Global Business Magazine - March 2011

gbm March 2011

global business magazine

tHE MaldiVES: A BLUEPRINT FOR A NEW DEVELOPMENT MODEL?

dispute resOlutiOn

Oil and Gas sectOr

private eQuitY Funds

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INSIDE This Month:

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internatiOnal envirOnMental law

luxurY Brand series GOlF resOrts

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Business Talk As the business world gets stuck into the crux of 2011, certain industries and sectors continue to shine and make headlines. In this month’s issue we focus on how Rothschild and BeCitizen are helping the Maldives to become carbon neutral by 2020.

Oil and Gas continues to make headlines both in the business and political arena. We take a thorough look with some of the leading experts and advisors in the industry to give their expertise on what is currently happening and what the future holds.

An important aspect of business that is often overlooked by many firms all over the world is Trademark Law, due to the lack of understanding, it is commonly placed at the bottom of the priority list and can in some cases it can be completely ignored. This month, we’ve gathered leading experts in the field to give you the low-down on the importance of trademarking your products and services.

cOver stOrY

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Oil and Gas sectOr

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private eQuitY Fund services

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internatiOnal arBitratiOn and dispute resOlutiOn

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internatiOnal advisOrY FOruM

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china FOcus

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iMpOrtance OF tradeMarkinG YOur Business

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cOuntrY prOFile - MalaYsia

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OutsOurcinG Guide

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unepFi

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aGriculture

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Contact Us:

Q&a with iveta cherneva

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

cOMpeitiiOn law

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deal directOrY

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In recent months, Europe has taken a battering from the current economic climate, none more so than Spain. However, we highlight Spain in our European Country Profile and promote businesses who prove that there’s still life in the “Matador!” The Far Eastern movement show there’s life beyond China, one such country is Malaysia, who look to promote what’s on offer behind their natural beauty.

As the competition heats up for every aspect and every type of business, our experts advise on what it legally takes to compete on a level playing field for big and small businesses. With organisations looking to take advantage of the global market, investors are finding it more and more difficult to understand the various jurisdictions of cross boarder laws and other issues relating to competition.

Finally, our luxury series continues to explore the ‘crème de la crème’ and the finest the world has to offer. This month we highlight some of the world’s most exclusive and exquisite golf courses to help you make your mind up when you’re looking to take a break from your work!

gbm global business magazine

cOuntrY prOFile - spain

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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March 2011 • GBM • 03

Business News

• UK Fears Over Inflation Rise

BANK of England supremo Mervyn King has predicted that inflation is poised to go up steeply during the first six months of 2011.

He said: “Some people are running ahead of themselves and saying that we are

a chance that weak growth would “push inflation well below target”.

pre-announcing or laying the ground for a rate rise.

He has also warned that it might either undershoot or overshoot the Bank’s target of 2%.

“That decision has not been taken and won’t be taken until we get to the next meeting or the following meeting, or it may be many quarters.”

He added that there were differences of opinion in the Bank’s rate-setting MPC over inflation’s likeliest path in the short to medium term.

The Bank of England governor repeated his strong belief that outside factors, including the increasing cost of energy and food, were the primary cause of prices rising across the UK. He also said that growth was likely to be a lot weaker than predicted by the Bank back in November.

Mr King has also played down claims that the Bank of England had hinted interest rates may have to go up during 2011 in an attempt to reduce inflation.

About 12 months ago the Bank of England’s Monetary Policy Committee (MPC) said it expected that inflation’s target measure would now be standing at about 1%. But instead it stands at 4%.

Mr King explained that if businesses and householders thought high inflation might be here for good, wages and prices may increase even more rapidly.

A couple of MPC members have already argued that interest rates should be raised. The base rate is currently at 0.5%, a record low.

The split in opinion reflects a bigger argument among economists. Some claim rates should rise to stop inflation going up further, while others insist a rise would put in jeopardy the beginnings of an economic recovery.

But as the impact of January’s VAT rise to 20% and imported pressures on costs start to diminish, Mr King said there was

• Record Profits for BHP Billiton

HIGH prices and huge demand has led to BHP Billiton, the biggest mining company in the world, making record half-yearly profits.

The company revealed that net profits leapt a staggering 72% to more than $10.5billion for the six months leading to the end of last December.

The mining giant has also revealed its plans to fork out $80billion on a raft of new worldwide schemes and also buy back $10billion of investors’ shares.

But BHP tempered the good news by claiming that demand was likely to slow in 2011, although it believes that economic conditions should boost earnings.

Marius Kloppers, BHP chief executive, said: “While we expect a slowdown in the growth rate of global commodity demand in calendar year 2011, the economic environment still underpins a robust

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near-term outlook for our products.”

The firm also said it was planning to splash out the $80billion through to 2016 in a bid to kick-start new projects.

Commodity and mining companies are experiencing mixed results in their bid to identify and access new deposits.

According to analysts, the constraints on supply are a major reason commodity prices are going up so much.

The firm also revealed it would utilise the cash to work on a series of projects in Canada, Australia and Chile.

Mes Bruce, portfolio manager at Perpetual Investments, said: “The biggest surprise is the commitment to spend $80bn over the next five years. This demonstrates the challenges the industry is having satisfying rising demand, while replacing declining production from mature operations.”

Recently, BHP was forced to scrap a merger deal with Canada’s Potash Corp, which was the firm’s latest major takeover bid to hit troubled waters in the last three years.

The company is now virtually debt-free and has a big cash pile, so it has opted to speed up its share buyback plan. A very similar shares plan has also been unveiled

by Rio Tinto, one of BHPs biggest rivals.

Shares in BHP dropped by 1% after the earnings revelation, although analysts said this met the expectations of the market.

• Dell Shares Soar After Profits Boost SHARES in computer giant Dell have risen by nearly 10% after the company revealed its profits had virtually trebled.

The PC-maker said its net income in the fourth quarter had jumped to $927million, which was an increase from $334million from the same period 12 months ago.

The figures helped to boost net income for the full year to a whopping $2.6billion as opposed to $1.4billion in 2009.

Dell was assisted by the reduction in price of computer components, while another factor in its success was the number of businesses replacing their IT and computer equipment, a signal that consumer confidence might be returning among companies.

Another encouraging statistic was that revenue from large and small business clients was up 12% on the previous year.

Dell’s growth was especially apparent in Brazil, Russia, India and China, known as the Brics countries, where revenue rose by more than a fifth. The four countries currently represent nearly one dollar in every seven that Dell makes. In the Americas and Europe, growth was just 3%

their share price will still be weighed on by rising costs and thinning margins.”

Michael Dell, the chief executive and chairman of the computer manufacturer, revealed: “I’m very pleased with the strong performance we’re seeing in our commercial businesses.”

It is thought that sales of its Inspiron Duo will be pivotal to its consumer division in the next 12 months. The device combines a keyboard laptop and a tablet, and is expected to be a major seller.

The firm has predicted that revenue will increase by between 5 and 9% during the present financial year, although some analysts have said this might not be possible.

Dell has also been trying to move the focus of its business away from the sluggish PC market and more towards cloud computing and data services.

Consumer revenue fell 8% compared with the last quarter 12 months earlier but Dell claimed this was due to last year’s statistics getting a boost by the Windows 7 launch.

Andrew Deng, of Taiwan International Securities, said: “Dell’s positive outlook is a plus for its suppliers’ businesses but

• India and Japan Secure Free Trade Deal

INDIA and Japan have penned a free trade agreement that will see tariffs on more than 90% of goods scrapped inside 10 years.

The deal focuses on the drug, textile, services and automobile sectors and arrives at a time that trade between the two countries is falling.

burgeoning economies and it is seeking new markets for products manufactured by its own companies.

The trade deal was signed and sealed in Tokyo by Japan’s Foreign Minister Seiji Maehara and India’s Commerce Minister Anand Sharma.

Bilateral trade was down 23% to about £6.2billion in 2009, according to the Japan External Trade Organisation.

Meanwhile, the World Trade Organization (WTO), in a separate report, has claimed that more open markets would boost economic growth in Japan.

The free trade deal omits Japanese farm products including wheat, dairy and rice goods. These are thought to be too sensitive to scrap the tariff.

According to the WTO, while Japan’s political leaders have taken major steps to boost growth, they still need to do a lot more where trade is concerned.

The agreement comes just after China overtook Japan as the world’s secondbiggest economy and Japan is now eager to improve trade links to counter slow demand domestically.

In a policy review of trade in Japan, the WTO said: “While looser macro-economic policies have helped Japan’s economy recover from the global financial crisis, they do not address its long-standing structural problems.

But India is among the globe’s

“These problems can be addressed more effectively by far-reaching structural reforms, of which trade liberalisation (and the resulting stimulus to competition) is an integral part.”

In another bid to boost links between the two countries, Japan is also considering proposals to finance some of India’s own infrastructure projects.

The Commerce Minister in India has proposed setting up a $9billion fund to develop the Mumbai-Delhi industrial corridor even further.

This project began in 2007, and is based on a similar deal between Tokyo and Osaka. It’s being partly funded by the Japanese government and other Japanese businesses. When it is completed, it will include rail freight network, six airports and a trio of new sea ports and is expected to attract over $100billion of investment.

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cOver stOrY

The Maldives:

A blueprint for a new development model?

By Flora Bernard, Associate Director of International Development

When thinking about the Maldives, images of paradise islands and coconut trees generally come to the mind, throwing the tourist back to times of epic discoveries. Today, the scene is different. Coconut trees, mangroves and blue seas are still there, but the symbols of modern society and comfort that goes with it have gradually invaded the country’s 200 islands with air conditioners, water desalination devices and diesel generators. These modern conveniences are the symbol both of improvements in our standards of living and also of our increased reliance of fossil fuels, the burning of which is one of the causes of global warming and climate change. In 2009, when Maldives’ President Nasheed committed to carbon neutrality by 2020, the aim was not as much to reduce global greenhouse emissions as to demonstrate moral leadership and show that a new path for development was possible, breaking reliance on fossil energy while improving standards of living and generating new sources of revenues from environmental restoration.

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The Maldives is one of the countries that is most vulnerable to climate change consequences, namely sea level rise. It is located south west of India and spreads over 1,000km north to south on 26 atolls with 1,200 islands, 200 of which are inhabited by the country’s 350,000 inhabitants; another 100 islands are occupied by resorts, where 650,000 tourists come every year. It is one of the most popular destinations for lovers of diving and sunny beaches.

The other side of the coin is somewhat different. In order to sustain life in the Maldives, the country depends entirely on fossil fuels and spends the equivalent of 25% of its gross domestic product (GDP) to purchase a source of energy that is both volatile, increasingly expensive and a major source of greenhouse gas emissions. If nothing is done, this dependency could double in the next ten years.

Let’s take a step back. One of the world’s most challenging problems today is climate change. For a lot of people, this is still a faraway concept because they do not see the immediate consequences on their everyday lives. This is mainly due to the oceans’ thermal inertia. Yet what is happening is unprecedented: by burning fossil fuels, humanity is currently releasing back into the atmosphere in a very short period of time (one hundred years or so) amounts of carbon that took millions of years for the Earth to pump from the atmosphere and store in the form of petrol, gas and coal. This has raised CO2 concentrations in the atmosphere from 280ppm (parts per million) in the preindustrial era to more than 390ppm today. It is not only the amount as such that is surprising (the Earth has known such concentrations before), but it is the rhythm of increase that is alarming and which humanity has never known before. It is as if we had suddenly turned the gas on under a pan of water, but the water is not quite boiling yet - and we are inside the pan…

to 59cm by 2100, but other research, such as a recent study from the Centre for Australian Weather and Climate Research, shows that these estimates are conservative, and that sea level rise is likely to be above 50cm and more than 1m by 2100. Even these estimates could be conservative too, as they do not take into account disruptive events, for instance accelerated melting of Greenland, Antarctic Ice Sheets or permafrost. The amount of water released by the melting of Greenland would alone raise sea levels by 6m across the globe.

Many countries are starting to prepare for these changes, and have initiated adaptation strategies in the form of National Adaptation Programmes of Action (NAPAs). Strategies include, for example, migration and population resettlement. In the Maldives, the Safer Island Strategy aims to resettle communities from the most vulnerable islands to better-protected ones.

There are immediate consequences, among which, change in rainfall patterns affecting agriculture, sea level rise affecting low lying countries and provoking erosion of coastlines, melting of glaciers affecting the livelihoods of millions of people, especially in the Himalayas and the Andes. Those countries that are directly affected by these impacts are mostly developing countries, mainly because of their strong reliance on agriculture and poor or vulnerable infrastructure. These climate vulnerable countries are vulnerable because their whole economy is affected by these changes and they will have to deal (some are already dealing with that) with the social consequences of this, amongst which migration of population both inside their own countries and to other countries – a new form of refugees that are called climatic refugees. In Ethiopia, for example, more than 80% of agriculture is rain-fed agriculture and a large share of the population depends on it for their livelihood.

With changes in rainfall patterns, Ethiopia is losing much of its agricultural land, is seeing shorter growing seasons, lower yields and declines in subsistence crops. In China, Nepal, Bhutan or other countries living in the catchment areas of the Himalayas, where glaciers are melting, local populations are facing increased risks of flooding, erosion and landslides. Risks are also in terms of water scarcity, resulting from rising snowlines and a decrease in meltwater, which feeds the seven rivers in Asia that people depend on for freshwater. In the Maldives, sea level rises are already starting to have an impact: coastal flooding, erosion, saltwater contamination of freshwater, are just some of the issues that low lying countries such as the Maldives will have to deal with, with consequences on population settlements, fisheries, coral reefs and wildlife habitat.

In the next century, estimates published by the Intergovernmental Panel on Climate Change (IPCC) state that sea level may rise by 18

Some countries are also using this threat as an opportunity to radically change their development pattern. The idea is for countries to develop new sources of revenue by producing environmental services and goods (by ‘restoring’ the environment). If we take the example of greenhouse gas emissions, a country could become a net carbon sink (rather than a net carbon emitter) and thus increase its revenue streams by having other countries pay for these extra emissions which can contribute to reaching their own national goals. That can be done by reducing greenhouse gas emissions on one hand and developing carbon storage projects on the other, for instance through using biomass to capture and store CO2. Reducing greenhouse gas emissions means reducing consumption of fossil fuels, which can be done either through energy efficiency measures or substituting fossil sources of energy by renewable sources.

Reducing consumption of fossil fuel will reduce the government’s energy bill and free money that can be invested elsewhere.

Also, implementing energy efficient technologies and renewable technologies mean that supply of and demand for these technologies need to be stimulated, through private sector development that will create new revenues locally as well as new jobs. To stimulate demand, innovative mechanisms need to be devised to make these technologies accessible to all parts of the population. It is possible to go further than this and ask whether a country can be a source of net carbon storage. Today, within the framework of the Kyoto Protocol, a non-Annex I country (with no emissions reduction targets) can reduce its greenhouse gas emissions and sell those to countries Annex I countries (those with emissions reduction targets) that need to reach their target, in the form of CDM (Clean Development Mechanism). The country is actually selling the fact that it is reducing its emissions. If a country goes further and also develops ways to store carbon in biomass, then it becomes a net carbon sink and could sell those extra tons of CO2 to other countries that need them. At the end of the day, economic value and social development will be created by creating environmental value-added. The issue which is at the core of the energy efficiency and renewable energy debate however is how to finance the initial capital investments that are required to implement energy efficient or renewable energy equipment. The challenge is to have investors (who can also be households investing in energy efficiency) understand the benefits of investing now to gain future low operational costs (eg. Sun or wind, which is free energy), against no investments now and higher operational costs (due to the increasing cost of fossil fuel). In the context of the Maldives, the challenge is to provide investors with a long term vision of the Maldives’ future and reassure them that the country will still be there for them to secure the expected returns on investments.

The Maldives is on its way towards this new model. When in 2009, Maldives’ President Nasheed announced that his country would be one of the first to go carbon neutral by 2020, he decided to adopt a positive stance to his country’s future and bet on the fact that if all countries follow his suit, then only does the world stand a chance to reverse global warming and its effects. This is also a way to say that

March 2011 • GBM • 07

cOver stOrY the country can survive sea level rise and attract the investments required to secure the country’s energy independence.

As a result of the Carbon Audit which BeCitizen completed in 2010, 5 Priority Areas were identified to enable the country to reach its goal: energy efficiency, renewable energy, sustainable transportation, waste management, and carbon storage projects mainly through biomass. In the Maldives, out of a total of 1.3 million tons of CO2 emissions per year (excluding international flights), more than 30% can be attributed to the capital island of Male, which hosts one third of the population. If energy efficiency measures and small scale renewable energy solutions were implemented, the inhabitants’ energy bill would be reduced (for instance 30% of the energy bill goes to cooling), and the costly development of new capacity could be avoided. Another 25% of greenhouse gas emissions result from resorts, and an extra 10% from transport to get to these resorts. If we add greenhouse gas emissions resulting from international flights, this is an extra 1.3 million tons of CO2. This makes tourism the largest contributor to greenhouse gas emissions.

Tourism is, however, also the greatest contributor to the country’s wealth and the sector could therefore be a major actor in providing solutions to the issue of climate change and become the spearhead of a new, truly ecological form of tourism, if a solution is found to reduce and compensate the sector’s emissions, both from resorts and internal and international transport. If resorts implemented solar cooling, they could reduce their energy consumption by more than 50%. Implementing other energy efficiency measures and producing renewable energy locally could also lead them to become energy positive. By producing more energy than what they consume, they could provide neighbouring islands with renewable sources of energy. This would have a strong social impact, providing poorer communities with energy produced by more wealthy islands.

Regarding transport, the solutions would have to go towards replacing fossil fuels by biofuels with a positive environmental footprint and finding ways to compensate greenhouse gas emissions resulting from international flights, in the form, for instance, of a carbon tax that would be imposed to all incoming flights.

BeCitizen and La Compagnie Benjamin de Rothschild have been involved with the Maldives for over a year now, helping the government realise its commitment. This involvement is particularly important to us, as we believe that the Maldives can serve as a model and as a blueprint for other countries to develop similar strategies.

Where does our involvement with the Maldives stem from?

BeCitizen is a strategic environmental consultancy based in Paris, France, that was created in 2000 with the vision that environmental degradation could only be countered thanks to innovative technologies and ideas based on innovative business models and supported by adequate regulations. Our vision is that environmental restoration can only happen if a positive economy model is developed, whereby more economic value gets created by producing environmental goods and restoring the environment, rather than destroying it - which is the model on which the current economy is based on. With our shareholder La Compagnie Benjamin de Rothschild and other institutional and private partners, we are inventing and creating the financial and market mechanisms that will accelerate this shift: investment funds that invest in innovative environmental technologies, companies with business models that favour environmental restoration. We advise companies in all economic sectors from agriculture to industry and buildings, to help them imagine how they can generate new sources of revenues by creating environmental value-added. For instance, buildings can become net energy producers and their owners can gain extra revenue from selling electricity, farmers can gain extra revenue from selling the fact that their agricultural activity contributes to preserving biodiversity. We also play a strong lobbying role to advance environment-related legislation that supports this vision.

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The Maldives’ new development model could combine innovative technologies, innovative financing mechanisms enabling the local population to have access to them and enabling regulatory frameworks that favour the development of environmental solutions.

The Benjamin de Rothschild family has always had a certain vision of the future and of the great changes that shape our society. The family has been involved in major societal and industrial changes over the past 250 years and large infrastructure projects. Today, the current economic model requires systemic changes in which different actors all have a role to play: governments need to show vision (as is the case in the Maldives); companies need to imagine and develop business models whereby economic value results from creating environmental value; and, financial institutions need to support the development of the real economy and, in particular, those companies and projects that will contribute to this new vision.

In 2008, La Compagnie Benjamin de Rothschild took a majority stake in BeCitizen to combine environmental expertise with the group’s financial expertise and develop tools and products that accelerate the development of a positive economy. Ariane de Rothschild, as president of BeCitizen’s board, is particularly involved in pushing these new models, in all areas of the world and in all areas of the economy. La Compagnie Benjamin de Rothschild and BeCitizen have launched the Positive Economy Edmond de Rothschild Funds (PEERF) family of funds, which cover private equity funds, funds investing in listed companies and funds investing projects.

The financial community needs to use its power to invest in the companies and the projects of the future, those that generate increased social value and improved standards of living, while at the same time reducing their environmental footprint, and more, creating positive environmental impacts.

The Benjamin de Rothschild family and BeCitizen wish to be one of the key actors in this new paradigm shift and supporting the Maldives’ efforts in this respect is a concrete demonstration of both the family’s and BeCitizen’s commitment. Yet as a country that has attracted much international attention over the past couple of years, the Maldives has received many promises from a variety of international organisations and countries for funding low carbon projects. The challenge the country is facing now is to decide how to best use these funds and design a strategy that will ensure that the flow of money is spent on the projects that have the most positive impact from a global environmental and social point of view energy, carbon and also resource use and impacts on biodiversity, health and the well-being of the local population. The challenge is to demonstrate through strategic planning and concrete action that a new road for development, with sources of revenues resulting from environmental restoration can also improve livelihoods and serve as a model to the rest of the world.

Copyright of images belongs to: Vincent Pichon

Oil & Gas sectOr

OIL AND GAS INDUSTRY - Investment Overview The oil and gas industry is something of a behemoth in the global economy, providing not only a huge slice of the energy requirements of modern society, but also a feedstock for a range of material products, from fertilisers to plastics. It encompasses a broad spectrum of activities, from geophysical surveys, to well drilling and production, through to refining and transportation. The players in the market are equally diverse, ranging from small independent exploration boutiques, to national oil companies, to multinational giants with massive economic power. And with oil supply and demand on the cusp of an historic divergence, with peak oil possibly around the corner, the scope for high oil prices, and enhanced returns, appears a certain one for the industry. This all adds up to a massive investment opportunity- but one of dizzying complexity, for which investors will need the most professional, and diligent, of advisers. It is essential to ensure that all of the legal and financial knots are unravelled, before investing, so that the real potential is fully realised.

History The oil and gas industry can trace its history back into the late 19th century, but it only developed in its modern form 20th century. The story really started to roll in North America, under the auspices of John D. Rockerfeller, whose entrepreneurial eye for an emerging market led to the creation of Standard Oil. He took the cut-throat competition that was undermining the industry, and formed the the first oil ‘major company’ through a trust which sought to increase prices. Once petroleum became the fuel of choice for the burgeoning market in auto-mobiles, a tremendous wave of capital investment in drilling, and oil and gas exploration began. Since then prices, and investment, have been on a century long roller coaster ride.

The initial boom in exploration, and frenetic race to maximise production, led to a dramatic fall in prices. This persisted until World War II, when demand for all forms of refined petroleum products increased, and worries over depletion of reserves focussed attention on the potential of the Middle East.

This ushered in the post-war golden era of the American oil companies, who ploughed into the region to secure the unprecedented reserves discovered there.

The 1950s were a time of low-cost oil, when huge new fields produced easily and rapidly, and in response the American consumer literally drove forward consumption to new levels, taking over a third of the world’s petroleum. But the low prices left many producers unhappy, and in the 1960s they banded together to form the Organisation of Petroleum Exporting Countries- OPEC. In the 1970s that they flexed their new muscle in the market, producing major price spikes. These in turn started the first serious efforts to look for alternative forms of energy, as well as new sources of supply. The most immediate effect of these efforts was to increase supply from non-OPEC sources, and oil price fell back again.

But the modern era of tightening supply, and rising prices, can really be traced back to the 1990s, with the supply disruption resulting from the Gulf Crisis of 1991. Although prices fell after that event, they never threatened to fall to the levels of ‘cheap oil’, and have spiked repeatedly since then. This new reality of high and volatile oil prices has driven the oil industry into ever greater innovation, both technical and financial, to efficiently utilise capital to continue to produce hydrocarbons profitably.

Structure of the oil and gas industry The oil and gas industry is currently composed of three main groups of corporate players. In many developing and OPEC countries, it is the National Oil Companies (NOCs) that hold sway, particularly in terms of their control and ownership of the resource. In the developed economies of the West, the multi-national integrated oil companies (IOCs) are the globally-dominant providers of capital and expertise. They cover everything from exploration, to production, refining and transport of hydrocarbons. Finally, these big players are supplemented by a host of independent oil exploration companies, who have a focussed expertise in the calculated risks that exploration demands.

Drilling for oil is is risky business, with large upfront costs, and only low probabilities of success in new exploration areas.

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Oil & Gas Sector

Current state of the industry The current situation in the oil and gas industry is one of a continuous expansion of horizons - in technological, financial and geographical terms. The driver of this ferment is an increasingly sticky supply, even as global demand recovers, as the world economy pulls out of recession. The need to increase supply has seen activity expand across a number of fronts. This includes reworking of old fields, using enhanced oilfield recovery techniques; the exploitation of more technically challenging environments, such as the ultradeep offshore fields; and the opening up of new alternatives, such as shale gas reserves. All of these are frontiers that have been opened up by the new regime of erratically high oil prices.

Investing in the industry- many avenues, and significant potential Moving money into a focused oil-and-gas sector strategy is a useful investment tool for diversifying portfolio risk. Most index-linked stocks and shares are in companies that are consumers of oil and gas, whose profits are hit by oil price rises. Having a targeted investment in the hydrocarbon sector provides a counterweight to this effect- with increased returns during oil price rises, and so a reduced risk for the overall investment portfolio.

The avenues for investing in the oil and gas industry are, however, many and convoluted. Because of this, it is advisable for any would-be investor to make sure they go through the proper professional channels. Oil and gas legislation, in particular, varies from jurisdiction to jurisdiction, and has a direct impact on the value of investments. It is important to choose investment and legal advisers who can deal with the these vital aspects of the investment - and do so with the utmost diligence.

Some of the most popular avenues for investing in the oil and gas sector are: 1) Shares in integrated oil companies(IOC) This is the blue-chip approach to oil-sector exposure, and offers a relatively simple method of participating in oil price rises. But it is worth remembering that not all of the price variation in an OIC stock can be attributed to oil price moves. There is some correlation to more general economic performance. And it is important not to weigh an investment too heavily into one companyindividual companies are often exposed to reputational risk, as was seen so dramatically with BP and the DeepWater Horizon disaster.

2) Shares in Independent Oil Exploration companies These lie at the riskier end of share investment - independent companies are usually involved in risky exploration wells, many of which are not commercial. As a result, such stocks are incredibly volatile, varying wildly according to the information coming from the drill-site. Such companies do offer major potential for significant returns; but selecting those companies that have the best risk-to-reward ratio, and experience in the region being explored, requires a great deal of professional expertise and advice.

3) Drilling Programs and Royalty Pools This is another risky, but possibly rewarding, approach to participating in exploration risks- either a direct investment in the upfront costs of drilling

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programs; or putting up money for a potential of sharing royalties from any commercial oil found on exploration. Here the legal issues as to what obligations the drilling company, or pool operator, has to the investor can be thorny. Oil ownership issues between state, company and investor are notoriously tricky, so expert legal advice is essential before signing up to any contract.

4) Production aggregators A recent development has been the buying up of complementary producing assets, by operators who are seeking to improve their cost structures. They are operated by large institutions, who raise capital on the open market for these ventures. They offer a low-risk exposure to beneficial price appreciation due to owning producing oil reserves- and also provide a return from ongoing operations. These can be excellent investment vehicles, provided the economic fundamentals have been properly assessed upfront, by suitable professionals.

5) Private equity funds This category covers a diverse range of private fund involvement in managing, or funding, oilfield operators. Quite often they extend their coverage across the industry, and may include production from fields, oil pipelines and even oilfield service companies in their portfolio. That does diversify the risks of that would be incurred investing in a single sector or company, but it also reduces the extent to which your gain from oil price moves- which is often a major incentive for getting involved in the oil and gas sector in the first place.

Future Trends Oil and gas are likely to continue to remain a dominant part of the global economy’s energy mix, even with downward pressures from carbon emission reduction programs. This is simply a factor of increasing demand from developing countries driving prices higher; inevitably this makes a greater proportion of hydrocarbons economical to pull from the ground.

The International Energy Agency (IEA) sees overall energy demand rising by 1.5% per annum, mainly from the developing giants of India and China, adding up to 60% growth by 2030, compared to 2000. With little prospect of a major revolution in energy sources, over the next decade or two, the lion’s share of that demand will presumably have to be met by increased oil and gas production.

The scenarios that are likely to evolve depend on whether we have reached ‘peak oil’. The idea of peak oil is one that has gained strength, over the last decade; it proposes that the total producible volume of oil is about to peak. In this scenario, supply can’t keep up up with increased energy demand, and a series of price spikes lie in the future. More optimistically, many in the oil and gas industry see gradually increasing prices bring an increase in productionand a softer peak in production, that is still decades away. In either scenario, the oil industry is likely to benefit, from either increased returns, for those that innovate to produce, or increased volume of sales across the industry.

Investment in the sector can only gain in the long-term.

Oil and gas sector report 2011

Brazil Ernst & Young Beth Ramos Tax Partner, Oil & Gas Brazilian Tax Leader Tel: 55 21 2109 1410 Fax: 55 21 2109 1501 beth.ramos@br.ey.com www.ey.com.br

Petroleum tax rules - still fighting for clarity If we look back almost 15 years, we would see Brazil enacting the Petroleum Law, opening the market for new companies and investments. This step, one of the most important in our recent economic history, should have been followed by other legal frameworks that could establish the adequate labour, environmental accounting and tax procedures generating the necessary legal stability under this new scenario.

Reality, however, was far from ideal, and the oil and gas industry has been doing business during the past years based on huge efforts from their professionals to get some clarifications from tax authorities or, in the majority of the time, to implement routines based on their common understanding about what should be the best law interpretation. A ‘learning on the business’ that is never free of risk for this very specific and super-sized oil and gas industry.

Some important improvements were made during this time.

Authorities at all levels, federal, state and municipal, have participated, but the speed of the business sometimes cannot wait for the legislative process and lots of pending issues are still flowing around the industry.

More details on local content requirements, environmental duties (SNUC) and accounting procedures are more than necessary. When we move to the tax side, the number of doubts and, consequently, the level of risk are drastically increased.

It could take pages to list all the situations in which more clarity on the tax procedures is necessary to run an oil and gas business in Brazil. Adding this to the fact that each month around 1,000 new legislation are issued  about 8% of such related to oil and gas  a proper tax management is becoming mandatory to ensure company is not incurring in unnecessary costs and/or facing unexpected risks.

It is not simple, however, to structure an effective tax management that can ‘turn on the safe mode’ to the company.

Staffing is an issue; the oil and gas industry is pretty new and very few tax professionals have been involved since the very beginning. From the small group with some history in the industry, just a few have had the opportunity of facing experiences in the exploration and production stages, as companies are not yet moving in the same rhythm.

One other interesting point is the enlargement of tax scope in our industry.

Due to the complexities of Repetro  a tax incentive for importation of oil and gas equipment and one of the main pillars of the industry in Brazil  tax has been closely linked to customs routines. Some big companies are still keeping tax and customs under the same management in order to optimise control and contacts with Internal Revenue Service (IRS).

Personal tax is also an expertise that had to be developed in order to manage the high level of expatriates in the industry.

Even social security, that used to be a historical back and forward discussion between tax and labour lawyers, is now more and more inserted in the tax scope, and not just because the contribution is now managed by IRS but based on the high level of special contracts involving services, manpower hiring, and so on.

The development of this new tax environment (despite being a privileged journey for the professionals involved from the very beginning) reinforces the demand for risk management and solid tax advice that brings the necessary clarifications  the big challenge of all oil and gas companies.

Now, when we are moving to the implementation of new regulatory system based on production sharing, with outstanding volumes of oil and money and having just one operator, the industry needs, more than ever, a clear understanding and alignment of tax procedures. Under this environment, there is no room anymore for theoretical tax analysis; in fact tax decisions must be supported by business driven analysis.

Ability with tax authorities, influence at industry boards and a solid tax position are not anymore just a ‘nice to have’  they are a must. Tax professionals that are not ready to offer this in the coming years must look for another industry. There is too much money and there are too many challenges involved in the oil and gas business and too much tax work to do.

Proper tax management is for sure one of the relevant roles to providing investors the expected comfort and financial return.

Besides this, different from other countries, tax knowledge in Brazil is not an exclusive skill of tax professionals: contracting, procurement and operations personnel need to have more than a basic tax knowledge. A supplier on a different state is enough to cause relevant financial damages if pricing and logistic is not analysed from a tax perspective. For the last bid rounds, with the local content requirements, this need has become more and more crucial. Risk preventive companies are already implementing training sessions with key staff, especially if it includes foreigners.

March 2011 • GBM • 11

Oil & Gas Sector

Nigeria Ernst & Young Abass Adeniji Partner, Tax Services 2A Bayo Kuku Road Off Alfred Rewane Road Ikoyi, Lagos, Nigeria Office: + 234 1 4630 479-80 Ext: 132 Mobile: + 234 802 301 3597 abass.adeniji@ng.ey.com Fax: +1 234 4630 481 Broadly speaking, for reasons introduced earlier on, the oil and gas industry has a tendency to underemphasise working capital performance. In general, the focus is on operational metrics - throughput, day rates, pricing, etc - and not on inventory, payables or similar metrics.

But on the flip side, accounts payable groups are often operating under legacy terms and processes that have long since outlived their usefulness. For example, units are evaluated on payment efficiency, and so they cut and mail their checks a week or more ahead of due date.

All too often, there are oil and gas business executives just one or two rungs below the most senior reporting levels who are operating with almost no working capital metrics or authority whatsoever. Of course, generalisations about an industry featuring so many elements and orientations can go only so far. To have real meaning, at some point the analysis must zero in on specific challenges and opportunities. So consider the following:

Alternatively, their commercial entities may have negotiated 45-day terms, but the payment system still works to a 30day target. It may sound preposterous, but when the focus is elsewhere, such inefficiencies can arise.

