111 www.hilton.co.uk/nagoya

Banyan Tree Club & Spa Seoul, Korea Overlooking Seoul’s picturesque Mt. Namsan, Banyan Tree Club & Spa Seoul is Banyan Tree’s first combination of urban resort and membership club. Located an hour’s drive from Incheon International Airport, and just 10 minutes from the lively beat of downtown Seoul, the hotel offers guests a welcome chance to escape the city’s hustle and fast pace, and to simply relax with family and friends amidst the serenity, greenery and natural beauty of Mt. Namsan. Rising 21 storeys, Banyan Tree Club & Spa Seoul occupies the former Tower Hotel building, one of Seoul’s most enduring cultural landmarks designed in 1967 by architect Kim Swoo Geun to commemorate the Korean War. The rooms and suites, each featuring a relaxation pool, and 16 dedicated Club Rooms and Suites especially for club members, are equipped with state-of-theart technology. Meanwhile, the private members club offers an unparalleled degree of attention, activities and pampering for every kind of social and business occasion. With wraparound views of Seoul, the limpid Han River and the lush greenery of Namsan Park, this urban oasis offers a sanctuary for the senses in the heart of one of the world’s most exciting cities. Effortlessly, it combines Banyan Tree’s signature warmth and traditional Korean hospitality with a tempting mix of Banyan Tree Spa, the first in Seoul, a myriad of outdoor facilities including golf driving range, tennis, futsal and outdoor swimming pool, and round the clock sophisticated cuisine and refreshments in any one of the resort’s 12 restaurants and bars. www.banyantree.com/en/gallery/seoul/

race 16 2011 formula 1 korean Grand prix (yeongam) 14 - 16 oct

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luxury Brand series – formula 1 Host city Hotels

Aman New Delhi New Delhi, India Long a gateway to the Indian subcontinent, Delhi is a destination rich with modern and historic attractions. Just within reach of Delhi’s bustling city centre, Aman New Delhi - Amanresorts’ newest city-based resort - is a luxurious retreat in spacious surroundings, offering guests an ideal base from which to explore the city’s many diverse charms. Amidst the lush order of Lutyens' Delhi, just minutes from the grandeur of Rashtrapati Bhavan, the peaceful Lodhi gardens and many other iconic sites, Aman New Delhi provides one of the world's most colourful and cosmopolitan capital cities with a tranquil new retreat. Offering essential respite in spacious surrounds, this city-based resort is an elegant haven exuding an air of sophisticated calm, and provides guests with the ultimate in comfort, as well as the ideal base from which to experience the city's wealth of historical, cultural and contemporary attractions. tel (91) 11 4363 3333 fax

91) 11 4363 3335

amannewdelhi@amanresorts.com www.amanresorts.com/amannewdelhi/home.aspx

race 17 2011 formula 1 Grand prix of india (new delhi) * 28 - 30 oct

48 • GBM • April 2011

Emirates Palace Abu Dhabi, UAE Located in the capital of the United Arab Emirates, the magnificent Emirates Palace is a national landmark and one of the most impressive hotels and conference venues ever built. Perfect for corporate and leisure travellers, Emirates Palace offers a variety of luxury services to suit every need, whether you come on vacation with your family or for a business meeting or international conference. Emirates Palace, located on 1.3 km of private white sandy beach and surrounded by 85 hectares of beautifully landscaped gardens, is only 30 min drive from Abu Dhabi airport and 1.5 hours drive from Dubai airport. Each of the exceptional rooms and suites provides guests with uncompromising indulgence. These include 302 Grand Rooms, 40 splendid Khaleej & Khaleej Deluxe suites, 4 Royal Khaleej suites, 16 three-bedroom Palace Suites divisible into a total of 48 one-bedroom individual suites. The Grand rooms, Khaleej & Khaleej Deluxe Suites & Royal Khaleej Suites are divided

equally within the East & West Wings. Both Wings enjoy their respective Reception area, Beach Access, Swimming Pool, & Fitness Center. The exclusive Palace suites are located in the centre of the Palace section itself and therefore provide the guest with ideal location whether for business / leisure requirements. Inside every room & suite, the decor is a masterful blend of Arabian regal splendor and the latest technology. Decoration includes acres of gold leaf and the finest marble. The guest is given command of all room & suite appliances including lights, air conditioning & in room entertainment systems via a touch screen hand held control. A 1.3km private beach awaits the guests at the Emirates Palace. The white sandy beach access is only limited to in-house guests thus ensuring privacy and exclusivity.

The West Wing swimming pool is an adventure pool equipped with water slides, waterfalls, and a lazy river, appealing for family and children. A separate covered children’s pool area is also available. The guests have access to both pools whilst staying at the Emirates Palace and therefore whether they are looking for family fun or secluded relaxation, Emirates Palace is the ultimate resort. Tel +971 2 690 9000 info.emiratespalace@kempinski.com Reservations reservation.emiratespalace@ kempinski.com www.emiratespalace.com/en/home/index.htm

The East Wing swimming pool is a relaxation pool complete with swim up pool bar, separate Jacuzzis appealing for adults & a covered children’s pool area. race 18 formula 1 etiHad airways aBu dHaBi Grand prix 11 - 13 nov

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luxury Brand series – formula 1 Host city Hotels

Hilton Sao Paolo Sao Paolo, Brazil The hotel offers excellent and modern accommodations for short or long term stays, great restaurant options, a state-of-the-art fitness center, roof top pool, spa and some of the best meeting and event options in São Paulo. Conveniently located in one of the main business centers of São Paulo, the region of Av. Luis Carlos Berrini, the Hilton São Paulo Morumbi is the East Tower of the United Nations Business Center (CENU). The hotel has underground access to Shopping Nações Unidas and D&D mall. At the margin of Pinheiros river, several accommodations have views to Octavio Frias de Oliveira bridge, also known as Estaiada bridge, the newest São Paulo's postcard. Ibirapuera and Villa Lobos parks are a 10-minute drive away, as well as several music halls. It is only 8 km from Congonhas National Airport and 35 km from the Guarulhos International Airport.

Patricio Alvarez patricio.alvarez@hilton.com +55 11 2845-0241

race 19 formula 1 Grande prÊmio do Brasil 2011 (sao paulo) 25 - 27 nov

50 • GBM • April 2011

ELVINGER, HOSS & PRUSSEN LUXEMBOURG LAWYERS

Quality Innovation Independence

Corporate and Tax Banking, Insurance and Finance Commercial, Employment, Litigation and Arbitration Investment Funds and Asset Management Administrative, Property and Construction Law Insolvency Law and Restructuring

Elvinger, Hoss & Prussen 2, Place Winston Churchill BP 425 L-2014 Luxembourg

www.ehp.lu April 2011 • GBM • 51

Islamic Finance

Gateway to Islamic Finance Islamic Finance has been around since the origination of Islam itself. The practices of what we see today have been used throughout the last 1500 years across the modern Muslim world and beyond. The Global Islamic financial industry is already estimated to soar to over $2 trillion dollars by 2012 and many successful commodities have spearheaded the financial world. Not only are Islamic territories experiencing this high growth rate, but western institutions are now starting to learn, understand and invest into the sector that was once only seen as a niche market.

Financial practice in Islam has the same purpose as conventional banking except that it operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury). Common terms used in Islamic banking include profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijar). Islamic principles allow instead for the replacement of interest by a return that is dependent upon the profitability of the underlying investment. In addition, Islamic principles permit the financing of sales by means of deferred payment at a premium to the spot price. With the industry sector maintaining a growth rate of 15% per annum over the last 10 years, it is predicted that this growth will continue or speed up in the coming years, dependant on different regulatory practices. The main reason for the growth stems from a number of sources including Muslims worldwide are starting to opt for Shariah compliant products that were not previously available to them. The increase in oil wealth of the Muslim nations in the Middle East and their decision to opt for Shariah compliant structured investments is making the western governments and conventional financial institutions consider using Islamic Finance. The Islamic finance industry will continue to evolve and more complex Shariah compliant products will come to the market. Investor demand will drive the industry and will ensure Islamic finance institutions and regulators work together to overcome some of the hurdles and obstacles. Due to their increasing competitiveness and ethical focus, Islamic products are attracting both Muslims and non- Muslims. With Islam as the fastest growing religion in the world, and being the second largest religious group in the UK, USA and France, Islamic Finance is certainly not about to go away any time soon.

52 â&#x20AC;˘ GBM â&#x20AC;˘ April 2011

United Kingdom Ernst & Young Ken Eglinton Director of UK Islamic financial services Tel: +44 (0)20 7951 2061 Fax: +44 (0)20 7951 1693 keglinton@uk.ey.com www.ey.com

No one can afford to ignore Islamic finance With four decades of history behind it, Islamic finance has developed substantially over the past ten years. Fuelled by growing hydrocarbon-generated wealth, plus fast-growing demand from a rising population of Muslims, Islamic finance is taking hold as a mainstream activity in the world’s financial centres. From its original bases in the Middle East and Malaysia, Islamic finance is increasingly being embraced by governments, regulators and businesses in Europe, Asia, Africa and the Americas. Islamic finance is rooted in compliance with Sharia’a (Islamic law), but is by no means restricted to wholly Sharia’a compliant institutions. Most global banks have now entered the market, which used to be confined to smaller Islamic banks and boutiques. Governments and companies in non-Muslim majority countries are also raising substantial funds in Sharia’a compliant forms. What is Islamic finance? A simple description of Islamic finance is that it is a form of finance that is based on an alternative economic model, governed by the principles of Sharia’a. Sharia’a is hostile to the notion of creating money from money without actively doing anything to facilitate the reward: hence the well-known prohibition on the paying or receiving of interest. Instead, investors and lenders need to have a real risk-stake in an asset or a business and to share in the rewards generated by that asset or business. Sharia’a insists upon there being a moral dimension to business activities. Consequently, transactions involving products that are not socially beneficial (eg, alcohol, gambling) are not permitted. Nor are any activities involving speculation or excessive uncertainty (particularly if based on the parties having asymmetric access to relevant information). This moral dimension led to the industry avoiding excessively leveraged and speculative products. This protected the Islamic banks from the sub-prime and asset-backed securities losses that precipitated the financial crisis. Of course, like all other banks they were not immune to the liquidity and credit issues that followed. In particular, Islamic financial institutions were heavily exposed to the Dubai property market when it crashed. The moral dimension is crucial to Islamic insurance too. Conventional insurance companies have shareholders that demand risk-based returns and policyholders with little incentive to mitigate risky behaviour. This structure is considered to contain forbidden elements of gambling and uncertainty. Islamic insurance overcomes this by adopting a mutual structure, where policyholders share the risk of loss. For retail and institutional investors, there is a range of Islamic investment funds listed in Luxembourg or London, as well as in Dubai or Bahrain. Such funds often invest in property and/or use

leasing based structures in order to comply with Sharia’a. Many investors in such funds or in Islamic bonds (sukuk) are non-Muslims that are attracted by the returns, the asset classes and/or the ethical imperative for Sharia’a compliant activities. To ensure that a company or fund is operating within Islamic law, a Sharia’a board and/or consultant will be appointed to advise on and give, or withhold, approval for the transactions that the firm proposes to enter. The Sharia’a board will also oversee the firm’s behaviours and actions more generally, to ensure that they hold true to the moral dimension as defined in Sharia’a. Some challenges to the sector As with all new industries, and plenty of old ones, Islamic finance faces challenges. Some question whether any conventional bank can offer products that can be considered to be Sharia’a compliant, given that such banks conduct unacceptable practices in their other activities. Many also argue that existing Islamic products are simply conventional products that have been restructured to overcome prohibitions in Sharia’a. Instead of condemning existing products and structures outright, most see such challenges as an exhortation to develop products that better meet Sharia’a requirements. However, there is a severe shortage of the skilled practitioners needed to develop the industry in the required direction. This is one reason why the industry is increasingly to be found in centres such as London, with its history of developing innovative financial solutions. Another challenge is a relative lack of standardisation of product terms and of Sharia’a interpretations. This lack of standardisation can add to the cost and complexity of transactions. A number of industry initiatives are working on this, in some cases with the help of bodies such as ISDA. While much remains to be done, the industry is dynamic and innovative and most practitioners are committed to resolving the challenges. For example, following the Dubai property market collapse, Islamic REITs are becoming more readily available specifically in Singapore and Malaysia and are likely to spread to other countries. Islamic finance offers capital opportunities The potential reach of this market is evident from the range of high-profile issuers of sukuk in recent years. The governments of Singapore and Saxony-Anholt have issued sukuk, and the UK government has the matter under review. In November 2009, GE Capital raised $500m and is looking to tap this market again; while in August 2010, International Innovative Technologies raised $10m with the first sukuk issued by a UK company. Notwithstanding political and financial upheaval in the Middle East, this is indeed a market that no major government or company searching for funding should ignore.