Upstream Oilfield culture is one of ‘get the rig up and running - and keep it running’. Local managers are making the decisions about what sorts of items to hold in inventory. Often, they are not evaluated on working capital, so there’s no incentive to manage a leaner inventory.

In many cases, parts are purchased and then never used or even returned or sold. Similarly, there is little collaboration between upstream field sites, even when these operations are relatively nearby. There are no attempts to standardise parts, consolidate inventories or collaborate on procurement.

How bad can matters get? There are even cases where materials aren’t even held in inventory, but rather are fully expensed upon acquisition. Indeed, many managers in the industry will contend that such issues could be a problem.

But because so little is known about the actual size of these issues, there’s a strong likelihood that the opportunities are even greater than imagined.

Midstream Largely peculiar to the US market, midstream oil and gas companies sit between exploration and final distribution as a sort of intermediate trader, transporter and general service provider. But just like so many other segments of the industry, the focus tends to be on operational metrics.

For example, managers are evaluated on the price achieved, not necessarily the terms or the carrying costs. The failure to fully account for the cost of the working capital employed in such endeavours masks the real profitability of any activity.

Downstream The accounts receivable function of many downstream entities works nearly flawlessly. Payment terms for shipments are generally ten days. So downstream operators are tightly focused on ensuring that, by day ten, they’re obtaining payment.

12 • GBM • March 2011

Joint ventures As the risks of oil and gas exploration, production and distribution increase - as operations move to increasingly challenging regions featuring often unfamiliar host governments - more and more organisations are turning to joint ventures.

In most instances, it is the operating partner that is in control of payments. And while trust is an essential element of such relationships, there is nothing wrong with verification, particularly of joint interest billings, which can be for substantial amounts.

General issues The list of potential opportunities is almost infinite. Consider the issue of unbilled receivables. Many in the industry are very slow to invoice, creating a working capital issue that is both costly and nearly impossible to identify without adopting a hands-on approach.

Similarly, there is much more that could be done to optimise liquidity through greater use of zero balance accounts (ZBA) or other cash call mechanisms. Or consider what could be done to accelerate the receipt of high-value payments from national oil companies. By taking time to study the payment processes of a host nation, it may be possible to greatly accelerate receivables.

This can even require the assignment of specific individuals to go to such government agencies and walk an invoice through the needed steps. But given the size of such payments, even such a labour-intensive approach can yield enormous benefits.

Cash improvement levers Certainly, the bulk of value in the oil and gas industry is created through key strategic choices and actions. And, undoubtedly, owing to volatile prices, tracking the value of working capital initiatives can be challenging.

Nonetheless, leaders in the industry are increasingly aware of the savings that, when combined, create a substantial opportunity. With this in mind, industry executives should scan their businesses to identify a range of strategic, operational and tactical actions.

RUSSIA

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.

1%

Asia (without China) Europe

20%

North America Latin America Middle East 19%

25%

Russia Africa

March 2011 • GBM • 13

Oil & Gas Sector

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

200

400

600

800

600

800

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

0

400

5 000

10 000

15 000

20 000

1 000

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

14 • GBM • March 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)

Nigeria BANWO & IGHODALO Ken Etim Partner +234 (0)8034003003 ketim@banwo-ighodalo.com

Developments in the Nigerian domestic natural gas sector With current estimated gas reserves of 185 trillion cubic feet, Nigeria holds the eighth largest gas reserves in the world and the largest in Africa. Despite these vast gas reserves, the domestic gas market is generally underdeveloped and a significant percentage of available natural gas is either exported as liquefied natural gas, re-injected to enhance oil recovery (where gas is found in association with oil) or simply flared.

There is dire need for infrastructural development. Most of the existing gas infrastructure is project-centric and there is lack of a robust transmission network and interconnectivity. Also, activities of insurgents in the Niger Delta and vandalisation of facilities have disrupted supply of the already low volume of gas being exploited and produced. These problems, coupled with the capital intensive nature of investments for gas production, artificially low prices at which gas producers are compelled to sell the product in the domestic market and the long lead time required to develop a commercially viable industry, have occasioned disincentives for investments and thereby hindered the growth of the domestic gas sector.

Yet, domestic gas demand, especially in the power and manufacturing sectors, is increasing and far outstrips supply.

In 2008, the Federal Government of Nigeria (FGN) issued the Nigerian Gas Master Plan (the Plan) to address impediments to the development of the domestic gas sector, engender the monetisation of gas, reduce gas flaring and assure longterm gas security for Nigeria. The Plan seeks to achieve these objectives through a roadmap for transformation of the Nigerian domestic gas market into a full market driven industry by year 2015 through the overhaul of the regulatory regime, the development of sustainable commercial frameworks and the procurement of essential infrastructure.

As part of the Plan, the FGN issued the National Gas Supply and Pricing Policy (the Policy) and the National Domestic Gas Supply and Pricing Regulations (the Regulations). The Policy and the Regulations provide for the imposition of a domestic gas supply obligation (DSO) on all gas producers, requiring them to set aside a predetermined portion of their gas production for supply to the domestic market. The Policy categorises the domestic gas market into three broad groups requiring special regulated pricing regimes, to wit: (i) power sub-sector; (ii) strategic industrial sub-sector, that use gas as feedstock (eg, methanol and fertiliser producers); and (iii) strategic commercial sub-sector (eg, cement and steel manufacturers). Different regulated pricing frameworks apply to each of these categories, with the expectation that there will be eventual graduation to a pricing regime led by market forces.

The Policy and the Regulations also provide for the establishment of an aggregator responsible for determining aggregated gas prices to be paid to gas producers for gas

Kehinde Ojuawo Senior Associate +234 (0)8033269891 kojuawo@banwo-ighodalo.com 98, Awolowo Road South-West Ikoyi 101232 Lagos, NIGERIA www.banwo-ighodalo.com

supplied to the domestic market. The aggregator will also: manage the operationalisation of the DSOs by ensuring the allocation of gas supplied under the DSO regime to the various sectors of the domestic market and ensuring that a minimum aggregate domestic gas price that tracks the transition to export parity is achieved; serve as an intermediary between domestic offtakers and gas producers by managing the receipt of revenues from the various sectors receiving gas supplied and effecting the payment of the aggregate domestic gas price to the gas producers; and manage the implementation of all revenue securitisation arrangements.

The Plan also consists of a Gas Infrastructure Blueprint (the Blueprint), which details proposals for private sector participation in the development of infrastructure required to support the domestic market. Under the Blueprint, Nigeria is divided into three franchise areas, within which franchisees will establish central processing facilities (CPFs) and transmission and interconnection infrastructure for distribution of gas to offtakers in the domestic market.

Implementation of the Plan is in progress. DSOs imposed on gas producers have been in place since 2008, with a penalty of US$3.5/mcf for non-compliance. Also, a model Gas Sale and Aggregation Agreement (GSAA) has been developed for adoption in the domestic market, and the FGN has established the Gas Aggregation Company of Nigeria. Negotiations of GSAAs are currently ongoing between several buyers and gas producers. In 2010, the Power Holding Company of Nigeria signed a GSAA with the Nigerian National Petroleum Corporation and Pan Ocean Joint Venture. In addition, the FGN is evaluating bids received from prospective franchisees in 2009 (and revised in 2010) for the development of CPFs and gas transmission networks under the Blueprint.

Further, as part of the roadmap issued by the FGN in August 2010 for reforms in the decrepit power sector, the FGN intends to develop policies and provide incentives for the exploitation of stranded gas locked up in various fields and for the development of gas transportation infrastructure, thereby tackling bottlenecks in the fuel-to-power end of the electric power sector value chain.

On the whole, it appears that there are interesting times ahead for stakeholders in the Nigerian domestic gas sector.

March 2011 • GBM • 15

Oil & Gas Sector

Netherlands Ernst & Young Belasting adviseurs LLP Linda Donkers Partner Tel: +31 88 407 8493 E-mail: linda.donkers@nl.ey.com www.ey.com Considering the nature of the Dutch petroleum tax regime, a good relationship between the taxpayer and the tax authorities is crucial. E&Y’s long experience, indebted knowledge and strong relationship with the oil and gas team of the Dutch tax authorities enables us to service our clients’ needs, providing quality and solid solutions quickly and without surprises.

The fiscal regime that applies in the Netherlands to the upstream petroleum industry consists of a combination of corporate income tax (CIT) - levied at a rate of 25% - and state profit share (SPS). Resident companies are taxable on their worldwide taxable income. Non-resident companies are taxable only on specific income sources, such as business profits earned through a permanent establishment (PE) in the Netherlands.

Interests in licences in Dutch onshore or offshore fields constitute a PE in the Netherlands.

The determination of the taxable income for SPS purposes is based on the same principles as CIT. However, some rules do not apply for SPS purposes. On the other hand, additional rules apply, such as a 10% uplift on costs and an investment incentive for marginal gas fields. The SPS rate is 50%, however, as SPS due is deductible for Dutch CIT purposes, while the Mining Act contains a credit for Dutch CIT, the effective tax rate on mineral production income in practice varies between 33-42%. Gas storage activities

do not fall within the realm of SPS. However, conversion of an upstream site into a storage facility may trigger ‘exit tax’.

The Netherlands has proven to be attractive for performing international exploration activities through foreign PE’s as the foreign exploration losses can be offset immediately against Dutch taxable (CIT) income. The foreign losses are recaptured when the PE is profitable.

For the acquisition of interests in Dutch licences, it is important to distinguish between asset and share deals. In an acquisition of a Dutch upstream company, the acquirer inherits the entire CIT and SPS profile of the seller. In an asset deal, the kind of licence and tax treatment of the seller may also have SPS consequences for the buyer. A potential buyer must therefore consider due diligence for SPS in both a share and an asset deal.

E&Y’s oil and gas tax industry group provides a wide range of tax services to a large number of companies in the oil and gas industry  national oil companies, independent exploration and production companies, oilfield service companies, independent refiners, traders and major integrated companies. As part of E&Y’s global oil and gas network, our office in Rotterdam plays an important role and we have focused our indebted knowledge in this sector in this city. With our experience, we can provide our clients with tailored Dutch and international corporate tax advice.

Brazil Doria, Jacobina, Rosado e Gondinho Advogados Associados Marilda Rosado Position: Partner Tel: 55 21 3523 9097 Fax: 55 21 3523 9080 mrosado@djrlaw.com.br www.djrlaw.com.br

Highlights in the oil and gas industry in Brazil

demonstrating its power and expertise (source: www.petrobras.com.br).

By Marilda Rosado, partner of Doria, Jacobina, Rosado e Gondinho Advogados Associados and Professor of International Law at Rio de Janeiro State University (UERJ)

The concession is granted and surveyed by ANP. The concessionaire needs to pay the government take in Article 45 of Law 9478, including royalties, special participation and a retention fee for the area. This regime was very successful during the last decade, with significant results to the country and stability to investors.

Brazil presents significant positive signs of an emerging economy, where direct foreign investments reached a peak of US$30bn (data published by the Brazilian Central Bank, 3 December 2010).

The oil and gas industry increased its participation in the gross domestic product (GDP), from 2.7% in 1997 to 12% in 2007. In 2010, 682,370,504 barrels of petroleum were produced (source: www.anp.gov.br), which represents 5.79 % of energy generated in Brazil (source: www.aneel. gov.br). This rate, joined by other sources, such as hydroelectric energy (66.29%), natural gas (10.71%), nuclear energy (1.65%) and biomass (6.48%), represents the framework of the Brazilian energy matrix.

The present phase of the Brazilian oil and gas industry was inaugurated in 1995, with the 9th Amendment to the Federal Constitution (FC)  thereafter, Law 9478, of 6 August 1997, our Petroleum Law. It also established an independent agency, the Brazilian Agency for Oil, Natural Gas and Biofuels (ANP).

Meanwhile, Petróleo Brasileiro SA – Petrobras , the state-owned company, has grown both domestically and internationally, with no more exclusivity operations in exploration and production (E&P). Petrobras has just been recognised by PFC Energy as the third biggest energy company in the world. The company operates in 28 different countries all over the world,

16 • GBM • March 2011

Recently, new legislation was enacted for the pre-salt area to be harmonised with the Petroleum Law still in force: Law 12304 of 2010, which creates the Pré-Sal Petróleo SA (PPSA), Law 12276 of 2010, which allows the assignment by the state directly to Petrobras of five billion barrels in this area; and, Law 12351 of 2010, which regulates E&P under the PSA and creates a social fund.

The new laws gave rise to several controversies, among others: PPSA management of the PSAs, and the increasing role of the Ministry of Mines and Energy as opposed to ANP’s legal role in the current Petroleum law.

However, although there is some concern over the new trends, we still picture an optimistic scenario for the Brazilian oil and gas industry, with great opportunities for investors.

Note: Ilana Zeitoune and Bruna Cal Viegas, respectively lawyer and trainee of Doria, Jacobina, Rosado e Gondinho Advogados Associados, and Maria Gabriela Garbelotti, junior researcher from UERJ helped in the revision of this article.

precision precisionamidst amidst complexity complexity For over 25 years, US Tax & Financial Services has For overUS 25 and years, & Financial Services has provided UKUS taxTax compliance and consultancy provided and UK and consultancy advice andUS services fortax UScompliance / UK individuals, corporations, advice and services forthroughout US / UK individuals, partnerships and trusts Europe. corporations, partnerships and trusts throughout Europe.

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Geneva offices for expert onLondon, multi-national expert advice on multi-national tax issues.

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ustaxonline.com March 2011 • GBM • 17 enquiries@ustaxonline.com ustaxonline.com

MicrO Finance private eQuitY investMent Fund services vehicles

Private Equity Fund Services Successfully participating in China’s rapidly growing private equity (PE) industry requires both tangible and intangible capabilities. Looking to 2011, local currency funds with sector specialties are more likely to triumph.

Amir Gal-Or, managing partner and founder of Infinity Group, says PE in China has become extremely popular in recent years and accelerated in the past year for three reasons: the establishment of a huge number of new local RMB funds; the opening of the stock market for growth companies; and, the increase of support for the PE industry by the Chinese government.

A decade ago, venture capital and PE were nearly nonexistent in China. The process of understanding exactly what it is, the need for it and how China could use and benefit from such an industry progressed first in small steps, such as the Chinese government’s encouragement of its cities to open local funds, and then later in bigger steps, like the July 2009 opening of the new Growth Enterprise Market (GEM), a separate board under the Shenzhen Stock Exchange. As described in the press, the GEM is China’s answer to the tech-heavy Nasdaq stock market, featuring new companies in sectors such as clean energy, biomedical, technology and environmental protection and rehabilitation. And, of course there were various milestones along the way.

In 2004, China issued a licence for the first foreign/local JV RMB fund to Infinity Group’s Infinity-CSVC. The fund made six investments and three successful exits including Shellcase, Nanomotion and Teledata. In 2007, Infinity created its second ChinaIsrael fund, Infinity I-China, which currently has an equivalent of $300m under management both in RMB and USD. Today, there are many such funds, exemplifying the huge interest in this sector and resulting from various legislative changes in China.

For example, in 2009, for the first time, the Chinese government granted permission to foreign PE firms to establish funds denominated in the local currency. Of the 30 PE funds established in 2009, 21 were denominated in Chinese currency. The momentum continued through 2010. In Q3 2010, 17 out of the 18 newly raised funds were RMB funds, a 41.7% from the previous quarter (source: zero2IPO Research Center). All in all, of the 82 new private equity funds established in 2010, a total of 71 were RMB funds. (source zero2IPO’s China VC/PE Market Review 2010 report) Gal-Or predicts that in 2011 China will continue to encourage RMB

18 • GBM • March 2011

verses foreign currency investment, to the point of stonewalling the latter: “Currency control in China has been tightened. It will grow more and more challenging to make foreign investments in China. Moving forward many deals will be inaccessible to US$ and international currencies. The reason for this is because today China has a great deal of foreign money, so the emphasis looking to the future will be to encourage investments by locals, rather than by outsiders. There is also speculation that the RMB is growing in strength. Blocking investment in China using foreign money helps to dislodge attempts at speculative currency investments.”

“I believe that most of the funds in China have a general focus, like in retail investment. There is a great deal of opportunism when it comes to Chinese funds. Given the high level of competition, however, I believe that the various funds will develop sector specialties and will become more industry specific in an effort to make their added value greater than just the financial investments currently being offered,” says Gal-Or. Sector specialties of choice could include bio/healthcare and cleantech, identified by zero2IPO’s Market Review 2010 report as the top two industries of private equity investment in 2010; of the 363 private equity investments deals in 2010, 55 were in the former and 31 in the latter.

In addition to a surge in the number of RMB funds over the past couple of years, listings on Chinese stock exchanges have also increased dramatically. As per the Ernst and Young Global IPO Trends 2010 report: Key Greater IPO Statistics chart, the number of IPOs on Chinese stock exchanges climbed from 154 listings in 2009 to 200 during the first half of 2010. The report also noted that of the 202 Chinese companies that went public in H1 2010, 110 listed on Shenzhen’s SME, 54 on the Shenzhen’s new start up board ChiNext,

Amir Gal-Or Founder and managing partner Infinity Group Tel: 00 852 662 68921 amir.gal-or@infinity-china.cn www.infinity-equity.com

25 on the HK exchange and 11 on the Shanghai Stock Exchange (SSE), noted by Wikipedia to be the world’s 7th largest stock market by market capitalisation at US$2.7 trillion as of Dec 2010.

Finally, the third reason for the expansive growth of the PE industry in China lies in the government’s demonstrative embrace of the sector both in terms of policy and support.

In 2010, as part of its ten-year plan for the region, Infinity furthered its liaison with the Chinese government through the establishment of ten new joint (JV) PE funds, building on its solid position as the fund with the greatest number of RMB funds in China. Ranging from 200 million RMB to a targeted 500 million RMB, the funds are purposed to support the growth of local Chinese businesses through the influx of advanced technology, proven intellectual property (IP) and knowhow, mainly from Israel, though also from the US and Europe.

In addition to the JV funds, Infinity also established the Infinity IP Bank, a central location in China for ownership and licensing of intellectual property and proven technology. The IP Bank partners with entrepreneurs and Chinese companies with a global strategy to license, develop and commercialise the advanced technology and/or proven IP. The IP Bank finances part of the initial commercialisation with both dollar and RMB financing. It also provides management, legal structuring and marketing support for its partners. Companies, from outside of China with IP and proven technology, benefit from being able to penetrate a new market without the challenges presented by new territories.

Infinity is true to its mandate to serve as a bridge connecting the worlds of China and Israel, which share a basic philosophy and have much in common in terms of overall history. Infinity regularly organises and hosts high level Chinese delegation visits to Israel and vice versa. During the course of 2010, Infinity hosted delegation visits to Israel led by, for example, the party secretaries of Harbin, Tianjin and Chengdu, to name a few. “Our close relationships with those at the most senior levels of Chinese government and business along with our infrastructure in the Jewish world have been core to the creation of what we consider to be a very good ‘China-out’ strategy. Trust and mutual respect are central to these relationships, which have been nurtured since our arrival to the country just after

the turn of the millennium and have been a major key to our success. Our Chinese partners too have garnered much success from our liaison as demonstrated, for example, by the successful commercialisation of the technologies that they have licensed under the Infinity structure,” says Gal-Or. Some examples of Infinity’s activities in 2010 include investments in United Water Corporation (Shanghai, China) and Weigo (Shangdong, China), as well as an exit from Teledata Networks, which marked Infinity's fourth China related exit, following those from the aforementioned Shellcase, Nanomotion, and the partial exit from Digital China.

“Investments by Infinity are not simply pure investments. Infinity is a strategic arm in China. It has access to intangible assets such as soft skills, cultural acuity, overall knowhow in terms of technological development and growing strong businesses from ground up. Investments in our network result in much more value than simply the investment itself,” explains Gal-Or. “I think that PE in China will continue to grow, but there will be more regulations and eventually a shakeout process that will not affect Infinity but rather non professional funds, and at a certain point render the industry more sophisticated.”

Infinity was founded by the IDB Group, the largest conglomerate in Israel, and the China Development Bank. Infinity has offices in Beijing, Changzhou, Chengdu, Harbin, Hong Kong, Jining, New York, Ningbo, Shanghai, Shijiazhuang Suzhou, Tel Aviv, and Tianjin.

Amir Gal-Or is the founder and HK-based managing partner of Infinity Group. He has a stellar track record in identifying, leading and building growth companies and securing significant returns for fellow investors. He is a member of and a regular speaker at the World Economic Forum. MSH

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LUXEMBOURG private eQuitY Fund services

Islamic Private Equity – an emerging asset class for alternative investments

Farabi Zakaria Senior Manager Ernst & Young, Luxembourg farabi.zakaria@lu.ey.com Tel.: 00 352 42 124 8919 Zeeshan Ahmed Senior Manager Ernst & Young, Luxembourg zeeshan.ahmed@lu.ey.com Tel.: 00 352 42 124 8091 www.ey.com/Luxembourg

Many economic indicators such as government initiatives to attract Islamic investments, increasing demands for Islamic banks and insurance companies and structuring of Sharia compliant investment products, indicate that Islamic finance has reached a critical mass and changed from a “niche market” to a main component in the field of finance. The increased focus on Islamic finance during the current crisis is also due to the realisation that it is not exposed, due to binding principles of Sharia, to leverage and unnecessary uncertainty and due to the fact that most Islamic transactions are backed by tangible economic businesses / assets. According to the 2010 Ernst & Young Islamic Funds and Investment Report global Islamic Fund assets are approximately, USD 52 billion in 2009.

Private Equity (‘PE’) is a natural fit:

The Sharia principles which govern Islamic finance are derived from a number of sources, the Quran, the Sunnah or Hadiths (examples and sayings of the Prophet Muhammad), Qiyas (analytical comparisons), Ijtehad (reasoning and logic applied by Islamic Scholars) and Ijmaa (consensus on issues requiring ijtehad).

Meeting the requirements of investors while ensuring Sharia compliance and remaining competitive with conventional fund offerings has been a significant and continuing challenge for Islamic fund managers. PE, however, (with some limitations) fits naturally to Sharia compliant investing due to its inherent profit and risk sharing aspects. Through PE, investors may participate in, and benefit from, the

i)

The prohibition of investments which are not consistent with the tenets of Islam such as alcohol, gambling and leisure related activities.

ii)

The prohibition of riba from economic transactions. Riba means excess compensation without due consideration.

iii) The removal of uncertainties from contracts. iv) The mandate of justice in all economic activities, which should never lead to the exploitation of any party to the transaction.

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50 40 30 20 10 0

This awareness has given opportunity and encouragement to this emerging sector to expand from its existing network in the Middle East and North Africa (‘MENA’) and South East Asia.

It has also resulted in more focus on investment products in the domain of asset management such as Sharia compliant private equity. Thus, an investment thesis, combining typical private equity parameters and Sharia requirements, has resulted in an emerging asset class for alternative investments. Both Muslims and non-Muslims are choosing these products either because they are in conformity with the principles enacted by Sharia or simply because they represent an alternative to other investments.

Basic principles:

The practical implications of Sharia can be summarized in the following general principles, the majority of which are based largely on simple morality and common sense which forms the basis of many of the world’s religions, including Islam. In short, they are;

60

value creation process of target companies as partners rather than as creditors. The use of the private equity model within a properly structured partnership is a true manifestation of Sharia business principles.

Key parameters of the conventional PE model are comparable to Islamic finance concepts, as explained in the table below:

The four main Sharia principles that are used to structure Islamic Finance are the Mudaraba, Musharakah, Murabaha and Ijarah.

Among the four, the Mudaraba and Musharakah are widely used to structure Islamic PE. Mudaraba means the surrender of capital by investors to an entrepreneur (a Mudarib), for investment in a commercial enterprise. Significantly, the profit for the Mudaraba contract is agreed at the inception of the contract and the losses are only borne by the investors. In this context, the Mudaraba is similar to a conventional PE whereby the Mudarib is the General Partner (‘GP’) and the investors are Limited Partners (‘LP’). On the other hand, Musharakah is a joint enterprise in which each partner (or parties) share both, the profit and loss. In this context, Musharakah provides an excellent alternative to the traditional interest based economy.

Challenge for managers and administrators: Managers and administrators in a Sharia compliant environment are challenged to increase efficiency through standardized internal processes in line with leading private equity practices and, in parallel, to deliver highly customized services in conformity with the specific requirements of Sharia laws and regulations. The balance between the two can only be achieved through a well trained and competent back office team with sufficient knowledge and experience in Sharia compliant private equity structures. The fundamental duty of managers and administrators is to ensure Sharia compliance both in the design of their product (commercial design) and in the conduct of their business (industry and financial screening of target investing entities). On the other hand, managers and administrators are also responsible for governance, risk

management, accounting, investor reporting and NAV calculation in accordance with guidelines of The Accounting and Auditing Organisation for Islamic Financial Institution (AAOIFI). AAOIFI is the autonomous self-regulated body responsible for the formulation and issuance of accounting, auditing, ethical governance and Sharia standards for Islamic financial institutions. These expectations require a robust operating platform where managers, administrators and Sharia boards can work together in order to meet the needs of investors.

Governance structure: To be Sharia compliant, an Islamic PE must appoint a Sharia Board that consists of at least three Sharia scholars. The principal role of Sharia Board is to oversee the entire business of the fund regarding the fund’s compliance with Sharia principles. This is not only legally required, but also in the best interest for both the GP and LP to avoid any discussion on individual interpretation on Sharia law.

The Sharia Board is normally provided from the outset of the fund and advise the GP with regard to Sharia principles affecting the fund business and mainly on the investments made by the fund.

The Board issues guidelines on investments with regard to the industry sector, eligible acquisition finance structures (which include certain ratio of permitted debt financing), permitted financial ratios of eligible target companies as well as any other compliance issues that affect the management of the investors’ funds. In general, investments proposed by fund managers or GP require the approval of the Board. The Sharia Board is required to issue annually a Sharia certificate that confirms the fund’s activities are compliant with Sharia principles.

What Luxembourg can offer?

One of the most pressing issues that fund managers face when routing their international investment is the domiciliation of the fund. Domicile that provides low or zero taxation will always be the main criteria that fund managers will choose.

Luxembourg’s role as the leading European centre for PE was first established in the late 1980s with the introduction of the financial participation companies or Soparfis. The Soparfi offers PE fund managers suitable intermediary vehicles for cross border acquisition. PE fund managers from Europe, America and Asia use the Soparfi for tax optimisation due to numerous double tax treaties concluded by Luxembourg. As of January 2011, Luxembourg has concluded more than 60 treaties. The establishment of the risk capital investment company (the ‘SICAR’) in 2004, as a lightly regulated vehicle designed specifically to attract PE buyout and venture capital business, has given a major boost to the Luxembourg PE industry. A SICAR is subject to the normal Corporate Income Tax rate of 28.80%. However, income generated from investments is exempt from tax.

In February 2007, the Specialised Investment Fund (the ‘SIF’) vehicle was introduced to further attract alternative investment to Luxembourg. As with the SICAR, the SIF is aimed at alternative investment products with a light regulatory regime, exercised, by the Luxembourg Financial Sector Supervisory Authority (CSSF).

244 SICARs and 1,196 SIFs are currently registered with the CSSF demonstrating the success of these vehicles which have been chosen by many of the top PE houses, as well by other smaller PE players.

Islamic PE can be set up using any of the above mentioned vehicles.

Apart from being a leading European centre for PE, Islamic Finance also has been one of the driving forces of the development of the financial services industry. As early in 1983, Luxembourg became the first non-Muslim country to domicile a Sharia compliant insurance company (Takaful). The Luxembourg Stock Exchange

(‘LuxSE’) plays a leading role in the Sukuk market with the first entrance in 2002. Currently, there are approximately 15 Sukuks admitted and traded on the LuxSE. Other recent initiatives, such as in 2010, tax circulars clarifying the use of Islamic financing instrument prove the growing interest of Luxembourg for Islamic finance.  Luxembourg became the first country in Europe to organize the seminar on Islamic Banking System.

 Luxembourg became the first non-Muslim country to domicile the first Shariah Compliant Insurance Company in Europe.

 The Luxembourg Stock Exchange (« LuxSE ») became the first stock exchange in Europe to enter the Sukuk Market. In 2009, the LuxSE admitted to trading a Sukuk issued from Petronas, the state-owned oil and gas company of Malaysia.

 The Government of Luxembourg set up a Task Force, changed with identifying obstacles to the development of Islamic Finance and ways to support it growth. Working groups were subsequently set up by the Association of Luxembourg Fund Industry (« ALFI ») and by Luxembourg For Finance (« LFF »), the agency for development for financial centre.

 The Luxembourg Central Bank is the first European Central Bank to be accepted as an Associate Member of the Islamic Financial Service Board (« IFSB »).

 As of January 2010, the Luxembourg tax authority issued a

circular that clarifies the tax treatment of various Islamic financing arrangement and issues. The circular deals with the tax treatment of Murabaha and Sukuk but also describe other instruments such as the Musyarakah, Mudaraba, Ijarah and Istisna.

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private eQuitY Fund services

BERMUDA

Bermuda passes private equity fitness test with flying colours Investor appetite for the private equity asset class is increasing as growth gradually returns to the global economy and the sector is expected to benefit from a significant uptick in capital raising and new fund formation this year. According to the latest Preqin Private Equity (PE) Investor Outlook, small to mid-market buyout funds are attracting the most investor interest, while emerging countries, including BRIC, SE Asia and GCC, currently represent the best opportunities for investment.

Such growth will not come without its challenges for PE managers, GP, administrators and auditors, however. The aftermath of the credit crisis prompted a number of important regulatory developments, such as Dodd-Frank, AIFMD and FATCA, whose impact has been felt throughout the financial services industry.

Crucially, the financial turmoil has bred a new awareness and sophistication among investors. One significant high-risk activity is the valuation and related governance process.

Against that background, Bermuda’s deep pools of intellectual resources and trusted regulatory framework have contributed to its emergence as a domicile of choice for PE. Bermuda has an extraordinary concentration of intellectual capital compared to other offshore financial centres. Its talented administrators, lawyers and accountants are used to dealing with complex products and their valuation, have a long history of working with emerging markets and can provide a high level of customised service, a requisite of PE funds.

Bermuda also has a good pool of highly experienced non-executive directors that can provide ‘mind’ and management, evidence of substance of activities, and independent, objective oversight as well as judgment over valuation and related processes.

Bermuda is well populated with PE fund administration firms that service the growing domestic market as well as PE funds domiciled in other jurisdictions. In fact, Bermuda is emerging as the first choice for PE houses coming under regulatory

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and investor pressures to outsource their back office activities looking for an offshore outsource location with a strong reputation and high quality services and infrastructure.

All the major accounting firms are represented on the Island  PwC Bermuda is the PE market leader and has been servicing PE fund clients for over 20 years including some of the largest PE funds domiciled and administered in Bermuda and other jurisdictions. The firm has dedicated PE teams with extensive valuation and tax expertise and can draw on international tax and transaction services know-how from the global PwC network.

Bermuda legal firms have expertise dealing with large, complex PE deals advising PE managers, sponsors and investors on structuring, fund formation and transactions.

Bermuda is arguably the only financial centre of excellence that is conveniently located to service the US and South America PE markets. That’s important because a Bermuda tax efficient global PE fund platform allows PE managers to attract cashrich investors from the growing emerging markets and provide US/global investors access to PE investment opportunities in those emerging markets.

Bermuda also benefits from the presence of the world’s top investment management firms, large independent hedge fund and private equity fund managers. Asset managers locate their operations in Bermuda because it offers one of the world’s highest standards of living and low taxes.

More and more investment professionals are interested in relocating to Bermuda to avoid higher personal taxes and take advantage of other benefits: political and economic stability; an avowedly businessfriendly government that understands the importance of a well regulated international business sector; a safe environment; easy access to North America and London; no income or corporate taxes; deep pool of talent; and, regular visits by high calibre investors, professionals and business leaders.

Recent regulatory developments will impact the way PE managers, GP, administrators and auditors address valuation risks. While there are no foolproof methods to eliminate valuation risks, PE houses can implement controls that monitor and mitigate risks and provide oversight from senior management and board or its equivalent.

Examples of valuation processes best practice include assigning a group of senior management with the responsibility for managing and overseeing control and valuation policies and procedures. Those performing valuation should be qualified, experienced, and independent. The presence of a governance body to review valuation that is independent and free of conflicts of interests is important and the board or its equivalent should be responsible for the oversight of the valuation process.

The growing focus on fair value measurement and related changes in accounting/disclosure requirements have added to the challenges associated with PE fair value measurements. PE fair value measurements are inherently imprecise.

To comply with the increasing number of accounting and auditing standards relating to fair value measurement and to address greater scrutiny of valuations by regulators and institutional investors, auditors are required to perform additional auditing procedures, request more information from management, engage valuation specialists and raise the level of audit evidence documentation.

So while the PE market is set for growth, it also faces new challenges. Demands on PE promoters from investors and regulators around efficiency, valuation and transparency will grow in line with opportunities stimulated by economic growth. Bermuda, as a financial centre of excellence, will thrive in such an environment, and solidify its reputation as the jurisdiction of choice for the global PE market.

www.pwc.com/bermuda

Having a global perspective

At PwC Bermuda we provide a broad range of assurance, tax and advisory services to private equity funds with multi-jurisdictional structures, including emerging markets and with different investment strategies.

Our asset management group has close working relationships with international tax and transaction teams in other PwC network firms to ensure our clients receive the best quality service and advice available.

Private Equity Funds George Holmes george.holmes@bm.pwc.com

Andrew Brook andrew.brook@bm.pwc.com

Belaid Jheengoor belaid.jheengoor@bm.pwc.com

© 2011 PricewaterhouseCoopers. All rights reserved. In this document, “PwC’ refers to PricewaterhouseCoopers (a Bermuda partnership), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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PrivATE EQUITY FUND SERVICES

UK

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

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

Fund counsel will need to be appointed to advise and guide the fund manager through each of these stages. Below, we explain briefly each of these stages in turn.

Structuring and key terms: Structuring requires tax and regulatory advice to determine the optimum management structure, vehicle and jurisdiction for the fund. Relevant factors will include: where the management team is based; the jurisdiction(s) of the proposed investments; anticipated tax status/jurisdictions of investors; and, how the carried interest participants are taxed. For example, a typical private equity fund structure targeting European investments that is managed by a team in London may comprise an English limited partnership as the fund vehicle with the management team operating as an FSA authorised English limited liability partnership (LLP). The key terms of the fund, which will form part of the marketing documentation, will concern, among others: the investment objective of the fund; maximum size of the fund; management fees; carried interest; investment period term; maximum fund life; permitted reinvestment of proceeds; and, the allocation policy of the manager among funds under its management.

Production of a private placement memorandum (PPM): The PPM is usually the key marketing document for the fund. It will set out: the investment objective and strategy; the experience and track record of the management team; how the decision making process will run; the key terms; risk factors and taxation matters that investors need to consider before making an investment (although investors will need to take their own tax advice). All statements of fact or opinion made in the PPM will need to be carefully checked by the fund manager who will normally retain detailed evidence of the basis on which the statements have been made. Interested investors can be expected to undertake due diligence on the manager and the investment proposition and then make their in principle decision of the amount they wish to commit, often before they instruct their own lawyers to review the detailed documentation for the fund.

Drafting the constitutional documentation and establishing the structure of the fund: This stage can be undertaken during the marketing stage, or delayed pending sufficient indications of investor interest. For an onshore UK limited

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partnership, the main documentation will usually be: a limited partnership agreement (or agreements if one or more parallel vehicles are being formed to cater for particular investor issues); a general partner partnership agreement (often the general partner itself is a limited partnership); a management agreement appointing the FSA authorised manager; application forms for the investors (comprising detailed information gathering representations about the status of the investor); and, legal opinion(s) concerning the constitution of the fund. Establishing the structure itself will involve registering new corporate vehicle(s) and the partnership and making necessary filings.

Negotiations with prospective investors: Investors in private equity funds are typically sophisticated and experienced. The fund manager should expect a reasonable level of negotiation both on the main fund documents and by way of side letters. In an era where investors may have more negotiating power than in previous years, side letter requests are becoming more detailed. Significant investors may seek, for example, bespoke fee arrangements or their own detailed reporting requirements.

Accepting investors at a closing: Fund managers need to judge the appropriate threshold at which they will hold a first closing. It should be sufficient to allow the fund to fulfil its investment objective even if no further investors are admitted at a subsequent closing, and also show some momentum to the fund raising to increase the appetite for second close investors. Some investors have a policy of participating only at subsequent closings, giving them the opportunity to see who has committed to the fund and what investments have been made during the early life of the fund. Subsequent close investors will participate on terms that they will share in investments already made (subject to paying a premium for the benefit of existing investors whose interests are being diluted). At a closing, the general partner and the manager of the fund will hold board meetings resolving to admit the investors and accept their side letters, legal opinions will be issued and filings made.

The above is a brief overview of a process that is often complicated and has many permutations. The key, we believe, to a successful fund is to invest time and effort in the structuring and documentation of the fund.

Going to the market with a position that has been carefully thought through and is within accepted market parameters can pay dividends later in terms of negotiation with investors on that fund, operational ease of the fund and also setting the parameters for successor funds.

Ashurst has a substantial international funds team backed by years of experience, and we are delighted to meet and talk with fund managers about how we can help with their business.

International Arbitration & Dispute Resolution guide

International Arbitration & Dispute Resolution Guide

By Doug Jones AM FCIArb, President of the Chartered Institute of Arbitrators (CIArb) and partner, Clayton Utz, Sydney Many businesses across the globe view arbitration and other forms of alternative dispute resolution (ADR) as viable and commercially sensible alternatives to litigation, especially in the context of international trade and investment. One of the key benefits of arbitration is often perceived to be the parties’ autonomy to design a procedure that best suits their individual needs as well as the distinctive features of each dispute.

In 2011, the continuing recovery from the global financial crisis will lead to a sustained expansion of international commerce, and foreign investment businesses will be cautious in protecting their vested interest in any dealings with foreign ventures. As such, it is important to maintain an awareness of several current trends both in arbitration practice and in regional developments, which will have ongoing significance into the New Year.

In 2010, an extensive empirical study into international arbitration practice conducted by Queen Mary, University of London and White & Case LLP, entitled International Arbitration Survey: Choices in International Arbitration, revealed several major trends as to how arbitration agreements are negotiated and what the priorities or preferences are in negotiating the terms of arbitration agreements. In line with the popularity of arbitration, commercial parties are becoming increasingly savvy in their approach to dispute resolution. Although 68% of survey respondents maintained a formal dispute resolution policy, it was more common for this policy to act as a guide for negotiations rather than a mandatory specification for dispute resolution agreements. Consistent with those findings, corporations were generally willing to take a fairly flexible approach to negotiating dispute resolution clauses in order to suit individual situations. Important practical considerations, however, are that, despite this general willingness to avoid rigid adherence to policy, many survey participants showed a strong preference for confidentiality and for the choice of language in which the arbitration would be conducted. Corporations were also likely to have a formal position regarding the selection of law and seat to govern the arbitration, and were less willing to concede ground in negotiation of these important points. Overwhelmingly, English law was the most commonly used to govern the arbitration, with 40% of respondents using this most frequently. This was followed by New York law, which was the first choice of 17% of the survey participants. The most popular seat for arbitration was London, followed by Paris, New York and Geneva. This strong corporate policy preference for Europe and North America as centres for international dispute resolution foregrounds the continued strength of arbitration in these areas. Notwithstanding this, places such as Singapore and Hong Kong have significantly increased their caseloads over the past years and appear to have established themselves as a preferred seat of arbitration for business from the Asia-Pacific and surrounding regions.

Another common feature of corporate dispute resolution policies was the use of ‘stepped’ or ‘tiered’ clauses that require parties to engage in mediation or other forms of ADR before resorting to arbitration. The incorporation of such clauses demonstrates increasing familiarity with ADR and a growing willingness to tailor these methods to suit individual dispute resolution needs.

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Micro Finance Arbitration International Investment Vehicles & Dispute Resolution guide

In 2010, there was still much debate within the international arbitration community about hybrid ‘arb-med’ procedures and how to incorporate these into commercial dispute resolution agreements.

Unlike tiered ’med-arb’ processes, ‘arb-med’ attempts to integrate conciliatory features into the arbitration so as to produce a hybrid dispute resolution process that allows arbitrators to encourage and facilitate a settlement between the parties at various stages of the arbitration. Expectations of the popularity of arb-med clauses were fuelled by the release of procedural guidelines for their use. It must be observed, however, that, at present, the actual use of these hybrid procedures has not matched the initial enthusiasm. This hesitance is not entirely surprising and may stem from the perceived pitfalls of integrating conciliation or mediation processes into arbitration, particularly regarding the disclosure of confidential information during the mediation phase.

for concern as to the ongoing viability of London as a major hub of international arbitration. The ruling of the ECJ in West Tankers (Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) v West Tankers Inc (C-185/07) [2009] 1 AC 1138) and National Navigation (National Navigation Co v Endesa Generacion SA (The Wadi Sudr) [2009] EWCA Civ 1397) significantly narrowed the scope of English courts, as well as other courts within the European Union (EU), to grant antisuit injunctions against parties who commenced court proceedings within the EU. It was feared that this would bar parties from seeking protection from the English courts against proceedings commenced in other national courts in breach of an arbitration clause. Despite these initial concerns, evidence from 2010 has shown that the situation has not been as dramatic as initially envisaged. London’s popularity as a seat of arbitration remains largely unaffected, and the efficacy of arbitration in Europe has not suffered drastically.

Another key issue in international arbitration is a debate surrounding the extent to which experienced arbitrators should use standardised procedures to conduct individual arbitrations. Many commentators are critical of this tendency, arguing that any benefits achieved through time-savings and consistency are outweighed by the cost to flexibility and party autonomy that commercial parties seek when they choose to arbitrate. Given the increasing complexity of the disputes being referred to arbitration, and the corresponding demand among users for ’bespoke‘ procedures, there is a strong argument in favour of arbitrators and parties engaging in a genuine pre-hearing dialogue to identify the individual issues and requirements of each dispute and tailor procedural requirements accordingly. This push toward more active case management by arbitrators will be one of the key areas of discussion in 2011.

In 2011, attention should also be directed toward the possibility of further withdrawals by members of the Washington Convention.

The International Centre for the Settlement of Investment Disputes (ICSID) is an institution of the World Bank designed for the purpose of conciliating and arbitrating investment disputes between member states and investors from those member states. It plays a significant role in shaping the international arbitration landscape. While the recent resignations of Bolivia in 2007 and Ecuador in 2009 as signatories to the Washington Convention caused discussions about the demise of ICSID and the Washington Convention as an effective mechanism for the protection of foreign direct investment, the mass exodus of signatories - especially from South America - predicted by many experts is yet to occur. Whether member states will be encouraged by the withdrawal of Bolivia and Ecuador and follow suit, and if so, whether this will threaten the importance of the role of ICSID for investment disputes will remain to be seen. What can be seen, however, is that an increasing number of investor-state disputes are being referred to arbitration under the rules of other arbitration institutions. Nevertheless, ICSID will continue to play an important role in the global dispute resolution community in the years to come.

Turning now to important regional developments, the main emerging hot spot will continue to be the Asia Pacific. Although Europe and North America remain the most popular centres for arbitration, Singapore and Hong Kong, in particular, are both emerging as two major new seats. The growing popularity of these two jurisdictions is driven not only by their importance as Asia-Pacific trading hubs, but also by the recent reform of national arbitral legislation and increased promotional efforts by the Singapore International Arbitration Centre (SIAC) and Hong Kong International Arbitration Centre (HKIAC) respectively. As the reputation of arbitration in Asia continues to improve, it is likely that in 2011 more international traffic flow of arbitration cases will be directed toward the Asian region. Another area worthy of mention is the Middle East, in particular the United Arab Emirates (UAE). With its ratification of the New York Convention in 2006, and new draft federal arbitration legislation in the pipeline, the UAE will remain a point of interest on the arbitration scene.

In 2009, two decisions of the European Court of Justice (ECJ) gave some quarters of the international arbitration community cause

For more information about arbitration or ADR, please contact the Chartered Institute of Arbitrators (CIArb): The Chartered Institute of Arbitrators (CIArb) T: +44 (0)20 7421 7444 F: +44 (0)20 7404 4023 E: info@ciarb.org W: www.ciarb.org

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Irrespective of the challenges ahead, arbitration, whether ad hoc or institutional, remains an attractive option for dispute resolution in the international context. Within these broad concerns, what is most crucial for an individual party seeking to utilise arbitration to resolve a commercial dispute is to ensure the appointment of a qualified and experienced arbitrator. In this regard, the Chartered Institute of Arbitrators (CIArb), the world’s leading professional membership organisation for arbitration and ADR, is a mark of international excellence. With 12,000 highly qualified dispute resolution practitioners spanning 110 countries, CIArb is uniquely placed to assist in identifying and nominating professionals with appropriate expertise to resolve disputes across a broad array of commercial sectors throughout the world.

ITALY

Court assistance in the taking of evidence in arbitral proceedings: The Italian perspective

By Ferdinando Emanuele and Milo Molfa, Cleary Gottlieb Steen & Hamilton LLP

Arbitral tribunals lack coercive powers with respect to the taking of evidence. Accordingly, parties to arbitration would normally have to resort to the assistance of state courts to: compel the appearance of witnesses; secure the preservation of evidence; and, order the production of documents.

The scope of state court assistance in evidentiary matters is laid down in the law of the seat of the arbitration. The rules described below apply to arbitral proceedings with an Italian seat.

Appearance of witnesses

Cleary Gottlieb Steen & Hamilton LLP Ferdinando Emanuele, partner femanuele@cgsh.com Milo Molfa, associate mmolfa@cgsh.com Tel +39.06.69.52.21 Fax +39.06.69.20.06.65 www.cgsh.com

The 2006 reform of Italian arbitration law introduced specific rules designed to compel the appearance of witnesses in arbitral proceedings. Specifically, pursuant to article 816-ter, second and third paragraphs, of the Italian Code of Civil Procedure (CCP), “[t] he arbitral tribunal may hear witnesses […].

Should a witness refuse to appear, the arbitral tribunal, if it so deems proper appropriate in light of the circumstances, may request the chairman of the court where the seat of the arbitration is established to order the appearance of the witness.”

Preservation of evidence Prior to the 2006 reform, Italian arbitration law did not contemplate any form of state court assistance in evidentiary matters. To fill this vacuum, a number of scholars had suggested resorting to the rules of the CCP governing the preservation of evidence in anticipation of litigation proceedings. Specifically, a party may seek urgency measures from the court aimed at: securing pre-trial witness depositions if there are “strong reasons to believe that one or more witnesses may not be available during the proceedings,” for example, due to health reasons (article 692 CCP); and, ordering pretrial inspections of objects or premises if there is “urgency to ascertain their status or condition” (article 696 CCP).

The Italian Supreme Court repeatedly dismissed attempts to seek court-ordered urgency measures in aid of arbitral proceedings on the grounds that the parties’ agreement to arbitrate precludes reliance on provisions intended to apply to court proceedings.

In Italy, unlike similar rules existing in other countries and the Model Law, only arbitral tribunals (and not the parties) are vested with the power to seek assistance from state courts to compel the appearance of witnesses.

Arbitral tribunals enjoy a certain degree of discretion in deciding whether to resort to the state court for assistance. The factors that it would normally consider include: the reasons given by the witness for his/her refusal to appear before the arbitral tribunal; whether a party has filed a petition with the arbitral tribunal seeking state court assistance; and, the probative value of the witness testimony for the outcome of the case.

Pursuant to Article 816-ter, fourth paragraph, CCP, if the arbitral tribunal seeks state court assistance, the time limit for the rendition of the award is stayed until the hearing date for the appearance of the witness before the arbitral tribunal. If a witness refuses to appear, even after a state court has ordered it, the arbitral tribunal may request the state court to compel such appearance with the assistance of law enforcement pursuant to article 255 CCP.

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International Arbitration & Dispute Resolution guide

cANADA Fraser Milner Casgrain LLP www.fmc-law.com/ADR John Lorn McDougall, QC Counsel and Partner Emeritus Tel: +1 416 863 4624 john.lorn.mcdougall@fmc-law.com www.fmc-law.com/McDougallJohnLorn

Michael D Schafler Partner Tel: +1 416 863 4457 michael.schafler@fmc-law.com www.fmc-law.com/ MichaelSchafler

Canada’s judicial system - a brief overview Canada’s ten provinces and three territories each have a separate and independent judicial system. Court rules and the administration of justice, including alternative dispute resolution (ADR) procedures, are under provincial or territorial control. The superior courts of each province or territory hear small and large commercial disputes. Canada’s largest cities, Toronto and Montreal, have specialised ‘commercial lists’ whereby commercial disputes are dealt with expeditiously by judges experienced in these types of disputes. The judicial process in each jurisdiction ends with a provincial or territorial court of appeal with the final arbiter being the Supreme Court of Canada.

The Supreme Court of Canada decides appeals from all jurisdictions, including Quebec (which operates under a civil code) and the Federal Court of Appeal, so the remedies available across Canada are similar.

Hallmarks of a typical proceeding Initiating the proceeding: In common law jurisdictions, depending on the court rules, a claim can be started by an initiating document describing the basis of the claim.

Each jurisdiction has its own limitation periods for different categories of claims, although two years from the date the cause of action arose is the norm for the most common claims, notably ones based in tort and breach of contract.

disclosed during the discovery process.

However, the exercise of privilege will prevent the disclosure of some documents.

Lawyer-client privilege protects documents containing confidential communications between a lawyer and his or her client while litigation privilege protects documents created for the dominant purpose of actual or contemplated litigation.

Summary proceedings: Most provinces have rules that permit a party to obtain judgment without a full trial where the court finds no genuine issue requiring a trial exists.

Traditionally, the judge’s jurisdiction to deal with matters on a summary basis has been quite narrow. However, in some provinces, notably Ontario and British Columbia, the rules have been amended to permit the judge to weigh evidence, evaluate credibility and draw inferences from the evidence.

Judgment may also be obtained in favour of the defendant on an application based only on the allegations contained in the claim, if the court is satisfied that the claim fails to set out a reasonable cause of action. However, these applications are rarely successful, since the threshold test is high.

Available remedies: The courts have jurisdiction to order any remedy that is just, whether it is based on common law, equity or statute. A common remedy is damages.

Courts also have broad statutory jurisdiction to grant practical relief, particularly in ‘oppression’-type cases.

Service: A defendant is generally given notice of the claim by being served personally. In Ontario, the claim must be served on the defendant within six months of being issued, and most other jurisdictions have similar limitations.

Costs: Generally, Canada applies the loser pays costs rule  a successful litigant is thus entitled to receive his or her costs of the proceeding from the unsuccessful party on either a partial or substantial indemnity basis.

Discovery: After the pleadings stage, the parties will exchange documents, conduct examinations for discovery, engage in interlocutory applications, conduct some form of mediation, attend a pre-trial judicial conference, and, failing settlement, proceed to trial. A document in a party’s possession, control or power that is relevant to any matter in issue in the case must be

Enforcement of judgments: Judgments of common law provinces and territories are enforceable in other common law provinces and territories under reciprocal enforcement of judgments legislation.

Notably, judgments from Québec, the civil law province, are not automatically enforceable in other Canadian provinces and judgments of other provinces are not

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automatically enforceable in Québec, so a judgment creditor must bring an action on the judgment to enforce it. The real and substantial connection test applies both to the judgments of foreign courts and those of Canadian provinces. It imposes a low threshold and involves a fact-specific inquiry as to whether the forum can assume jurisdiction over the parties’ claims considering the relationship between the case, the parties and the forum. Once this test is met, the enforcing court will then consider whether enforcement should be denied on the basis of fraud, denial of natural justice, or public policy.

Recent trends Recent trends in commercial dispute resolution include a growing use of ADR procedures and thriving private dispute resolution service providers and institutions.

In most jurisdictions, ADR procedures are required steps in the judicial process.

Several law societies even require that lawyers inform clients of available ADR options and consider ADR for every dispute. There is a growing desire to seek alternatives to court proceedings, and in industry specific disputes, parties often implement private dispute resolution schemes into a contract. Also, the use of international commercial arbitration is growing in line with the internationalisation of the Canadian economy, with courts providing a high degree of deference to international arbitration clauses and proceedings. Class action litigation is now common, particularly in British Columbia, Ontario, Saskatchewan and Québec. In relation to actions based on alleged breaches of securities laws, all provinces now have legislation intended to protect purchasers of securities in the event of material misrepresentation, both for primary market and secondary market transactions.

Mauritius

Mauritius: Positioning itself as an international centre for Arbitration

By Muhammad R C Uteem LLM TEP, barrister (Middle Temple) Co-authored by Basheema Tanween Begum Farreedun LLB, barrister

Strategically located at the crossroads of Africa and Asia, Mauritius is already an established financial centre handling trillions of dollars worth of funds every year. With the enactment of the Mauritius International Arbitration Act 2008 (based on the UNCITRAL Model Law on International Commercial Arbitration), which came into operation on 1 January 2009, the country is now placing itself as an international forum for settling international commercial and financial disputes through arbitration.

Arbitration is not new to the Mauritian culture. As far back as 1865, the Supreme Court of Mauritius had already declined to review an arbitration award where the parties had expressly agreed that the decision of the arbitrator would be final and non appealable, Robert v Martin (1865) MR 140. Since 1998, the Mauritius Chamber of Commerce and Industry (MCCI) also has its own Permanent Court of Arbitration, for settlement of disputes in national and international matters and its own sets of arbitration rules.

months of the appointment of the arbitrators unless the parties agree otherwise, thereby ensuring that the arbitration is dealt with speedily and efficiently. The speedy resolution of dispute and confidentiality conferred by arbitration has resulted in a growing number of disputes being referred to arbitration, especially in the construction sector. In recent years, Mauritius has also been used as the place of arbitration for several commercial disputes involving companies from neighbouring countries such as Madagascar.

Current Mauritius laws in matters of arbitration

With the International Arbitration Act 2008 (the Act), the international perspective has broadened. The Act applies solely to international arbitrations, and provides for the possibility to refer to the local office of the Permanent Court of Arbitration of the Hague for its intervention; for example, in case of failure to constitute the arbitral tribunal, for appointment of the arbitrator if the parties have not done so, or for challenge of the arbitrator. The Act also provides for an obligation for the arbitrator to run proceedings effectively so as to avoid any delay and expense that would not be necessary. Provision is also made for interim measures that are in the form of a valid and binding award to be enforced on application to the Supreme Court of Mauritius, irrespective of the country where the award was issued. Based on the Model Law, the Act not only provides that awards (excluding interim measures) obtained under the Act are final and binding, on the parties themselves, but also on the arbitral tribunal, subject to the right of the arbitral tribunal to rectify or modify such award.

Domestic arbitration is primarily governed by the Code de Procédure Civile 1808 (the Code), which allows parties to refer any dispute for arbitration either before or after a dispute has arisen. The Code requires the arbitration to be resolved within six

It is worth noting that Mauritius is a member state to the New York Convention 1958, which has been given legal force through the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 2001. Foreign arbitration awards are

The country’s history resulted in Mauritius having a hybrid legal system. The legacy of the French colonial rule includes substantive laws, such as the Code Napoléon, Code de Procédure Civile and Code de Commerce, while evidential and procedural rules in Mauritius are inspired by English law.

Despite being a Republic, Mauritius has retained the Judicial Committee of the Privy Council in England as its ultimate appellate body.

Uteem Chambers Muhammad Uteem Barrister and Head of the Law Firm Tel: (230) 211 7700/(230) 211 8700 Fax: (230) 211 4700 muteem@intnet.mu uteemchambers.com

thus enforceable in Mauritius subject to the qualifications set out in the convention, including the requirement for reciprocity, but not that of commerciality. Mauritius also ratified the Washington Convention on the Settlement of Investment Disputes 1965, which has been given legal effect in the domestic legislation by the enactment of the Investment Disputes (Enforcement of Awards) Act 1969.

Why Mauritius?

Mauritius has a pool of more than 600 qualified law practitioners, about half of whom have been called to the bar in England and Wales. The Mauritian lawyer is multilingual and familiar with both French and English law. This makes them particularly attractive to resolve international disputes involving cross-border transactions.

The parties may also choose non-Mauritian arbitrators and, in that respect, it is worth noting that following the recent amendment to the Law Practitioners Act, foreign law firms are allowed to register in Mauritius and can also team up with a local law firm.

The professionalism of lawyers and its strong tradition of judicial independence ensure that any arbitral proceedings are dealt with impartially and effectively. The cost of arbitration in Mauritius is also generally lower than if carried out in European countries. For example, the scale of fees under the arbitration rules of the MCCI is much lower.

The government of Mauritius is committed to develop Mauritius into an international arbitration centre. With a strong democracy, excellent telecommunication network, geographical location and time zone, economic and political stability, skilled workforce and the appropriate arbitration legislations, Mauritius has all the necessary ingredients to be an international centre for arbitration.

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International Arbitration & Dispute Resolution guide

British virgin islands

Andrew Thorp Harney Westwood & Riegels Partner, Litigation and Insolvency Tel: + 1 284 494 3267 Fax: +1 284 494 3547 andrew.thorp@harneys.com www.harneys.com

The onset of the global financial crisis has placed increased focus on the BVI as an offshore jurisdiction. As a home to some 900,000 incorporated international business companies as well as being a major centre for mutual and hedge funds, captive insurers and wealth planning vehicles, such as trusts, the jurisdiction has been at the forefront of many recent developments, especially in the law relating to distressed securities and investment funds.

The familiarity of the legal system and a bespoke Commercial Court has heightened the BVI’s reputation as a reliable and efficient centre for international dispute resolution.

English common law applies to the BVI, as do the principles of English equity, so BVI common law is largely identical to that of England (except as modified by BVI statutes).

Any decisions of the Judicial Committee of the Privy Council are binding on BVI courts. In addition, in the absence of any BVI authority, on-point decisions of English courts are of strong persuasive authority. BVI courts will often develop BVI law in line with decisions of English courts and broadly recognise the desirability of having the same common law throughout the Commonwealth.

In 2009, in response to the number of high value and complex international commercial cases coming before the High Court, a dedicated Commercial Division was opened, greatly raising the profile, efficacy and quality of reported case law, as the Court has responded to the unprecedented events of the post-Lehman world.

BVI vehicles are commonly used to hold assets or form a layer of a more involved structure. BVI law will apply to many disputes and regularly prompt urgent ancillary relief applications such as disclosure and freezing orders.

The jurisdiction to freeze the assets of a BVI company is well established and will be exercised, in broad terms, where the Court is satisfied that there is a good arguable case, there is a threat of dissipation of assets and the balance of convenience lies in favour of an injunction being ordered. A more recent development is the Court’s recognition that a freezing order may be issued in support of foreign proceedings where the enforcement of a money judgment obtained might otherwise be frustrated. Ancillary disclosure orders will usually follow freezing injunctions, requiring a target defendant to give details of its assets.

A public search of the Corporate Registry will not provide details of shareholders or directors of BVI Companies. As such freestanding disclosure orders can be sought where the identity of a wrongdoer is required in order to bring an action or to assist in the preservation of assets. These applications are usually aimed at the BVI registered agent of the company

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that will normally hold details of a company’s membership and beneficial ownership, although recent case law (currently under appeal) has made it increasingly difficult to draw in registered agents unless they can specifically be linked to any wrongdoing.

The Insolvency Act 2003 (IA) provides a balanced and effective framework in which creditors may seek redress and for companies to enter liquidation. Secured creditors enjoy statutory protection confirming that they may seek to enforce their security outside of the insolvency regime. Of note are the time limits that provide for swift recourse to the Court and leave little room for stalling tactics.

While the IA provides for a corporate rescue facility in the form of administration, this is yet is to be brought into force and there are few hurdles in place restricting the enforcement capability of a creditor.

Whilst the emphasis of the insolvency regime is largely creditor-friendly, recent Commercial Court decisions, specifically relating to the hedge fund industry, have afforded a level of protection to funds and their managers struggling to realise illiquid portfolios in the face of disgruntled investors.

The BVI Arbitration Act has been in place since 1976 however the incidence of arbitrations has been relatively low, despite the fact that many of the governing documents of BVI companies contain an arbitration clause. This may begin to change following a recent decision of the Commercial Court, which found that an arbitration agreement bit between two parties, even where the broader dispute involved other entities that did not fall within the arbitration agreement.

There has been a considerable surge in contentious trust litigation in the BVI, including Beddoe applications, applications for declarations as to the construction of settlement deeds and applications for directions by trustees.

The BVI offers corporate trustees the opportunity of becoming private trust companies and in turn, the Virgin Islands Special Trusts Act provides flexible trust arrangements in relation to assets held on trust. Smooth management of a trust necessitates trustee confidence in the local court and judges to deal with complex trust and commercial arrangements. The considerable experience that the BVI Court is building up in this area can only enhance the underlying utility of the various trusts products available in the BVI. The BVI enjoys the benefits of a high quality specialised statutory framework alongside wellestablished principles of English common law.

Combining these with a responsive Commercial and High Court means that the BVI is able to provide tailored and effective relief for the wide ranging disputes that affect BVI entities.

France France is a civil law system. The rules of civil procedure are in the Civil Procedure Code (CPC).

The vast majority of domestic commercial disputes are tried before the commercial courts.

In international disputes where international commercial interests are involved, parties prefer arbitration to the commercial courts.

The 141 commercial courts in France are composed of non-professional judges  businessmen elected by their peers for four-year terms renewable four times. There are no limited rights of audience in the commercial courts.

Partial contingency or conditional fee arrangements are permitted. Hourly billing and fixed sum fees are both common. Legal insurance and third party funding of commercial disputes are permitted but remain a limited practice.

Commercial claims are time-barred after five years. Limitation periods usually start running from the date on which the claimant ought to have had knowledge of the event giving rise to the cause of action.

Proceedings before the commercial courts are public, although there are procedures by which documents containing sensitive information may be withheld from public view.

There are no particular formalities that must be complied with before proceedings may be initiated before the French courts, although there are certain exceptions for which specific advice should be sought.

Proceedings between parties present or resident in France are commenced by the delivery by a bailiff of a signed copy of the writ on the defendant at its last known address. In the absence of any other provision in an international convention or in the EU Service Regulation 1384/2000, service on a defendant abroad is effected by the bailiff delivering the summons to the representative of the state.

There is no provision for summary judgment in French civil procedure. In cases where the issues are open to little contestation, the court can bring the investigation to a rapid close and set the case down for a hearing in a manner akin to summary judgment. There is no specific power in the civil courts for the striking out of claims.

The principal pre-action remedies available relate to the protection or establishment of evidence.

The courts have the power to issue a wide range of judgments and orders both of a provisional and final nature, although punitive damages are not recognised. Compensatory damages are calculated by reference only to the extent of the loss actually incurred. Moral losses may be compensated.

French courts may also grant injunctions, although breaches of most contractual obligations will only sound in damages.

Interest on awards of damages runs automatically at the legal rate from the date of the

pronouncement of the judgment.

French law requires litigants to prove the facts on which they intend to rely, although there is no procedure for discovery as in common law systems. Judgments can only be based on the evidence produced during the proceedings. The court’s role in disclosure is essential given its case management role. The taking of oral evidence is almost unheard of in commercial cases.

Correspondence between a party and its counsel is privileged. This privilege is absolute and can only be waived by the client. Correspondence between counsel is privileged, but may be waived.

Under the CPC, the claimant commences proceedings by having a summons served by a bailiff directly on the defendant. Exchanges of written pleadings then follow according to a timetable set by the court. When the court is satisfied that further pleadings are not necessary, a date for the hearing of oral argument will be fixed.

Bredin Prat Tim Portwood Avocat à la Cour/Barrister of England and Wales Partner Tel: + 33 1 44 35 35 35 Fax: + 33 1 42 89 10 73 timportwood@bredinprat.com www.bredinprat.com

Appeal (filed within one month of notice of the judgment) is a rehearing of the case. Appeal to the Cour de Cassation is on the only ground of error of law.

The courts may order a party to pay the other’s costs, although any such order is far less than the amount actually spent. There are no specific provisions in French law regarding security for costs. Claimants domiciled outside France are no longer required to give security for costs.

Judgments for the payment of a sum of money are usually enforced by the seizure of property. A range of different forms of attachment or seizure is available. Companies may be placed into insolvency if they fail to satisfy a judgment.

Jurisdiction clauses are valid in commercial agreements. Choice of law agreements are enforced although mandatory provisions of French law will always apply.

The taking of evidence in France for the purposes of foreign proceedings is a criminal offence unless performed under an international convention.

In the absence of an enforcement treaty, enforcement of a foreign judgment will succeed if the Tribunal is satisfied that the court that rendered the decision had jurisdiction under French rules of jurisdiction, that enforcement would not breach French international public policy and that the judgment was not obtained by fraud.

Arbitration is a widely used form of alternative dispute resolution in France. The French international arbitration rules that have recently been reformed are not based upon the UNCITRAL Model Law. Mediation and conciliation are being promoted in all fields of the French legal system as an appropriate remedy to the overburdening of the courts and the consequential delays that are commonly observed.

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Micro Finance Tax International Investment GUIDE Vehicles

El salvador Ricardo A Cevallos or Oscar Samour Consortium Centro America Abogados Ricardo A Cevallos Partner Tel: (503) 2209 1600 Fax: (503) 2298 3939 elsalvador@consortiumlegal.com www.consortiumlegal.com

Commercial dispute resolution Until 2002, when the Mediation, Conciliation and Arbitration Law (ADRL) was passed, almost all commercial disputes were resolved in the courts. Since then, several large commercial disputes as well as shareholder disputes have been resolved through arbitration.

In 2010, a new Civil and Commercial Procedure Code (CCPC) was introduced and it has changed court procedures drastically.

Today, most commercial disputes are resolved in the courts, but arbitration has become increasingly popular especially among large corporations and sophisticated clients, particularly multinationals.

Other ADR are rarely used, although they are regulated by the ADRL. Interestingly, there are no court fees in El Salvador for commercial disputes, which encourages much frivolous litigation and manoeuvring. By law, all parties in an arbitration or litigation in most cases must be represented by local counsel. Fee arrangements with attorneys vary but usually respond to a flat fee amount plus a success fee for each stage of a case and depending on the court level; contingency fees are extremely rare. All civil and commercial cases are considered confidential and files are only open to the parties and the attorneys on record. The statute of limitations for commercial actions varies between six months and five years  most fall under the two-year limitation.

Preliminary and interim measures or injunctions are available to the parties in litigation and are granted on the grounds that the requesting party must have a prima facie right in its favour, the likelihood of damage due to the delay caused by the action or impossibility of enforcing the decision. Some measures are the attachment, security for costs, creating an inventory of goods or assets, orders preventing assets to be transferred to third parties, intervening in the management of companies or production centres.

Parties must produce all the evidence to the court or tribunal, but judges and arbitrators are free to request additional information.

Witnesses must give oral evidence and may be cross-examined by opposing counsel.

Under the CCPC, a typical commercial case takes about three to nine months in the court of first instance. However, that same case may take about two years in the appeals court and two to five years in the Supreme Court. Time is one of the issues why parties have preferred arbitration since the ADRL establishes a maximum of three months to issue an award after the tribunal has been installed and if such award is final (unless one of the parties tries to set aside the award under very specific causes established in the law). The commercial interest rate is fixed by the government at 12%, which is applicable to all monies owed due to commercial obligations or as a result of a court or arbitration decision.

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Local courts respect both the choice of law and choice of forum provisions in contracts. A local court confronted by a choice of law different than Salvadoran law, even if it has jurisdiction of the case, will usually defer to the courts of that country.

Arbitration The ADRL establishes that the government will recognise and enforce international arbitral awards based on the treaties and conventions signed by the government, such as the New York Convention, the Panama Convention and the ICSID Convention.