April 2011 • GBM • 53

Islamic Finance

United Kingdom Samer Hijazi KPMG UK Director – Financial Services Tel: +44 (0) 207 694 2807 Fax: +44 (0) 207 311 5837 samer.hijazi@kpmg.co.uk www.kpmg.com.uk

Ahmed Alvi KPMG UK Associate Tel: +44 (0) 207 311 8098 ahmed.alvi@kpmg.co.uk www.kpmg.co.uk

A guide to Islamic Finance KPMG has long been supporting the industry by advising and working to meet the needs of banks, takaful providers and other Islamic financial institutions (IFIs) across national boundaries. KPMG maintains a dedicated Islamic finance group (IFG), which comprises of a global network of professionals with in-depth knowledge of Islamic finance and provides practical, value-added assistance to KPMG firms’ clients across a range of issues. Members of the team are based in KPMG’s three operating regions: EMA (Europe, Middle East and Africa), Asia Pacific and the Americas. KPMG firms have received accolades as the advisers of choice for the Islamic finance industry on multiple occasions, including the ‘Best Islamic Assurance and Advisory Services Provider’ award in Euromoney’s Islamic Finance Awards for four years in a row. Islamic finance, in the aftermath of the global financial crisis, is becoming an increasingly attractive proposition to a large number of consumers, not only in the emerging eastern economies, but also in the West. There is an ever-growing desire for a greater focus on responsible, sensible and principled behaviour in the banking sector - something held by politicians, regulators and customers across the spectrum, which sits well with the basic ethos of Islamic finance. The Islamic financial system is based on a unique set of underlying principles that aim to enforce greater transparency and stability. Three activities are prohibited in the system: Gharar, Maisir and Riba. The first is defined as excessive uncertainty in commercial transactions under Islamic law, and was one of the reasons why IFIs did not participate in the sub-prime mortgage market. Maisir is the undertaking of unnecessary risk, and this too is outlawed. In practising this principle, whereby transactions are more carefully considered, risk exposure should be reduced. The relative absence of highly speculative trades is a concept that differs greatly from conventional finance. Riba relates to the charging of interest on loans. This is a major structural issue for Islamic finance, which contrasts greatly with the Western system. Feedback from KPMG member firms around the world shows that meeting the needs of the customers will be crucial going forward. Islamic finance needs to better match liability providers, such as depositors with asset seekers, to include investment and financing within the holistic customer choice range. Launching Shariah-compliant products can, however, pose a variety of challenges to the practitioners. These could generally be classified as either compliance or resource-related. Compliance-related issues can include accounting standards compliance, where the specific nature of many Islamic products, in conjunction with the increasing complexities of reporting generally accepted accounting principles (GAAPs) and international financial reporting standards (IFRS) in particular, can make financial reporting for many IFIs complex. Compliance with Shariah law also remains subjective, and is interpreted almost on a case-by-case basis at some IFIs. Risk management compliance, based on practice by conventional

54 • GBM • April 2011

financial institutions, can be difficult to customise for many IFIs. Moreover, issues can also arise with the tax treatment of Islamic financial products in instances in certain jurisdictions where this differs to that of conventional products. Practitioners are also faced with resource-related issues. Human capital shortage has been a key restraint on the growth of Islamic finance and it has been noticeable that there are a limited number of individuals who possess both expert knowledge of Shariah laws and also a comprehensive understanding of modern financial instruments. While different countries naturally impose different regulatory requirements, KPMG member firms worldwide have observed that many clients are no longer concerned about barriers facing the implementation of Islamic banking in new markets. Many now see both Shariah compliance and regulatory approval merely as additional steps in the inevitable processes of governance. Rather, the major challenge is seen as getting the strategic positioning and business model right, and managing the image and branding of Islamic finance institutions and customer expectations appropriately. Islamic insurance, also known as takaful, is another unique product based around compliance with the Shariah laws regarding Gharar, Maisir and Riba - in contrast with conventional insurance, which obviously is not. It revolves around the principle of collective responsibility whereby a group of people pool their funds to protect themselves against a specific risk. While takaful remains well behind conventional insurance’s share of the market, it is growing quickly and is expected to continue doing so. Islamic finance is well placed for growth in the aftermath of the global financial crisis. The institutions most likely to successfully capitalise on these prospects are expected to be those with robust governance structures and a clear focus on their business priorities. Additionally, they will need to be able to manage well their asset and liability portfolios, while having the resources and industry knowledge to bring products to the market that meet the needs and expectations of their customers.

Malaysia Adnan Sundra & Low Deepak Sadasivan Managing partner Tel: 603 20700466 Fax: 603 20783382 deepak.sadasivan@asl.com.my

Adnan Sundra & Low was established in August 1975 under the name of Messrs Mutalib Sundra & Low. This name was later changed to Messrs Adnan Sundra & Low from June 1982. The firm currently comprises 14 partners and 19 legal assistants. The firm has traditionally had strong finance and corporate divisions. The firm is familiar with finance and corporate practice and procedures and has experience in devising and advising on complex and innovative financial and corporate structures for local, offshore and foreign clients. The firm also has experience in commercial and civil litigation. The firm is involved and possesses considerable experience in: infrastructure and privatisation projects; international and domestic joint ventures; establishing and setting up of companies, corporate arrangements and structuring (including mergers, acquisitions and restructuring); land and industrial development (including construction and financing); Islamic financing; loan syndications; private debt securities; credit facilities; and, stock exchange listings. Although the firm has a number of practice areas, a significant portion of its work is connected with the Malaysian debt capital markets, including, in particular, the structuring and issuance of Islamic securities or ‘sukuk’. From the aftermath of the Asian financial crisis in 1997 to the first half of 2008, the Malaysian debt capital market has expanded rapidly, attaining a breadth and depth capable of providing a stable source of long-term financing for corporate entities. Corporate bonds and sukuk (excluding short-term papers) constituted 51% or RM267.9 billion of total outstanding bonds and sukuk in the domestic market as at end-December 2008. However, the second half of 2008 saw the domestic market feeling the effects of the global financial crisis, and bond and sukuk issuance came to a virtual standstill. Throughout most of 2009, the deleterious effects of the global financial crisis continued to be felt and the Malaysian debt capital market was sluggish,

and investor appetite was low, resulting in many corporate issuers having difficulty in accessing the same for funding. The Malaysian debt capital market is primarily governed by the Capital Markets and Services Act 2007 (CMSA) with the Securities Commission of Malaysia being the primary regulator having oversight of capital markets transactions. In the second half of 2009, the CMSA was amended to expand the categories of transactions not requiring the approval of the Securities Commission, while at the same time a further category of securities was exempted from the mandatory trust deed requirements, namely any securities made by any person formed or incorporated or existing within or outside Malaysia (other than a special purpose vehicle, which has no full recourse to another entity), with a local rating AAA or an international rating of BBB and above, assigned by a credit rating agency. In addition to the CMSA, on 26 July 2004, the Securities Commission issued its Guidelines on the Offering of Private Debt Securities (PDS Guidelines) and Guidelines on the Offering of Islamic Securities (Islamic Securities Guidelines). The PDS Guidelines and the Islamic Securities Guidelines provide a regulatory framework for the issuance of corporate debt securities and sukuk and serve to expedite and create a facilitative and transparent approval scheme imposing full disclosure requirements and enhancing legal protection for investors. In tandem with the legislative amendments, amendments to the PDS Guidelines and Islamic Securities Guidelines are currently being considered by the Securities Commission in consultation with industry participants comprising banks, trustees, rating agencies, investors and legal advisers, with a view to such amendments further facilitating and liberalising the

regulatory requirements for a bond or sukuk issuance while at the same time preserving, and where necessary, enhancing investor protection. Such amendments are anticipated to include an expedited approval process (from the current 14 working days timeframe) in respect of bonds or sukuk with the requisite rating, as well as a dispensation of the rating requirements in connection with specified securities. One of the consequences of the global financial crisis in Malaysia was heightened risk aversion among investors leading to diminished demand for corporate bonds and sukuk, with most investors’ interest confined to higher quality papers (typically AAA or AA). In an effort to address this, Malaysia’s first financial guarantee insurer (FGI), Danajamin Nasional Berhad (Danajamin) was established in May 2009 as part of the RM60 billion economic stimulus package announced by the Malaysian government in March of that year. Danajamin is an AAArated FGI, licensed under the Insurance Act 1996 and regulated and supervised by Bank Negara Malaysia. It is jointly owned by Minister of Finance Incorporated (50%) and Credit Guarantee Malaysia Corporation Berhad (50%). The primary objective of Danajamin is to provide financial guarantee insurance (for private debt securities) or AlKafalah Guarantee (for Islamic securities) to help Malaysian companies access long-term capital at reasonable rates. By providing the wrap, Danajamin enables the potential issuers to achieve AAA status (bonds and sukuk will automatically be rated AAA with Danajamin’s wrap), hence increasing their chances of a successful issuance. The first credit wrapped issuance of debt securities under the auspices of Danajamin took place in the second quarter of 2010.

April 2011 • GBM • 55

country profile - russia

russia Russia Today Like every major European nation, Russia took a heavy hit during the recession. On September 16th 2008, Moscow’s largest stock exchange, MICEX, fell by a staggering 17.5 percent, whilst the rival RTS exchange dropped by 11.5 percent, marking the largest one day losses since the financial crash of 1998. However, unlike the vast majority of European countries, Russia’s brief period of economic downturn has only served to prove the nations capabilities as a strong economic power. Having risen from the ashes of the financial crash, newfound stability has lead to the continued desire to diversify Russia’s economy, with the UK Trade and Investment Department declaring that “Russia remains a long term market of great potential for British exporters and investors,” whilst adding that “Western goods and expertise remain in demand.” This diversification has advanced business opportunities in Russia. The country’s reliance on an oil lubricated economic growth has lessened in recent years, with promising opportunities arising for UK investment in Advanced Engineering, Financial Services, Airports and Creative Industries. Furthermore, the highly anticipated 2014 Winter Olympics in Sochi have given a fresh impetus to investment in telecommunications, power, transportation and accommodation. The 2014 games will see a boom in Russian tourism, with more than $6 billion

earmarked to transform the provincial Russian town of Sochi into a metropolis of sporting heroics. Along with a lifetime of memorable athletic prowess, Sochi will be left with new hotels, concert halls, business centres and a new, state-of-the-art airport terminal. But, of course, Russian tourism is not solely reliant on the future, with foreign tourist numbers in 2010 marking a vast improvement upon disappointing statistics during the economic downturn. As Russia’s most popular tourist destination, Moscow is widely regarded as one of the most expensive cities in Europe. However, with transport fees amongst the lowest in Europe and a wide range of reasonably priced accommodation and dining options available, Moscow authorities expect to attract up to 10 million foreign tourists to the vibrant city by 2020, vastly disputing its overblown reputation as a sanctuary to the rich. The riches Russia can boast include a

staggering array of unique architectural delights and sites of historical importance dating back to the architectural renaissance of the early Muscovite period, which have been at the forefront of the country’s rapid growth in tourism since the fall of the Soviet Union. A further focus on the modernisation of national tourism has also seen Russia become host to the largest sports complex in the world, with the 78,360 seat Luzhniki Stadium having played host to the UEFA Champions League Final in 2008. Sadly, a string of high profile terrorist attacks have combined with international tourist’s doubts surrounding VISA applications, language barriers and a lack of travel information, to force Russia’s hand in actively promoting Russian tourism throughout the world. So whether you are looking to revel in the Russian rouble or meander through the Moskva River, you will no doubt be eager for support in ensuring that your trip goes to plan, be it business or pleasure.