Recent experience has shown that the courts have respected and enforced foreign arbitral awards. Both pre- and post-dispute agreements to resolve commercial disputes are enforceable and although the law requires these to be in writing it also contains an exception when the parties’ actions indicate their desire to engage in arbitration. Party autonomy  or freedom of contract  is well respected by the courts and arbitral tribunals, in arbitration, its only limitation is when an arbitration agreement places a party in serious disadvantage vis-à-vis the other; in which case the clause may be considered partially null and void.

The ADRL is extremely open as to who the arbitrators may be, except in arbitrations under the law of El Salvador, where they must be persons authorised to practice law in El Salvador. This is not a requirement for equity or technical arbitrations. Counsel to any of the parties before the arbitral tribunal must also be authorised to practice in El Salvador. Foreign attorneys may serve as advisers, but may not intervene in the proceedings.

Currently there is only one arbitration centre operating in El Salvador, which is part of the Salvadoran chamber of Commerce in San Salvador. It began operating in 2003, but has had minimal work; most of the arbitrations that have happened recently are ad hoc. Curiously, ex aequo et bono arbitration is not uncommon in El Salvador, there are no statistics but the ADRL states that if the parties are silent the law assumes that they agreed to this type of arbitration.

Although it seems expensive when compared with free courts, it is highly recommended that when involved in a commercial dispute in El Salvador that arbitration be considered if negotiations do not succeed. The time that may be spent in court proceedings is not worth it when compared to an arbitral award obtained in three months and which may take up to a year to enforce.

Brazil Gustavo Tepedino Advogados Gustavo Tepedino Senior Partner Tel: +55 21 25053650 Fax: +55 21 25317072 gt@tepedino.adv.br www.tepedino.adv.br

Arbitration’s new challenges in Brazil

By Gustavo Tepedino

In Brazil, arbitration consolidated itself in recent times, only after the ruling by the Brazilian Supreme Court (Supremo Tribunal Federal) at the end of 2001 as to the constitutionality of the Law 9.307/96. For this reason, we are still living in a period of uncertainty in which the old practice of litigation exerts significant influence on the procedural dynamics. In arbitration, the proceedings have to be leaner with petitions and objective and less repetitive testimony. On the other hand, since no appeal is possible, the non-conformance of the defeated party, deprived of the proper appeals to the state justice, ends up turning to the insistent attempt of judicial attacks of the arbitration awards.

Fortunately, in this particular case, the firm action of the judiciary, repelling illegitimate procrastinating expedients, has proved itself fundamental to the preservation of the reliability of the arbitration procedures.

The situation is crucial at this particular moment in time. One sophisticates, with the rising number and amounts of the arbitrations, the allegation that the unfavourable arbitration awards infringe the internal public order by alleged violation by, for example, the Arbitration Tribunal of the imperative law applicable to the proceedings, or erroneous valuation of the evidence by the arbitrators in disrespect to the adversary proceeding and the procedural equality, or even for the apparent impartiality of the arbitrators, all to evoke the annulment of the arbitration award according to article 32, VIII, of the Law 9.307/96, combined with article 21, § 2º, the language of which is peremptory: “The principles of adversary proceeding, equality of the parties, impartiality of the arbitrators and of their free convincement will always be respected in the arbitration proceedings.”

The wide adoption of the legal provision, with the intent of protecting the right of

defence, demands that the judiciary shows itself extremely prudent under penalty of turning admissible the state control in face of any arbitration award, which would discredit arbitration in Brazil.

The arbitration awards, pronounced by specialists chosen by the parties, are, inevitably, the fruit of an imperfect work – being human - of the arbitrators. The arbitrators, similar to the judges, discipline and (in some way) restrict the adversary proceeding, evaluate the material evidence, close the instruction in a determined moment and decide the dispute. If the parties selected the arbitrators and do not consider that their performance was adequate, they will not choose them in the future, not being plausible that the judiciary transforms itself in an oblique and trite appeal instance for arbitral awards.

In the same vein, delicate issues submitted innumerous times to the judiciary relate to the impartiality of the arbitrators. In a general manner, while assuming their roles, the arbitrators sign a declaration of independence, indicating possible circumstances in which, in the eyes of the parties (under the terms, for example, of article 7 (2), of the Rules of the Arbitration Chamber of the International Chamber of Commerce (ICC)) could compromise their impartiality. If the parties, learning of these facts, accept the appointment, they may not later impugn for impartiality the award rendered by the Tribunal.

However, supposing that a particular arbitrator failed to indicate a fact that could be considered relevant (by simple forgetfulness or lack of knowledge of the relation between such a fact relative to a prior professional performance and the controversy under litigation), the good faith of the representatives of the parties shows itself indispensable. These, more than the arbitrators, may many times identify the

professional performance or the personal relationship of the appointed arbitrators with companies or persons close to the parties under litigation. And they should announce such information as soon as possible, independent of being called upon to do so, as a means of preservation of the integrity of the proceedings.

In any case, in all the above hypotheses, the judiciary will endeavour to preserve to the fullest the arbitration proceedings and awards, intervening only when there is verified damages to one of the parties, especially in the presence of an unanimous award pronounced by a tribunal composed of three arbitrators. The trivialisation of the annulment of the decisions would be equivalent to the debacle of arbitration, the expansion of which favours all society and, in particular, the judiciary itself, unburdening it of procedures for which it is not prepared to judge.

The maintenance of the extraordinary success reached in the past few years by arbitration in Brazil depends on the overcoming of the difficulties common to the growth. Therefore, with greater urgency than in the judicial sphere, it becomes indispensable, precisely due to its private nature, based on the trust between peers and the acclaim of good faith in the proceedings. The culture of loyalty, ethics and transparency  of the arbitrators, the arbitration courts, the lawyers and the parties  more than the threats of nullities and repressive attitudes, is that which may assure the credibility and maturity of the arbitrations in Brazilian judicial life.

Such a goal, if reached, will produce fruits that extrapolate the alternative solution of conflicts, positively influencing the behaviour of the parties and the lawyers in general, in a truly civilising influx of forensic practice.

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International Arbitration & Dispute Resolution guide

Monaco Jean-Charles S Gardetto Avocat défenseur Partner 19, Boulevard des Moulins 98000 MONACO Tel: +377 92 16 16 17 Fax: +377 93 50 42 41 info@gardetto.mc www.gardetto.mc

The Principality of Monaco is a hereditary and constitutional monarchy under the rule of law.

The Constitution, adopted on 17 December 1962 and amended since, provides in article 2: “The Principality is a State governed by the rule of law and committed to respecting fundamental liberties and rights.”

Executive power is vested in the Sovereign Prince as head of state, and the Minister of State as head of government, assisted by the members of the Council of Government, who are responsible to the Prince. Legislative power is exercised jointly by the Prince and by the National Council (parliament). Judicial power is exercised by the Courts.

The Principality is a member of leading international organisations, including the United Nations (UN), the United Nations Educational, Scientific and Cultural Organization (UNESCO), the World Health Organization (WHO), the Organization for Security and Cooperation in Europe (OSCE) and others.

The Principality also became a member of the Council of Europe on 5 October 2004. This had the effect of giving Monegasques and residents access to the European Court of Human Rights, after exhausting of all domestic forms of legal remedies against decisions rendered by the local courts.

Monaco is not a member of the European Union. However, by virtue of certain treaties signed with France, Monaco is subject to a certain number of European standards, particularly in the banking field.

With a population of about 32,000 inhabitants, including about 8,000 Monegasque citizens, the Principality is highly cosmopolitan, with residents representing nearly 125 different nationalities.

Given these particularities, Monegasque lawyers are used to handling various international as well as local disputes.

If the dispute cannot be settled amicably, the judicial process starts with summons to appear before the Court of First Instance. In front of most courts, the assistance of a Monegasque lawyer called an ‘avocat défenseur’ is required. The court proceedings are usually public.

There are three levels of civil jurisdiction in Monaco. The jurisdictions of first instance, essentially the Court of First Instance, which rules on civil and commercial litigations and the emergency judge (juge des référés), who can issue orders in urgent matters.

The President of the Court of First Instance decides alone for ex parte matters, filed by a request. The president issues orders, such as provisory attachments on bank accounts or shares, provisory mortgages, orders for authorisation to obtain bailiff statements,

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including for documents held by a debtor or a third party, or orders enforcing a foreign arbitration award.

Other first-level courts include the Labour Court (ruling on disputes arising from work contracts) and the Rent Arbitration Commission (commercial or housing matters).

The Court of Appeal has general jurisdiction over appeals. The Court of Revision acts as a court of cassation. Its role is purely to ensure that lower courts have applied the law correctly. The Court of Revision may decide to confirm or quash the decision brought before it.

In large commercial disputes, a case can take at least two years from the beginning until the appeal decision. However, this duration depends on the number of opponents (each of them is granted a postponement of one to three months in order to answer to the opponent’s writings), and on the number of exceptions raised by them (nullity of the summons, statute of limitation, jurisdiction issues, choice of law issues).

The parties can avoid court actions, or end their litigation, if they find a way to settle their dispute amicably; this negotiation can be handled by their Monegasque lawyers (avocats). The lawyers’ correspondences remain confidential until they reach an agreement, which facilitates the amicable process. The courts may enforce by judgment the settlement found by the parties.

The parties can also avoid court actions by signing an arbitration agreement, either before any dispute arises by inserting an arbitration clause in their contract, or after the dispute has arisen by signing a compromise, ie an agreement providing that they will settle their dispute in front of an arbitrator, and also defining the process of arbitration. The Code of Civil Procedure recognises these two types of arbitration agreements in articles 940 to 965 under chapter III, entitled ‘Arbitration in civil or commercial matters’. The president of the Court of First Instance may deliver interim orders preparing or facilitating the arbitration process.

Monaco is a party to the New York Convention dated 10 June 1958 on the recognition and the enforcement of foreign arbitration awards. Most of the time, the recognition and enforcement of awards in Monaco is easy, since it only involves an ex parte proceeding before the president of the Court of First Instance.

The government of the Principality has a project to reform the law of arbitration, but it is not clearly defined yet.

Republic of Mauritius

Erriah Chambers (EC) is the only chambers that specialises in international tax law, international trusts law, international business laws, arbitration and mediation and all aspect of offshore business for international and domestic clients in Mauritius. EC was set up in response to the demand for Mauritiusbased lawyers with international exposure and specialised expertise in the fields of international trusts, international finance, corporate and cross border insolvency, tracing and debts recovery.

EC acts as legal adviser and legal consultant to various banks in Mauritius and internationally, such as, among others, Barclays Bank Plc, State Bank of India, Indian Ocean International Bank, Investec Bank, Deutsche Bank, Standard Bank, Standard Chartered Bank, Banque des Mascareignes, DBS (Singapore), UOB (Singapore), Citibank, SG, Credit/Lyonnais (Calyon) DVB Bank, Bank of America, Bank of Nova Scotia, Royal Bank of Scotland and Investec Bank.

Dev Erriah is listed as Band I and II individually in Chambers and Partners Global 2008, 2009, 2010 respectively and EC is listed as Band II and Leader in General Business Law 2009 and 2010 by Chambers and Partners.

ERRIAH CHAMBERS Erriah Chambers Dev Ramdeo Erriah Head of chambers Tel: (230) 208 2220 Direct Line (230) 208 3220 (230) 254 5116 Fax: (230) 212 6967 deverriah@intnet.mu

More than 80% of EC’s practice involves advising international clients, multinational enterprises, international law firms, the top ten international accountant firms, management companies, domestic and international banks. EC is also involved in setting up of various investment funds with very complex structures in India, various jurisdictions in Africa, and China etc. Funds set up are inter alia listed such as Alchemy, Marshall Wace, Altima, Absolute India Fund, iLabs, Prudential, Parkcentral, Lyxor, Bramah, DE Shaw, etc.

EC provides litigation services, advice and legal opinions on: any aspect of the laws of Mauritius; international tax planning; domestic taxation; import and export services; all cross-border transactions; hotel industry and construction law; international investments, trusts law, company law, bankruptcy and criminal law and economic crimes; international law of finance including capital structured finance and derivatives, securitisation by making use of special purpose vehicle; aircraft leasing for clients such as AirAsia, Jet Airways, Air Deccan, Commair, Air Mauritius; international banking and privatisation; international tax and trust structuring; implementation of international transactions; negotiation; and drafting of transaction documents and review of all legal documentation inclusive of trusts deeds, corporate constitutive documents, credit facility documents etc.

EC undertakes international litigation and arbitration, such as international bankruptcy, enforcement of international creditor’s claim, arbitration award and money laundering and due diligence in Mauritius and at international level.

EC has a very diverse portfolio of international clients ranging from institutional investors, bank merchant banks and government-linked agencies to the individual requiring international tax planning and estate planning. EC has also advised overseas governmental agencies and been involved in legislative drafting in Mauritius.

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International Arbitration & Dispute Resolution guide

Ecuador

Austria

Alejandro Ponce Martínez Quevedo & Ponce, 12 de octubre y Lincoln, Quito, Ecuador Senior partner Tel: + 593 22 98 66 50 Fax: + 593 22 98 65 80 alejandro.ponce@quevedo-ponce.com www.quevedo-ponce.com

Klaus Oblin Dr. Klaus Oblin, LL.M. Founder Tel: +4315053705 Fax: ext - 10 klaus.oblin@oblin.at www.oblin.at

Interim relief and court intervention in arbitration

The work that our firm does:

Enacted in September 1997, the Arbitration and Mediation Law of Ecuador (LAM) has encouraged the use of mediation and arbitration as dispute resolution methods. In particular after December 2004, when the judiciary was intervened by the executive and legislative powers that determined the submission of the courts to the political pressure of the other branches of the government, a dependency that has been constantly increasing when a new Constitution (approved only by 48.6% of the voters) was published and the executive has followed a path of absorbing totalitarian powers.

We are practising in the field of commercial law with an international focus and particular expertise in dispute resolution.

Under the LAM, arbitration panels have the power to order provisional measures of any kind in order to protect the subject matter of the arbitration or to guaranty the results of the arbitration process. These provisional measures in arbitration are binding for the parties once ordered. Normally these provisional measures should be executed before and by the courts, which have no powers to contest the arbitrators’ rulings.

The main things a client needs to look out for when seeking advice in a commercial dispute:

However, if the parties have agreed in the arbitration compromise, the arbitrators may directly request the help of any public officers, either from the judiciary or from the administration, including the police, to conduct and execute the provisional measures ordered by them.

If arbitration has not commenced, either because arbitration proceedings have not been brought or the arbitrators have not yet been sworn in, provisional measures may be requested to the competent courts, which may only order the specific measures provided in the Law (except in intellectual property litigation, on which their powers are broader), and no others, which in practice limit the possibility of the parties to protection before awards are entered. The judicial recourse to provisional remedies does not imply a resignation of the right to arbitration, if the arbitrators’ panel have not been sworn in.

Decisions granting provisional measures by the courts made before arbitration has commenced may not be overruled by the arbitration panels, except in the final awards, without the agreement of the parties; but the panels may grant other provisional measures during the course of the arbitration. Rejection of granting provisional measures by the courts is not binding for the arbitrators, who are entitled to order appropriate interim reliefs.

Once arbitration proceedings have started, the courts are not entitled to order any provisional measure. The arbitration panel should take the decision on competence in the first arbitration hearing.

In short: the courts may order provisional measures before arbitration begins; arbitration panels may order provisional measures at any time during arbitration, if requested by any of the parties; such provisional measures should be executed before the courts, unless the parties have agreed that they may be executed by the arbitrators directly. Anyhow, they are binding in any case for the parties.

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We advise and represent corporations with regard to all aspects of judicial and extrajudicial dispute resolution including national and international enforcement proceedings.

Klaus Oblin is regularly appointed as arbitrator in national and international commercial disputes.

In addition, we advise companies particularly in the areas of commercial law and international contract law

- Make sure that their advisors are (a) good at what they do (b) familiar with the relevant legal systems (c) follow through on doing what they need to do in a prompt and efficient manner, (d) understand the client´s business and (e) communicate with their client all the way through the process, that is make sure that the advisors keeps the client informed about everything from the first actions to the last bill.

- Ask for clear answers that demonstrate knowledge of the law and understanding of the client´s business.

- Examine whether the advisor will give the client an opportunity to work alongside; a good relationship is critical.

The use of arbitration in Austria: The entry into force of a new Austrian arbitration law on 1 July 2006 has been positively received by the international business and legal community. It substantially reflects the UNCITRAL Model Law on International Commercial Arbitration while granting a great degree of independence and autonomy to the arbitral tribunal. The legislation put Austria on the map as a venue for international arbitration with courts now statutorily bound to assist, where necessary, the smooth running of both arbitration proceedings and to intervene only in limited circumstances. First level courts support the parties in finding an amicable solution (settlement). However, they do not recommend to resort to either arbitration or mediation.

The main advantages of arbitration, as opposed to litigation: There are many reasons why arbitration is chosen in international business, not least the fact that there is the advantage of a confidential and neutral forum, the usually high levels of experience among arbitrators, the relatively high speed and lower costs, and the fact that arbitral awards are internationally enforced.

Increase or decrease in commercial disputes and litigation in the wake of the current global economic downturn: There has been some increase but not significantly. The mainly concerned areas are insolvency related. In addition, the volume of work is already increasing in connection with the regulation of banks, financial services and advisers.

DOMINICAN REPUBLIC

THE DEMOCRATIC REPUBLIC OF THE CONGO Edmond Cibamba Diata Cabemery & Partners (Pty) Ltd at Johannesburg office

Jiménez Cruz Peña Marcos Peña Rodríguez Partner Tel: 809 955 2727 Fax: 809 955 2728 mpena@jcpdr.com www.jcpdr.com The openness to international commerce and investment over the last decade has led to a positive revolution of the methods traditionally used to settle disputes. In the Dominican Republic, arbitration provides a simpler, less expensive more specialised form of dispute resolution than national courts.

The legal framework governing arbitration consists of: Law 489-08 on Commercial Arbitration, which governs domestic and international arbitration proceedings, and enforcement of domestic and foreign awards; Law 50-87, which instituted administered arbitration; and, the international conventions on arbitration ratified by the Dominican Congress.

Law 489-08 is based on the UNCITRAL Model Law on International Arbitration. Although a few variations were included, the main features of arbitration are expressly contained.

In terms of procedural rules, Law 489-08 applies absent the parties’ agreement. Although not much detail is provided as to how the production of evidence shall be carried out due to the inquisitorial nature of the proceedings before local courts, the notion of discovery is inexistent in our legal culture. Each party has the undertaking of submitting all evidence in support of their own arguments, a consequence of the civil law tradition that governs the Dominican legal system.

Interim measures may be ordered at the request of a party whose credit is in danger, for the conservation of an asset or to secure evidence, by applying to by either a local court or the arbitral tribunal, before or during the arbitral proceedings. This authorisation process, when filed before a local court, may be ex-parte.

As to administered arbitration, the Centre for Alternative Dispute Resolution of the Chamber of Commerce and Production of Santo Domingo (CRC) is the most prominent arbitral institution in the country.

Its rules resemble those of the International Court of Arbitration of the International Chamber of Commerce. One of the most important aspects of arbitration under the Centre is that the award is definite and binding, and no court authorisation is required for enforcement, as opposed to awards rendered under ad hoc proceedings or foreign awards. The CRC may administer national as well as international arbitrations.

A recent development in state arbitration is the inclusion in the Constitution enacted on 26 January 2010, which expressly foresees that the Dominican State may be a party to international arbitration as a result of contracts with private entities. Although the Dominican Republic has not ratified the ICSID Convention, the country is a party to bilateral investment treaties with France, Spain and other countries. In addition, the country has signed free trade agreements with Central America, the US, the Caribbean and the EU. The future of arbitration in the Dominican Republic is very promising since it is increasingly becoming the preferred dispute resolution mechanisms for business people, strongly supported by the local courts.

Senior Partner Tel: (+27) 11-78-35-750 Fax: (+27) 11-78-32-717 etshidiata@cabemery.org Emery Mukendi Wafwana Emery Mukendi Wafwana & Associés Emery Mukendi Wafwana Senior Partner Tel: (+243) 99-99-03157 ewafwana@cabemery.org www.cabemery.org (DRC) has a single judicial system, which is organised by title II of the DRC Constitution of 2006. Commercial disputes arising in the DRC are settled either using the judicial method or alternative methods, for example, conciliation, mediation and arbitration.

Litigation Litigation takes place before various DRC courts and tribunals.

Commercial disputes are typically brought before trade courts, which are common law courts of first resort. Trade courts have been instituted in the DRC since 2001.

Trade courts sit in panels of three judges. An action before a trade court is commenced when a written or oral motion or a writ of summons is filed with the clerk of the court. Within two days of filing a motion or a writ of summons, the president of the court sets the date of the hearing and designates the presiding judges.

A judgement is rendered within eight days of the hearing. A party against whom a judgement has been entered by default has eight days, following the notification of such judgement, to file a motion to set aside the default judgment.

Trade courts decisions are appealable within eight days of their publication, before the court of appeal.

Court proceedings are public and any lawyer of their choice licensed in the DRC can represent parties or any lawyer admitted to the bar of a country that has a reciprocity agreement with the DRC. DRC law organises attachment procedures in actions pertaining to claims for money. A party seeking to attach the property of a debtor must apply for a writ of attachment to the court. Generally, no writ of attachment can be issued except after a hearing where both parties must appear.

Alternative dispute resolution DRC law also provides disputes settlement through one of the alternative commercial disputes settlement methods, namely arbitration. The parties to a dispute shall have agreed to submit to arbitration an existing controversy or a controversy arising thereafter. There are two arbitration centres in the DRC: Centre National d’Arbitrage, de Conciliation et de Médiation (CENACOM) and Centre d’Arbitrage du Congo (CACO).

These are private associations of public service authorised by ministerial decree. They are competent for the settlement of commercial disputes.

Arbitration proceedings last on average about four months.

A part from these arbitration centres, the parties to an agreement can designate any other person or institution to arbitrate their disputes.

The DRC has ratified some international instruments, such as the ICSID Convention and OHADA treaty (the OHADA treaty is a treaty executed by 17 African countries, with the goal to unify African business law), which provide for and organise arbitration proceedings. The DRC mining code further provides for the use of international arbitration as one of the guarantees offered to foreign investors.

Our law firm has a proven track record in handling cases in DRC trade courts as well as in local and international arbitration courts.

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internatiOnal arBitratiOn & dispute resOlutiOn Guide

SYRIA

OUSSI LAW FIRM

Salhiye – Shouhada Str. P. O. Box: 2506 Damascus – Syria Tel : +963 11 3300090/1 Fax: +963 11 3312581 E-mail : go-law@oussico.net

Oussi law firm was established in 1968 and offers a full range of legal services. The firm is associated with a comprehensive network of distinguished experts and consultants in the field of business management and economic feasibility studies. Moreover, reliable contacts are maintained with other firms in Syria, the Middle East, Europe and the US. The firm’s activities are conducted by several professional reputed lawyers dedicated to serving their clients the very best of legal services in English and Arabic.

The firm’s activities include: administrative law; civil law; criminal law; contract law; financing law; arbitration; international law; trademark law; counterfeiting & infringement law; unfair competition law; franchising law; labour law; tax law; banking law; construction law; insurance law; and, business consultancies.

In order to give the reader an idea about the services my law firm offers as a specialist in the field of international arbitration and dispute resolution, I must define the methods used by trained neutrals to help people to communicate more clearly, negotiate effectively, develop and evaluate solutions, or resolve conflicts.

Negotiation is a discussion between two or more people solving disagreements, deciding what to do or making a bargain.

Conciliation is the use of a third person who is asked to help people reach an amicable resolution of their dispute. Facilitation involves a neutral who helps members of a group define and meet their goals, exchange ideas and information, solve a problem or hold effective meetings. Mediation is a method for discussing problems and exploring solutions with the help of a trained neutral. Neutral evaluation is conducted by a neutral with the expertise to hear arguments and predict the likely outcome in court. Arbitration is a formal proceeding that uses one or more neutrals to listen to evidence and render a decision. Finally, litigation is a legal dispute argued in court.

Whenever there is a dispute between two parties, the first step my firm takes is to work on a solution outside the court, and I believe this characteristic differentiates us against our competitors.

In Syrian legislation, especially after Arbitration Law No.4 dated 25 March 2008 was published, there is an important role for the judiciary in the arbitration case, either in the procedure of arbitration or in the interim measures, such as the provisional lien, call of witness and judicial delegations.

It is worthwhile to note that the economic downturns has affected dispute resolution as the parties involved preferred to settle their disputes outside court to save money and time. I believe the main factors that will affect the dispute resolutions are mediation and arbitration, but that reconciliation is the master of the rules.

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International Advisory Forum International Advisory Forum

The outlook for UK AIM and M&A activity in 2011 AIM teams: Michael Bennett, Keith Dempster, Joan Yu, and Michael Corcoran M&A teams: Daniel O’Connell, Yvonne Donaghey and Una Deretic Kerman & Co LLP Incorporating Lipkin Gorman 200 Strand London WC2R 1DJ www.kermanco.com +44 (0) 20 7539 7272 (Main)

Macro economic factors Most commentators are optimistic about prospects for global growth this year.

Growth in the global economy for 2011 is estimated by the IMF to be on average 4.4%, lower in developed markets and higher in emerging markets (up to 6.5%). Stronger growth will result in higher commodity prices and higher inflation rates.

Commodity prices are likely to increase due to limited resources. Copper has recently been the strongest performing commodity due to its association with growth in China, which accounts for 37% of annual refined consumption, and more generally manufacturing. Although the oil price has fluctuated wildly, it has recently recovered strongly. Gold continues to be a focus for investors and its steady rate of increase is a warning of inflationary pressure.

Interest rates are generally likely to increase.

The contraction in the UK economy at the end of 2010 and start of 2011 may mean any rise is now delayed, but rates may go to 4-5% in the medium-term. Globally currencies will fluctuate as Central banks juggle with fiscal tightening. The Japanese yen and US$ are likely to significantly underperform. The euro area bailouts may continue with Portugal and Spain possibly next in line, but the currency should stabilise. Sterling is forecast to remain strong. This will impact on bank appetite for lending and the rates available for acquisition finance.

AIM AIM has been a popular market for small and mid-size public energy, mining and natural resource companies due to its flexible regulatory regime that is less costly than many other growth markets. AIM, like other public markets, has been affected by the global economic downturn, which has had a detrimental impact on the ability of resource companies to raise finance for the exploration, development, extraction and commercialisation of their projects.

These challenges are viewed by some as

an opportunity. However AIM will need to work hard to retain its position as other secondary markets compete hard to win its business.

Commodities Macquarie bank’s upgraded forecast for 2011 is for copper, aluminium and silver to rise by about a third and gold, iron ore and coking coal by 10-15%. Morgan Stanley estimates a similar range of commodity price increases.

It is anticipated that the stronger resource companies will make opportunistic acquisitions due to discounted asset values, particularly where the seller is distressed, and consolidate their interests across different geographical regions. This may be a continuing trend and AIM will emerge a better exchange as a result, with properly funded companies with high quality projects leading to better liquidity and prospects for shareholder returns.

Kerman & Co’s AIM teams continue to be very active in the natural resources sector, advising clients on transactions relating to gold, molybdenum, copper and a range of other metals. Kerman & Co has acted on the admission of Copper Development Corporation to AIM on its £40.7m placing.

The Company’s principal investment is a copper project in the Philippines. The firm has also recently acted on the admission of, and placing for, Noricum Gold Limited, which holds exploration licences in a high grade Austrian gold production region.

Energy Kerman & Co’s energy team, ranked number one for the number of its AIM oil and gas clients by Hemscott in the first quarter of 2011, serves the needs of its clients in the global energy industry, encompassing a broad portfolio of transactions from the exploration and exploitation of oil and gas (and other fossil fuels, such as anthracite coal and uranium) to developing and implementing alternative energy concepts.

This includes advising clients who are active in developing solar, wind and waterpower.

The firm’s energy litigation practice also plays a crucial role in safeguarding clients’ assets and interests overseas, and it regularly handles commercial disputes as well as arbitrations and alternative dispute resolution proceedings in international energy litigation matters.

M&A The current economic situation is starting to be viewed by many entrepreneurs as an opportunity. Established companies are being forced to leave gaps in the market place that may be developed. Coupled with reduced asset values, particularly where the seller is distressed, this is creating opportunities for entrepreneurs to exploit.

Kerman & Co advised the Bestway Group, the UK’s largest privately owned wholesale and cash & carry group on its US$230 million investment to acquire an additional 20 per cent. of United Bank Limited, Pakistan’s second largest private bank. The firm has also recently advised on the sale of World Events Group Limited, an event management specialist, for £13.5 million.

This is the third deal completed by the firm in this sector.

Client focus Kerman & Co LLP lawyers pride themselves on understanding their clients’ business issues, providing high service levels and on being approachable, empathetic and pragmatic. They look for practical and workable solutions to problems and challenges in a timely manner.

A significant proportion of their work is international in scope, and the firm has a number of multilingual partners and staff. Having developed strong working relationships with likeminded firms around the world, in particular Europe, Asia, and Africa, the firm can offer extensive experience in project managing the legal aspects of international transactions ranging in both size and magnitude.

March 2011 • GBM • 39

International Advisory Forum

Ireland Olwyn Alexander Partner +353 1 792 8719 +353 1 792 6000 olwyn.m.alexander@ie.pwc.com

PwC is the largest professional services firm in Ireland and provides integrated Audit, Tax and Advisory services across all industries in Ireland and internationally.

In Ireland, PwC employs over 1,900 people in seven locations - Dublin, Cork, Galway, Kilkenny, Limerick, Waterford and Wexford.

Globally, there are more than 163,000 people employed in 151 countries in firms across the PwC network. Our culture centres around what we call 'Connected Thinking', a process of teamwork and collaboration which draws on the collective knowledge of the Firm to benefit our clients and our people.

Our area of specialism is that of asset management services. PwC Ireland has twice the market share in asset management of the nearest competitor in the market, auditing 67% of the assets of Irish domiciled funds and 60% of the combined domiciled and non-domiciled funds administered in Ireland. PwC is the only Big Four firm with a 100% dedicated Asset Management Group.

This group in PwC Ireland is the largest part of the Irish firm (20%), with over 300 people, 13 partners and 50 plus Directors/ Managers. PwC Ireland is very active across the PwC global network and works hard to ensure that colleagues in the large asset management centres around the world (e.g. London, Zurich, New York, Boston, Hong Kong and Tokyo) are aware of the advantages of locating investment funds in Ireland.

Irish alternatives fund industry Ireland is a jurisdiction that is synonymous with alternative investments. It is the largest hedge fund administration centre in the world, servicing an estimated 42% of global hedge fund assets at the end of April 2010.

Additionally, the proportion of global hedge funds domiciled in Ireland doubled to 7.4 per cent in the first nine months of 2010. These figures reveal that Ireland is far outpacing all European domiciles and

40 • GBM • March 2011

is now home to 63 per cent of all European hedge funds according to data from the Irish Funds Industry Association (IFIA).

Ireland supports this billion dollar industry by providing unrivalled experience and expertise in establishing and servicing hedge funds through a support structure including more than 11,000 people providing a range of value-added services, including fund administration, transfer agency, custody, legal, tax and audit services.

Lowest headline corporate tax Ireland is a recognised EU and OECD, open and tax transparent jurisdiction with the lowest headline corporate tax rate in the OECD of 12.5%. Ireland’s attractive corporation tax rate of 12.5 per cent is secure and described by the Government as a ‘cornerstone’ of the Irish economy since the 1950s and integral to the Irish ‘brand’. The Government have insisted that the corporate tax rate will be retained and our European partners have not made a change to this rate a requirement of any aid package. Irish regulated investment funds are exempt from the following taxes; tax on their income and gains irrespective of investors’ residency, withholding taxes on payments made to non-Irish resident investors or exempt Irish resident investors, stamp duty or capital duty charges on the establishment of a collective investment fund – this all results in 0% tax for investors on funds set up in Ireland.

Setting up an alternative fund in Ireland There are two main fund regimes in Ireland; UCITS and non-UCITS. There are a number of factors to take into consideration when deciding whether to structure an investment fund under either the UCITS or the nonUCITS regime such as; location of target investors, investment strategy of the fund etc.

The non-UCITS regime is more suitable to certain funds which employ more complex

investment strategies posing greater risk in return for potentially greater reward which may not be permissible under the UCITS regime. The most popular fund structure under the non-UCITS regime is the Qualifying Investor Fund (QIF). The QIF is seen as a flexible fund structure and can be set up as a corporate vehicle, a limited partnership or a unit trust. All investment and borrowing restrictions which apply to UCITS funds are automatically disapplied in the case of the QIF. Period of change The impact of the liquidity crisis and resulting fearful investors, has resulted in alternative investment fund managers exploring new avenues not previously ventured, which in turn has resulted in products such as “Newcits” (hedge fund UCITS).

The Qualifying Investor Fund (“QIF”), as mentioned above, has always been the onshore vehicle of choice for fund promoters wishing to pursue alternative strategies such as hedge funds, private equity/venture capital funds and real-estate funds due its significant investment flexibility. Interest in this vehicle has increase substantially due to the impending AIFM Directive as investors and managers are beginning to look onshore for their products. The QIF complies with most of the Directive’s requirements and is deemed to be “AIFMD ready”, for both EU and non-EU AIFMs. Total assets of Qualifying Investor Funds (QIFs) grew by 35 per cent during 2010 to €153 billion, according to figures released from the Central Bank of Ireland in early February 2011.

In addition to alternative fund managers availing of the non-UCITS regime, Ireland has also seen a surge in number of hedge funds managers embracing the UCITS regime aka “Newcits”. In response to investors’ demands for more liquidity, security and regulation, hedge fund managers have started to seek alternatives to complying with the upcoming AIFM Directive. They have began to realise the benefits of the UCITS regime i.e. fund raising opportunities, an extensive distribution network, regulated environment, soothing of invertors’ liquidity fears etc. There has been abundance of Newcits launched in the last year. It remains to be seen whether this growth will be curbed with the introduction of UCITS V.