The Russian National Tourist Office Founded in 1997, and with offices throughout the UK and Russia, the Russian National Tourist Office lays the foundations for ensuring that your trip goes to plan. Whether travelling alone, with a group, or as part of your company, the services provided by this IATA accredited agency will put any lingering doubts surrounding your travel arrangements to bed, long before your departure. As one of the key hurdles of foreign travel to Russia, Visa documents are required of all British citizens visiting the country, for both business and pleasure. The National Tourist Office is able to transform this complex process into a convenient and simple procedure, with online assistance making your application just a few short clicks away. Regular customers can also serve as testament to the company’s unique ability to provide urgent visa services, with a remarkable turnaround of less than 24 hours. Options for short stay accommodation in Russia are far more expansive than some tourist brochures would have you think, but finding yourself in the right spots for 56 • GBM • April 2011

your business and tourist needs can be a painstaking process. The Russian National Tourist Office not only possesses the expertise to guide your decision, but can arrange your reservation well in advance, with a wide range of rates available across the board, guaranteeing the ultimate convenience for budget travellers, as well as those looking to live it up in the marvellous 5-star hotels across Moscow and SaintPetersburg. The Tourist Office’s special offer flights add value to convenience, with deals available through Aeroflot and Rossiya Airlines, whilst also providing the best service in London for quick turnaround on all major airlines. Of course, the service would not

be complete without transfers to and from the airport, whilst special VIP packages guarantee a stress free travel experience throughout. Russia is a thriving country; the economy is on the rise, providing newfound business opportunities and a host of historic and cultural landmarks to make for a memorable trip, whatever your purposes. The Russian National Tourist Office is delighted to be able to lend a helping hand, with a bilingual, knowledgeable and friendly team available round the clock, to ensure that your first trip to this captivating European country will not be your last. For more information visit www.visitrussia.org.uk

Country Profile - russia - legal services

Matvey Levant, Managing partner Levant and Partners Law Firm Rubtsovskaya Nab. 4, Bldg. 2, Moscow 105082 Tel/Fax: 7 (495) 740-0373 info@levantlegal.com www.levantlegal.com

Current development of the RF competition law Recent changes in Russian competition law were aimed at enhancing its efficiency and strengthening of responsibility for its violation. These amendments provide for a number of restrictions, in particular, for public officials. Large punitive sanctions shall be applied to the officials for breaching such statutory restrictions. The new competition law more clearly specifies the definition of terms “monopolistically high price” and “monopolistically low price”. The ‘cost plus method of study’ (estimate of the amount of necessary expenses for production of goods), and the ‘method of comparable markets’ (comparison with the price, established in the market competition conditions) are now used in determination of monopolistically high price. Monopolistically high price is a price set by the economic entity possessing a dominant position at the market that exceeds the total amount of costs required for production and sale of such kind of goods and profits, and the price formed at the competitive market of similar goods within the territory of the Russian Federation or outside of it. Two methods can be used when determining a monopolistically high price: ‘cost plus method’ and ‘method of comparable markets’. For instance, in Europe, establishing high prices for goods is not deemed illegal as far as it does not lead to restriction of competition. According to the Russian competition law, the actual fact of establishing and supporting of monopolistically high or low price of particular goods shall be considered as abuse by the economic entity of its dominant position. However, a price for goods produced as a result of innovation activities (ie activities leading to the creation of new non-interchangeable goods or such new interchangeable goods where production expenses are lower and/or qualities are improved) is not recognised as a monopolistically high price.

The new provisions of the competition law in fact abolish the previously existing 35% threshold of market power domination. Actions of the largest companies in the market may be regarded as violating competition law if they start to dictate their terms at the market, thus putting all other companies in a position where they are forced to accept such terms. However, the Federal Antimonopoly Service (FAS) should first prove that a company holds a dominant position at the market and has a real possibility of influencing the pricing at the certain markets. Another advantage of the new law is the significant increase of threshold of assets and turnover for companies willing to establish commercial legal entities or to conclude transactions with shares (participatory interests), property of commercial legal entities or rights related to the commercial legal entities. Currently, prior consent of the antimonopoly authority is required for such activities if the company’s assets exceed seven billion rubles according to the last balance sheet (instead of three billion, as before). The companies’ turnover thresholds (net sales proceeds from the sale of goods during the last calendar year) increased from six billion to ten billion rubles. Threshold values of assets or turnover were twice increased (from 200 million to 400 million rubles). The noted measures will significantly reduce administrative supervision over the medium-sized companies, allowing the antimonopoly authorities to focus on serious violations of competition law (‘Subsequent Changes in the Competition Law’, VI Eremenko, Law and Economics 2010, No2). At the same time, legal responsibility has been strengthened. For repeated abuse of dominant position, the company’s top managers may face criminal liability.

that first stated the existence of such a cartel, a practice commonly used in the US and EU countries. According to the head of the FAS, maximum assistance can only be received by the first company that reported the cartel scheme to the antimonopoly authorities (‘The New Rules of the Competition Law’, IY Artemyev, Law of Russia: Experience, Analysis, Practice). Unlike the antimonopoly authorities in other countries, the FAS has no right to conduct operational-investigative activities. It can only decide on the question of whether a specific company and its director violated competition law or not. Only after the FAS decision is confirmed by all the court instances can the materials of the case be transferred to the law enforcement authorities for initiation of criminal prosecution. The new amendments to the RF Criminal Code provide for fines, ranging from 300,00 to 500,000 rubles, or imprisonment for up to three years for prevention, restriction or elimination of competition by entering into agreements, restricting competition and conduction of other concerted actions. The repeated abusing of a company’s dominant position by way of fixing and supporting of monopolistically high (low) price of goods, entailing infliction of heavy damages (more than one million rubles) to citizens, organisations or state, or gaining profits on a large scale (more than five million rubles) are now punishable. As we mentioned, the law provides for exemption from criminal liability in cases where the offender assisted in uncovering the crime, compensated the damages caused, or transferred to the federal budget the income received as a result of its wrongful actions and if such actions do not contain components of another crime.

Under the current rules, any member of the cartel can voluntarily admit its guilt before the antimonopoly authorities and escape the criminal liability. The FAS proposes to exempt from punishment only the company

April 2011 • GBM • 57

country profile - russia - leGal services

Tatiana V Petrova Head of trademark department Sojuzpatent 13 Bldg 5 Myasnitskaya St 101000 Moscow, Russia Tel. +7 495 2218880, +7 495 2218881 Fax. +7 495 2218885, +7 495 2218886 info@sojuzpatent.com www.sojuzpatent.com

Andrey Astapov Managing Partner astapov@astapovlawyers.com

PROTECTION OF TRADEMARKS IN RUSSIA

Complex corporate disputes in Russia

Russia is a ‘first to register’ country. Under Russian law, the first person that files a trademark application is generally granted trademark rights. With the exception of the very narrow category of well-known trademarks, the actual use of a brand in Russia doesn’t give the brand owner any legal rights. Nor does the registration of a trademark outside Russia give the owner any rights. Without legal protection of their brands, owners are unable to stop infringement of their trademarks. Moreover, if a third party has registered a brand owner’s trademark, it can accuse the brand owner of infringing its own brand and take steps to prohibit the brand owner from using it.

by Andrey Astapov, Managing Partner and Head of Dispute Resolution Practice of AstapovLawyers International Law Group

The only protection afforded to non-registered brands in Russia can be found in the unfair competition legislation based on article 10-bis of the Paris Convention for the Protection of Industrial Property (PCPIP). Russian unfair competition legislation essentially reiterates the provisions of the PCPIP, but the practice of protecting nonregistered brands in Russia on this basis is extremely limited and underdeveloped. Relying on the unfair competition legislation to ensure brand protection is therefore highly undesirable. According to Russian law, any transaction that includes registered intellectual properties (trademarks, designs, patents or some other IP assets) must be registered with the Russian Patent Office (RPO). This means that to be valid in Russia any licence, assignment or franchising agreement related to a trademark should be registered with the RPO. Such agreements enter into force from the date of their registration with the RPO only, and there are several undesirable consequences if such agreements are not registered. One is that a trademark licensee (or assignee or franchisee) could experience some administrative problems with customs, advertisement agencies and other regulatory bodies. The local user will not be able to pay royalties under a non-recorded agreement. If a licence is not an affiliated entity of the licensor, the relevant trademark is vulnerable to non-use cancellation even if the licensee really uses it in Russia. And, finally, the non-recorded agreement is not enforceable in Russian courts because it is not effective under Russian law. There are several ways to protect one’s products against trademark infringement in Russia: through court proceedings in Russian arbitress (state commercial) courts, through administrative proceedings via the Federal Anti-monopoly Service, and through a criminal prosecution. The bottom-line assessment in such cases focuses on the similarity between the counterfeit/lookalike products and registered trademarks and/or designs, as well as the possibility that consumers are being misled. Sojuzpatent is the oldest firm rendering services in intellectual property in Russia. It was founded in 1922. Nowadays, Sojuzpatent provides its clients with full range of high quality services relating to protection and enforcement of patents, trademarks, designs, copyrights and other intellectual rights. 58 • GBM • April 2011

Russia has always been a battleground for large corporate disputes. Most of them involve assets based in Russian Federation in the energy, mining, telecoms and other high- return sectors, where due to limited internal competition the returns are much higher than anywhere else in the world. Due to the immaturity of national corporate legislation, most of the M&A transactions are conducted under English law in the foreignto-foreign format. These involve offshore entities that are contracted with arbitration clauses calling for dispute settlement procedures outside Russia. In the event of disputes arising, such structures result in very complex sets of arbitral proceedings bringing about all types of ancillary court proceedings. This is where the leaders of legal businesses in Russia show their legal creativity. Loopholes in Russian legislation and the persistant problem of corruption can cause a dozen of litigations in various parts of Russia to be held parallel to main LCIA proceedings. Such disputes are multi- jurisdictional in nature and can involve NY discovery proceedings as ancillary to main litigation/arbitration in Russia. There is also a wide spread use of criminal prosecution as a means of pressure on the opponents. Among new trends in this respect is application of the US FCPA (Foreign Corrupt Practices Act) and RICO (Racketeering Act) to the commercial context of Russian relationships. Most of the high profile corporate disputes arise from relationships between foreign capital and Russian capital and also from legal relationships between russian high net- worth individuals (so called oligarchs). A Typical example of this is the recent situation around TNK-BP joint venture. The examples of the latter are numerous among which Prohorov - Potanin rivalry around RUSAL is nototious. Russia is not regarded as highly litigious country such as the US, but on a certain level it icertainly is and there is a lot of potential to be explored by law firms practicing commercial litigation. Kyiv Europe Business Centre, 4 Muzeyny Lane, 3rd floor Kyiv, 01001, Ukraine T: +38 (044) 490 70 01 office@astapovlawyers.com

Moscow 2/1 Semenovskaya Embankment, Building 1, Quarters VII, office 1 Moscow, 105094, Russian Federation T: +7 (495) 988 60 64 moscow@astapovlawyers.com

country profile - russia - financial services

PVC production profitability In 2010, Deloitte conducted a comparative analysis of production cost and contribution margin of ethylene-based polyvinyl chloride (PVC) production facilities of Europe and South-East Asia. The results of the analysis are quite straightforward and reflect overall state of the world economy at the period under review. The European PVC production contribution margin varies from €56.7 to €247.9 per ton of PVC (not including PVC production at Râmnicu Vâlcea facility with its negative contribution margin) and averages at €136.45 per ton of PVC, subject to the current average capacity utilisation level of 67%. The potentially achievable contribution margin, considering existing technologies and prevailing prices, averages to €190.85 per ton of PVC. PVC production contribution margin in South-East Asia is negative (€65.10 per ton of PVC). It is caused by the low capacity utilisation (52% in 2009, including 44% in China). Subject to the full capacity utilisation under prevailing prices, the PVC production contribution margin is estimated at €81.47 per ton of PVC. This article contains results of our research, but should not be considered as a recommendation. Before making any decision or taking any action that may affect your finances or your business, you should conduct further analysis

Approach to comparative analysis Due to the lack of publicly available data on production costs and contribution margin of PVC production, along with some indicators required for their evaluation, a number of parameters were estimated indirectly. To ensure a solid approach to analysis, all the plants under review accommodate chlorine, vinyl chloride (VCM), and PVC production facilities and produce suspension PVC. The estimate was made according to the following formula. Contribution margin = ([Proceeds]-[Production cost]) / [Actual PVC Production], where: the production cost of PVC has been estimated using information on the capacity of PVC producers and data on materials - power balance of the applied production scheme; the proceeds were calculated as a cost of sales of products made by the production facility operating in the mode that provides for output at the installed capacity level and at the price equivalent to the average price for the period in question (according to official sources).

2% 2%

The highest PVC production falls at Asia and Europe with more than a half of Asian PVC produced in China (51%). Figure one: Global PVC production by region, 2009

Asia (China)

4% 26%

Overview of global PVC production Asia and Europe are the leading regions in terms of PVC production capacities along with China accounting for the bulk of PVC production in Asia (65%). Global PVC production capacities reached 47,972,000 ton/year by the end 2009 with the average utilisation level of 62%. Breakdown of actual PVC production is shown at figure one.

Asia (without China) Europe

20%

North America Latin America Middle East 19%

25%

Russia Africa

April 2011 • GBM • 59

Country Profile - russia - Financial services

Choosing the companies European PVC producers: European ethylene-based PVC production capacities account for 8,105,000 tons per year, 90% of total ethylene-based PVC production in the region. The diagram with key European producers of the suspension PVC is presented at figure two. Ethylene-based PVC production market players may be presented either at all three stages of PVC production (production of chlorine and sodium hydroxide as by-product from sodium chloride, production of ethylene dichloride by direct chlorination and ox chlorination of ethylene, production of vinyl chloride from ethylene dichloride, production of PVC by VCM polymerisation), or by one of them. A typical feature is the presence of ethylene dichloride production in close proximity with the chlorine production facilities and as the chlorine transportation may be difficult the ethylene is most often bought from ethylene producers. However, the production capacities may not correspond with each other and the companies may use both: self produced semi-products (chlorine, ethylene, EDC, and VCM) and purchased feedstock at the same time. For the purpose of this review, we considered European-producer companies that integrate all the PVC production stages from chlorine production to VCM polymerisation using both their own and purchased ethylene materials. Figure two: Production and total capacity of fully integrated suspension PVC production facilities in Europe by producer, ‘000 ton per year, 2009

production from ethylene, 3,040,000 ton/year (15%); and, that of mixed type production, 750,000 ton/year (4%). Six major producers of PVC from ethylene may be selected in China (figure three) with all of them integrating the entire production chain from chlorine production to the polymerisation. Figure three: Suspension PVC production capacities in China (ethylene based), ‘000 ton/year, 2009 0

200

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Ineos Solvin Arkema Vinnolit Shin-Etsu LVM

The remaining PVC production in the region originates mainly from Japan, Taiwan and South Korea. The largest facilities there belong to Asahimas Chemical (ASC, majority owned by Japanese Asahi Glass), LG Chemical Ltd from South Korea, Formosa Plastics from Taiwan as well as Shin-Etsu from Japan. These four countries account for 81% of production and 86% of PVC production capacity in SouthEast Asia (figure four). Figure four: PVC production and total capacity in Asia, ‘000 ton/ year, 2009 0

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5 000

10 000

15 000

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China

Solvin

Japan

Ineos Vinyls Vinnolit

Taiwan

Borsodchem

South Korea

Vestolit Arkema Oltchim

Production, '000 ton / year

Spolana (Anwil)

Idle capacities

Ercros

Production, '000 ton/year

Idle capacities

PVC producers in South-East Asia China is the key PVC producer in South-East Asia and globally. It is also the world’s No 1 in terms of PVC production capacities: in 2009, the aggregate capacity achieved the level of 19,890,000 ton/year, that is 37% of the world’s total capacity). However, such a high level is achieved due to large investments in construction of new production facilities prior to the global financial crisis. In 2009 the aggregate utilisation ratio of the PVC production in China dropped to 44% (in Europe, this factor amounted to 68%; in other Asian countries, 79%; while the production in China in 2009 totalled 7,734,000 ton/year or 26% of the global production level). PVC production in China is represented by two key types: an acetylene-based and ethylene-based, and the former prevails. The acetylene-based approach uses calcium carbide (normally produced from calcareous rock and coking coals, which are more readily available in China than hydrocarbons) as key raw materials. Calcium carbide is used to produce acetylene, which in turn is used for vinyl chloride monomer production. In addition, there are mixed type production facilities in China where the mix of vinyl chloride produced from acetylene and vinyl chloride produced from ethylene is polymerised. By the end of 2010: the capacity of PVC production from acetylene was expected to achieve 16,100,000 ton/year (81% of the total PVC production capacities in China); the capacity of PVC

60 • GBM • April 2011

Results The results of Deloitte’s calculations are shown in table one. PVC price, € per ton

PVC production cost, € per ton

Utilisation Ethylene, Chlorine, Processing ratio, % of € per ton € per ton , € per ton installed of PVC of PVC of PVC capacity

Contribution margin, € per ton of PVC

Europe average

1,057

866

434

161

271

if 100%

190.85

South-East Asia average

730

673

323

100

250

if 100%

81.47

Table one: Economic performance per one ton of PVC

Table one: Economic performance per one ton of PVC If you would like to get a full report or have any questions regarding the topic, please contact Elena Lazko, Deloitte partner by email elazko@deloitte.ru. Sources: ICIS; Harriman; CMAI; Platt’s; Equipment manufacturers’ data (Vinnolit, Chisso, INEOS); Technical progresses for PVC production by Y Saeki and T Emura; Polymer BREF (StuttgartUniversity)

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Outsourcing

telecommunications

Creating the European space for using the radio spectrum efficiently to strengthen the digital economy

Telecommunications - the business When the financial crisis hit in 2008, many governments responded by guaranteeing bank deposits and looking for stimulus packages, especially in ‘new infrastructure’ such as telecommunications. It’s easy to see why: known business advantage through using good communications, and public familiarity with the services. Of course, some famous services struggle to make a profit. Facebook was wooed by Google in 2008 and has a stratospheric market value as the heiress of the ‘networked generation’, but it is yet to reveal a strong business model beyond its several attempts to collect your personal data and sell it on. E-mail was a revolution, and Skype is a game changer - the commercial balance will always be found in the end. Telecommunications is central to how we live our lives and trade. Some of the business models are far from clear, such is the speed of development and today’s expectation that everything is ‘free’. But the value-added to business and society is so great that some will make huge returns on an investment, even if others lose out. Radio communications - an essential component that needs management The backbone of the broadband revolution is fibre optic cable and exponential growth in electronic circuit capability (sometimes referred to as ‘Moore’s Law’). These twin frontiers of progress enable us to switch, store and transfer more and more data around the world at progressively less cost; the faster and bigger principle. But there are two limitations with cables. First, it is very difficult to get an adequate return on investment in areas of lower population density. The so-called ‘digital divide’ 62 • GBM • April 2011

excludes people in more rural areas who can miss out on higher speed broadband. Second, we are now seeing genuine applications and public demand for Internet applications on the move. It was a slow start in the early 2000s, but now, with iPads and the like, the need to interact with centralised facilities is growing fast. Radio communications can solve these needs. But using the radio spectrum (the range of different radio wave frequencies) requires proper management to avoid one use of radio waves interfering with another. Those of us above a certain age grew up experiencing interference when we listened to analogue radio stations, especially on the old AM frequencies. When it got really bad, you could hear an unwanted signal underneath something you wanted to listen to. Or maybe you could see strange patterns on the TV under certain weather conditions.

and newcomers will be frustrated: they can’t get in, but they see lots of unused space inside. So we mark out the spaces - but how big should they be? Today’s ‘small car’ is bigger than yesterday’s luxury saloon. So do you future-proof by making the spaces very large? Or smaller spaces so you accommodate more cars? That is one of the dilemmas faced by national spectrum regulators - high bandwidth applications as for mobile broadband (mobile devices with lots of apps) are like the big cars, but smaller spaces allow more market players and more competition. As spectrum regulators, we are planners;and we have to repaint the car park spaces from time to time! Two complementary elements

So we have to manage the radio spectrum well. We have to make a careful balance between on the one hand protecting existing services and systems from interference, and on the other enabling new and innovative technologies to be introduced easily. Both of these objectives are very important for anyone considering investment in services that use spectrum.

There are two complementary aspects to spectrum management planning: ‘allocations’ and ‘compatibility’. Allocation is the designation of a range of radio frequencies to a given type of service. Compatibility is a set of technical specifications for spectrum use that, if we get that balance right, will enable a service to work properly and not be too affected by interference. We aim to allow spectrum to be used efficiently - to have more communications going on and enabling more consumer and producer surplus to be created. And sometimes there will be radio interference. That disturbance should be infrequent and manageable. As far as possible, we need to be transparent about what a user can expect in terms of interference. But, and it’s an important ‘but’, the responsibility of estimating that impact definitely rests with the company, so it is vitally important to have good expertise available.

It is like designing a car park. If you invite people to park anywhere on a ‘first-comefirst-served’ basis, they will park near the entrance. The place will become blocked

Permission to use the spectrum is granted by national regulators. This may be an individual licence for an individual transmitter, through to licences to use a

The digital age has brought a revolution in telecommunications, but one thing it has made more difficult for ordinary people is in understanding how devices work; and, if not, then why not. And this applies to the impact of radio interference, which can be just one of several reasons why a device such as an iPad or a mobile phone or TV settop box may not function properly. An important balance

CEPT ha all 27 me Union.

Mobile b and mo

CEPT has 48 member countries, including all 27 member states of the European Union.

range of spectrum exclusively subject to specified limits (eg mobile phone operators), through to use of spectrum without a licence: so called ‘licence-exempt’, where specific ranges of frequencies can be used only subject to respecting certain technical limits on power and the frequency range occupied. A well-known example is the wireless networks that you use at home to connect a laptop to the Internet. European cooperation But national regulators do not act alone. Forty-eight national European regulators, from Portugal to Russia, Finland to Malta to Azerbaijan, collaborate within the European Conference of Postal and Telecommunications Administrations (CEPT) organisation (an organisation where policy makers and regulators from 48 countries across Europe collaborate to harmonise telecommunication, radio spectrum and postal regulations), specifically its Electronic Communications Committee (ECC), to harmonise the use of spectrum. That means allocating the same parts of the spectrum to the same types of use throughout Europe. There is some flexibility for specifically national solutions, usually a matter of protecting existing systems. But harmonisation greatly increases the viability of the European markets for services and devices. It enables economies of scale for equipment, and also removes the inefficiencies of having services that are technically very dissimilar either side of Europe’s numerous national borders. In the car park analogy, it is like having a car park several stories high, and making sure that each level fits neatly on the one below. Harmonisation requires a common set of technical planning assumptions about how one type of system uses a set of frequencies compatibly with other systems on the same or nearby frequencies. The ECC brings together many experts from the national regulators, from the CEPT’s central office

Mobile broadband devices need more and more spectrum.