MEXICO Miguel Ángel Orozco Medina Managing Partner +52 (55) 3687-2717 +52 (55) 5575 7008 maorozco@oma.com.mx www.oma.com.mx

Nurturing your business Moore Stephens Orozco Medina, S.C. (MSOM) is an international accounting and consultancy firm with 35 years of experience.

Currently it has a team of over 180 qualified professionals in its own facilities, committed to provide integral solutions to more than 500 international enterprises of diverse industries, in a full range of services such as: business development, foreign trade, accounting, administration, audit, tax, legal, transfer pricing, SOX, corporate governance and human resources consultancy.

The Firm is supported by many strategic alliances with other international specialised firms, being the main alliance the one established with Moore Stephens International Ltd., which is an association of independent accounting and consultancy firms based on London England; with 314 member firms, 638 offices in 97 countries, ranking number 13 internationally. Through such alliance, MSOM is able to offer services of the highest quality as an international firm while having the capability of response and the face-to-face attention of a local firm, thus ensuring that our clients receive the best service and advice.

MSOM assists foreign investors by jointly planning all their operations in Mexico; managing, representing and acting on their behalf, since the incorporation of the legal entity, and throughout the administration of all their services (such as rent, mobile, telephone, etc), as well as providing total assistance on personnel, tax, legal, accounting and treasury matters that investors may require.

In addition, the Firm gathers the local and foreign set of information and prepares all the required reports to be submitted before the Ministry of Economy and the Ministry of Finance. The aforementioned is achieved by developing integral solution plans rendered in just one address. Therefore, foreign investors can handle and manage their businesses with or without personnel in Mexico, incurring only very reasonable expenses.

Moreover, the Firm examines its national and foreign clients’ accounting and financial statements to verify their accuracy, as well as to confirm that they meet all principles established by the Generally Accepted Auditing Standards, USGAAP, IFRS and Mexican Financial Reporting Standards, ensuring that they comply with all the regulations such as IAC’s, NIC’s, etc. The reports are issued for different purposes such as financial, fiscal, credit, legal, mergers and acquisitions, etc.

On to another matter, in today’s economy, moving goods internationally can be a complex activity. More than ever before,

effective management of customs and international trade issues is crucial to maintaining a competitive advantage. The Globalization and Trading, along with the different Customs and Tax Regulations in Mexico, generated the need in our Firm to create and implement strategies on the Foreign Trade and Tax – Customs sectors, that enable us to offer different options that help our clients to seize the existing opportunities, assuring that all their international trading operations are legally accurate and in compliance with the applicable regulations.

Furthermore, Mexican subsidiaries commonly share services, costs and expenses that have to be managed at market value; requiring evaluations related to Transfer Pricing according to the provisions of the Mexican Income Tax Law. Likewise, tax authorities are entitled to determine the accumulated revenues and authorized deductions that from their point of view must have been obtained. For such requirements, MSOM provides complete support, including consultancy and advisory in Transfer Pricing.

Additionally, and since CEOs and CFOs must confirm on an annual basis that the company’s control environment is adequate to ensure the overall integrity of its financial information, and that environmental processes and procedures are adequately documented and effectively communicated, our Firm assists them to substantiate the management assertion by internal control audits, SOX compliance, advisory on the implementation of quality standards, reengineering processes, developing company manuals and policies, among others.

Moreover, MSOM assists its clients on their recruitment and personnel selection process, working as a team on the description and valuation of the positions, only presenting candidates who meet the expected characteristics according to the most recent techniques in competence evaluation and with a deep research on their references and previous performance.

In conclusion, those who are involved in international business and aware of the need for the innovation and development required for such activity, often require the support of experts with deep knowledge in order to receive assistance for the exploitation of comparative advantages, and the elimination of risks. In our stop shop Firm they can find integrated strategies that help them address the challenges of doing business in today’s global environment, thus achieving all their potential.

Consequently, foreign investors are welcome to set their business in Mexico, and Moore Stephens Orozco Medina would be pleased to assist them in doing so.

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International Advisory Forum

India Rajesh Chaturvedi, Managing Partner Telephone: +00 91 22 30218500 Fax: +00 91 22 22840892 rajesh.c@cas.ind.in rajesh.chaturvedi@ril.com

Chaturvedi & Shah is one of the largest Indian Accounting firm of Chartered Accountants and leading Financial Advisors in the country having a national presence through its head office in Mumbai and branches at Delhi, Ahmedabad, Bangalore, Calcutta and Jamnagar. The firm made spectacular progress over the years and has more than 500 corporates as clients which are leaders in their respective fields. It is perhaps the only accounting firm in India, apart from big four to service and advise some of the largest corporate brands and market leaders in India. It is to the credit of the firm since inception the retention ratio of a client is almost 100%. It is the first Chartered Accountant firm to do the largest aviation deal in India. Also, in recent month, it played an instrumental role in a telecom infrastructure deal in India.

At Chaturvedi & Shah, we understand our client’s constraints and work around the rough edges to offer smooth, hassle free business environment. Our services are rendered keeping in mind accessibility and ease. The firm specializes in : •

audit and assurance services

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mergers and acquisition

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corporate taxation

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international taxation

and is recognized as the best firm in litigation support.

Being a part of Nexia International, one of the largest network of accounting firms, we feel our clients can obtain expert advice on any issue related to their business with ease.

It is no news now that India is one of the fastest growing economies in the world. India’s positive economic outlook and regulatory reforms have made it an attractive market for foreign investors.

While many barriers to foreign investment have been removed, there still remain formidable challenges for a foreign investor doing business in India. Understanding and preparing for these challenges is the key to success in India. Challenges in the form of getting regulatory approvals, inadequate infrastructure, labour and employment laws etc. can drag down any robust business plan. We, at Chaturvedi & Shah have a thorough understanding of the practice

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and the manner in which the work can be expedited in India and with our large network, we have been very successful in meeting our client’s needs.

One such challenge is the Indian Direct Tax framework which is slated for an overhaul. The Indian Government has introduced Direct Tax Bill (Direct Tax Code 2010) and hopes to make it effective from 01.04.2012 with the objective of removing uncertainty in the current tax code, stimulate compliance and broaden the tax base.

One of the welcoming feature of Direct Tax Code for all stake holders has been the expected adoption of APA Program as dispute resolution mechanism with effect from 2012. The proposed increase in the threshold limits for computing the tax liability of an individual is another welcome feature in the Direct Tax Code.

Another important provision dealing with the extension of tax holidays to the units in Special Economic Zone (SEZ), has brought about cheers to many. The Indian exporters having units in SEZ can now commence operation on or before March, 2014 and would be entitled to profit linked tax deduction.

Many apprehensions have also been cast regarding some of the proposed provisions in the Direct Tax Code, prominent ones being introduction of General Anti-Avoidance Rule (GAAR), Controlled Financial Corporation (CFC) regulations, change in the manner of determination of residential status of companies etc. The professional fraternity is keenly looking for how these provisions will be implemented once the code becomes effective.

Whether the Direct Tax Code’s objective of a modern, stable and simple tax regime is met is something to be seen. A lot would depend upon tax administration implementation that will determine the long-term impact of the new tax regime.

Further, convergence of IFRS with the Indian Accounting Standards from 01.04.2011 is also likely to throw challenging issues. Some of the notable issues which are likely to arise post adoption of IFRS would be the Computation of Minimum Alternate Tax i.e. whether the book profit needs to be taken as per Indian GAAP or as per IRFS converge standard. The tax treatment of certain one-time adjustments, at the time of transition, which will be recorded in the reserves also, needs to be looked into.

We at Chaturvedi & Shah are fully geared up to meet any challenges in the forthcoming times and expect, with India showing great economic resurgence, the coming years to offer significant opportunities for our services.

CIS Lydia Petrashova Head of Metals and Mining sector, KPMG in Russia and CIS +(495)9374477 www.kpmg.ru

M&A activity is often perceived as one of the strongest indicators of a market’s health and sustainability. In emerging markets it can also demonstrate the level of faith international and local investors have in the fundamentals of the country’s economic development. Metals & Mining have historically been a core driver of economic activity in Russia and the CIS. The Metals & Mining M&A market volume in 2010 was primarily contributed by a few large transactions, with the top 10 accounting for 93% of the sector’s total volume. The majority of transactions were outbound acquisitions of international targets by Russian mining companies, and the list of buyers was dominated by the Russian government.

Although clearly a positive trend, the doubling of M&A activity in the Metals & Mining sector in Russia in 2010 is not yet a reflection of the full recovery of the economy. It should, however, make domestic and international investors more comfortable about searching for targets and capitalizing on the improved commodities prices outlook. We expect that the growth in consumption of commodities, including metals, will remain positive in 2011 and prices will continue to increase, albeit at a slower pace than in 2010.

We expect that the uranium and gold mining subsectors will become the most active in terms of M&A activity in the Russian Metals & Mining sector in 2011. Russian steel producers are likely to continue their vertical integration, and if steel prices improve sufficiently we may see acquisitions of iron ore and coke producers in Russia.

The level of activity in various subsectors will not surprise: gold prices hit historical peaks following the growth in investor demand. Two large transactions in uranium related to ARMZ, part of the state-owned Rosatom Corporation. ARMZ continued its expansion strategy through increasing its stake in a Canadian company, Uranium Once Inc., to a controlling level (38% acquired for USD1.1 billion) and announced the acquisition of 100% of shares in an Australian company, Mantra Resources.

The recovery of prices for aluminium and crude steel was not as strong.

The state actively participated in acquisitions of distressed steel makers in Russia and Ukraine, such as the acquisition of the Industrial Union of Donbass and Zaporizhstal by an investment group led by VEB and Troika Dialog, and the acquisition of Amurmetal by VEB and Group MAIR’s plants (STAKS, Arzil) by Sberbank.

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internatiOnal envirOnMental law

internatiOnal envirOnMental law The UNEP Finance Initiative: The other face of finance www.unepfi.org

Author: Iveta Cherneva, UNEP Finance Initiative, communications@unepfi.org

Within the UN system, there is a place where 200 global financial institutions work together on environmental, social and governance (ESG) factors. This place is the UN Environment Programme Finance Initiative (the Initiative) - the oldest UN public private partnership dating back to 1992, which brings together firms and banks from across the finance services spectrum.

Together, they form the other face of finance: responsible and sustainable investment, banking and insurance. Partnering with some of the finance giants in the world Deutsche Bank, JPMorgan, Allianz, CitiBank, Bank of America Merrill Lynch, UBS, Credit Suisse and HSBC ď‚ž the Initiative brings the knowledge, capacity-building, tools and training necessary for private finance to incorporate ESG factors into its operations.

Participating in the regional task forces (Africa, Asia, Europe, North America and South America) and thematic working groups (biodiversity, climate change, human rights and property) the financial institutions give direction to the Initiative and often speak with a unified voice on the most pressing issues, including climate change.

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“We cannot drag our feet on the issue of global climate change,” Barbara Krumsiek, Co-Chair of the UNEP Finance Initiative

Climate change advocacy Preceding the UN climate change negotiations UNFCCC COP16 in December last year, the Initiative, together with its partners, brought together 259 investors representing over US$15 trillion who issued a climate change statement, as reported by Reuters news agency, the Financial Times, Bloomberg and CNBC. As the largest ever investor group to urge action on climate change, the investors urged for domestic policy frameworks to catalyse renewable energy, energy efficiency and other low-carbon infrastructure, certainty needed to invest with confidence in receiving long-term risk-adjusted returns.

In order to attain no more than a two-degree temperature increase as pledged by governments, the investors further called upon governments to reach an international agreement on climate financial architecture, delivery of climate funding, reducing deforestation, robust measurement, reporting and verification, and other areas necessary to set the global rules of the road, bolster investor confidence, and allow financing to flow.

In addition, the investors representing US$15 trillion required international finance tools that help mitigate the high levels of risk private investors face in making climate-related investments in developing countries, enabling dramatic increases in private investment.

Preceding Cancun, the statement sent a strong signal towards policymakers, showing the level of interest by the industry. “We cannot drag our feet on the issue of global climate change,” said Barbara Krumsiek, Co-Chair of the Initiative and CEO of US-based investment firm Calvert Investments.

These and other climate change-related projects originate from the Initiative’s Climate Change Working Group, chaired by Deutsche Bank and HSBC.

“Nature is not just about fluffy animals or brightly coloured frogs - it’s central to the health of businesses that need to incorporate environmental impacts into their risk management,” Richard Burrett, Co-Chair of the Initiative

Biodiversity: Demystifying materiality Image Demystifying Materiality CEO Briefing However, 2010 has not only been about climate change. 2010 was the year of Biodiversity. While last year in October, governments successfully negotiated pledges to biodiversity conservation in the context of the Convention on Biological Diversity in Nagoya, Japan, the first CEO Briefing on finance and biodiversity was born out of the Initiative. As reported by Reuters news agency, Radio Free Europe and the Guardian, financial institution representatives gathered in the Japanese city to witness the presentation of the business case for biodiversity from financial point of view. The key word was ‘risk’.

“Nature is not just about fluffy animals or brightly coloured frogs  it’s central to the health of businesses that need to incorporate environmental impacts into their risk management,” the Co-Chair of the Initiative, Richard Burrett, told Reuters.

Biodiversity presents larger risks to the finance sector than terrorism, said the Guardian headlines, pointing to a survey of attitudes across the industry cited in the CEO Briefing.

Training Working with the finance sector on ESG factors also means creating knowledge and capacity within the institutions, which enables them to take informed decisions. The trainings package the Initiative offers relate to assessing overall risk (environmental and social risk analysis), climate change (climate change online course) and responsible property finance (energy efficiency financing in buildings online course), and also aims to ensure that the day-to-day operations of institutions themselves are environmentally friendly as well (corporate ecoefficiency and financial institutions online course).

“The UNEP FI CEO Briefings continue to provide guidance to ASN Bank in formulating and implementing policy. ASN Bank hopes they do the same for other financial institutions,” Ewoud Goudswaard, Managing Director ASN Bank

For more information about the Initiative, its services and it members visit www.unepfi.org.

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BRAzIL Milaré Advogados – Consultoria em Meio Ambiente (Environmental Consultancy) Mr. Édis Milaré – owner of the firm Telephone + 55 (11) 3046-7470 Fax +55 (11) 3046-7470 milare@milare.adv.br www.milare.adv.br

Milaré Advogados - Consultoria em Meio Ambiente (consulting on the environment), a pioneer in Brazil as a law office dedicated exclusively to environmental advocacy, has a representative client list. Founded on 16 years of experience in the market, Milaré Advogados counts on its managing partner and consultant on environmental law, Professor Édis Milaré who has already been consecrated in environmental disputes, both in practical actions related to legal and administrative procedures in the environmental sphere. Édis Milaré is a retired public prosecutor who created the Prosecutor Offices specialising in Environmental matters in connection with the Public Attorney’s Office of São Paulo State. His work in the Public Attorney’s Office, performed in order to protect the environment, was not only pioneer, but also a reference for the development of environmental law in Brazil.

In 1992, due to his extensive theoretical and practical knowledge related to environmental issues, he was nominated the Secretary of the Environment, a key position in the São Paulo State Government.

In the environmental intellectual context, Édis Milaré has a highlighted position. Since 1995, he has been the coordinator of the Environmental Law Review (Revista de Direito Ambiental). Along with the books he has authored, he also wrote some of the main pieces in relation to environmental law and public civil action.

As far as Milaré Advogados’ significant practice areas are concerned, it is important to emphasise that this law firm works exclusively with environmental issues. Considering this, the law firm provides full services related to: legal court practice; administrative procedures; legal and institutional counseling in environmental affairs; and, studies, analysis and drawing up of environmental law codes.

It is imperative to highlight that this law firm handles the most significant matters related to environmental law in Brazil. These days, the law firm is involved in the administrative procedures related to the environmental authorisation of the most important infrastructure projects in Brazil. Its actions also deserve to be highlighted in the fields of authorisation and implementation of agribusiness and forestry projects.

Likewise, Milaré Advogados has already operated in cases related to the obtainment of authorisations to access genetic resources and the development of benefit-sharing agreements. At the same time, this law firm has already worked on cases associated to the feasibility of the implementation of environmental service projects.

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Nevertheless, besides the owner, all the attorneys at Milaré Advogados are specialised in environmental law and environmental management. Moreover, these attorneys are experts in environmental civil law, environmental criminal law, environmental administrative law and environmental management.

Furthermore, Milaré Advogados’ team counts not just on attorneysat-law, but on other professionals who act in other fields of environmental areas, such as: environmental planning engineers; environmental licence and management engineers; sociologists specialised in politics and environmental education; and, geographers expert in management who deal with natural resources.

The members of Milaré Advogados have great experience in dealing with all regulations of the Brazilian environmental Legal System, for example, Act No 6,938 of 17 January 1981 (Política Nacional do Meio Ambiente) and the Forestall Code, Act No 4,771 of 15 September 1965 (Código Florestal), that indicates the importance of the original forest protection and also defines the description of the permanent conservation areas.

Nowadays, Brazil is joining forces to improve its environmental legal framework. Considering this, there are some new approved regulations, for example, we can mention the National Political Guidelines on Climate Change - Act No 12,187 of 29 December 2009 (Política Nacional sobre Mudança do Clima) - and the National Political Guidelines on Solid Residues - Act No 12,305 of 2 August 2010 (Política Nacional de Resíduos Sólidos).

Furthermore, there are also some other laws and regulations that are still in progress. For instance, the Brazilian Congress is planning to vote the new version of the Brazilian Forestall Code in March of 2011. The text will comprise some relevant amendments.

Finally, it is really significant to highlight some current trends related to Environmental Law in Brazil. First, it is pertinent to mention the project of the new law regulating the payment for environmental services that regulates the benefits that society and individuals acquire from natural ecosystems.

In addition, the Brazilian regulatory system is facing new developments in the field of biodiversity protection. As a result, between 18 and 29 October 2010, during the 10th Conference of the Parties of the Convention on Biological Diversity, Brazil acted as the main player on the approval of the Nagoya Protocol for fair and equitable sharing of the benefits arising out of the utilisation of genetic resources.

UK

USA

Lucy Bruce Jones Senior associate (environment, safety and planning group) Tel: +44 (0)20 7444 5159 lucy.bruce.jones@nortonrose.com www.nortonrose.com

Dewey & LeBoeuf LLP Andrew N. Davis, Ph.D., Esq. Partner Tel: 212 424 8214 (New York & Hartford), 617 748 6826 (Boston) Fax: 617 897 9026 adavis@dl.com www.dl.com Aaron D. Levy, Esq. Associate Tel: 212 259 8543 (New York), 212 424 8543 (Hartford) 212 632 0126 alevy@dl.com www.dl.com

Environmental disasters: Responding to the regulatory challenge The catastrophic human, environmental, commercial and political consequences of the recent environmental disasters in Hungary (toxic sludge spill) and the US (Deepwater Horizon) have emphasised the need for companies to improve their management and understanding of environmental risks. Large-scale environmental disasters have significant impacts on a company’s reputation, relationship with its employees and surrounding community. There are commercial consequences in the form of share price reduction, funding and insurance, not to mention damages and remediation costs. Regulatory consequences of environmental disasters can vary significantly depending on the enforcement regime in the territory concerned. Some jurisdictions have advanced environmental legal systems with punitive damages, fines and directors’ and officers’ liability, whereas others have limited regulatory regimes, laxer enforcement and less clearly defined civil liabilities. Notwithstanding these legal differences, pollution incidents have many similar features that are common across territorial boundaries, legal jurisdictions and financial markets. This underlines the need for international standards and cooperation, and a uniform liability regime for environmental incidents. The climate change debate has highlighted this, but a similar approach is needed for other environmental damage.

The ‘polluter pays principle’ is enshrined in many jurisdictions. In the UK, under the contaminated land regime, the primary responsibility for remediation rests with the polluter; but if they cannot be identified (or are insolvent), it may fall to the innocent owner/occupier. In the EC, the Environmental Liability Directive 2004 (ELD) includes the polluter pays principle. However, the definition of contaminated land is narrower than in the UK. The ELD imposes a duty on the polluter to carry out primary remediation of any damage and to provide, as appropriate, complementary remediation (where primary remediation is unable to restore the land) and/or compensatory remediation (to compensate for loss of resources). This can include provision of alternative habitats for affected species. This is more extensive than the UK regime and will give rise to greater liabilities.

As Deepwater Horizon demonstrated in the US, strong enforcement of environmental laws cannot eliminate the risk of catastrophic disaster. Companies should evaluate their emergency response procedures, including environmental and health and safety policies, risk management plans and insurance coverage. Traditional public liability policies are unlikely to cover the full extent of liabilities under the ELD. In some member states, environmental insurance is mandatory and this may extend to the rest of EU in time.

Norton Rose’s international environment, safety and planning (ESP) group has extensive experience of advising on environmental matters.

We provide compliance advice regarding environmental permits and operational requirements. We have experience of complex remediation programmes and advising on associated liability issues. Our services include 24/7 incident response with immediate support for incidents, liaison with regulators, incident investigation and board/employee support.

Investors and the SEC drive disclosure of emerging and developing climate change-related business risks Emerging domestic and international climate change-related initiatives, along with a growing body of related case law, have the potential to materially impact the bottom lines of companies with large carbon footprints, especially those in the energy sector. As a result, publiclytraded companies should strategically evaluate potential climate changerelated risks and, as appropriate, address those risks in disclosures required by the US Securities & Exchange Commission (SEC).

Pursuant to Regulation S-K (17 CFR Part 229), publicly-traded companies must disclose certain categories of information to investors, including: a description of the company’s business (Item 101); any material pending legal proceedings (Item 103); a discussion of the most significant factors that make investment in the company speculative or risky (Item 503(c)); and, an explanation of the company’s financial statements, including forward looking statements, as appropriate, enabling investors to see the company through the eyes of management, i.e., Management’s Discussion and Analysis (MD&A) of Financial Conditions and Results of Operations (Item 303).

Although ‘climate change’ is not specifically referenced in Regulation S-K (nor is ‘environment’, for that matter), due in part to growing concern among individual and institutional investors (including through the Carbon Disclosure Project, currently in its 11th year, acting on behalf of institutional investors holding $64 trillion in assets under management) about the lack of climate change-related disclosure by publicly-traded companies, the SEC issued interpretive guidance specifically addressing disclosure requirements as they apply to climate change. ‘Commission Guidance Regarding Disclosure Related to Climate Change’, Release Nos. 33-9106; 34-61469; FR-82 (2 February 2010). According to the SEC guidance, the following climate change-related topics may trigger disclosure pursuant to Regulation S-K: the impact of legislation/ regulation; international accords; indirect consequences of regulation or business trends; and, physical impacts of climate change.

Due in part to the issuance of the SEC guidance, public companies are re-evaluating and, in many cases, enhancing their public disclosures to specifically address climate change-related risks. (Notably, climate change-related representations, warranties and covenants are also becoming increasingly common in M&A deals involving carbonintensive assets.) In addition, companies are also evaluating and, as appropriate, disclosing potential benefits and opportunities related to climate change. For example, while companies with carbonintensive electricity-generating assets (e.g., coal-fired power plants) are increasingly disclosing potential risks associated with the regulation of greenhouse gas emissions, companies with less carbon intensive assets (e.g., natural gas, wind, solar) are increasingly disclosing potential benefits associated with an increased demand for their products/services.

Despite the ongoing debate regarding climate change, the business risks associated with climate change, including those identified in the SEC guidance, are indisputable. As a result, public companies should continue to assess climate change-related business risks and opportunities, and strategically evaluate whether those risks/ opportunities should, or need to, be disclosed as investors continue to drive the evolution and development of environmental law.

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

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ROMANIA

Nestor Nestor Diculescu Kingston Petersen Attorneys & Counselors Roxana Ionescu, senior associate Head of environment practice roxana.ionescu@nndkp.ro T: (40-21) 20 11 200 | F: (40-21) 20 11 210 T: (40-31) 22 53 300 | F: (40-31) 22 53 310 www.nndkp.ro

Environmental challenges for the Romanian corporate sector For 21 years, Nestor Nestor Diculescu Kingston Petersen (NNDKP) has represented clients in some of the most significant transactions in Romania and became one of the largest and most respected law firms, providing full and integrated services both to domestic and foreign companies with an emphasis on providing superior, individualised client service. The firm offers the combination of legal insight, courtroom experience, industry knowledge and practical business sense needed to help clients prevail in their most complex cases.

Headed by Roxana Ionescu, one of the most experienced environmental lawyers in Romania, NNDKP’s environmental practice has been rapidly expanding over the years in response to our clients’ increased need for specialised and timely advice. Our team’s expertise ranges from assessing environmental liability matters and negotiating environmental indemnity mechanisms, to assistance in connection with the development of complex manufacturing, waste-to-energy and renewable energy generation projects. We also routinely advise our clients on matters related to the functioning of the Emission Trading Scheme, the trading of European CO2 allowances (EUAs) and represent clients before environmental authorities and the Romanian courts.

The Romanian environmental legal sector has been subject to significant changes over the past years for Romania’s accession to the EU on 1 January 2007. After which, the focus shifted to ensuring actual compliance with the new and diverse regulations adopted in Romania, especially in the waste management, environmental permitting and water management fields.

This effort also helped to highlight the main environmental challenges to be considered by the corporate sector when developing projects in Romania.

Perhaps the biggest environmental challenge is represented by the sheer volume, complexity and lack of correlation of the legislation adopted in the field, which makes it difficult for the corporate sector to integrate environmental compliance requirements into their business model and procedures. The existence of various distinct authorities handling different environmental matters also adds to the corporate sector’s burden in addressing environmental matters relevant for their operations.

The need to comply with complex and sometimes time-consuming environmental permitting procedures for the development of new projects or the modernisation of existing ones represents yet another challenge. One of the particularities of the Romanian regulatory framework is that distinct permits are required for the construction and functioning phases of each project. The increased attention of the public and of non-government organisations to the unfolding of these permitting procedures also led to more cases where the validity of environmental permits has been challenged before the courts.

In the energy sector, the biggest challenges appear to be faced by the developers of waste-to-energy projects, which do not benefit from a single, integrated regulatory framework and have difficulties in correlating the various requirements under the waste management, sanitation and public procurement legislation for the development of such projects.

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Luxury Brand Series – Golf resorts

Luxury Brand Series

TheWorld’s FinestGolf Resorts The Professional Golfers’ Association

By Nat Sylvester

The Professional Golfers’ Association (PGA) has history on its side, but it is its forward thinking approach to education, plus strong brand identity, that has made it a world leader and one of golf’s most important bodies.

Golf is a billion dollar industry, played worldwide, and the Ryder Cup is the most watched sporting event outside of the World Cup and the Olympics. Stars like Tiger Woods, Lee Westwood and Ernie Els are household names across the globe as they pursue the Holy Grail of Majors, where golfers have the chance to etch their names forever in the record books.

But the sport’s popularity and impact stretches far beyond the confines of Augusta or the famous links of St Andrews where the elite do battle for Green Jackets and Claret Jugs. Every day, from China to Chelmsford, hundreds of thousands of amateur golfers play with as much zeal as Woods and co  if perhaps not with quite the same expertise. And at nearly every recognised golf facility in the world, these golfers are benefiting from the expertise of PGA professionals.

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While often excellent players in their own rights - Ryder Cup ace Ian Poulter came through the PGA ranks - PGA professionals are more widely employed in the business of golf where their skills are utilised in various elements of the game, such as coaching, equipment, managing golf clubs, administering tournaments or growing and promoting the sport.

PGA professionals are at the hub of the sport, and in the field of coaching have made a significant contribution at all levels of the game. Former European Tour chief executive Ken Schofield recently hailed the standard of PGA coaching as being pivotal to the success currently being enjoyed by many UK-based players on the world stage.

This is highlighted by current World No.1 Lee Westwood coached by PGA master professional Pete Cowen, and Northern Ireland superstar Rory McIlroy who still works with PGA professional Michael Bannon  his coach since he was ten years old.

“It is inspiring to see the graduates coming through the PGA’s teaching and educational programmes,” said Schofield. “I think they give all golfers, regardless of age or experience, the chance to enjoy the game much more and perhaps more importantly for the elite in the game, they are equipping them with the basic technique that will stand up to the challenge of international competition.”

PGA professionals have been the lifeblood of the sport and wider golf industry ever since a letter to Golf Illustrated back in 1901 triggered what was to become the creation of the Professional Golfers’ Association, led by golfing greats of the day such as JH Taylor, Harry Vardon and James Braid.

Now based at the Belfry, and universally recognised by its three initials, the PGA now represents more than 7,500 PGA professionals with more than 1,500 members based overseas in 70 countries worldwide. As the world’s oldest professional golfers’ association, the PGA is one of the sport’s most important governing bodies with particular responsibility for ensuring training and education standards. This is achieved through the PGA’s widelyadmired education programme, run in partnership with the University of Birmingham, which sees all qualified members undertaking a three-year work-based foundation degree, with a separate honours degree in applied golf management studies also available at the university.

Once qualified, members also have on-going continual professional development to ensure that they are equipped to deal with the demands of the modern golf industry  whether dealing with the latest coaching techniques or the marketing and business demands of managing a golf club or resort.

In addition to training PGA professionals, the PGA is also a partner in the Ryder Cup alongside the European Tour and the PGAs of Europe, and remains the trustee of the famous gold trophy donated by Samuel Ryder back in 1927.

The PGA comprises national headquarters, home to the PGA National Training Academy, and also has seven regional offices in the east, Midlands, west, north and south of England, and also in Scotland and Ireland.

Nationally and regionally, the PGA administers more than 700 tournaments annually with prize money in excess of £3m. These include the flagship Glenmuir PGA Professional Championship and Europe’s largest pro-am event  the Virgin Atlantic PGA National Pro-Am Championship.

Aspiring tour hopefuls also benefit from the PGA’s role in organising the world’s leading developmental tour, the PGA Europro Tour, which is the third tier of elite level golf behind the European and Challenge Tours. Among those to have graduated from the PGA Europro Tour are last year’s Open champion Louis Oosthuizen and BMW PGA Championship winner Simon Khan.

Away from tournaments, the PGA has a range of commercial interests with a flourishing PGA Partner and Official Supplier programme with leading brands in the golf industry including Titleist, PING, SkyCaddie and ClubCar. It is also an important stakeholder in national initiatives such as the England Golf Partnership and clubgolf Scotland, and its commitment to growing and promoting the game remains as strong as ever reflected in the work by members at grass roots level.

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Luxury Brand Series – Golf resorts

Meanwhile, a growing section of the PGA’s business operation is its portfolio of PGA-branded golf courses and academies, both at home and abroad. These include premier UK golf resorts Gleneagles and the Belfry, while overseas its branded facilities include the PGA Sultan Course in Turkey, which is hosting the prestigious Eisenhower Trophy in 2012.

Key to the success of this is the PGA’s brand strength within the world of golf and overseas, and with facilities in China, Spain and Cyprus, plus the imminent completion of the first PGA National course in Russia, it continues to go from strength to strength.

As a founding member of the PGA World Alliance, along with the PGAs of America and Australia, the PGA is also ensuring educational standards across the globe particularly in developing golfing communities.

“We are the oldest PGA in the world, and although not the biggest, we do have far more members working around the world than any other PGA,” says Kyle Phillpots, director of education and career development at the PGA’s National Training Academy. “Golf is a multi billion pound industry and those employed at the heart of this industry need to be well qualified. Golf has been fortunate in that there has always been a qualified person at most golf clubs who can firstly teach the game to beginners and then help them develop into good players.

In recent years, we have worked closely with 22 other sports to raise the standard of all coaching as part of the United Kingdom Coaching Certificate project. PGA professionals are in the business of golf and so it is important that they understand about managing events, people and facilities as well as marketing, balance sheets, business plans and strategy.”

“It is through the still expanding golf business, with an economic impact worldwide of over $1bn each year, that today’s PGA professionals have been able to find their own niche. Whether they want to be club pros, coaches, directors of golf, retail managers, owner operators or club managers, we have to help provide the education they need to develop their careers,” stresses Dr Phillpots.

As it reflects on a rich history, the PGA will this year celebrate the 50th anniversary of the launch of its training programme. The PGA professional has come a long way in that time, but with an increasingly important part to play in golf, the PGA is already looking ahead to the next 50 years.

For more information please visit www.pga.info

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The PGA is increasing its efforts to work with developers to brand golf courses and complexes across the globe. Its premier brand is the PGA National brand, applied exclusively to one facility of the very highest quality per country or major geographic region.

To be eligible to be considered for PGA National status, the venue must be capable of hosting international tournaments, while facilities of PGA National Golf Academy standing must boast the latest technology and equipment for the Association’s members to provide world-class teaching and education.

One of the newest ventures overseas is the PGA National Russia, which is currently under construction in Zavidovo, close to Moscow and is scheduled to open in early 2012.

The PGA brand can also be applied to an individual golf course, which is not otherwise a ‘PGA National’. Again, the emphasis is on quality, as a PGA Golf Course must be of sufficient standard to be capable of hosting a national tournament. A superb example of this is the PGA Sultan course at Antalya in Turkey, which will stage the Eisenhower Trophy in 2012.

A PGA Golf Academy can sit alone, or alongside an unbranded golf course, like the award winning PGA Golf Academy at Bayhood No 9 near Beijing in China. In either case, it will offer the very latest coaching and educational facilities and equipment to make it a unique venue that drives greater revenue to the overall facility’s owners.

Common to all PGA-branded facilities is the creation of jobs for PGA members and a reinforcement of the Association’s status as a body at the forefront of professional golf development and education. This in turn benefits the facility in the highest levels of expertise being offered to its customers.

The PGA is proud to be associated with all its PGA branded facilities, and looks forward to continuing its work in positioning the PGA brand at the highest levels of quality, accessibility and education at many more facilities around the world.