(the ECO) and from industry to consider the enable a huge range of activity. From evidence, weigh up the options and advise geographical sensing by satellites in the on spectrum compatibility. This provides fight against climate change, to tagging the sound technical basis for the ECC’s goods passing in and out of warehouses, to Mobile broadband devices need more decisions on spectrum harmonisation. televisions, radio, mobile devices connecting and more spectrum. your apps to the Internet, ordinary mobile The ECC also undertakes technical work on phones, aircraft navigation: the list goes on spectrum compatibility for the European and on. So we have seen that there is a lot Small short ran Commission. The Commission makes enable efficient of knowledge and dedication being applied spectrum harmonisation decisions that are distribution cha to making sure that the opportunities binding on the 27 EU member states (all of to use spectrum for communications which are members of CEPT). This provides continue to grow. This doesn’t mean the even greater legal certainty for investment regulators ‘picking the winners’; we try and the EC acts where it believes this is to be as flexible and generic as possible in relevant to the single European market for the spectrum regulations we create. But it telecommunications services. The other key does mean understanding the demands, player is the European Telecommunications giving every serious application the best Standards Institute (ETSI), which makes the possible opportunity, and also protecting standards for much of the actual equipment the investments already made from being that uses the spectrum. eroded by too much interference. The essential outputs for a successful Our relationship with industry is crucial. spectrum ’playing field’ We set what we hope is an enabling and Over the past two years, the ECC and its effective technical framework for using the subgroups have held about 100 structured spectrum, and some of this effort is used and meetings (some physical, some electronic) some of it turns out in the end to be wasted plus much more background work, to - that’s inevitable. But it is industry that produce no less than seven decisions, five implements the use of the spectrum, and it recommendations, 27 ECC reports on is implementation and the benefits that this Small short range communications devices numerous subjects, plus 16 CEPT Reports brings to society enable efficient management in the supply and in all sorts of ways, that for the Europeandistribution Commission. You can makes our job worthwhile - and fun! chain see all of these at our website: www. cept.org/ecc. These have covered subjects ranging from the use of ‘ultra wide band’ Mark Thomas devices for workshop safety through to the Director of the European much-discussed ‘digital dividend’, where Communications Office (ECO) frequencies formerly used for analogue TV mark.thomas@eco.cept.org can now be used for mobile broadband, www.cept.org/ecc (ECC) including in rural areas. The recent German www.cept.org/eco (ECO) auction of a total of 350 MHz of mobile spectrum in the 800 MHz, 1800MHz, 2 GHz and 2.6 GHz bands (based on ECC-defined technical criteria) yielded a total bid take of €4.4bn out of which €3.5bn were given for this digital dividend spectrum. The numerous radio communications systems that share the spectrum efficiently April 2011 • GBM • 63

Capital markets

Capital Markets Law The world stock exchanges have come a long way since the Venetian‘s first started trading in government securities in the 13 century. Nearly every developed nation and emerging country has its own stock exchange, including its own rules and reregulation’s that traders must adhere to. With the global market expanding at an exponential rate dayon-day, and trade between nations becoming more intensified, capital market law is becoming a key element for any investor to understand.

Despite the current financial situation, capital markets transactions continue to be an integral part of the world’s financial markets. Investment in capital market instruments is an invaluable tool for financial institutions and corporations managing credit risk and liquidity. Given recent market events, capital markets lawyers have played a pivotal role in facilitating these types of transactions in the new financial market landscape. Banks, companies and investment managers are, even now, developing new, robust financial products that satisfy investor and market concerns As the trading world adjusts itself to the aftermath of the financial crash of recent years, the market is heading towards a universal exchange and free global market. The London Stock Exchange has announced plans to merge with Canadian exchange TMX, Deutsche Boerse and NYSE Euronext have revealed marriage plans and now the Hong Kong Stock Exchange, has said it will "consider international opportunities for alliances, partnerships and other relationships that present strategically compelling benefits consistent with its focus on markets in China". In recent years, the emergence of the Middle East and Far East as financial ‘powerhouses’ has also had a profound effect on the global securities and bond markets. With China, United Arab Emirates, Saudi Arabia, Singapore and Qatar all major influencers in their regions, the importance of understanding their capital market law is a new challenge for the lawyer in this arena. With partnerships and alliances being formed daily between governments and enterprises , the legal implications of trade in securities, commodities and bonds has and will become more complex. The world's leading capital markets lawyers have lived through the ‘tough” times of the recent economic crisis and have learnt from their experiences. The market is changing in an unprecedented fashion, in terms of speed, geographical breadth and depth of impact, and so is capital market law. What many investors have come to recognise today, is that by understanding laws of foreign markets, future investment will heavily depend upon the expertise of Capital Market Lawyers.

64 • GBM • April 2011

United Kingdom

Slaughter and May Peter Brien Partner Tel: (0)20 7090 4016 Fax: (0)20 7090 5000 peter.brien@slaughterandmay.com www.slaughterandmay.com

Listing in London The wave of consolidation across international stock exchanges at the start of the year saw the London Stock Exchange (known as the LSE) announce its proposal to merge with Canada’s TMX Group in the same month that NYSE Euronext revealed plans to join forces with Germany’s Deutsche Borse to create the world’s largest exchange by revenue. Like the corporations which they serve, stock exchanges have long ceased to be national entities: NYSE Euronext already operates the Paris and Amsterdam bourses in addition to the New York Stock Exchange, and the LSE itself merged with Milan’s Borsa Italiana in 2007. This increasing consolidation reflects both the global flow of capital as well as a response to increased competition from new market entrants offering ‘off-market’ trading facilities. The exchanges themselves are large and complex businesses with their own capital requirements. The company which operates the LSE is listed on the London Stock Exchange, and as a consequence has been the target of several takeover attempts by other exchanges in recent years. The LSE is one of six recognised investment exchanges in the UK. It operates two principal public markets: the Main Market, which hosts around 1,400 companies representing approximately 60 different countries across some 40 business sectors; and ‘AIM’, its alternative investment market which caters to growing, smaller cap companies within a more flexible regulatory regime. It is possible for AIM companies, if they meet the Main Market’s eligibility criteria, to transfer their securities across to the Main Market at a later stage of their development. In 2010 over £20 billion was raised on the London Stock Exchange, and most of this was on the Main Market. Companies on the London Stock Exchange are subject to the UK’s rigorous listing regime which is administered by the Financial Services Authority (or ‘FSA’) in its role as the United Kingdom Listing Authority (the ‘UKLA’). As the national EU ‘competent authority’ for the listing process, the UKLA’s role has its statutory basis in the Financial Services and Markets Act 2000 (known to practitioners as ‘FSMA’). On an IPO its principal roles would be to approve a company’s prospectus and then to admit its securities to listing. The rules which govern this process (which, alongside FSMA, implement various Europe-wide directives and regulations) are set out in the FSA Handbook. They are known as the ‘Listing Rules’ (which cover listing eligibility and a company’s continuing obligations to investors), the ‘Prospectus Rules’ (which set out when a prospectus is required, and what it should contain), and the ‘Disclosure and Transparency Rules’ (which regulate the disclosure of information by a listed company, covering a variety of communications from the publication of interim accounts to the disclosure of significant shareholdings to the market). Many of these rules apply to offers and listings of securities regardless of the actual stock exchange on which they are listed.

In order to join the Main Market, a company must apply for admission both to the ‘Official List’ maintained by the UKLA (at which point it becomes a ‘listed’ company), as well as to the LSE itself for admission of its securities to trading on the market. The exchange has its own set of rules (the ‘Admission and Disclosure Standards’) which demand that a company complies with the requirements of the local securities regulator as well as with various technical requirements relating to the trading and settlement of its shares. At the start of the admission process, a company must decide with its advisers whether it should apply for a ‘Standard’ listing, or whether it would be eligible for, and would benefit from, its securities being admitted to trading with a ‘Premium’ listing. A Standard listing on the exchange requires compliance with the EU regulations, and is available to a range of a company’s securities, including its Depository Receipts. Many emerging market companies will opt for a Standard listing. For a Premium listing, a company must meet UK-specific requirements that go beyond those set out in the applicable European legislation. A Premium listing is only available for the equity securities of commercial trading companies and closed and open-ended investment entities. It indicates, amongst other things, that a company has met certain standards for the quality and detail of the financial information it has provided to the UKLA, that it has a certain level of working capital, and that it has engaged an approved sponsor organisation (typically an investment bank) to lead it through the listing process and liaise with the UKLA on its behalf. Overseas companies with a Premium listing of equity shares are also required to ‘comply or explain’ against the UK Corporate Governance Code, and to offer pre-emption rights to existing shareholders to prevent them being diluted on a subsequent issue of shares. Although these requirements are more onerous, both for admission and in terms of the company’s continuing obligations once on the exchange, a Premium listing is regarded by investors as a hallmark of quality. All of the companies in the prestigious FTSE 100 and FTSE 250 indices will have a Premium listing. Increased investor confidence will generally be reflected in the liquidity of a company’s shares and in the positive impact on a company’s cost of capital. In order to retain London’s attractiveness as a place for companies to float and raise further equity capital, and in response to the international financial crisis, in June 2010 the UK government announced plans to reform the financial regulatory system. Under these proposals the FSA will be abolished and replaced by three new regulatory bodies: the ‘Prudential Regulation Authority’ and the ‘Financial Policy Committee’, which will be linked to the Bank of England, and the ‘Financial Conduct Authority’, which is expected to take on the majority of the FSA’s market regulatory functions, including its role as the listing authority for the UK. These changes are expected to be implemented by the end of 2012. April 2011 • GBM • 65

Capital markets

Denmark

LETT law firm Kim Esben Stenild Høibye and Søren Brinkmann Tel: +45 33 34 05 88 & +45 33 34 02 26 Fax: +45 33 34 00 01 kho@lett.dk; sbr@lett.dk www.lett.dk

Alternative public offerings in Denmark (in the wake of the crisis) In recent years, there has been a growing interest in alternative public offerings (APOs) as an alternative to initial public offerings (IPOs), in Denmark and the Scandinavian Nasdaq OMX Nordic exchange: Not necessarily in order to raise capital as a primary goal, but to complete a listing with a quick transaction and at a reasonable cost - and sometimes even with the chance of a profit in terms of a favourable price of the public ‘shell’ company. The financial crisis has emphasised a business case utilising a particular type of ‘shell’ company that has proven to be an interesting variant of the APO. Private companies may assume several benefits in becoming publicly traded, such as being valued higher, providing liquidity or exit to shareholders, having an identified market value, greater access to additional capital, etc. Investment companies (funds) will even have legal advantages in attracting new investors as a result of the risk diversification regulation in place for institutional investors and mutual funds; just as the Danish double taxation treaty with most countries includes favourable treatment of publicly traded companies, leaving them virtually tax exempt under certain circumstances. In short, an APO is usually understood to be comprised of two processes: a reverse merger and a private investment in public equity (PIPE). In this scenario the public (discontinuing) company acquires all the shares of the initiating private (continuing) company in exchange for more than 90% of the shares of the public company. After that, the continuing (recently merged) company takes on the name, logo, etc, installs the management of the former private company and files appropriately with relevant authorities. The merger can be either taxable or tax exempt subject to due considerations of what may be most advantageous in accordance with applicable law. The whole transaction and accompanying change of control have transformed the private company into a public company. Followed by a PIPE facilitated by an investment bank or other placement agent, the transaction offers obvious advantages to the IPO especially for small cap companies. In the wake of the financial crisis, a variant of the APO has appeared as a large number of the listed investment funds structured as PLCs have experienced a considerable gap between the NAV of the fund and the market value of the shares as efficiency and liquidity left the market and market makers unable to uphold the market value close to the NAV. In this situation, the shareholders of the PLCs

66 • GBM • April 2011

had but two alternatives to get out of their investment: either sell in the market at a discount compared to the NAV or suggest a solvent liquidation of the company. As a result of performance during the financial crisis, these funds may have little investor interest. In reaction to this mechanism, some investment funds structured as PLCs have recently implemented measures that to a certain extent will allow redemption of shareholders on the basis of the NAV deducted a spread. As an alternative, the private company may make a takeover bid at a price either at or usually below the NAV to release these shareholders and gain the necessary control of the PLC to ensure a subsequent merger, stock swap with or without asset acquisition from the private company. As a possible further advantage to the primary objective of becoming publicly traded, the private company may possibly pick up a profit because of the gap between the NAV and the bid price. This gap may also be the bait if a financial institution or institutional investor is required to facilitate (bridge) financing, the profit depending on the liquidity of the assets in the portfolio of the PLC. In this variant, the ‘shell’ company actually does have assets, which are often highly liquid assets such as listed securities and (some) liabilities and an investor base. As it appears, the procedure would be the private company either acquiring a dominant position in the PLC triggering a mandatory takeover bid or putting forward a voluntary takeover bid. The private company may not acquire as much control in the PLC as 90%, but will instead broaden its investor base and take control of the PLC’s liquid assets. Very often, a surprisingly large number of the shareholders do not react to the takeover bid and remain shareholders in the continuing company after the takeover, which, combined with the liquid assets of the PLC, may serve the same purpose as an ordinary APO. A further variant could be that of entrepreneurs using the ‘shell’ company as an opportunistic fund swapping shares for assets as a way for financial institutions to get listed stock instead of real estate and similar assets that have landed on the institutions balance sheet as a result of defaults in collateralised loans. In this procedure, the PLC issues new stock in exchange for assets in the form of a portfolio of real estate, new energy sources (windmill parks, etc) or other suitable assets, after which the financial institution agrees to act as distributor or placement agent for the newly issued shares.

Nigeria

Olaniwun Ajayi LP

The equity capital market involves the offering of shares of both quoted and unlisted public companies. Prior to the crash of the Nigerian Capital Market, the equity capital market was vibrant, and a significant number of companies raised capital through public offers and private placements. The debt capital market has, however, started to gain depth with public companies now issuing fixed income securities through public offers and private placements. To execute a public offer, the law requires the registration of the securities with the Securities and Exchange Commission (SEC) and the filing of a prospectus, which must disclose with sufficient particularity the state of affairs of the issuer and details of the public offer. However, underwriting of public issues is no longer a mandatory requirement of the law. It is a civil wrong and a criminal offence under Nigerian law to issue a prospectus that contains false or misleading information, and the directors and all advisers named therein must verify the contents and accept full responsibility for the prospectus. For the issuance of debt securities, the law requires additional documents such as a trust deed and a vending agreement. The issuer will engage the services of financial and legal advisers to structure, market and document the deal, and interface with the regulators. The issuer is subject to

Olaniwun Ajayi LP Yemisi Awonuga Head, Banking and Finance Practice +234 1 2702551 yawonuga@olaniwunajayi.net www.olaniwunajayi.net

continuous disclosure requirements, such as filing quarterly reports and accounts with the SEC and Nigerian Stock Exchange (NSE). In 2007, the SEC introduced the book building process, which assists an issuer to determine the price at which a public offer should be made based on feedback received from high-net-worth individuals and qualified institutional investors. Where the book building process is utilised for equities, a minimum of 20% of the offer must be reserved for retail investors. The tax consequences of a public offer for equities and debt securities range from stamp taxes payable by the issuer on the offer documents to the tax liabilities of an investor. However, in respect of bonds, the fiscal landscape may change given the recent move by the federal government to make all types of bonds tax exempt. The NSE regulates the admission of securities to the official list of the Exchange; the delisting of securities and supervision of dealings on the Exchange to protect the investing public. A public company may apply to the NSE for the admission of its shares by way of an offer for subscription, an offer for sale, placing, rights offer and listing by way of an introduction, to mention a few.

April 2011 â&#x20AC;˘ GBM â&#x20AC;˘ 67

procurement law report

procurement law report International Public Procurement Law

Although public procurement is the purchasing of goods, public works and services by a government, many organisations and business fail to recognise the importance and impact this can have on trade. Public procurement rules are intended to ensure the best terms for government and the adequate protection of suppliers and contractors that sell their goods and services to the state.

With the ever growing global market, public procurement is expanding into territories beyond national boundaries and as a result, governments and businesses that deal with them have to adjust and understand new legislation at a rapid pace. However, there are specialist law firms and lawyers who specialise in assisting firms and government bodies to stay within the law of national and cross-border procurement. In an attempt to reduce barriers to international trade, public procurement agreements have evolved during the past three decades at both global and regional levels. These agreements give rise to a number of complex, topical issues especially from a legal perspective, thus resulting in confusion and ultimately a breakdown of trade possibly between two nations. Within the European Union alone, over 700 public procurement procedures are commenced daily. With â&#x201A;Ź1500 billion being expended on transfers and services, it is self evident that there are immense interests at stake for both governments and companies. It is with an everincreasing frequency that both groups are calling upon legal expertise. Public procurement can mean valuable, often long-term business opportunities for bidders and their suppliersand that means it is particularly vulnerable to corruption. Therefore, understanding the legal framework is of paramount importance and procurement lawyers are becoming just as important the buyers and sellers themselves.

68 â&#x20AC;˘ GBM â&#x20AC;˘ April 2011

UK Jeremy Sharman and Russell Williamson Bird & Bird LLP 15 Fetter Lane London EC4A 1JP United Kingdom

T: +44 (0)20 7415 6000 F: +44 (0)20 7415 6111 Jeremy.Sharman@twobirds.com Russell.Williamson@twobirds.com www.twobirds.com

After the dust has settled: post-award changes to contracts in Europe Once a public contract to supply goods or services has been awarded, the contracting authority and successful supplier may be forgiven for believing that no further hurdles must be overcome. However, unexpected pitfalls for the parties can arise when changes are made to an existing contract after the procurement process has been completed. Such issues are particularly noteworthy in the uncertain economic environment, as parties may seek to adjust contractual terms to reflect altered circumstances. For example, a contracting authority may want to extend the period of the contract, or replace a supplier who can no longer deliver its services due to financial difficulties. The key question for the parties to remember is this: is the intended change so material that it effectively creates a new contract? If so, the change may amount to the award of a new contract which should be re-advertised under a competitive tender process in accordance with procurement law and the underlying objectives of transparency, equal treatment and undistorted cross-border competition. Such requirements are likely to be costly and disruptive for the parties. ‘Material change’ The European Court of Justice (“ECJ”) has explained, in its decision of Pressetext Nachrichtenagentur GmbH v Austria and others (C-454/06), that – in principle – contractual changes will give rise to a new contract if the new terms are materially different in character from the original contract, such as to demonstrate the intention of the parties to re-negotiate the essential terms of that contract. This test will be satisfied where the scope of services under the contract is extended or where conditions are introduced which, had they been part of the initial award procedure, would have allowed for the acceptance of tenders other than the winning bid. Conversely, minor amendments that do not give the supplier a significant economic advantage are unlikely to re-trigger the procurement rules.

Nevertheless, whether a particular change is ‘material’ is a grey area and one which is likely to give rise to confusion and uncertainty. Change of contractual partner One notable example of this uncertainty concerns the substitution of a new contractual partner for the one which had initially been awarded the contract. The ECJ has stated that, as a rule, such substitution will constitute a change to one of the essential terms of the contract, unless that change was provided for in the terms of the original contract (such as, for example, provision for sub-contracting). It does therefore appear that a change of contractual partner is only exceptionally permitted under EU procurement law. The Pressetext decision itself involved the transfer of the contract to a wholly-owned subsidiary of the original contractor. In particular, the original contractor controlled (and managed) the new subsidiary and continued to assume responsibility for the relevant obligations under the agreement. In these specific circumstances, the ECJ considered that this represented an internal reorganisation of the existing contractual partner, which did not fundamentally modify the contractual terms. However, the ECJ left open the question of whether other types of contractual transfer, such as novation and assignment, would signify a material change. This will create a dilemma for contracting authorities where, for example, the original supplier becomes insolvent (and can no longer fulfil its obligations) and its assets and business are acquired by another company. It is likely to be argued that, in such circumstances, the change to the supplier’s identity is one of form rather than substance and, accordingly, should not constitute a material change. The ECJ however has stipulated that changes in the identity of shareholders of a supplier would not be equivalent to an internal reorganisation, and would constitute an actual change to an essential term. However, where a supplier is publicly listed,

a transfer of its shares will not generally denote a material change as such shares are liable to be transferred at any time. Limiting the risk It is clear that changes to an existing public contract must be treated cautiously. Care will need to be taken when making changes as a result of economic or organisational circumstances, to ensure that such amendments do not transform the contract into something materially different from that originally tendered. Parties should consider the significance of any proposed change, both in terms of monetary value and scope. For instance, a change in the price or an extension of services to be supplied are likely to constitute material changes. However, it should be remembered that it is not the intention of the procurement rules to stifle sensible changes to existing contracts which achieve cost savings for the parties. The concern that the Pressetext decision gives rise to is that uncertainty in this area will enable disgruntled suppliers to do just that. The case law also highlights the importance of making provision for anticipated and future changes in the original contract itself, rather than leaving open the possibility of parties negotiating particular variations. This may include the incorporation of change control and transfer mechanisms, allowing a contracting authority to substitute the original contractual partner with another party. However, it should not be forgotten that the fact that a contract may permit a change (for example, an assignment to another party) does not mean that the change will be permissible under procurement law. It is not yet known how pragmatic the Courts will be when faced with significant amendments to public contracts. However, contacting authorities should be aware that changes to a contract, not only during the tender process, but after the award has taken place are likely to be scrutinised by unsuccessful tenderers and may well be challenged.

April 2011 • GBM • 69

procurement law report

Latvia Agnese Hartpenga Senior associate, attorney at law Tel: +371 6788 9999 Fax:+371 6788 9990 agnese.hartpenga@tgslegal.com http://www.tarkgruntesutkiene.com

International Public Procurement – The Remedies and Enforcement Latvia is a Member State of the European Community (EC) and thus is subject to EC laws. The public procurement Directives 2004/18/EC, 2004/17/EC, 2007/66/EC, 2009/33/EC have been implemented in the laws of Latvia. The main laws regulating public procurement in Latvia is Public Procurement Law, 2006; and Law on Procurement for Utilities, 2010. A separate law regulates private and public partnership (Public and Private Partnership Law, 2009). Currently there are no significant proposals for changing the effective laws. Most recently the applicable laws have been amended due to implementation of the Remedies Directive (2007/66/EC) supplementing the review procedure. Since May 2010 the law provides for the right to appeal a public contract in court. An administrative court may declare a contract void as of its execution date, amend or cancel its terms or shorten the term of the public contract. Otherwise, in case of breach of law requirements prior to execution of a public contract a complaint shall be filed with the Procurement Monitoring Bureau – a public authority supervised by the Ministry of Finance. Generally pursuant to the Latvian procurement laws, if a person, who is or has been interested in execution of a public contract or is a candidate for awarding and which, in relation to the specific procurement procedure governed by this law, believes that its rights have been encroached upon or such encroachment is possible, caused by possible violation of EC or other laws, is entitled to submit an application on the selection regulations of the candidates or tenderers, technical specifications and other requirements, which relate to the given procurement procedure, an application on activities of the contracting authority or tender commission during the tender procedure. An application on the violations of the requirements of the procurement law may be submitted by the day of execution of

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the public contract (pursuant to the Public Procurement Law - within 10 days – if the notice on results of the procurement procedure has been sent via fax or email, and within 15 days – if sent via ordinary mail). If an application is received in the given time period, the Procurement Monitoring Bureau informs the contracting authority and the authority does not execute the contract by the day of receipt of results of the review of the application by the committee formed by the Procurement Monitoring Bureau. An application on the requirements included in an open tender rules and notice on public contract shall be filed with the Procurement Monitoring Bureau not later than 10 days prior to the end of the term on submission of the tender. With regard to a closed tender invitation or candidate selection rules, as well in the documents of negotiated procedure and competitive dialogue and in their notices of public contract shall be filed with the Procurement Monitoring Bureau not later than four working days prior to the end of the term on submission of the tender. The Procurement Monitoring Bureau reviews an application within a month from the day of receipt of the same. If, due to objective reasons, such a term cannot be observed, the committee may prolong the term by sending a respective notice to the person submitting an application and to the contracting authority. The decision of the Procurement Monitoring Bureau may be challenged in administrative court. The judgement of the first instance court may be appealed only in the Supreme court in the cassation procedure. The case review in the court, until the final binding judgment is made, may take three years or more. It must be noted that the risk of challenge or appeal of any element of the procurement procedure as provided by law exists, and as per the practice in Latvia participants tend to exercise their rights provided by law

quite extensively in this regard, sometimes also just with an intention to delay entering into a public contract. In order to limit filings of complaints, the parliament introduced in the Public Procurement Law a new provision – an obligation to pay a deposit for filing an application in certain cases. The amount of the deposit is set as a fixed amount depending on the procurement contract sum. However, this body of law was disputed by the president of Latvia by submitting a constitutional complaint, on the grounds that the disputed provisions restrict the rights of a person to challenge legality of use of the state and municipal funds and violates the principle of separation of powers. The Constitutional Court annulled this requirement. Taking into account that the law foresees a detailed challenge procedure, the Procurement Monitoring Bureau has a considerable number of cases to review, of which many are satisfied and as a result the contracting authority prohibit to enter into public contracts. Due to the length of the court proceedings and because losses are difficult to prove, we have no information at our disposal on any case when damages are compensated due to the procurement procedure violating the requirements of the law. Thus, currently the challenge of the purchaser’s decision or activity is effective only until the moment of entering into the public contract.