For more information please contact Guy Moran, head of property and development at the PGA on guy.moran@pga.org.uk or + 44 1675 470 333

Lough Erne Resort Location: Northern Ireland

Lough Erne Resort – The Gateway to North West Ireland

"A Great Place to Play. A Great Place to Stay." Rory McIlroy Lough Erne Resort is proud to have Rory McIlroy as its Touring Professional Lough Erne Resort, Enniskillen, Co Fermanagh is Northern Ireland’s first AA and NITB Five Star hotel and was recently awarded 'Golf Resort of The Year' by the Irish Golf Tour Operators Association (2010).

The Resort is home 2 Championship Golf Courses, including The Faldo Course (7,167 yards Par 72), designed by Sir Nick Faldo.

The Faldo Course is a Golf World and Golf Monthly Top 100 Course as well as a Golf Week, Top 10 Course. Situated between Castle Hume Lough and Lower Lough Erne, it has breathtaking views of The Fermanagh Lakelands and is an exciting challenge for golfers of all abilities. Featuring 18 spectacular golf holes, 14 of which have Water in play, which is highlighted by the iconic 10th Hole, ‘Emerald Isle’ where the green is surrounded on three sides by the waters of Lower Lough Erne . The Faldo Course provides golfers with superb all year round playing conditions.

The Faldo Academy, the first of its kind in Europe, provides state of the art Practice and Tuition facilities and is headed up by Lynn McCool, Director of Golf & Head Professional.

The Resort features 120 Luxury Rooms & Suites; The Thai Spa, with Golfers Treatments, specifically designed to raise your game; a variety of innovative Dining Experiences with Menus by Acclaimed Chef, Noel McMeel including The Halfway House, situated behind the ninth green of The Faldo Course which allows golfers to take a relaxing break from play; The Catalina Restaurant for elegant dining overlooking the Lough and The Blaney Bar featuring an exclusive collection of 101 Irish Whiskies; The Loughside Bar & Grill for casual all day dining and Afternoon Teas in The Garden Hall; 6 Conference, Event & Meeting Rooms; Great Outdoor activities include Fly Fishing for Pike on Castle Hume Lough, with resident Game Angling Instructor Packie Trotter. Lough Erne Resort is located within 2 hours drive of Belfast & Dublin Airports.

Lough Erne Resort, Belleek Road, Enniskillen, BT93 7ED, Northern Ireland.

T: + 44 (0) 28 6632 3230 .

W: www.lougherneresort.com E: info@lougherneresort.com

Jonathan Stapleton General Manager jstapleton@lougherneresort.com

Lynn McCool Director of Golf & Head Professional lmccool@lougherneresort.com T: +44 (0)28 6632 3230

March 2011 • GBM • 53

The Kildare Hotel and Country Club – The K Club Location: Ireland luxurY Brand series – GOlF resOrts

The Kildare Hotel and Country Club, affectionately known as The K Club, drew international acclaim when it hosted the 36th Ryder Cup in September 2006. Already a well known golfing destination having hosted 13 Smurfit European Opens (1991 – 2007), the eyes of the world were drawn to this magnificent resort to see the who’s who of the Global Golfing World take their place, centre stage on the Arnold Palmer designed Ryder Cup Course.

passage to an emerald island which is hugged by two watery arms of the River Liffey, while the ruins of an ancient church can be spotted as you approach the 13th.

The Palmer Ryder Cup Course is recognised as one of Europe’s most spectacular courses, challenging and dramatic, the layout and design takes your breath away. At every turn, fairway, cascading water feature or leafy, verdant space a challenge ensues, can you pit your wits and skill against the golf guru himself, Arnold Palmer, can you follow in the footsteps of the worlds best golfers?

Not content with creating one internationally acclaimed Championship course, Dr. Michael Smurfit joined forces with Arnold Palmer once again to create a second stunning 18 hole course. The Palmer Smurfit Course is every bit as challenging as the Palmer Ryder Cup course. While the Palmer Ryder Cup Course is generally described as a mature parkland course, the Palmer Smurfit Course is a surprisingly link-style course. On the Palmer Smurfit Course the 7th is a long and genuine three shotter. The magnetic feature is a ‘Swallow Quarry’, a vast man made rock face that rises some 60 feet out of a glorious lake. A series of waterfalls cascade the water hazard but its beauty belies its treachery and players are well advised to admire the view from the centre of the fairway!

The 7,350 yard course is set around the mighty River Liffey which flows through the 550 acre lush Kildare estate. Mature indigenous Irish trees, carve their way around the fairways, towering over head, arms outstretched just waiting to catch a ball which may have made its way a little off course.

Meanwhile, numerous water hazards and ‘beach-like’ bunkers lap the waters edge.

Greens are lightening fast and too much action on many of the greens could lead you to a ‘watery grave’!

The walk through the course is a true joy, a myriad of land marks can be spotted throughout, adding interest and surprises at every stage, a quaint 19th century iron bridge at the 16th provides players with a safe

Have you had your serving of Special K yet?

Call (01) 6017200 or log on to www.kclub.ie for more details.

54 • GBM • March 2011

Views of ‘Straffan House’, the hotel itself can be seen through the trees at the 17th. Dating back to 1832, Ireland’s first AA Five Red Star Property is the original home of classic Irish hospitality and is just the place to sit and relax tired, golfing bones.

Both courses are tantalising, challenging and have a degree of difficult to suit all levels.

With two championship courses, offering 36 of the most exciting and dramatic holes in Europe, golf at The K Club is a truly unique experience. The K Club also includes a luxurious resort spa, fishing on the River Liffey and a selection of dining experiences.

The Belfry Location: England, United Kingdom

Experience The Belfry…

Steeped in history, yet combining modern comfort, The Belfry is a complete leisure and golf destination combined with a superb range of facilities all set within 550 acres of beautiful English countryside. With a central location we are easily accessible from all over the UK via the region’s excellent road and rail links.

ESCAPE Everyone has a different idea of what a leisure break should be. That's why you can choose how you spend your time at The Belfry.

Our sole ambition is to create the perfect experience for you, whatever it is that you enjoy doing.

Whether you want to relax in our fantastic refurbished AquaSpa, be pampered at simply THE spa, revitalise in the leisure club with its two spa pools, sauna, solarium and extensive gym, play 18 holes on one of our three golf courses, enjoy fresh food with one of our dining experiences or have a fun-packed break with the kids in one of our 324 rooms, the choice is yours at The Belfry.

PLAY Perfect greens, world-famous holes, stunning views and exhilarating match play: Golf at The Belfry has it all.

As the UK headquarters of the PGA and spiritual home of the Ryder Cup, the noble game and The Belfry are inextricably linked.

The Belfry has become synonymous with golf and a Mecca for both professional and amateur players. Our two stunning Championship courses, sculpted from 550 acres of lush North Warwickshire countryside, have provoked some of the most dramatic moments in the history of the sport.

Play The Brabazon, our internationally recognised championship course. Play the PGA National, England's only American

links-style PGA course. Or play The Derby - a shorter, more relaxed course for players of all levels. Better still, make a break of it and play all three.

Need a little help with your game?

The PGA National Golf Academy houses a 34 bay flood-lit Driving Range, National Custom Fit Centre, putting green and a short game area. With over 20 PGA qualified Golf Professionals we offer world-class golf tuition, practise facilities and custom fitting for golfers of all abilities, from age four and upwards!

DINE Whether informal or indulgent, for business or pleasure, intimate or celebratory - our range of dining experiences offers the freshest ingredients, all beautifully prepared and served in world-renowned surroundings.

Enjoy a glass of Champagne in the Cocktail Bar before indulging in fine modern European cuisine at The French Restaurant, or create your ideal dish from the buffet carvery in The Atrium restaurant. At Sam's Bar and Grill the perfect 19th hole - we serve up a menu of home-cooked favourites, whilst The Café Bar offers lighter, healthier snacks for those hitting the gym and spa.

Our recently launched Dine Club offers its members invitations to exclusive dining events and promotions, as well as providing members with 10% discount at all our bars and restaurants.

To plan your very own Belfry experience visit www.TheBelfry.com or call 0300 500 0405 to find our more

March 2011 • GBM • 55

The Arabella Western Cape Hotel & Spa Location: Western Cape, South Africa luxurY Brand series – GOlF resOrts

The Arabella Western Cape Hotel & Spa - naturally luxurious It may be best known for its championship golf course, ranked among the top four in the country, but the Arabella Western Cape Hotel and Spa offers much more than 18-holes in a spectacular setting.

mountain range. It is ranked as the numberone course in the Cape and number-four course in South Africa and there is no doubt that a round of golf here ranks with the best experiences anywhere in the world.

A short drive from Hermanus, South Africa’s whale watching capital and home to the best land-based whale watching in the world, and within easy access to the Cape’s major tourist attractions, the 145-room crescentshaped resort hotel looks out over the Botriver Lagoon, which forms the eastern coastal border of the Kogelberg Biosphere Reserve and is the largest natural lagoon in South Africa.

Other activities include horse riding, mountain biking, quad biking, canoeing or a visit to the nearby penguin breeding colony and for the more adventurous at heart, the adrenaline rush of shark-cage diving with Great Whites. Of course a firm favourite between June and December is whale watching from the Old Harbour in Hermanus, where Southern Right Whales frolic in the clear water just off the rocks

The unique luxury resort, acclaimed as a leisure destination, is also considered to be one of the Western Cape’s premier event and conference facilities.

Guests have a choice of fine dining in the award-winning Première Restaurant or the Jamani Restaurant, offering contemporary cuisine and the option of eating outside on the terrace. Alternatively they may prefer the relaxed atmosphere of the Laguna Lounge.

The Arabella Spa and Wellness Centre, voted as one of the ‘100 best Spas of the World’ provides the full gamut of relaxation and beauty therapies from around the world.

The 18-hole, Par 72 Championship golf course was designed and built in 1999 by celebrated South African golf course architect Peter Matkovich. As a golfing experience there are few to match the beauty and tranquility of Arabella’s sweeping kikuyu fairways, manicured greens and magnificent views across the Bot River lagoon and Kogelberg

Bars include the Laughing Waters Pool Bar at the swimming pool, Barnabas Bar or the sophisticated Cristobal’s Cigar Bar. Arabella Western Cape Hotel & Spa received the IAGTO Golf Resort of the Year award for 2008 in the Rest of the World category (outside Europe and North America) and was also named Africa’s Leading Luxury Resort in the 2010 World Travel Awards.

Arabella Western Cape Hotel & Spa

Toll-free reservations: 0800 994 276

Arabella Country Estate, R44 Kleinmond, Overberg, Western Cape, South Africa

reservations@arabellawesterncapehotel.co.za

Tel: +27 (0) 28 / 284 0000

General Manager: Rob Kucera

Fax: +27 (0) 28 / 284 0011 56 • GBM • March 2011

www.arabellawesterncapehotel.com Golf Director: John Bumpsteed

Pan Pacific Nirwana Bali Resort Location: Bali

Taking holidaying and destination resort stay to the next level.

Ask any global golf traveler or local golfer in Indonesia that has ever holidayed at the Nirwana Bali Resort (NBR) what they thinks about NBR, and most likely the first words that come out are; “wow, amazingly spiritual, idyllic and romantic” or “our stay was way too short, but we’ll be back for more of the same”.

As it finds it home on the “Island of the Gods” and in close proximity to the iconic Tanah Lot temple - the island’s most visited landmark shrine, NBR truly embodies supreme holidaying in peace, tranquility and spiritual awakening. It’s a place where the scent of Frangipani and the smell of incense harmoniously complement the contrast of the roaring sounds of the Indian Ocean surf and the gentle Balinese Gamelan music creating a unique tapestry only to be found in Bali.

Pan Pacific Hotels and Resorts talented management team and sense of purpose creating GREAT hotels with GREAT relationships is organically enhanced with GREAT people, our best asset will enrich this exceptional, truly unique place to provide indigenous memorable guest experiences for our valued clients, loyal repeat Pacific club members, Nirwana Bali Golf members and Resort guests.

The Tanah Lot names implies: “Land amidst the Sea”. Our desire and privilege is to complement and celebrate the beauty of Nature represented by the magnificent examples of Nature here surrounding us on this wonderful 103 hectares of natural habitat.

The earth is represented by Asia’s Number 1 rated golf course and our expansive fertile property inhabited by the cultural and spirituality of 13 temples overlooking the famous Tanah Lot. The Sunset lounge popular for romantic sunsets framed by the thunderous surf, The signature golf course overlooking Tanah Lot temple. Our natural romantic surroundings will be enhanced with Cliff lawn services for weddings and private intimate Bale cabana dinning and rendezvous.

Nirwana Spa will be completed featuring full service wellness activities, including hot, warm and cold dipping pools, rejuvenating steam saunas and several unique relaxation areas.

Creating a sanctuary featuring natural and holistic treatments involving blessed ocean, earth and pure air for longer, healthier, more enjoyable life. Pan Pacific Bali Nirwana Resort takes pride in celebrating the blending of Balinese nature, tradition and spirituality with our unique sensual retreat, relaxation meditation, wellness and spiritual rejuvenation.

Our exotic lush natural grounds will offer ample opportunities for photography, temple tours and nature walk. Active lifestyle activities include snorkeling, swimming, hiking & biking. Local artists provide insight into Balinese Art, heritage & culture including rice paddy and organic farming harvesting programs, Balinese cooking classes and demonstrations will complete your experience.

March 2011 • GBM • 57

china FOcus

china From the point of view of an entrepreneur, one of the best countries to invest in these days has to be china.

For the past three decades the country has thrived, outstripping all global rivals. In 2010 it overtook Japan as the world’s second largest economy.

In China, the economy grows so fast, it’s essential that any potential investor has their finger constantly on the pulse. The speed of change in China is, in fact, breathtaking - making it an exciting place in which to either launch a new business or export an existing one.

As a result, the opportunities in this once backward area are massive. For instance, the Chinese economy increased by 8.7 per cent in 2009 alone. And even more interesting, that increase appears to be continual.

understand it

A year later, in 2010, seven Chinese companies were listed on the main London Stock Exchange. Another 46 appeared in the Alternative Investment Market.

“

must “You visit China to

The country’s population is benefitting too. The Chinese Academy of Social Sciences claimed a study, carried out towards the end of 2009, showed 23 per cent of the Chinese population – or 300 million people - were considered middle class.

Recent successful investment stories in China include the high street supermarket chain Tesco. Its long-term investment programme began as a joint venture with existing Chinese retailer Ting Hsin in 2004. Today Tesco has 66 stores in China and plans to open another 19 hypermarkets over the next two years. In fact, the retailer directed the bulk of its investment capital – around £500 million to China last year. The supermarket giant’s Chief Executive Sir Terry Leahy recently described China as ‘a market set for investment.’

Other tales of success come from small to medium-sized companies such as UK engineering firm Miller UK. Based in Lancashire, the bucket and earth-moving equipment manufacturer already had a joint venture in North West China but is now hoping to open a storage facility and office near Shanghai.

The firm’s Director Jacqui Miller was recently quoted saying: “China is now the world’s largest consumer of construction equipment, so if we want to be a true global player, we can’t afford to ignore the market potential for growth. We believe that China represents one of the biggest opportunities for our business over the next three to five years.”

"This will not be all through cash disbursements but achieved by tax credits, privileged import tariff reductions and presumably easier credit and trade finance terms."

At the moment, R & D spending in China is 1.5 per cent of its gross domestic product. But the figure is expected to increase by at least one per cent within the next five years.

It counts seven 'strategic industries' as currently generating two per cent of its GDP. That figure should rise to 15 per cent by the year 2020. In doing so it plans to close the divide between its limited supplies of commodities and the growing demand which has resulted in it becoming the world's second largest economy.

So where in China should you invest and how should you go about it?

She added: “Although China is a huge market, as with any other investment you really need to know what you want to achieve and what you’re prepared to put into it before you start, if you want to ensure success.”

She also recommends serious entrepreneurs pay a visit to the country.

“You must visit China to understand it,” she said. “You can’t expect to make a success of it from the UK - you really need to be there while establishing your business. China has a different business day to the UK and Europe so this and the added challenges of the culture and language, have to be considered. “ Other sectors which have excelled in China include those in the digital industry (Levering Ltd), aircraft research (AVIC ARI), construction (Paul Davis & Partners), show business (Global Immersion) and oil and gas (Univation Ltd).

But it's not just in the UK of course that China is attracting interest from. Its power is global. The US economy too has shifted in response. Top American firm 3M (MMM.N) say their business in China has resulted in profit margins which far exceed its overall average. The company, which manufactures LCD screen, home cleaning products and face masks reckon seven per cent of its annual sales ($2 billion in revenue) come from Far Eastern markets. China's input, it calculates, will result in nine per cent of its total sales by the year 2015. The firm's chief financial officer Pat Campbell said: "Markets such as China, India, Latin America and Eastern Europe will account for 40 percent to 45 percent of 3M sales by 2015 from about 33 percent now."

Meanwhile General Electric Co (GE.N) and United Technologies Corp (UTX.N) are aware of China's rising middle class.

Mr Campbell added: "We fundamentally believe that emerging markets have such good underlying growth potential."

China itself sees the future in terms of nuclear power and highspeed rail. Its high-speed rail network already exceeds 8,358 km (5,183 miles) and is indisputably the worlds longest. By 2015 the Chinese government intends to have invested a total of four trillion Yuan in the sector. Meanwhile, America's GE has already signed a deal to bring Chinese rail technology to the US and vice versa.

In terms of nuclear power China lags behind. Its target for 2020 is still less than five per cent of its electricity generating capability. But it's trying.

When it comes to research and development China boasts a five year plan involving investment of four trillion Yuan.

"The re-industrialisation is designed to move China away from an export-industrial model to a domestically focussed one," a spokesman for the Chinese government said.

The opportunities are numerous and not just centralised in the large business centres of Beijing, Shenzhen, Guangzhou and Shanghai.

There are many emerging regional centres and it pays to look throughout the country as a whole. Although that’s not easy. The country itself is as big as Europe and that’s why research into your chosen market is crucial.

The most economically advanced regional economies in China are those in the eastern seaboard side. The infrastructure is better, and the historical trade links already exist. Currently 70 per cent of the Chinese population lives in the eastern part of the country. Inland China is more abundant in natural resources but tend to be very backward industry and manufacturing-wise. On the other hand, the four large established markets already mentioned tend to have higher land and labour costs in addition to plenty of domestic and international competition.

Looking at the country as a whole, China is massive. It’s almost similar in size to Europe and has twice the population therefore it should not be considered a single nation, but rather one that has 30 varying provinces and municipalities. Its top 35 cities offers huge opportunities combined with a number of challenges. The one pleasing benefit for investment is that of large industrial markets and low input costs. Government support is also there in terms of regional development. Four sectors have been identified as being crucial - research and development, domestic-orientated production together with its export-orientated cousin, and sales of imported goods within China itself.

Chinese economist Wu Bangguo has already voiced his optimism for the continued resurgence of China and its emergence with world leading economies. His remarks were based on three principles.

These were: his country's complementary economic status with the US, its continued annual growth rate and the accelerated pace of industrialisation/urbanisation.

Meanwhile, the country's largest national daily newspaper The China Daily reported that China was expected to achieve its goal of quadrupling gross domestic product from 2000 to 2020 well ahead of schedule.

Barry Naughton, a professor from the University of California at San Diego, reinforced this when he was quoted as saying that China enjoyed far more growth potential than other economies. He added: "The Chinese economy is facing an unprecedented combination of factors that build on the high investment rate and reinforce each other to create rapid productivity growth in a broad range of economic sectors."

The professor also pointed to political stability, improved labour productivity and technological advances. This could be tempered however, by increased consumption within China itself due to an emerging middle class.

The country's growing tendency towards socialism however, goes hand-in-hand with improved productivity. However you look at it, China is a force to be reckoned with investment-wise. Ignore it at your peril!

March 2011 • GBM • 59

iMpOrtance OF tradeMarkinG YOur Business

IMPORTANCE OF TRADEMARKING YOUR BUSINESS CANADA

Canadian trademark registrations: What are they good for?

Scope of protection

Ownership of marks

Canada offers broad protection to deserving trademarks. The fundamental principle governing the Canadian regime is that a person who is using a trademark normally has the right to prevent the entry of a subsequent confusing trademark if there is some overlap between wares and services associated with the respective trademarks.

Any legal entity, including individuals, corporations and government entities, may file an application to register a trademark in Canada. Co-ownership of trademarks is not permitted; however, the co-ownership issue can be overcome as partnerships, associations or joint ventures are appropriate applicants as long as they qualify as legal entities in Canada.

Trademarks are protected under the federal Trademarks Act (the Act) and at common law based upon their use in the marketplace.

However, registered and unregistered trademarks may not be protected to the same extent.

Registration not only provides notice of the owners’ rights to subsequent third parties attempting to use similar marks, but also creates a rebuttable presumption that a registered trademark is existing and valid.

On the other hand, owners of unregistered trademarks have to expend more effort through use, advertising and promotion to give public notice of their rights, and do not have the benefit of statutory presumptions.

The protection of an unregistered trademark could be restricted to the geographical area(s) in Canada where it has been used and has established a marketplace reputation. In contrast, with minor exceptions, registration provides an owner with the right to the exclusive use of its trademark throughout Canada in association with the listed wares and services.

Rights to unregistered and registered marks can be enforced by common law and statutory passing off. However, under the Act, owners of registered trademarks also have access to claims of infringement and depreciation of goodwill against third parties misusing their trademarks in the Federal Court of Canada.

Registration may also provide a full defence against a claim for trademark infringement or passing off by an alleged prior user of the trademark.

60 • GBM • March 2011

Marks registered The Act (as currently interpreted in the Trademarks Office) allows for registration of word marks, design marks and combinations thereof. Certification marks, namely trademarks that distinguish goods and services that meet a defined standard, are registrable.

The shaping of wares or their containers, or a mode of wrapping or packaging of wares, otherwise known as distinguishing guises, may be registered if they operate as trademarks.

Canada also permits the registration of otherwise prohibited marks by qualifying entities as well as official marks by public authorities.

Registrability of ‘non-traditional’ marks, including sound, movement, smell and touch marks, is under debate. It is likely that some non-traditional marks will eventually be permitted to register through either a change in the practice of the Trademarks Office or by legislative amendment.

Application process An application can be based on one or more of the following grounds, namely: use in Canada, proposed use, making known in Canada and/or foreign registration and use.

Canada has not adopted the Nice Classification System for wares and services. Instead, wares and services are described in ordinary commercial terms. This allows for flexibility in filing and significant cost savings.

Applications are examined to ensure they meet technical and substantive requirements under the Act. Substantive examination includes reviewing the inherent registrability of the

TM

Toni Polson Ashton, Partner Contact No: (+1) 416-849-8330 ashton@sim-mcburney.com Sanjukta Tole, Associate (+1) 416-849-8462 tole@sim-mcburney.com applied-for mark (for example, descriptiveness, surname significance, etc) and the likelihood for confusion with any trademarks previously registered or applied-for in Canada. Applicants are given the opportunity to respond to objections raised on examination.

The Trademarks Office will refuse an application if an applicant does not overcome examination objections. An appeal to the Federal Court of Canada is available. If the applicant overcomes objections, the application is advertised for opposition in the publicly accessible Trademarks Journal.

An application is allowed if no opposition is raised or an opposition is overcome. A certificate of registration is issued after the payment of the registration fee (and the filing of a declaration of use for applications, including a proposed use basis).

On average, an application takes approximately two years to register, but can take longer if substantive objections are raised in examination or if a third party opposes upon advertisement.

Post-registration maintenance A trademark registration remains on the register permanently, subject to periodic renewal. Continuous use of a registered mark is recommended to avoid susceptibility to cancellation proceedings before the Trademarks Office for non-use or the Federal Court of Canada for abandonment. Trademarks should only be used in the exact format as registered.

Owners attempting to use variations of their registered trademarks should do so only after seeking legal advice.

Trademarks provide a unique set of rights and are valuable assets that should be properly used and maintained. This includes active policing of the marketplace and monitoring of activities of potential third parties in the relevant industries so as to prevent encroachment on these rights by others.

nigeria

David Garrick, Kayode & Co. 25, Olanrewaju Street, Oregun Industrial Estate, Oregun, Ikeja, Lagos, Nigeria Olugboyega Kayode Managing partner Tel: +234 1 7361902, 7361989 info1@garkaylaw.com Website: www.garkaylaw.com

David Garrick, Kayode & Co is a commercial law firm established over 40 years ago. The firm’s practice areas include intellectual property law, corporate/commercial law, tax, shipping and admiralty law, oil and gas, real estate and general litigation. The firm’s major area of expertise is intellectual property law, for which it has won many international awards and represents major blue chip multinational companies and law firms in the acquisition, maintenance and enforcement of their intellectual property rights. The firm practises in the Nigerian jurisdiction but assists clients to register, maintain and enforce their intellectual property rights in other African countries through its wide network of associates.

The firm’s understanding of the relevant laws, competent attorneys and support staff, who have background knowledge in various sectors of the economy, enables it to give sound and practical legal advice to its clients.

Nigeria adopts the Nice Classifications of goods and services.

Trademarks are therefore filed in Nigeria in accordance with this classification. Multi-class applications are not accepted in Nigeria. Goods and services of interest that fall into several classes must be protected in those classes by trademark applications in the classes.

The examination procedure is regulated in accordance with the requirements of the Trademarks Law. Marks are examined on absolute ground and relative grounds. Applications that infringe any of the grounds would be provisionally refused.

The main law regulating trademarks in Nigeria is the Trademarks Act, Cap 436 Laws of the Federation of Nigeria, 1990. The Merchandise Marks Act also deals with the criminal aspects of trademarks.

Registration of a trademark gives exclusive right to the owner to use the mark in Nigeria and entitles it to sue for infringement of the mark. Companies wishing to come into Nigeria or selling their products or services in Nigeria must take immediate steps to register their intellectual property rights. This will prevent ‘bad faith’ registration, which may be costly and timeconsuming to retrieve.

The documentation of assignment starts with the stamping of the deed of assignment by the commissioner for stamp duties (after payment of the stamp duty tax). The document is thereafter filed with the registrar who, on satisfactory prove of the devolution of title, issues a certificate of assignment to the assignee.

An assignment is valid only if registered. An unregistered assignment shall not be admitted in any court except otherwise directed by the court.

There is no provision for registration of a security interest against a trademark in Nigeria. A creditor may, however, request the assignment of a trademark to it pending settlement of a debt.

Enforcement of trademark rights is through the courts.

Investigation of infringement is carried out through private investigators and execution of a seizure order (Anton Pillar Order) is done by attorney, bailiff and the Police.

Trademark law and procedure are territorial in nature. Multinational companies therefore have to protect and enforce their trademark rights in countries of interest to them. Where there are regional intellectual property organisations, multinational companies may register and protect their right with these organisations (for example, the African Intellectual Property Organization  OAPI) and this gives protection in member countries of the organisation.

The Nigerian intellectual property legal regime is similar to those of other common law countries.

Applicants are advised to take prompt action to register their trademarks and other intellectual property rights in Nigeria due to the high rate of bad faith registrations in the country.

The current Trademark Law was enacted in 1965. It is overdue for review. Unfortunately, this law still governs the trademark regime in Nigeria as successive governments have failed to enact new developments in international trademark practice.

Where the registrar refuses an application, an appeal may lodged by applying for a hearing within 30 days from the date of refusal. Further appeal from the registrar’s decision may be lodged at the Federal High Court, Court of Appeal and the Supreme Court of Nigeria.

A trademark is valid initially for seven years from the date of filing. It may be renewed for successive periods of 14 years thereafter. Application for renewal must be filed on or before the renewal date to prevent removal of the mark from the register for non-renewal.

March 2011 • GBM • 61

importance of trademarking your business

mexico

Goodrich Riquelme y Asociados Enrique A Diaz, Esq + (52 55) 55 25 14 22 ediaz@goodrichriquelme.com Paseo de la Reforma 265 Mexico City, DF 06500, México Tel: (+52 55) 5533-0040 al 55 Fax: (+52 55) 5525-1227 mailcentral@goodrichriquelme.com A full-service law firm with 75 years of experience, Goodrich Riquelme y Asociados (Goodrich) is made up of carefully trained lawyers with diverse fields of legal specialisation. Goodrich’s overall strength is the way in which we use this specialised expertise for the needs of our clients, providing highly qualified immediate legal assistance with an innovative approach.

Goodrich recognised long ago that we must represent our clients’ needs wherever their business takes them, which required us to extend our presence beyond Mexico City. Today, we have collaborating attorneys throughout Mexico and have had an office in Paris since 1971, which has

62 • GBM • March 2011

consolidated a strong presence in the EU. With our participation in the Bomchil Group (that is associated with offices in every Latin American country), we ensure that our clients are competently represented the world over. As our clients’ needs change, we will continue to grow and service them with trusted local and international advice.

As a leading intellectual property (IP) law firm in Mexico, we regularly handle the prosecution of over 3,500 trademarks and more than 1,000 patents each year, and provide trademark and patent assistance worldwide, namely in the Latin American region. We also file and handle more than 400 litigations in both fields each year.

Our IP staff has over 80 individuals  including attorneys, engineers and computer specialists  that handle litigation in all areas, such as licensing, and patent and trademark infringement, and also counterfeiting, pirating and unlawful duplication of computer software.

Much of our IP work is for non-Mexican companies that are conducting business in Mexico. We help adapt foreign patent specifications and claims to Mexican law, aid in registering patents and trademarks and maintain them by handling the necessary renewals. Our computer system is linked to the Mexican Patent and Trademark Department, which allows us to ensure our clients are always given adequate notice of important dates for the protection of their IP. We are particularly specialised in relation to the acquisition of rights and in transactions involving licensing and the transfer of technology, as well as in technology joint ventures, research and development, supply and distribution agreements and dispute resolution. We have, in fact, been recognised by many clients for our negotiation skills.

We focus on facilitating the exchange of specialised knowledge and, in particular, are pleased to assist biopharmaceutical companies, banking institutions and research organisations. We act as IP business advisers to several of our clients, and can also assist in entertainment and sport law.

taiwan Deep & Far attorneys-at-law was founded in 1992 and deals with all the areas of law with a focus on the practice (in separate or in combination) of all aspects of intellectual property rights (IPRs) including patents, trademarks, copyrights, trade secrets, unfair competition, and/or licensing, counseling, litigation and/or transaction thereof.

The patent attorneys and patent engineers at Deep & Far hold outstanding and advanced degrees and have generally graduated from the top five universities in the country. Our prominent staff is dedicated to providing the best quality service in IPRs in Taiwan. As proof, about half of top-100 incorporations in Taiwan have sought to patent their techniques, but more than one fifth have used the services of this firm. Hi-tech companies in the Hsin Chu science-based industrial park have played a most important role in booming Taiwan’s economy; around half have sought to patent their techniques, out of which more than 60% have ever entrusted their IP rights work to this firm. We also represent international giants, for example, InterDigital, Samsung SDI, Infineon, LCD Advanced, Carl Zeiss, Samsung, MPS, NovaLED, Schott Glas, Genelabs, Toyo Ink, Siemens and Motorola.

It is our philosophy to provide competent legal services that other firms cannot comparably provide. How do we do this? Deep & Far have achieved this by selecting, edifying and nurturing staff with expertise that are moral, earnest, sincere and strictly disciplined properties that are key factors we believe for proper and competent comportment.

Deep & Far C F Tsai Tel: 886 2 25856688 Fax: 886 2 25989900 13th Fl, 27 Sec 3, Chung San N Rd, Taipei, Taiwan email@deepnfar.com.tw www.deepnfar.com.tw

More information regarding this firm can be found on our website.

March 2011 • GBM • 63

cOuntrY prOFile - MalaYsia

Malaysia Today, Malaysia is one of the world’s top 20 trading nations. Malaysia is ranked 21st in overall performance out of 134 countries. The country’s top trading partners includes Singapore, Japan, the United States, China, Korea, Indonesia, Hong Kong, Taiwan and Germany. To date, Malaysia has signed bilateral investment agreements with more than 70 countries. In addition, Malaysia has signed or implemented four bilateral FTAs and at regional level, Malaysia and its ASEAN partners have established the ASEAN Free Trade Area. ASEAN has also concluded FTAs with China, Japan, Korea and India, as well as Australia and New zealand.

MALAYSIA – UNITED KINGDOM In 2009, Malaysia was United Kingdom’s 35th largest trading partner, and U.K. was Malaysia’s 16th largest trading partner. Malaysia’s highest number of exports to the U.K. in terms of product sectors is electrical and electronic products. Other top exports to U.K. include machinery, appliances and parts, chemicals and chemical products, and transport equipment. In 2009, Malaysia’s bilateral trade with partner United Kingdom has a total export value of USD $1,099.44 million. Several of the major Malaysian companies operating in UK includes Petronas, MAS, Air Asia, Proton, Genting Group, and Laura Ashley, just to name a few. Major investors from UK in the Malaysia include Astrazeneca, Standard Chartered Bank, Ernst & Young, and Glaxosmithkline.

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Contact Details: Mr. Raja Badrulnizam Raja Kamlazaman Malaysia External Trade Development Corporation (MATRADE) 17, Curzon Street, London W1J 5HR Tel: 020 7499 5255/4644 Fax: 020 7499 4597 London@matrade.gov.my www.matrade.gov.my

MATRADE Malaysia External Trade Development Corporation (MATRADE) was established as a statutory agency under the Ministry of International Trade Industry (MITI). MATRADE is the national export promotion agency, and is responsible for assisting Malaysian companies to promote products and services in the international market. MATRADE’s vision is to promote Malaysia as a globally competitive trading nation, and its’ mission is to promote Malaysia’s enterprises to the world. MATRADE is also actively involved in assisting foreign companies to source for suppliers of Malaysian products and services, and is represented worldwide at 40 locations in major commercial cities.