Argentina María Inés Corrá Partner of M. & M. Bomchil Abogados Tel: +54 11 4321 7517 Fax: +54 11 4321 7555 mariaines.corra@bomchil.com www.bomchil.com

Public procurement law Argentina has both federal and provincial levels of legal organisation with their respective laws on public procurement. Decree No 1023/2001 sets forth the general rules governing the federal state contracts. This Decree is complemented by Decree No 436/00 (the Regime). Further relevant legislation on the matter are: Law No 13,064 (on public works); Law No 17,520 (on concessions contracts for execution of public works); Ministry of Economy Resolution No 834/00 (general bidding terms and conditions for the contracting of good and services by the federal government); Law No 25,188 (on ethics in the public function); Law No 25,551 (on buy Argentinemade products); Decree No 1818/2006 (on electronic system of public contracts); and, Law No 24,156 (on financial administration and control system of the national public sector), among others. The basic underlying principles are: reasonability; efficiency; competition among tenderers; transparency; publicity; public accounting; and, equal treatment. Procedures The Regime establishes the following awarding procedures: public tendering (for contracts that value exceed AR$300,000; selection upon economic factors) or contest (decisive criterion based on technical-scientific ability or otherwise); abridged tendering or contest (applicable to contracts amounting between AR$75,000300,000); public auction (for government acquisition or sale of real state, animals or chattels); and, direct contracting (for contracts not exceeding AR$75,000 and for exceptional circumstances expressly established, ie urgency reasons). Other procedures are also applicable, such as the sale of shares in stock exchange markets. There is no free choice among them. As a general rule, the co-contractor must be selected through the public tendering or public contest procedure. Only in case of an express rule providing for a different method such alternative awarding procedure shall be applied. The Argentine Supreme Court has consistently ruled that whenever a mandatory procedure is established by law and not followed by the government, the contract thereafter executed is null and void. As a general approach, the Regime establishes that selection of the contractors should be made on the basis of the most convenient tender, considering the price, quality, the tenderer’s credentials among other conditions. In some cases, the most convenient tender shall be, in principle, the one that has offered the lower price. Any tender that departs from the bidding terms shall be declared inadmissible, even if it would have been considered as the most convenient one. However, the possibility of alternative bids could be occasionally established in which event they should be exercised within the boundaries set forth for them. Exclusions/exemptions The Regime is applicable to the federal administration and its decentralised entities. State controlled companies and public entities falling outside the federal administration organisation and trust funds

mainly integrated by state assets or funds are excluded from the Regime’s scope of application. The Regime governs all the administrative contracts, except those expressly excluded (namely: public employment contracts; acquisition of goods and services that do not exceed AR$500 or AR$1,000, depending on the circumstances; contracts executed with foreign governments, international public entities, multilateral financial institutions, or totally or partially financed by those bodies; and, contracts related to public finance operations). Remedies and enforcement Any interested party (either involved in or excluded from a procedure) has standing to challenge administrative decisions or regulations issued within the framework of awarding procedures. In addition to the remedies set forth in the Administrative Procedural Law No 19,549, the Regime establishes two specific remedies against certain technical decisions on bids. Administrative remedies shall be submitted within the peremptory time limit established in each case. The application for these remedies does not suspend the effects of the respective order or act, unless it is so established by the law or courts (through a provisory measure). If these remedies are rejected, the claim can be brought before courts, generally within a peremptory ninety court working-day term. The Federal Contentious Administrative Courts have jurisdiction to entertain claims related to federal government acts and omissions. Interested parties may also: pursue a summary judicial proceeding (amparo) aimed at challenging actions and omissions that manifestly affect constitutional, treaty or law rights; or, seek an injunctive relief from judiciary, even if the decision by an administrative authority is pending. Changes during and after a procedure As a general rule, the bidding terms and conditions cannot be materially changed once the call for competition or invitations to submit tenders have been released. If case of substantial amendments, the awarding procedure must be called off and a new one governed by the amended conditions must be launched. The state party to the contract is also empowered to unilaterally modify the total amount of the contract up to a 20% limit, adapting any deadlines to the new conditions. Beyond such limit, the cocontractor has a right to the economic and financial equilibrium of the contract. Additionally, the contractually agreed term for supplying goods or performing services can be unilaterally extended for a period equal to the contract’s initial term. The future The state parties to the Mercado Común del Sur (MERCOSUR) have negotiated a protocol for public procurement - ratification is still pending (see CMC Decision No. 23/2006). As supra-national treaty, if such protocol enters into force, it would hold higher hierarchy than the Regime and thus prevail in case of inconsistency.

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tecHnolGy review - laptops

Technology LAPTOPS Apple Macbook Pro The Macbook Pro is first on our review list, and as ever, it’s an expensive option. Pricing starts at £999 for the 13” version. The 15” version will set you back £1549, and the stunning 17” version an eye-watering £2099. The different Macbook models vary in processor speed depending on the screen size you choose, from dual core 2.3Ghz Intel i7 processor through to the 15” and 17” versions which are fitted with quad core i7s. If you need lots of processing power you may find that the improvement between dual core and quad core is worth paying for, but for home users it’s unlikely you’ll feel the benefit. There is something to be said for future-proofing your purchase, but other than that, you may find your money is best spent on other ugrades. All Macbook Pros are factory fitted with 4GB or 8GB RAM. 4GB is likely to be enough for home users, but again, if you’re planning to use demanding software, such as Adobe Photoshop, After Effects or Premiere, the increase in RAM is likely to make a real difference to the

HP ENVY 17-1195ea The HP ENVY 17-1195ea laptop is certainly stunning to look at, with a brushed aluminium case. The sheer size of the screen makes it almost monolithic; 17.3” of high definition Ultra Brightview display, plus the same Intel i7 processor and 4GB memory as the Macbook Pro. For a laptop of this spec it’s surprising not to see 6GB RAM as in the Asus G53JW 15.6” 3D, or even 8GB RAM, but at least this is one of the easier user upgrades. This HP laptop will catch your eye for more than one reason, though the HP ships with a pair of 3D glasses, which work in the same way as the glasses provided with 3D TVs. Remember, though, that 3D glasses

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performance of your machine. In the same way, the slower 5400RPM hard drive in the 13” Macbook Pro may well feel sluggish compared to the 7200RPM drive in the more expensive models, but for most casual users this is unlikely to be an issue. You have the option of upgrading to SSD (solid state flash memory) for your hard drive, a feature that recurs through our reviews. SSDs are still very expensive and unlikely to offer much benefit in a business environment, except in limited circumstances which we’ll talk about later. Two things to be aware of with these new Macs. Firstly, the battery is not removable. If you’re likely to need more than the estimated 7 hours between charges you may well be stuck; there’s no way you can add a bigger battery or swap your battery over when commuting. Secondly, previous generations of Mac laptops have had problems with their SuperDrives, and once your Mac has passed the one-year guarantee cut-off these can be expensive to replace. The one huge plus with a Macbook Pro is that business users can now dual-boot Windows XP or Windows 7 alongside OS X, meaning they have all options available to them when choosing software. This combination of the stylish OS X interface with Windows business compatibility means more and more Macbook Pros are appearing in offices that were previously dominated by Dell, HP and Microsoft.

are still a long way off being portable, not to mention stylish. However, as 3D gaming becomes more popular - thanks in no small part to the Nintendo 3DS console - it will undoubtedly spread to the PC market. If gaming is your thing, there’s probably little else on the market at the moment with 3D capability that can boast the same sheer size and presence. HP are currently offering the ENVY 17-1195ea with a £100 discount, making it £1499 at RRP. With the price of 3D TV sets dropping rapidly in 2011, you’re unlikely to feel the value in this laptop if you have the option of watching 3D TV in the comfort of your front room. Gamers may feel it’s a worthwhile investment, but they will struggle to play games on the go: while viewing 3D content the battery life drops to under one hour. For business users, there is really little benefit in having a 3D experience, unless you’re planning to create some seriously innovative presentations.

Sony Vaio Z series

Asus G53JW 15.6” 3D

Dell Latitude E6400 XFR

Sony were undoubtedly at the forefront of the netbook revolution with their P-series Vaio line. With the Z series, focus shifts back to the business market with top-ofthe-range solid state technology, Blu-Ray DVD burners and Windows 7 Ultimate as standard issue. As we mentioned in the Apple Macbook Pro review, it’s unlikely that business users will benefit from a SSD hard drive, unless portability and nippy performance are at the top of the wish-list. The Sony Vaio VPCZ13Z9E/X is at the top of the Vaio Z range with a price that makes the most expensive machines in the Apple shop look positively economical. It’ll set you back a whopping £3129, yet the hard drive capacity only tops out at 256GB. It’s worth considering whether you’re likely to need more in the long run. The processor varies between Intel i5 and i7 depending on price, and with up to 6GB RAM, 1GB Nvidia graphics, HD output, 3G capability built-in and N speed wireless network adapters, these laptops are really built for performance. With the option of an online upgrade to carbon fibre casing, it’s clear Sony are marketing these laptops squarely at the professional market. Whether you want to take a gamble on the solid-state drive is very dependent on your business need.

The Asus G53JW is the second 3D laptop in our review list. Perhaps the money Asus save on marketing is better spent in their specs; compared to the HP ENVY 17-1195ea they fit 8GB RAM as standard which is good to see; the processor is an Intel i7, a direct match. Corners have been cut with the screen, though, which is 2” smaller. Arguably this makes the laptop more portable, although a serious gamer is likely to want the biggest display they can find.

This laptop is a real wild-card in our reviews. You won’t be surprised to hear that this is a business laptop, but with a very specific purpose. The Dell Latitude E6400 XFR boasts Ballistic Armor and sealed ports to keep liquid, sand and dust out of the case. If that hasn’t grabbed your attention, it can be dropped four feet onto concrete and looks like a tank with a carry-handle. These laptops have been purchased by farmers, farriers and US Marines for their rugged protection against rough handling. An optional dock allows the laptop to be mounted on a dashboard of a vehicle and the backlit keyboard enables work to continue in the dark. In short, these laptops are designed for environments none of our other laptops would dare to approach. User feedback on the Latitude E6400 XFR is mixed, though. Shock mounted hard drives have been withdrawn, reportedly due to numerous problems and hardware failures. Instead, Dell now issue solid-state hard drives as standard. In some ways this is a good choice, but older models with shock-mounted drives may well be vulnerable and they are not always replaced under warranty. This is also a heavy laptop, weighing twice as much as some of the other laptops we reviewed, and having a battery life of just four hours. Good news for Arctic explorers, though: Dell will guarantee this laptop will work at -29 degrees celsius, which is a pretty impressive feat.

As with the HP we reviewed, nerdylooking 3D glasses are included, as is a gaming backpack - a real clue as to the audience Acer are looking to attract. The laptop also supports full EAX and THX audio, a technology developed by Creative specifically for a better gaming experience, and something serious players are going to be looking for. Interestingly, the air vents on the case are arranged to encourage air flow away from the user for less distraction. The Asus G53JW 15.6” 3D is really not a business machine, although there are a limited number of business users who will find use for the advanced audio and video features. The two-year warranty is a nice bonus over the HP laptop’s one-year plan, but really, neither machine is going to be the primary focus for a professional purchase.