MATRADE PROMOTIONAL ACTIVITIES MATRADE runs and take part in many promotional activities to help Malaysian entrepreneurs, such as promotional booths, in-store promotions, trade promotional visits, trade fairs, and so forth. Some of the latest promotional activities carried out by MATRADE London include Interiors Birmingham 2010, specialized marketing missions, as well as the recent Malaysia Kitchen Programme (MKP). MKP aims to educate and inform consumers in United Kingdom about Malaysian cuisine and Malaysian restaurants. This programme is also carried out in various parts of the world. The MKP was considered a success, such as in London where year-long activities such Taste of London at Regents Park, Promotions at Selfridges London, Birmingham and Manchester, Trafalgar Square Night Market and Winter Market at Westfield Shopping Centre were carried out by MATRADE.

March 2011 • GBM • 65

Country Profile - Malaysia - Language translation services

Contact: Sophia Jusoff Position: Director and founder Tel: +60162194833 sofie@malayexpressions.com www.malayexpressions.com

Malay expressions - transforming complexity into clarity There is a rampant misconception about translation. Most people think that armed with a bilingual dictionary, translations can be handled by anyone with sufficient ability to understand or speak the source and target languages. The truth is translation is an art and a science on its own. As the Russian Nobel Prize poet, Boris Pasternak, once said: “Translation is like copying a painting.” It is obvious that such a feat can never be achieved satisfactorily by any layperson. Only experts in the field are qualified to undertake such a responsibility; only then can the results be appreciated by all and sundry.

At Malay Expressions, this is what we set out to achieve. We handle our translation assignments like a highly priced work of art. Our objective when we translate is to ensure that every aspect of the message is transferred into the target language; not just the words, but also the intonation, the emotions and the mood.

Another important aspect that we are most particular about is that the message is expressed in the most natural manner and tailor-made specifically for the target audience. This also requires a fine understanding of the cultures and sensitivities of the target audience.

We understand that, with the current tide of globalisation, political and physical boundaries are blurred in the business realm. Company operations are not confined to specific countries, regions or continents, but spread throughout the world. As such, communication is the most vital tool to reach out to your customers, employees and stakeholders throughout the world. Your documents and websites, in particular, are your best face, your virtual persona that you put forward to the world at large. What persona do you want the world to see?

Malay Expressions can help you do this for the Malay-speaking world. At Malay Expressions, we only use mother tongue speakers who are experts in their respective fields. As such, they also understand the subtle cultural sensitivities of the region, an important aspect that can help you avoid social blunders related to local nuances that can be quite embarrassing; and, what is worse, may even destroy your business deals with local parties or tarnish your reputation.

Malay Expressions specialises in English to Malay and Malay to English translations. We are able to translate most types of genre, but we pride ourselves in the ability to translate the following genre particularly well: medical, IT, technical, telecommunications, human resource, legal, and, business and finance.

consistently develop and enhance their linguistic, grammatical and writing abilities. They are periodically sent for linguistic and translation training courses to brush up on their skills and to ensure they are current with their knowledge on the latest terminologies.

We have a team of translators, in-house and freelance, who are specialists in these areas, all of whom are practising and retired experts in each of these fields.

Our quality assurance practice does not end there. Depending on the fee agreed upon, all our translations go through at least one round of proofreading before they are submitted to our clients. Budget permitting, we also carry out proper and full-scale language quality assurance.

We are cognisant that being experts in these respective fields will not guarantee the quality of translations we aspire to achieve. We understand that the best translations can only be produced by those who are well versed in language and writing skills, in both the source and target languages. As such, we ensure that our translators

So, if you are ready to impress the Malay-speaking world in the Malay Archipelago, be it Malaysia, Brunei or Singapore, look no further. Speak to us to see how we can help you traverse the tricky cultures and linguistic puzzle of the region. Reach out and communicate - express yourself clearly with Malay Expressions.

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Country Profile - Malaysia - legal services

ARSA Managing Partner Datuk Dr Abdul Raman Saad dars@arsa.com.my

ARSA Lawyers of Malaysia Messrs Abdul Raman Saad & Associates, Advocates & Solicitors, also brand-named “ARSA Lawyers”, was established more than 30 years ago by its founder Datuk Dr Abdul Raman Hj Saad and today, it is one of Malaysia’s leading legal service providers for all business and commercial endeavours. The legal firm is easily remembered by its ever popular acronym, ARSA by its esteemed clients, friends and supporters not only in Malaysia, but also beyond its borders, in Singapore, Indonesia and the Middle East.

ARSA is also a member in the international legal group, InterPacific Bar Association (IPBA) and Asian Islamic Finance Alliance (AIFA) A wide and comprehensive range of legal services offered by ARSA makes it a “one-stop” centre for its clients’ total business expectations and commercial aspirations. ARSA’s main practice areas include, inter alia,: Corporate & Commercial Banking & Finance Real Property & Conveyancing

In 2008, ARSA was involved in the first successful conversion of AXIS REIT, a conventional REIT to an Islamic/Shariah compliant REIT.This exercise successfully produced an alternative method in encouraging Middle Eastern Sovereign funds and Muslim Fund managers in accessing high quality assets which generate a stable stream of cash flow backed by a steady portfolio of tenants which offers investors high yield returns and certainty of income other than just relying on the expansion plans of the then existing two Islamic REITS or the new listing of other Islamic REITS on Bursa Malaysia. Another innovative aspect is that, notwithstanding that there is no specific guidelines to regulate this conversion, it was achieved through the spirit of cooperation between the regulators, issuer and its advisers to achieve common goals.

From the compliance perspective, ARSA and the Shariah advisor work closely together in a specialised Shariah compliant due diligence module to ascertain the position of the existing portfolio to ensure that it complies with the permissible activities ratio under the Islamic REIT Guidelines issued by the Malaysian Securities Commission.

Litigation & Dispute Resolution Corporate Finance Islamic Banking & Finance (IBF) Building & Construction Information Communications Technology(ICT) Intellectual Property & Biotechnology International & Cross Border ARSA is currently promoting and actively specializing in areas of ICT and Islamic Banking & Finance (IBF) as two new and exciting areas of growth due to their increased demand in the market. In tune with that demand, ARSA has enhanced its human capital to face globalisation and liberalisation of its services by adopting strategic alliances and creating business synergy with global law firms, academia and other industry players. ARSA advises stakeholders on investment into Malaysia, particularly in the new regional development of Iskandar Development Region (IDR) in the state of Johor where ARSA has a strong presence. ARSA is driven by the strong conviction that it has to stay ahead of the needs of its clients and, to this end, ARSA’s core group of lawyers ensures that all legal problems affecting their clients are addressed to proactively.

For its years of service with distinction and excellence, ARSA has been given due recognition and was awarded the Islamic REIT’s Deal of the Year by Islamic Finance News in 2006. In 2009, the Deputy Prime Minister of Malaysia, Tan Sri Dato Muhiyiddin KUALA LUMPUR Level 8, Bangunan KWSP, No. 3, Changkat Raja Chulan off Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia Tel : +603-2032-2323 Fax : +603-2032-5775 Key Partner : Zain Azra’ i Abd Samad zain@arsa.com.my www.arsa.com.my

Yasin, while officiating ARSA’s brand launch, congratulated ARSA for its pioneering efforts in promoting Islamic Finance, both locally and globally. In 2010, ARSA was nominated as one of the leading Islamic Finance lawyers for Islamic Banking & Finance, Islamic Project Finance and Islamic Real Estate by Islamic Finance News. ARSA is also certified with the international accreditation of ISO 9001:2008 for quality management system that produces time-and-cost-efficient deliveries to its clients.

In the areas of Biotechnology, Intellectual Property, Technology & Telecommunication (BITT) which includes Information Communications Technology (ICT), ARSA had advised a healthcare provider on a series of agreements for the supply, delivery, installation, testing, commissioning, post acceptance maintenance, and support for their IT environment which will manage the administration, financial and clinical operations at its 10 hospitals in Peninsular Malaysia, where the project value was RM40 million.

ARSA provides services that assist stakeholders evolve in a managed way to meet the legal and regulatory challenges in this fast paced globalization. In tune with that demand, ARSA has enhanced its human capital to face globalisation and liberalisation of its services by adopting strategic alliances and creating business synergy with global law firms, academia and other industry players. ARSA advises stakeholders on investment into Malaysia, particularly in the new regional development of Iskandar Development Region (IDR) in Johor where ARSA has a strong presence. ARSA renders high quality service where the client will benefit from customised and focussed legal advisory and transactional work.

MELAKA 240A&B, Jalan Melaka Raya 1, Taman Melaka Raya 75000 Melaka, Malaysia Tel : +606-283-4857 Fax : +606-284-7868 Key Partner : Mahdi Baharom mahdi@arsa.com.my www.arsa.com.my

JOHOR BAHRU Level 12, Menara Pelangi, Jalan Kuning, Taman Pelangi 80400 Johor Bahru, Malaysia Tel : +607-333-0222 Fax : +607-334-9490 Key Partner : Norliza Mohammed liz@arsa.com.my www.arsa.com.my

March 2011 • GBM • 67

cOuntrY prOFile - MalaYsia - enerGY

United Kingdom, United Arab Emirates and Malaysia Ian Laing Managing Director, OPITO International + 971 4 4458482 + 971 4 4458481 Ian.laing@opito.com www.opito.com

Raising the bar on global safety standards in oil and gas

these markets so we have separated our business to reflect this and provide a distinct offering for each province.

Worth billions to the global economy, the oil and gas industry is poised for significant growth in the next five years with a rise in production activity, asset decommissioning and the estimated demand from the emerging offshore renewable and carbon capture and storage industries creating a significant demand for a safe and skilled offshore workforce and supply chain.

“The memorandum of understanding with Iraq is an exciting opportunity for OPITO and acknowledgement of the high regard in which our standards are held globally. But more importantly this is a major step forward for the people of Iraq, who if they are to successfully re-build their country must create a safe, sustainable and profitable oil and gas industry.”

OPITO is a unique organisation which delivers standards to improve workforce safety and competency in worldwide oil and gas provinces.

Working in partnership with the government and the industry in Iraq, OPITO will set out a broad strategy which will help build the skills base through use of standards and qualifications, best practice and proven learning products.

The world class network of OPITO approved training providers now stretches across 30 countries with more than 150,000 people trained to OPITO standards worldwide last year.

Industry funded and employer-led, the company recently underwent a major restructure to help it better address the growing needs of the oil and gas industry both internationally and in the UK. The international organisation works with governments, national oil companies, multi-nationals and contractors to meet their skills needs, providing independent advice and guidance on effective management of workforce skills development, emergency response and occupational standards and qualifications and quality assurance of training delivery.

OPITO has structured itself to meet the ever increasing demands of the global industry by establishing international support offices in Kuala Lumpur, Malaysia and Dubai in the United Arab Emirates.

Its international workforce helps to support and guide 70 approved training providers who have passed stringent tests to allow them to pass on the OPITO message.

Amongst other initiatives, OPITO has led in the creation of employer forums in key provinces and has been able to break new ground by delivering Basic Offshore Safety Induction and Emergency Training in India, Saudi Arabia and Libya.

In January, the company signed a landmark memorandum of understanding with the Iraq Ministry for Oil, Training and Development Directorate to help the war-torn country develop the skills and training necessary to enable exploitation of its hydrocarbon resources.

Ian Laing, managing director of OPITO International, said: “By 2030, global energy demand will be almost 35% higher than it was in 2005 and hydrocarbons will continue to provide the majority of the world’s energy needs.

“For any company working within any industry, its people are its most valuable asset. Standards are developed by the industry to reflect today’s offshore oil and gas working environment. Many markets are not as mature as the UK and therefore the skills offering has to be different. OPITO wants to be at the forefront in serving

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”As with each of our partnerships, this is a long-term relationship which we are confident will strengthen as the country develops and prospers,” added Mr Laing.

“Employers are in agreement that safety standards around the world have improved as a result of what OPITO does and are choosing voluntarily to adopt OPITO standards because they are recognised by employers around the world as the best for the oil and gas industry.

“While the individual gains an advantage, the industry as a whole, in turn, also reaps the benefit of a robust quality assured training and competence environment.”

While OPITO continues its international drive, the company remains committed to serving the UK industry. It is widely recognised as the industry’s focal point for skills, learning and workforce development in the United Kingdom.

A major initiative for the North Sea industry has been the introduction of the Minimum Industry Training Standards (MIST) programme which aimed to ensure the offshore workforce has the necessary safety awareness and training to avoid risk and ultimately incidents.

Covering nine basic safety elements, including the core topics of risk assessment and permit to work, with new key safety awareness centred on mechanical lifting and platform integrity, to date, 90% of the UK workforce has undertaken the training.

“MIST set a new common standard to ensure that everyone, regardless of role or discipline, has the same basic safety understanding. An entirely voluntary programme, its success is testament to the continued commitment within the industry towards ensuring the highest possible safety standards,” said Mr Laing.

“It provides the industry with a solid platform on which to build its skills base further in the future and an international version of the training programme has been made available to the global oil and gas industry.”

OutsOurcinG

OutsOurcinG: helpinG Business staY aFlOat

By Martyn Hart, Chairman of the National Outsourcing Association (NOA)

In a changing world, the one thing you can always predict, with a fair degree of certainty, is that the year ahead is guaranteed to bring uncertainty. The continued fallout from the global financial crisis means that we’ve seen more and more well-established companies folding, with countless others looking for a way to stay afloat amidst choppy economic waters. I like to look upon outsourcing as a life raft in these uncertain times, offering help and support to a wide range of organisations across all sectors of industry, and allowing them to row to safety.

March 2011 • GBM • 69

Outsourcing

The key to successful outsourcing However, none of this is to suggest that outsourcing should be seen purely a means of cutting costs. It’s true that if managed correctly, outsourcing can provide significant cost efficiencies, although the caveat I would add to that is that outsourcing relationships which are entered into on the basis of cost are rarely, if ever, successful.

Organisations all over the world, and across every industry, have discovered that by entering into an effective outsourcing relationship they can provide not only a reduction in costs, but also an increase in flexibility and efficiency. However, in order to achieve these feats, there are a number of steps that should be taken.

The first of these is that it is important for anyone thinking about outsourcing to identify what they are trying to achieve. A range of outsourcing functions and options are now available, many of which can ensure that productivity and efficiency is achieved, but it’s important to remember that not all of these will be relevant to every business.

It’s true that developments in technology have made it possible for operations to be outsourced with little or no fuss, which has, in turn, opened the way for outsourcing to improve efficiency. But before any business can decide how outsourcing can best add value, it is imperative that they first identify what they want their project to achieve – it is the only way to measure how effective the project has been once it has been concluded and to determine whether or not it has been a success.

Once these factors have been taken into consideration, both the supplier and the vendor can begin working together to build a successful, lasting partnership. End-users and suppliers cannot work in isolation of one another, and both must understand that collaboration can often be the secret of outsourcing success. For instance, the importance of suppliers gaining an insight into business they are serving cannot be underestimated, and can play an important part in allowing them to understand the key operations, objectives and values by which they should operate. It’s also true that by developing an understanding of the end user’s business, suppliers will be much more able to help and understand any potential issues that may arise in the long run.

However, it takes more than just identifying areas where outsourcing can make a difference to ensure a successful business

70 • GBM • March 2011

relationship. You might think that a close, long-standing friendship with your service providers seems like a little too much to ask for, but it’s true that the most successful outsourcing relationships are those where suppliers and end-users work towards a common goal.

Last year, the NOA conducted some research, in conjunction with Kingston Business School, in which suppliers and clients were asked to rate how successful their own performance has been against that of their outsourcing partners. All participants to the study were also asked to evaluate how strong their relationship was with their partner.

Interestingly, the research found that those who viewed their relationships with partners as successful were far more likely to experience successful outsourcing. Conversely, it also found that those who rated their own outsourcing as less successful were also significantly lower in their rating of their relationship.

So what makes for a strong, effective collaborative relationship?

From the outset, it’s crucial that both partners identify one another for the right reasons. It’s not enough to find a solution that merely offers, let’s say, a skills fit at the right cost. Organisations should aim to go the extra mile to understand as much of their outsourcing partner’s cultural values as possible before they make a decision.

An outsourcer should aim to get under the skin of their partner and really understand the key areas in which they can best deliver value before agreeing to any undertaking if they are to avoid problems in the long run.

However, the process of collaboration does not stop once a compatible partner has been identified. Indeed, it should be of paramount importance that the relationship is managed on a continuous basis to ensure that the outsource operation functions to the best of its ability.

A strong, ongoing relationship can help to resolve problems that may crop up, while regular communication can ensure robust, effective management of processes, while regular discussion can provide insight on how to implement innovative changes to existing systems. Some of the best collaborative relationships I’ve seen have resulted in suppliers joining their clients for strategy days, working alongside them to create innovative new ideas, a benefit shared by both when a milestone is reached. One of the keys of collaborative working is that existing supplier/client silos must be broken down to foster effective working relationships and that some of the SLAs can only be achieved by both sides collaborating.

How can I manage my outsourcing effectively?

When most people think about outsourcing, their first thought is typically of a call centre in a far flung location, providing customer service or technical IT expertise. However, there is much more than meets the eye, in this respect – and outsourcing can deliver so much more than effective customer service or technical skills, and could help to add value across an entire organisation.

one. Organisations have found that they can find significant cost efficiencies by distributing application development and maintenance work among more than one service provider to carry out work for them, instead of relying on a single provider. Under this model, each business function can be treated as a separate portfolio of activities, with peripheral tasks outsourced to multiple service providers.

For example, in recent years, we’ve seen tremendous growth in HR outsourcing (HRO), which can allow organisations to outsource a complete HR service to a team of dedicated experts. Organisations are also increasingly discovering the value of outsourcing their back office functions or business processes (BPO), which can mean outsourcing anything from payroll to accounts.

So why has multi-sourcing proved so popular in these troubled economic times? It’s clear that multisourcing allows organisations access to a much wider range of resources as well as a much deeper set of skills than would have been possible from a single service provider. Equally, it’s true that when outsourced work is divided among several service providers, there is often increased competition to deliver results amongst suppliers, with the knock-on effect that the quality of work is increased.

But what’s the best way to manage your outsourcing suppliers? Recent changes in the way contracts are sourced mean that, in outsourcing terms, this is becoming an increasingly difficult task. For instance, the government’s £100 million contract cap means that there has been a sharp decline in the number of ‘mega deals’ in recent years, which means that more and more organisations are beginning to see multisourcing as an attractive proposition.

However, as much as multi-sourcing provides a range of benefits for business owners, it’s important to recognise that it’s not the answer for everyone.

Having a large number of different service providers requires a very high level of governance and management – after all, you’re not just coordinating with one single company, but many.

For the uninitiated, multi-sourcing is the process of outsourcing to multiple service providers instead of

The public sector Of course, here in the UK, one of the reasons why outsourcing has become such a staple part of the news agenda, and is predicted to flourish in the coming years, is the government’s recently announced public sector cuts. We’ve already seen a wave of detractors predicting that, in the scramble to outsource services, the public sector will inevitably see a lower level of service. But how fair is this? Just because there are initial cost-efficiencies, will we see the taxpayer footing the bill in the long run?

It’s probably worth noting that the private sector can typically call on far greater resources than government departments, which means that, particularly in the procurement sector, it can be far easier for them to execute some of the larger supply chain requests necessary when dealing with a large, national contract. For example, some large orders

made by government departments can be difficult to deliver through the public sector – and certainly could not be delivered as quickly as if the supply chain was outsourced to a supplier in the private sector.

The public sector is an excellent example of how businesses can use outsourcing to add greater value.

However, as with any form of outsourcing, it’s also true that if the public sector rushes into outsourcing, without first ensuring that their service providers are a good cultural fit, or that they can deliver an improved service, then problems will arise. Perhaps then, the only danger, is if public sector departments look to outsource cheaply, at the cost of improved service. If performed correctly, however, and for the right reasons, there’s absolutely no reason why outsourcing should not achieve real results for the public sector.

Keeping you afloat When all is said and done, outsourcing can play a significant in helping businesses of all shapes and sizes to stay afloat. However, to make sure that this happens, it is important to strike the right balance, and, if you like, find the outsourcing life-raft that suits you best, then work alongside your outsourcing partner, if you are to row to safety. Remember to watch out for the sharks!

To find out more about outsourcing, and how it could benefit your business, please visit our web site: www.noa.co.uk

March 2011 • GBM • 71

OutsOurcinG

NIGERIA, GHANA, LIBERIA, SIERRA LEONE

XL HR Outsourcing Limited (a subsidiary of XL Management Services Limited) is a wholly owned indigenous company incorporated under Nigerian Law. We are registered by the Federal Government and licensed by the Federal Ministry of Labour and Employment, to provide business process outsourcing (BPO) services to clients using a tested world-class technology and process platform designed and implemented to deliver consistently excellent results. Our solutions are tailored to suit the identified strategic needs of client organisations or prospective client organisations, as the case may be.

An ISO 9001:2000 certified company, XL HR Outsourcing Limited is one of the leading BPO services providers in Nigeria and other West African countries, and its clients include, among others, government agencies, leading banks, manufacturing companies, telecom companies and international oil companies.

We believe in forming a partnership with our clients based on good corporate governance practices, visible and measurable valueadding initiatives, full understanding and perfect alignment with the client’s strategic vision and business objectives as the basis for implementing a successful outsource strategy Our services In partnership with Direct Channel Holdings, South Africa, XL HR Outsourcing Limited is Africa’s most flexible BPO solution provider offering a wide range of services to diverse industry sectors including the following.

Support staff outsourcing: Profiling, interview, recruitment, training, deployment and overall management of various categories of staff including call centre operators, marketing officers, IT technicians, engineers, bank tellers, secretaries/receptionists, security guards, office assistants, cleaners and drivers. We have a robust KIV (keep in view) database from where qualified personnel can easily be deployed at minimal notice to guarantee a seamless and smooth continuity of our client’s services.

Recruitment services: Profiling, interview and recruitment of certain categories of staff for select clients.

Flexi-staffing: Supply of interim workforce to clients in order to meet their seasonal and strategic fluctuations in demand for services.

Training and development services: Our training academy is one of the leading training centres in Africa.

Outbound telemarketing: Well-trained officers that ensure the sustainable and steady growth in the sales volume and revenue for our clients.

Field marketing distribution channel: Traditional face-to-face marketing leveraging off advanced mobile technology solutions.

Inbound call centre services: Inbound telesales, product enquiries, customer services, after-sales servicing, technical help-desk, shared services, activations and order tracking, and claims handling.

Customer relationship management: Welcome calls, verification calls, up-sell and cross-sell campaigns, retention calls, renewals and upgrades, and referral marketing.

Debt collection and credit management: Servicing major banks, retailers and telecoms companies pre-charge off, early stage, late stage and legal recovery. Also, tracking and tracing services.

Hosted platform and disaster recovery solutions: Contact centre on demand services, workspace recovery solutions and data storage and server room recovery solutions.

Back-office fulfilment and administration services: Enhanced prefulfilment processes to ensure greater sales conversion ratios and lower lapse rates. With seamless front and back office integration, multiple strike dates and multiple payment collection methods and advanced MIS (management information system) and reporting capability.

Payroll administration: Our software package can be customised to meet client’s needs in terms of preparation and management of the payroll.

Background checks: Character checks and certificate verification/ reference check - we use our professional expertise to ensure that all certificates, former employers references and guarantors forms as submitted by staff are verified and authenticated.

Business process re-engineering: Our experienced consultants are available to make your businesses take a new shape.

Why XL HR Outsourcing Limited We have an entrepreneurial and visionary management team backed by exceptionally dedicated and talented staff. We provide IT, recruitment, training, quality and shared services. There is flexibility in our approach - outsource, in-source or co-source. We provide consistent high productivity without compromising quality or service levels. There is diversity in our service offerings and we have the ability to service all verticals - BFSI (banking, financial services and insurance), automotive, retail, telecoms, government and state-owned-enterprises. We provide world-class technology infrastructure and technology solutions and are highly compliant in all aspects of legislative and regulatory framework.

Afam Udeagwu General Manager Plot 883 Samuel Manuwa Street, Victoria Island, Lagos, Nigeria Tel: 234-1-7405786, 4613606-7 2621320, 234 – 702 9375 483, 234-819 1442 400 Fax: 234-1-4616877 info@xlmanagementservices.com, a.udeagwu@xlmanagementservices.com www.xlmanagementservices.com 72 • GBM • March 2011

UNITED KINGDOM

With pressure to compete in a global marketplace and with an increasingly international dimension to many businesses, outsourcing has never been more prevalent. All shapes and sizes of companies are attracted by the promise of business efficiency though international outsourcing. If executed correctly, outsourcing can deliver real business benefits but, if not, all manner of pitfalls await.

The recent spate of renegotiations across the outsourcing sector, largely stemming from the current economic climate, are indicative that there is no room for inefficiencies as businesses simply cannot absorb additional costs.

The following is a reminder of some of the important legal and commercial issues which customers should consider before setting off along the path of international outsourcing.

Jurisdictional issues abound and represent a vast range of contractual, commercial and cultural challenges for outsourcers.

The control and regulation of the governance of an outsourcing arrangement is a particularly hot topic if the supplier is based oversees, where language, time-zone and geography can be significant impediments to the management of the relationship.

Processes providing for the oversight of the arrangement and managerial access to operational information must be written-in to the outsourcing agreement to ensure that there is an early warning system in the event of poor performance or default. A performance regime which incentivises consistent achievement of specified service levels is an essential part of any international outsourcing agreement.

Some overseas jurisdictions present major risks in terms of the efficacy of local laws in protecting data. Data security and privacy are paramount considerations for many businesses and appropriate due diligence should be undertaken to establish a supplier’s proven track record in processing and protecting data before entering into an agreement.

resolution (such as mediation or arbitration) will ensure clarity in the event that things start going wrong.

For the discerning organisation with ethical compunctions, the adequacy of suppliers’ sustainability and ‘green’ initiatives should also be investigated. If the supplier’s organisation operates within the EU, certain conditions can trigger laws on mergers and concentrations, which could be anti-competitive.

Many of the factors mentioned above texture the overall corporate complexion, which also include: transparency of decision-making, restrictions on foreign ownership, disaster recovery capability, tax structuring, currency fluctuations, compliance monitoring and shareholder protections, to name a few.

The success or failure of international outsourcing arrangements can often depend on the model of engagement. Direct contracting has the advantage of providing contractual rights of escalation, resolution, claims and recovery; however, in some jurisdictions, these rights are of little practical value as the claims process can drag on for many years. Some comfort may be offered if a UK or European-based parent company can guarantee the supplier’s performance. Indirect outsourcing, where the customer contracts with the UK or European entity of an offshore supplier which then sub-contracts the service to the offshore operating company, allows for claims in the UK courts and provides an understanding of UK business culture that might otherwise be lacking. Of course enquiries should be made to establish that the UK company is not merely a shell company that may be wound up at the first sight of trouble. A joint venture allows the customer to retain some management control through equity investment of the supplier.

Although there are often associated tax benefits with JV structures, they are often more complex, resource draining (both in terms of time and investment) and therefore favour the longer term, strategic customer.

As intellectual property (“IP”) is an increasingly important asset class for today’s businesses it is equally vital to ensure that IP rights are recognised and adequately protected. IP laws are complex and there are vast disparities in the effectiveness of safeguarding IP across jurisdictions.

The models mentioned above are not exhaustive, as there are all manner of structures available to suit any organisation’s needs, but are illustrative of the manifold factors that affect the viability of any outsourcing arrangement. The issues they raise are both legal and commercial with immediate and prospective consequences that require careful thought from all customers and their advisers.

Outsourcing agreements must also enshrine the manner for dealing with disputes. Not all countries recognise the decisions made by the courts of other jurisdictions. At the very least, a robust dispute escalation procedure and an effective and enforceable governing law provision are required. A formal mechanism for alternative dispute

Companies should leverage the competitive pressure created in carefully constructed procurements to achieve the best possible solution and commercial deal going in to the outsourcing arrangement. A poor choice of supplier can have disastrous consequences.

Field Fisher Waterhouse Paul Barton Partner Tel: 44 (0) 20 7861 4708 Barton, Paul Paul.Barton@ffw.com www.ffw.com

Companies must ensure that off-shoring is the right choice for their business – consider how your customers might be affected. For example, despite a wave of offshoring of customer contact centres

by Financial Services firms a number of those operations have been brought back onshore because of low customer satisfaction. Arm yourself with as much local knowledge as possible, though one of the difficulties can often be acquiring accurate market information in offshore locations for benchmarking exercises. Consider all the risks involved – if you have no experience of outsourcing but the business’ future depends on its success, ensure adequate termination/break option provisions and a comprehensive exit strategy to salvage a failing arrangement.

For the risk-averse, maybe on-shoring is the appropriate approach.

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OutsOurcinG

CHINA

Managing IP risk when offshoring technology to China In recent years, the focus on offshoring to China has shifted to China's capabilities as a supplier of higher-value outsourcing services including research and development, IT outsourcing (ITO), business process outsourcing (BPO), and knowledge process outsourcing (KPO).

Surprisingly, China is now considered the preferred outsourcing and shared services destination for companies located in Asia according to a KPMG 2010 survey. Part of this growth is due to the Chinese government's stewardship of the growth of China's outsourcing industry as a strategic way to move China's economy up the valuechain. For example, in 2010, Chinese ministries issued two circulars which provide preferential tax rates, special deductions, and tax holidays to qualifying Chinese and foreign invested enterprises located in 21 municipalities offering ITO, BPO, and KPO services.

These are powerful incentives, particularly for Western companies, to set up captive service providers (SP) to take advantage of cost-savings and efficiencies that can be gained.

This growth trend underscores one of the great risks in offshoring arrangements - the risk of loss or misappropriation of intellectual property and trade secrets.

Understanding the business and legal environment The key risk to IP or trade secrets in captive offshoring arrangements in China is their leakage to competitors or their misappropriation by employees. Where a joint venture (JV) or a SP is involved, there is an additional risk that technology transferred to or developed by the JV or SP will leak to the JV partner, SP or their parents.

Against this IP risk, Chinese laws, at least on paper, protect the major forms of IP one would expect from the now world's second largest economy. The key issue remains weak enforcement. Although enforcement of IP rights continues to improve, China’s civil procedure laws and systemic weaknesses make it very difficult to protect high technology patents and trade secrets.

For example, the strong burden of proof plaintiffs carry is exacerbated by a lack of established rules on burden shifting and the general conservancy of Chinese judges when making inferences. There is no discovery in civil proceedings and oral evidence, in practice, is very rarely accepted or carries much weight. Judges also lack effective contempt powers. These rules make it extremely difficult to prove that a patent was infringed or a trade secret was misappropriated.

As a result, legal practitioners in China advise businesses to focus on preventative and contractual measures to manage IP risk when outsourcing technology to China. These include registering IP rights, finding the right partners or SPs, performing IP due diligence, smart contracting, designing and executing compliance programs, imposing document disclosure obligations, adapting and implementing IP protection policies and procedures, and training and reminding managers and employees about confidentiality and IP rights and the infringement of them.

IP transfer and minimising transfer risk China’s rules on cross-border technology transfer have become more liberalised over the years but there remain some important rules to consider. Although most technology can be transferred into and out of China without restriction, certain types of technology remain restricted or prohibited and cross-border technology transfer contracts need to be registered.

In practice, a major issue in IP transfer agreements is the improvements and the ownership of them. Under the rules, a licencee cannot be prevented from making and using improvements to the transferred technology and owns the improvements it makes.

Improvement licence-backs must be reciprocal or in exchange for inkind or monetary consideration. In addition, basic IP warranties and 74 • GBM • March 2011

indemnity obligations remain mandatory for cross-border technology transfers.

While the rules have become more liberalised, it is obvious that they were not directed to outsourcing arrangements where technology is made available solely for the purpose of enabling the SP to provide the outsourcing services. Adapting existing contracts with tailored provisions is essential to properly address the ownership of improvements, narrow the broad implications of the basic IP warranties and indemnity obligations, and limit the transferor’s liability.

Managing IP created by employees or SPs New IP rights are regularly created by SPs in the course of providing technology outsourcing services. Under Chinese laws, commissioned inventions or works belong to the commissioned party unless a prior agreement otherwise. It is important that outsourcing contracts contain provisions that address ownership and provide mechanisms for the new IP to be disclosed and properly captured.

To avoid invention rights disputes later on, it is important that SPs are required to conclude employment contracts with employeeinventors before employment commences that provide for invention rights assignment, require payment of reasonable lump-sum awards for service-inventions in-lieu of any exploitation-based awards, and waive certain rights. In practice, typical lump-sum awards for large companies can be 200-400% greater than the statutory minimum of RMB3,000 for invention patents and RMB1,000 for utility model and design patents, but providing additional awards for commercialised patents or for patents that are commercially successful vary considerably.

Adapting IP policies, business practices, and mindset While many businesses are aware that China has weaker protections for IP, they often fail to properly take account of this increased IP risk in their contracts and licensing arrangements, policies and procedures, and mindset. Operational convenience and a 'getting the deal done' mentality often lead to IP issues taking a back seat.

Without appropriate top-down attention to IP risk, even the most carefully crafted IP protection policies and procedures fail to achieve their intended effect. Vigilance in protecting IP is essential and must continue after the deal is 'done'. Concentrating ownership of IP risk management at the highest levels is crucial to effective IP risk management.

Conclusion Managing IP risk when offshoring technology to China may be burdensome, but failing to do so effectively is something technology dependent businesses offshoring technology to China cannot afford. By properly understanding IP risk, the rules of the game, and adjusting policies, practices and attitudes, your business can effectively manage IP risk and reap the benefits of offshoring technology to China.

Hogan Lovells International LLP Horace Lam Partner Tel: +86 10 6582 9488 Fax: +86 10 6582 9499 horace.lam@hoganlovells.com David Chen Associate Tel: +86 10 6582 9488 Fax: +86 10 6582 9499 david.chen@hoganlovells.com www.hoganlovells.com

SWEDEN

Outsourcing Trends in Sweden and the Nordics Bird & Bird LLP has offices in Beijing, Bratislava, Brussels, Budapest, Dusseldorf, Frankfurt, Helsinki, Hong Kong, London, Lyon, Madrid, Milan, Munich, Paris, Prague, Rome, Shanghai, Singapore, Stockholm, The Hague, Warsaw.