Samsung Series 9 Our final review brings us back to the altogether more delicate world of the ultra-slim, ultra-mobile and ultra-light. In complete contrast to the Dell Latitude E6400 XFR, Samsung’s Series 9 range might not rival the Macbook Pro in it’s features, but it may well sway you from buying their lighter, thinner creation, the Macbook Air. The Samsung Series 9 is one of the few laptops in our reviews to use SSD for good reason. The obvious reduction in weight and bulk has made it possible to slip the rest of the components into a tiny case which is only three-quarters of an inch thick. It is, in fact, thinner than

Our recommendation

We’ve covered a wide variety of laptops here, and anyone with specialist needs is likely to have spotted the laptop that will suit them already. For business and leisure, the Asus G53JW 15.6” 3D may appeal, giving the user the option of mobile 3D gaming and movies. The

Apple’s signature wafer-thin creation. This is a direct competitor, make no mistake; the spec sheet reads like an echo. It has a backlit keyboard. It has a multi-touch trackpad. But - and this is quite a marked difference - the Series 9 has an Intel i5 processor, which is actually an improvement on the AIr’s ageing Core 2 Duo, a processor that has now been offered on the Macbook Air for around three years. At 4GB RAM, the memory in the Series 9 is substantial, and works well with the solid-state drive in providing a really slick and speedy machine. You’ll pay for the upgrades, though. Taking the US RRP as a guide (the UK RRP has not yet been announced), the price is likely to exceed the top-end Macbook Air by a couple of hundred quid. If you want Windows 7 Professional, Samsung will charge you extra for that too. At least you can say your laptop is made out of Duralumin - usually found in aircraft components.

Samsung Series 9 looks the part, and will impress clientele with sheer style and great performance, with the added bonus of weighing less an a notepad. But for true business versatility, and software compatibility, it is hard to overlook the Macbook Pro. Unless you have particular concerns around weight and durability, the three size options and varying specs of Apple’s flagship computer are hard to beat.

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Deal Directory

Carbon Trust and Siemens joint partnership

On 4 March 20011, a joint partnership was announced between the Carbon Trust and Siemens to provide UK businesses with green equipment finance worth up to £550m over the next three years.

This major new deal will boost green growth and unlock business investment in the low carbon economy - key to the UK’s recovery. The new dedicated low carbon finance scheme is a first and will enable UK businesses to invest in cost effective energy efficiency equipment or other low carbon technologies, such as new efficient lighting and biomass heating. Tom Delay, chief executive of the Carbon Trust, commented: “Driving green growth in the UK is key to our economic recovery. A missing ingredient at present is access to affordable finance to enable business to make green investments. This new major finance facility will improve business competitiveness, cut carbon and boost green growth.” All businesses will be able to apply for new green growth finance from the scheme from 4 April 2011. Under a heads of agreement signed between the two parties, Siemens Financial Services Ltd in the UK (SFS UK) will provide the financial backing and manage the provision of funding, and the Carbon Trust will use its expertise in carbon saving from energy efficient technologies to assess the carbon, energy and cost savings of any application. This will enable the financing to pay for itself through energy savings. James Gearey, CEO from Siemens Financial Services Ltd UK commented: “We are delighted to be working with the Carbon Trust, their values very much match our own. Siemens has been reporting the performance of its environmental portfolio since 2002, not just the commercial performance, but also the hundreds of millions of tonnes of carbon emission reduction that has been delivered through Siemens technology.

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Siemens Financial Services has extensive experience of asset financing and lending to UK business and is particularly successful in the SME sector. This background combined with our ready access to funding means we are well placed to support the scheme and deliver the associated benefits to its future customers.” Miles Templeman, the director general of the Institute of Directors, said: “In today’s high energy cost environment improving energy efficiency is a must for all businesses. The new Energy Efficiency Finance scheme could play a significant role in stimulating innovative solutions.” And John Sauven, executive director of Greenpeace, welcomed the partnership saying: “This green finance deal is exactly the sort of initiative that we need to see happening more frequently in the future. A green growth strategy can only work if it is backed by green finance. Deals like this, alongside the development of a green infrastructure bank, could be a tipping point that the UK economy needs to get out of the current doldrums.” The Carbon Trust and Siemens Financial Services have also agreed to finance a new commercial venture that will increase the take up of energy efficiency projects. This venture will offer procurement support to businesses wishing to purchase energy efficiency equipment at scale from a network of accredited suppliers and will be launched later this year. Siemens was established in the UK 168 years ago and now employs around 16,000 people in the UK. Last year’s revenues were £4.1bn. As a leading global engineering and technology services company, Siemens provides innovative solutions to help tackle the world’s major challenges, across the key sectors of energy, industry and healthcare.

Siemens has offices and factories throughout the UK, with its headquarters in Frimley, Surrey. The company’s global headquarters is in Munich, Germany. For more information see www.siemens.co.uk The Siemens cross sector Financial Services (SFS) is an international provider of financial solutions in the business-to-business area. With about 2,000 employees and an international network of financial companies coordinated by Siemens Financial Services GmbH, Munich, SFS supports Siemens as well as non-affiliated companies, focusing on the three sectors of energy, industry and healthcare. SFS finances infrastructure, equipment and working capital and act as a competent manager of financial risks within Siemens. For more information see www. siemens.com/finance The Carbon Trust is a not-for-profit company with the mission to accelerate the move to a low carbon economy, providing specialist support to business and the public sector to help cut carbon emissions, save energy and commercialise low carbon technologies. By stimulating low carbon action, it contributes to key UK goals of lower carbon emissions, the development of low carbon businesses, increased energy security and associated jobs. It helps to cut carbon emissions now by providing specialist advice and finance to help organisations cut carbon, and by setting standards for carbon reduction. It reduces potential future carbon emissions by opening markets for low carbon technologies, leading industry collaborations to commercialise technologies and investing in early stage low carbon companies.

Intertek acquires Moody for £450m

Intertek Group plc (Intertek), a leading international provider of quality and safety services, announced on 7 March 2011 that it had entered into a conditional agreement to acquire Moody International (Moody) for a consideration of US$730m (£450m) on a cash-free and debt-free basis (the acquisition).

Moody is a leading worldwide provider of quality and safety services to the global energy industry. It also provides systems certification services to the manufacturing, construction and service markets. Moody is headquartered in Haywards Heath, UK, and employs approximately 2,500 people in over 80 offices and 60 countries. Moody is currently owned by companies controlled by Investcorp Securities Limited and the management of Moody. Moody will join the industrial services division of Intertek. Together Intertek and Moody will have a leading technical services platform in Intertek’s sector of the global energy market. The value of Moody’s gross assets, which are the subject of the acquisition, was US$330m as at 31 December 2009, the latest date at which audited consolidated accounts are available for Moody. For the year ended 31 December 2009, Moody generated revenue of US$457m, operating profit before the deduction of goodwill amortisation (EBITA) of US$66m and profit before tax of US$49m. Moody’s unaudited management accounts for the year ended 31 December 2010 show revenue of US$476m and EBITA of US$54m. The consideration of approximately US$730m represents a multiple of 11.1x 2009 EBITA and 13.4x 2010 EBITA. The acquisition, excluding reorganisation and associated costs, is expected to be earnings enhancing for Intertek in the current financial year and is expected to be materially earnings enhancing next year. The acquisition is conditional upon competition clearances in certain countries.

It is anticipated that the necessary clearances will be obtained by the end of April and the transaction will complete immediately after.

is set for strong long-term growth. Moody is a successful company with a well-regarded management team.

Intertek is a leading provider of quality and safety solutions serving a wide range of industries around the world. From auditing and inspection to testing, quality assurance and certification, Intertek people are dedicated to adding value to customers’ products and processes, supporting their success in the global marketplace.

“The combination of Moody and Intertek provides a platform for the enlarged group to further develop its service offerings and network within the oil and gas industries specifically, but also to the wider energy and industrial markets. Intertek will now have a leading position in providing quality and safety services to the assets, processes and products for the energy market. The good match between the geographic exposure of the two businesses gives Intertek scale in new countries and the enlarged group a greater presence in the fastest growing regions of the world.

Intertek has the expertise, resources and global reach to support its customers through its network of more than 27,000 people in over 1,000 laboratories and offices in more than 100 countries around the world. Intertek is funding the acquisition entirely in cash from new and available debt facilities. The acquisition offers significant benefits for and opportunities to Intertek, including: becoming a leading provider of quality and safety services for the global energy market; creating a global platform for the provision of industry services, extending existing EU and North American positions; extending the depth of the service portfolio for energy assets, processes and products; becoming a global player in systems certification; increasing revenue diversification for Intertek; and, pre-tax cost synergies rising to approximately £6m are expected to be achieved by the third full year of ownership. Wolfhart Hauser, chief executive officer of Intertek, commented: “Today’s announcement marks an important stage in the ongoing development of Intertek. Moody operates in one of our core industries, the global energy market, which

“We are also pleased to be merging our systems certification business with that of Moody. The businesses are strongly complementary with good geographic and customer fit and this will make Intertek a significant player in this industry.” Brendan Connolly, chief executive officer of Moody, will remain as part of the management team going forward. He commented: “Moody and Intertek are a perfect fit. We can offer our world class technical inspection, consultancy and training services to Intertek’s clients and we will benefit from the Intertek expertise in providing quality and safety services to existing, and often ageing, energy assets. By combining these two businesses, we will ensure that the enlarged group takes a leading position in the global energy market. The fit of our businesses also applies to the merger of our two strong systems certification platforms. Overall, this is a compelling combination.”

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Deal Directory

Milestone Capital completes the buy-in management buy-out of Compre Holdings Limited

Milestone Capital Partners LLP (Milestone Capital), the Anglo-French private equity firm, announced on 7 March 2011 that it had completed the buy-in management buy-out (BIMBO) of Compre Holdings Limited (Compre) following receiving regulatory approval from the UK, Finnish and Swedish Financial Service Authorities.

Compre is being acquired from the three current owners: Mikko Sinko, Nick Steer, and Ken Davies. Both Mikko Sinko and Nick Steer will roll-over a significant proportion of their proceeds, with Nick Steer remaining with the Group as chief executive officer and Mikko Sinko remaining on the Group board as a non-executive director. Nick Steer and Mikko Sinko will be joined by two new members of management: Will Bridger (managing director - acquisitions) and Rhydian Williams (managing director operations). Milestone Capital, specialists in buy-andbuild investments, led the transaction and provided the equity funding for the deal and will own a majority stake in Compre going forward. Milestone Capital has also committed substantial additional funds to support the buy and build vision of the new management team. Compre is a specialist insurance group focused on acquiring Nordic, continental European and UK insurance companies and portfolios that are in run-off, ie that have been discontinued by their parent. The business was founded in 1991 and had net assets of circa £23m as at December 2010. In the past 24 months, the Compre Group has grown significantly through the acquisition of the WI Insurance (formerly WASA) and

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Stockholm Re run-off portfolios in Sweden, the London & Leith Insurance Company in London and has set up new service operations in Basel and Baar, Switzerland. The new management team believes that there will be significant opportunities in the near future to acquire additional insurance companies and portfolios in run-off from larger insurance companies, largely as a result of regulatory changes in the insurance market. Philip Conboy, partner at Milestone Capital commented: “We are pleased to have completed the transaction following receipt of the required regulatory approvals. The market continues to offer significant opportunities as a result of regulatory changes and we look forward to announcing new bolt-on acquisitions shortly.” Milestone Capital is an independent private equity firm investing in buy-andbuild situations, owned and controlled by its partners, which manages over €300m and invests mainly in the UK and France. Milestone Capital seeks to identify and invest in experienced management teams with a strong track record. Working in close collaboration and partnership with these management teams, Milestone Capital executives will deliver strategic business input and significant industry contacts,

ensuring maximum business performance and strong long-term shareholder returns. This is Milestone Capital’s sixth investment in its current portfolio. Milestone Capital has seven investment professionals based in London and Paris. The team at Milestone Capital was made up of Philip Conboy and Colin Granger. Milestone’s legal advisers were Osborne Clarke led by Paul Cooper and Amy Salmon. Milestone’s due diligence team were: PwC (actuarial) led by Mark Allen; Littlejohn (financial) led by Ian Cowan; E&Y (commercial) led by Kevin Gill; Cobalt (human capital) led by Madeleine Pincott; and, Willis (insurance) led by Alistair Lester and Rose Weedon.

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