Since they became mainstream practices in the late 1980s and early 1990s, IT and Business Process Outsourcing has continued to grow as a means of cost saving and business streamlining in Sweden and the Nordics. Sweden, much like the UK, is a relatively mature market when it comes to outsourcing, with many companies entering into second or even third generation outsourcing processes.

With this experience has come an increased awareness of the issues which commonly arise in the process of tendering, procurement, negotiation and implementation – and of the potential problems as well.

Certain outsourcing trends have emerged over the last few years in Sweden and farther afield, which continue to affect the nature and negotiations of outsourcing projects locally, including the increased prevalence of multisourcing, offshoring and nearshoring (considered below). The way in which businesses have gone about the process of outsourcing in Sweden has also been significantly refined.

Increasingly, dedicated management teams focus on sourcing specific parts of their operations which are not part of their core businesses, rather than outsourcing larger branches or divisions.

Set out below are some of the key trends and tendencies which Bird & Bird has seen as a regular advisor on the procurement or provision of such services.

1. Experience in the Marketplace. The Swedish outsourcing market, both in the public and private sectors, and particularly in industries such as ICT, is comparatively developed and mature.

Parties are therefore increasingly aware of the potential pitfalls in an outsourcing transaction, from difficulties in transition and implementation and relationship management, to lack of sufficient transfer of knowledge between the parties. A critical example is the often inadequate transfer of data concerning the customer’s business and technical requirements to a potential supplier. Poorly conceived outsourcing transactions can cause as many challenges as they may solve - many businesses have learned to their cost that the implementation and management of outsourced services requires experienced teams and resources to achieve full and effective functionality. Businesses are therefore increasingly attempting to achieve as much flexibility as possible when drafting and implementing their agreements in order to limit their contractual risk.

One way in which they have sought to do this is to limit the duration of agreements, so far as possible, while retaining an option for Edwin Moore-Gillon Bird & Bird LLP Jim Runsten Advokat/Partner Tel: +46 (0)8 506 320 00 Fax:+46 (0) 8 506 320 90 jim.runsten@twobirds.com www.twobirds.com

the customer to call for and require an extension and/or transfer assistance when changing supplier or ultimately insourcing their operations. While first generation outsourcing contracts may be longer in duration due to more complicated transitions and transformations required, a standard term for a second or third generation outsource is now commonly three years.

2. Multisourcing. Another way to try to achieve flexibility, which has become an increasingly prevalent trend in recent years, is the development of multisourcing. When looking to pursue a multisourcing strategy, it is important to focus on the integration issues that arise from having multiple vendors interacting with your business. More and more customers are looking to deal with these challenges by implementing supplier cooperation agreements which force the suppliers to work together for the benefit of the ultimate customer. Appointment of a dedicated business management team is often crucial to co-ordinate these services and manage increased levels of information.

3. Off-shoring. This has also been a major trend in Sweden, with many international service providers (such as Indian companies) increasingly doing business here. However, when Swedish companies choose to outsource their own business overseas, they will often require a Swedish counterparty in the contract, which will then use the offshore business entity as a sub-contractor.

4. Near-shoring. A further and perhaps more localised trend we have recently observed in Sweden and the Nordics, is an increase in the numbers of near-shorings (outsourcing in a relatively proximate geographic area), for example to the Baltic or the CEE regions.

4. Cultural clashes and disputes when negotiating. Such issues in outsourcing agreements can also arise, often between large Swedish companies outsourcing parts of their operations and large American service providers trying to obtain the contracts. Outsourcing in Sweden, as in many other countries, is a buyer’s market, where the customer is used to dictating the terms. As a service provider, despite the fact that you may be a large global company, you may still be a small player on the Nordic outsourcing market.

Outsourcing contracts are most commonly drafted on terms dictated by the customer, often resulting in biased and one-sided terms and conditions. While this might appear positive for the customer in the short term, our view at Bird & Bird is that businesses often find that such contracts do not have the most constructive results in the long run. Time and time again, companies have discovered, too late, that it is better to try to find a sound balance between the interests of the parties to the contract. This is particularly the case from the perspective of a relationship maintenance/contract management perspective (something which is increasingly reflected in governance schedules of an outsourcing agreement). While cutting costs may be the key driver in outsourcing, and the purpose of contractual negotiations is naturally to obtain the best result for your client/ business, that aim is not always best achieved when the final draft of the contract appears to benefit just one party.

5. Final general points - governing law and language, and supplier flexibility on limitation. It is worth noting that the vast majority of outsourcing contracts in Sweden will be drafted in English, but will be governed by the law of one of the Nordic jurisdictions, most typically Swedish. Finally, we have increasingly seen suppliers who are willing to accept certain potential liability under a contract for a direct loss of profits and loss of revenue when negotiating outsourcing agreements. This is a trend we have observed in both Sweden and the UK, where the only real remedy for a contractual breach which results in a loss of business to a customer, is the loss of profit or a revenue claim.

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UNepfi

A trading world

by Paul Clements-Hunt, head, UNEP Finance Initiative

The world is entering a period of fundamental change for finance and investment, as economic power in the global economy is rebalanced, with much greater prominence for emerging economies such as the BRICs. The prospect of fundamental demographic changes in the years ahead also raises serious questions about how and where concentrated pools of capital captured in the developed economies savings structures will be invested in coming years. Equally, the extension of financial services to those 2.8 billion people “with discretionary income who are not part of the formal financial system” (‘Global capital markets: Entering a new era’ McKinsey Global Institute, September 2009), as well as the evolution of financial services for those at the base of the pyramid (‘The Fortune at the Bottom of the Pyramid’ CK Prahalad, University of Michigan, 2002/2005), is also a critical challenge.

The G20’s stated goal in April and June 2010 of a stable, sustainable, and resilient global financial system, and the fundamental economic, social and environmental roles of the investment chain and processes of financial intermediation within that system, will also greatly influence the speed and ability to transition to a low carbon, resource efficient economy. The financial crisis of 2007-2008 saw worldwide financial assets fall

by US$16 trillion to US$178 trillion in 2008 from their peak of US$ 194 trillion in 2007. The crash and subsequent severe global recession destroyed US$28.8 trillion in global wealth captured in equity and real estate values by mid 2009 (‘Global capital markets: Entering a new era’ McKinsey Global Institute, September 2009).

During one week in October 2008, it is estimated that some 20% of the “value of global retirement assets” were “wiped out” (‘Market Forces’ Financial Times, 22/23 May 2010). These value destroying financial and economic crises have come with greater intensity 76 • GBM • March 2011

and higher frequency since the ‘Black Monday’ stock market crash of 1987 when the Dow Jones Industrial Average in the US lost more than 22% in a day (‘Exorcising Ghosts of Octobers Past’ Wall Street Journal 15 October 2007). Such events, with serious systemic implications, raise a fundamental question of whether the current financial system is ‘fit for purpose’ to deliver sustainable development during the 21st Century and, if not, what such a system should look like.

Importantly, new and complex questions about how future financial instability might be triggered and compounded by the myriad “slow failures or creeping risks”, such as resource scarcity, climate change, threats to our biodiversity and ecosystems, the demographics of ageing populations, and the impact of chronic diseases have not been adequately explored by financial policymakers or the finance and investment sectors (‘Global Risks 2010: A Global Risk Network Report’ executive summary, World Economic Forum, January 2010). Such an exploration of financial stability and long-term systemic risks is only now just starting (‘Financial stability & systemic risk: Lenses and clocks’ UNEP Finance Initiative and IISD July 2010).

Slowly, the very distinct worlds of finance and environmental economics are grinding their ways closer and closer together.

For example, one might question how sustainability and high frequency trading on the world’s equity markets are connected.

On the face of it, the lofty academic realms populated by economists focused on externalities, resource scarcity and ‘the polluter pays principle’ and those of the proprietary trading desks of large investment banks or the ‘shadow pools’ of capital controlled by secretive hedge fund stars, remain poles apart.

And, yet, as every year passes, it becomes clearer that through globalisation, heightened connectivity and the ability to employ super computing power to agglomerate and assess data and information ‘we exist in a trading world’. The ability to make successful trading and investment decisions is directly correlated with an ability to slice and dice information from anywhere in the world and, in doing so, to understand where assets - assets of any kind - are mispriced. Once this knowledge is to hand the best of financial traders can then execute highly leveraged trades to make a ‘killing’. And volatility is the smart trader’s secret darling.

As markets for commodities, foreign exchange, sovereign debt and many other forms of assets fluctuate, so the fast, nimble, all seeing,

all hearing trader - as distinct from the lumbering electronic herd - plays uncertainty to his advantage. A world of resource scarcity, global climate change, ecosystems destruction, and the potential of human rights issues to erupt along industry value chains, is a world of uncertainty.

In what other ways are high finance, investment, trading and financial sector policy-making associated with the sustainability agenda? This is a question that UNEP Finance Initiative (FI), the oldest and largest partnership between the UN and 200 banks, insurers and investors, will ask at a global roundtable that convenes in Washington DC on 19-20 October 2011. The event is UNEP FI’s latest meeting that has spanned the globe from Frankfurt, to Rio de Janeiro, Tokyo, New York, Melbourne and Cape Town. This coming autumn in the US, the UNEP FI conference under the umbrella theme ‘Tipping point: Sustained stability in the next economy’ will explore these complex issues by bringing 600 financiers, policy-makers and civil society representatives together.

One obvious focus of the roundtable will be how the forensic analysis of the calamitous 2008 financial meltdown and economic recession relates to the sustainable finance and responsible investment agenda. UNEP FI’s forthcoming report ‘Financial stability & systemic risk: Lenses & clocks’ will be released at the Washington event and will probe these exact issues.

To address the question, the 23 April 2010 Communiqué from G20 Finance Ministers is a good starting point as incorporated within the statement is: “The G20 Framework for Strong, Sustainable and Balanced Growth”. As part of this framework: “The objectives of strong, sustainable and balanced growth are closely related and need to be pursued in a way that is mutually reinforcing.”

Supporting this objective, the framework becomes more explicit saying that sustainable growth, among others, should be based on “sustainable public finances and price and financial stability … and consistent with social and environmental policy goals”.

The G20 statement is a strong anchor point for the fact that the emergent thinking and practises of sustainable finance and investment are inextricably connected with the high level financial policy-making that seeks a more stable and resilient global financial and economic system.

It’s worth dwelling for a moment on the implications of the financial crises for sustainable finance and vice versa. In the period since August 2007, when the first rumblings of the coming global financial crisis were heard on Main Street, the very model of modern financial services has been questioned. Financial policy-makers have called for “radically changed regulations and supervisory approaches” (The City Banquet - speech by Lord Adair Turner, 22 September, 2009) and one of the world’s most senior bankers has asserted that certain complex financial products were “of no real use to humanity” (Banking in the Process of Change Conference - speech by Sir Stephen Green, 9 September 2009).

In the late spring of 2010, the sector was warned that post crisis “private players will be held accountable to new and stricter standards of economic integrity and prudent management” (9th Munich Economic Summit, keynote speech - Jean-Claude Trichet, 29 April 2010). There have been numerous calls for a root and branch re-assessment of the way in which this powerful sector - more globalised than any other - contributes to economies and society.

responsibility, improved governance, legitimacy, financial inclusion and equity are repeated internationally and in different jurisdictions.

Ideas presented for the overhaul of our financial markets cover both institutional reform to broader functional reform. Some observers have argued that a change in our regulatory philosophy from “horizontal” to “vertical” regulation is needed to strengthen the whole chain that governs the financial system (‘Towards an accountable capitalism’ Private Sector Opinion, Issue 13, GCGF). Such a change, they contend, would yield a system appropriate for the needs of interconnected financial markets in an age of globalisation. Others stress the critical need for greater competition and diversity across the financial markets notably with an increased emphasis on institutions with clear cooperative, mutual, social and environmental missions to balance the dominance of ‘too big to fail’ financial institutions. The concept of ‘long finance’, which poses the question of ‘when would we know our financial system is working?’ is also gathering support.

The intense period of analysis by many different bodies worldwide has highlighted the fact that while many actors along the investment and financial intermediation chains were acting rationally and legally in their own self interest that the “ collision of all these self interests brought the system to its knees” (‘Towards an accountable capitalism’ Private Sector Opinion, Issue 13, GCGF). Questions over the ethical, governance and legal aspects of decisions taken by individual executives and institutions continue to be raised.

There has also been a widespread recognition of the systemic nature of the failure that saw a global financial crisis turn into a severe economic downturn for many major economies. The role and effectiveness of lawmakers, the financial policy community, supervisory bodies and regulators, both internationally and nationally, pre- and post-crisis have come under close examination. The president of the European Central Bank acknowledged in late April 2010 that “the vast expansion of the financial sector would not have been possible without supportive macroeconomic conditions and inadequate prudential regulation” (Op cit Trichet, President ECB, 29 April 2010.). Various commentators, examining many different aspects of the financial system, have repeatedly called for: a thorough rethink of the overall governance of our financial system and how the architecture of the system interrelates; finance to revisit its basic role in order to more effectively serve its primary social and economic functions; and, a new vision where a re-engineered financial system builds lasting economic, social and environmental value.

Importantly, a re-engineered financial system needs to be one capable of delivering the new, low carbon, resource efficient and inclusive markets and economies that an increasing number of governments and businesses have committed to and which, in turn, are recognised as the type of structures upon which future economic, social and environmental stability can be based.

For the global financial policy-making and accounting communities, given the fundamental and wide ranging nature of possible changes post the crisis, a quote from former UK Prime Minister Tony Blair’s speech to the Labour Party Conference (2 October 2001) captures the current period: “The Kaleidoscope has been shaken. The pieces are in flux. Soon they will settle again. Before they do, let us re-order this world around us.”

After two years-plus of almost continual analysis of the causes of the financial crisis, it is clear that misaligned incentives, conflicts of interest, a predominance of short-termism, failures of both accountability and responsibility and, in some cases, fiduciary duty, have occurred at many different points along the investment chain and throughout the processes of financial intermediation.

Across the various market-reform processes the themes of transparency, accountability,

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You are cordially invited to REGISTER for the UNEP FI 2011 Global Round Table, which is being held from 19-20 October 2011 at the Ronald Reagan Building and International Trade Center in Washington, DC. The event will explore the theme of: "Sustained Stability in the Next Economy”

The United Nations Environment Programme Finance Initiative (UNEP FI) Global Roundtable is the largest global conference exploring sustainable finance and responsible investment.

More than 600 bankers, insurers, investors, joined by government and civil society participants, will gather in Washington to discuss the latest global and regional developments, as well as to cast a spotlight on what the sustainable development agenda means for the world’s finance, investment and insurance sectors.

Building on previous successes in Cape Town, Melbourne, New York, Tokyo, Rio de Janeiro and Frankfurt, UNEP FI now brings this agendasetting global event, coming just seven months ahead of the landmark United Nations Rio+20 Earth Summit scheduled for May 2012 in Rio de Janeiro, Brazil.

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. REGISTER now to set the agenda for action on environmental, social and governance (ESG) issues for the financial services and investment sector.

Also, be part of the effort to crystallise the global financial services message that will be taken at the historic follow-up to the 1992 Earth Summit in Brazil.

Venue: Ronald Reagan Building and International Trade Center, Washington, DC. Date: 19-20 October 2011 Registration: Click here to register Website: http://www.unepfi.org/events/2011/roundtable/index.html

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March 2011 • GBM • 79

aGriculture

Agriculture Price volatility and food crises

By Jacques Diouf, Director-General of the Food and Agriculture Organization of the United Nations (FAO)

Must history always repeat itself? We are indeed on the verge of what could turn out to be another major food crisis. The FAO Food Price Index at the end of 2010 returned to its highest level. Drought in Russia and the export restrictions adopted by the government, together with lower crop harvests than expected, first in the United States and Europe, then in Australia and Argentina, have triggered a process of soaring agricultural commodity prices on international markets.

Admittedly, the present situation is different from that of 2007-2008, although recent climatic events may significantly reduce agricultural production next season. The hike in prices concerns sugar and oilseeds in particular, more than grains which account for 46 percent of calorie intake globally.

Cereal stocks amounted to 428 million tonnes in 2007/08 but stand currently at 525 million tonnes. However, they are being seriously drawn down in order to meet demand. On another front, oil prices are at around 90 dollars a barrel, instead of 140 dollars.

No doubt higher prices and volatility will continue in the next years if we fail to tackle the structural causes of imbalances in the international agricultural system.

We continue to react to circumstances and thus to engage in crisis management. The underlying problems were identified in 1996 and 2002 at the FAO World Food Summits.

On both occasions, the attention of the highest authorities of the world was drawn to the failure to deliver on commitments.

If current trends persisted, the goals set by the world leaders of reducing by half the number of hungry people on the planet by 2015 would only be achieved in 2150.

There has been no decisive change in policy since 1996, despite the warnings by the Global Information and Early Warning System of FAO and those issued through the media. Yet, today there are still close to one billion people who are hungry.

We must therefore forcefully remind everyone the conditions needed for an adequate supply of food for a population that is constantly growing and that, in the next forty years, will require a 70 percent increase in agricultural production worldwide and a 100 percent increase in the developing countries.

First is the issue of investment: the share of agriculture in official development assistance (ODA) dropped from 19 percent in 1980 to 3 percent in 2006, and now stands at around 5 percent – it should amount to

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44 billion dollars per year and return to its initial level that helped to avert famine in Asia and Latin America in the 1970s; the budgetary expenditure of low-income fooddeficit countries on agriculture represent about 5 percent, when this should be at least 10 percent; finally, domestic and foreign private investments of around 140 billion dollars per year should amount to 200 billion dollars. These figures are to be compared to global military expenditure of 1 500 billion dollars per year.

Then there is the issue of international trade in agricultural commodities which is neither free nor fair. The OECD countries protect their agriculture with a total support estimate of 365 billion dollars per year, and the subsidies and tariff protection in favour of biofuels divert some 120 million tonnes of cereals from human consumption to the transport sector. Further, unilateral sanitary and phytosanitary measures and technical barriers to trade are hampering exports, particularly from the developing countries.

Finally, there is the subject of speculation that is exacerbated by the measures of liberalization of agricultural futures markets in a context of economic and financial crisis.

These new conditions have served to convert hedging instruments into speculative financial products replacing other less profitable forms of investment.

The solution to the problem of hunger and food insecurity in the world therefore requires an effective coordination of decisions on investment, international agricultural trade and financial markets.

In an uncertain climatic context marked by floods and droughts, we need to be in a position to finance small water control works, local storage facilities and rural roads, as well as fishing ports and slaughterhouses, etc. Only then will it be possible to secure food production and enhance the productivity and competitiveness of small farmers, thus lowering consumer prices and increasing the income of rural populations who make up 70 percent of the world’s poor. We

must also reach a consensus on the very lengthy negotiations of the World Trade Organization (WTO) and put an end to the market distortions and restrictive trade practices that are aggravating the imbalances between supply and demand. Finally, there is a pressing need for new measures of transparency and regulation to deal with speculation on agricultural commodity futures markets.

Implementation of such policies at the global level requires the respect of the commitments made by the developed countries, notably at the G8 Summits of Gleneagles and L’Aquila, as well as at the G20 Summit in Pittsburgh.

Developing countries, for their part, must increase their national budget allocations to agriculture. And private foreign direct investment needs to be made in conditions that will ensure in particular, thanks to an international code of conduct, an equitable sharing of benefits among the different stakeholders,.

Crisis management is essential and a good thing, but prevention is better. Without longterm structural decisions and the necessary political will and financial resources for their implementation, food insecurity will persist with a succession of crises affecting most seriously the poorest populations. This will generate political instability in countries and threaten world peace and security.

The speeches and promises made at major international meetings, if not acted upon responsibly, would only fuel a growing sense of frustration and revolt. The time has come to adopt and implement policies that will enable all farmers of the world, in developing and developed countries alike, to earn a decent income through mechanisms that do not create market distortions. These men, women and youths must be allowed to exercise their profession under conditions of dignity so we can feed a planet that will grow from 6.9 billion inhabitants at present to 9.1 billion in 2050.

Switzerland Contact: Dr Karola Krell Zbinden, Matthias Städeli Firm Name: Rentsch & Partner Contact Person: Dr Karola Krell Zbinden, Matthias Städeli Position: Attorneys-at-Law Tel: 0041 44 225 7070 Fax: 0041 44 225 7080 krell@copyright.ch; Staedeli@copyright.ch www.rentschpartner.ch; www.industriallaw.ch

Rentsch & Partner is a law firm and patent attorney’s office in the centre of Zurich, preferentially working in the fields of trademark, patent, copyright and advertising. Rentsch & Partner’s specialists have also developed their consulting services in industrial law since 2007. In this field, Rentsch & Partner consults producers and retailers of foods and feeds, cosmetics, and consumer articles in matters such as, authorisations, labelling, establishing of hazard analysis critical control point (HACCP) concepts, crisis management, distributer and supplier agreements, and liability.

Since Switzerland is not an EU member state, it has established its own food law. In principle, only foodstuffs that are described in the specific regulations are authorised in Switzerland. Non-described products have to be authorised by the Federal Office of Public Health. In order to reduce trade barriers with the EU, Switzerland constantly adapts the Swiss Food Law to the European Regulations

and Directives. Since July 2007, products that have been put lawfully on the EU market, are principally marketable in Switzerland as well (‘Swiss Cassis de Dijon’ principle). However, several specifically Swiss provisions persist and need to be respected for successful businesses on the Swiss market. These are, for example, a positive list of health related allegations for food, special requirements for food supplements or the control of packaging inks. Rentsch & Partner advises its clients comprehensively on questions in Swiss Food Law as well as in European Food Law. In Switzerland, the country of origin must be labelled on prepackaged food. Currently, the legal conditions for the indication ‘Made in Switzerland’, as well as the use of other Swiss symbols, like the Swiss cross, are under revision. It can be foreseen that the regulation will turn out to be rather strict in order to prevent abuse and to protect ‘Swiss quality and standards’.

If Swiss Food Law is violated, the responsible person is subject to objections, orders or charges of the cantonal food control. The attorneys-at-law of Rentsch & Partner have and keep good and close contact with the cantonal and federal authorities.

The industrial law team of Rentsch & Partner is composed of attorneys-at-law and patent attorneys. This combination has been proven to be very valuable with regard to the growing importance of science in the food industry, as well as the need to provide sciencebased proofs for special functions of foods. Rentsch & Partner is member of the Food Lawyers Network Worldwide and country representative of the EFFL (European Food and Feed Law Review).

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Deutsche Bank DB Climate Change Advisors

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We all have an investment in fighting climate change.

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cOuntrY prOFile - spain

spain welcome to spain! spain is a key hub in south-west europe, with a population estimated to be just over 47 million and an average population density of just 89.5 inhabitants per km2 - one of the lowest in the eu.

With a surface area of 505,955 km2, Spain is among the 50 largest countries in the world. The largest part of the territory is located on the Iberian Peninsula; the remainder, approximately 12,500 km2, attributed to the Balearic and Canary islands, plus 32 km2 that are accounted for by the cities of Ceuta and Melilla, situated on the coast of Africa. The situation of the Iberian Peninsula in the extreme south west of Europe, only 14kms away from the African continent gives Spain great strategic value, projecting into the Mediterranean on one side and acting as an intersection on the path to Africa and America on the other. Spread over 17 regions (as well as the enclaves of Ceuta and Melilla), Spain is culturally driven and topographically diverse.

The capital city, Madrid, is geographically central and is home to more than three million inhabitants (rising to more than six million including the city outskirts). Barcelona is the second largest city, followed by Valencia, Seville, zaragoza, Malaga and Bilbao.

Castilian (or Spanish) is the official language of Spain but there are also officially recognised languages in the autonomous regions of Catalonia, Galicia, the Basque Country, Valencia and the Balearic Islands (where they speak a particular variety of Catalan).

Spain has been a democracy since 1978, following the death of Francisco Franco. The supreme values of the legal system are the concepts of freedom, justice, equality and political pluralism. The main political parties in Spain include the Partido Popular (People’s Party), Partido Socialista Obrero Español (Spanish Socialist Workers’ Party - PSOE), Izquierda Unida (United Left) and several nationalist parties that have a major influence in everyday political life. The main trade union organisations (recognised by the Spanish Constitution) are the Unión General de Trabajadores (General Union of Workers), the Confederación Sindical de Comisiones Obreras (Trade Union Confederation of Workers’ Committees) and the Unión Sindical Obrera (Workers’ Trade Union). In addition, the Spanish monarchy (including HM the King Juan Carlos, HM the Queen Sofía and the Prince and Princess of Asturias, Felipe and Letizia) continues to enjoy the affection and respect of the Spanish people.

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Spain’s current prime minister, José Luis Rodríguez zapatero, belongs to PSOE and was first elected on 14 March 2004 and re-elected for a second term in 2008. His second victory was seen as the endorsement of the social reforms he put in place during his first term, including the legalisation of gay marriage, fast track divorces and laws to promote gender equality and tackle domestic violence.

After continual growth for more than a decade, owed in part to the housing boom, the crash of real estate in Spain attributed to the repercussions of a global recession led to many unsold homes, and an increasing unemployment rate. Unemployment is currently at 20% and economists are predicting a slow recovery, which has led to dwindling consumer confidence and government support. In 2010, it was reported that over one million homes stood empty in coastal areas and on the periphery of commuter cities. In response, Spanish banks stepped in and are reported to own around €30bn worth of properties.

In order to jumpstart the economy, the government announced a series of measures. In December 2010, the government secured support for the budget and announced pension reform, raising the retirement age from 65 to 67. On 1 February 2011, Spain announced a ‘grand social pact’ between governments, labour unions and businesses to stimulate an overall boost in the economy. Further measures are soon to be announced.

While Spain, like many of its European neighbours has suffered from the global economic crisis, Spain is already a leader in agricultural production, manufacturing, transport infrastructure, financial services, renewable energy and IT development. In addition, Spain’s young breed of entrepreneurs, including architects, designers, filmmakers, chefs and artists, are collectively helping to redefine the nation’s creative output with very positive results. This emerging talent, twinned with the recent sporting successes at the 2010 World Cup in South Africa and Rafa Nadal’s 2010 Wimbledon victory, have helped propel Spain even further into the world’s media, contributing to a shift of thought from the traditional images of Spain to a more diverse and modern reality.

Despite an economical downturn, tourism continues to stimulate growth and Spain maintains its position as one of the world’s favourite holiday destinations and the UK’s favourite holiday destination.

The tourist boom to Spain started in the mid 1950s predominantly due to the recreational assets of the Mediterranean seashore. Throughout the 1960s, the number of tourists rose rapidly and charter tourism became a Spanish phenomenon unmatched anywhere else in Europe.

This newfound tourism income had a significant impact on the Spanish economy and created many new employment opportunities. By 1987, the net tourism income accounted for around 10% of gross domestic product (GDP). Nowadays, Spain’s net tourism income maintains a level of 10% GDP, but the country is now luring visitors through a diverse range of attractions other than the traditional images of sunny beaches and flamenco guitarists.

In 2009, Spain welcomed over 52 million visitors, bringing in €48bn, down 9% and 7% respectively from the previous year. In 2010, Spain maintained the same level of tourism arrivals and in May of the same year renowned Spanish chef Ferran Adrià, of El Bulli fame, was announced as the ‘face’ of Spanish gastronomy by the Spanish Tourist Office. Adrià, who has three Michelin stars, now acts as an ambassador for tourism to Spain, tapping into the gastronomy sector, which accounts for an estimated 5.5 million visitors or an approximate 8% of total visitors (based on those who in 2009 cited ‘gastronomy’ as their main reason for visiting Spain). The agreement has now been extended up until the end of 2013, when Adrià will set up his gastronomic academy located in the Basque Country. This growing gastronomic sector has a significant importance for Spain as it represents a higher average spend ($1,000 per ten days versus $924 per ten days for ‘non gastronomic’ tourists) as well as the exploration of non-typical Spanish destinations and gastro hotspots, such as the Atlantic regions of Galicia, Cantabria, Asturias and the Basque Country.

Despite the growth of specialist tourism sectors, the value of the pound against the euro has in recent years had a big impact on tourism from the UK to Spain, with some important repercussions on traditional tour operation. During 2008 and 2009, the British currency fell to £1-€1.5 on average, almost reaching parity by the end of 2009. This major decline in the value of the pound hit the UK tour operators that had previously negotiated and fixed their prices with prior exchange rates.

and the Christians has made a significant imprint on Spain’s artistic heritage and today art and culture lovers can find wide diversity and inspiration. From the Altamira cave paintings in Northern Spain to the surrealist works of Salvador Dali, Pablo Picasso and Joan Miró, Spain’s art offering is unrivalled.

Beyond canvas, Spain offers a highly skilled array of performance artists, sculptors, architects and film directors. Pedro Almodóvar, Alejandro Amenábar, Jaume Balaguero and Paco Plaza currently make important contributions to Spain’s home-grown film industry and internationally. Spain’s architectural legacy is also renowned. The Guggenheim in Bilbao designed by Frank Gehry has international acclaim, as do many of Gaudi’s works in Barcelona. In addition, young architects such as Francisco Mangado have contributed to a new urban typology offering functional and modern living spaces with clean and innovative design.

Spain continues to upgrade and modernise their art and cultural offering, and for 2011 will welcome the opening of a new Carmen Thyssen museum in Malaga as well as Barcelona’s Museum of Ideas and Inventions (MIBA).

Despite recent challenges, Spain is a country of diversity, tradition and culture that continues to embrace ‘la vida’ (life) in many different ways.

In 2011, Spain’s arms remain open to new and repeat visitors, both for the leisure and business market, to those looking for investment and trade opportunities and for people who have the chance to indulge and discover the Spain that we know and love.

For 2011, Spain will re-visit the UK with their annual ‘A Taste of Spain’ event that will hit London’s Regent Street on 5 June 2011, as well as Canary Wharf, Edinburgh, Leeds and Liverpool from April to July 2011.

The free Spanish extravaganza will showcase many Spanish regions through gastronomy, sports, entertainment and music, while promoting the country and the regions of Spain to one of the most important international markets.

Saludos cordiales!

For more information on Spain, visit www.spain.info

Destinations outside the eurozone benefited and increasingly became more competitive. In summer 2009, Spain assumed a 33.3% share in the UK tour operator market, compared to 35.2% the previous year. Turkey, Egypt and Tunisia saw positive growth being perceived as ‘value for money’ against Spain.

In April 2010, the Icelandic Volcanic Ash cloud led to further uncertainty for the tourist industry and operators and airlines lost millions of pounds. Spain was forced to close 19 of its airports and many Spanish flights were grounded. Nevertheless, Spain’s strategic location and infrastructure allowed them a pivotal position in the midst of the crisis as European transport hub and thousands of stranded passengers passed through Spain to continue their onward journeys via road or sea.

To date in 2011, tourism has continually been at the front of the news agenda spurred by global national disasters such as the Queensland floodings, political instability and protests such as the recent unrest in Tunisia, the ongoing political protests and reform in Egypt and the threat of further reform and therefore instability in the Middle East.

Tour operators to Tunisia and Egypt have been badly struck with many airlines deciding to pull out their capacity for summer 2011. These negative consequences lend opportunity for growth for the Spanish tourism industry, particularly as Spain is a destination viewed as ‘safe’ and politically stable. Already much of the extra capacity created by cancelled services to Egypt has been shifted to Spain, where it is expected there will be a swing back to as the non-eurozones experience crises and people return to their favourite destinations.

Aside from traditional tourism, in the world of art, heritage and culture, Spain continues to make an important contribution. Each ancient civilisation from the Phoenicians and Greeks, to the Moors March 2011 • GBM • 85

Country Profile - spain - Legal Services

AddVANTE Oriol Ripoll Partner Tel: +34 934 158 877 Fax: +34 934 155 777 oripoll@addvante.com www.addvante.com “In AddVANTE, we focus in problem-solving with a multilateral approach” AddVANTE is an internationally oriented professional services firm, with over 20 years experience, provides legal and financial counselling in Spain. Our professionals specialise in different areas of law, tax, M&A, audit, forensic and economic & financial consulting. We favour interdisciplinary as a key principle to increase value and profitability and to ensure successful development of our clients’ projects.

We focus on problem solving with a multilateral approach. Our services adjust to clients’ business reality and their phase in the economic cycle, with the sole purpose of adding maximum value to their decision-making.

AddVANTE is the Spanish member (leader) firm of JHI (www.jhi. com), enabling the firm to draw on the resources of a network of professionals in 70 countries to offer clients excellent support in handling cross-border transactions in its areas of expertise. We not only give advice on how to face the challenges of globalisation, but also provide foreign clients with all the necessary guidance over Spanish regulation on the implementation and development of business.

Our role is to design and implement the right strategy to successfully handle insolvency and business restructuring processes, and to effectively manage crisis situations, insolvency proceedings, and the winding-up of businesses. For example, our firm was recently designated legal administrator to the second largest Spanish real estate agency by turnover and one of the emblematic groups of the Spanish sector of the communication.

We work in several market sectors, in particular renewable energy, and have engaged in various projects of financial restructuring and relaunching of real estate companies. As a result of our advice to energy developers in project finance and legal matters, AddVANTE has contributed more than 1,000 MW (approximately the energy supply for a region the size of Catalonia) to the Spanish market of renewable energy, especially in the areas of photovoltaic and wind energy.

With over 15 years experience advising companies in the energy sector, particularly on renewable energies and energy efficiency, AddVANTE has built up an expert team in this field, providing entities in the sector with advice on the contractual, business and regulatory aspects of all types of transactions.

AddVANTE’s M&A unit provides services to companies, venture capital firms and banks in relation to investment, divestment and company restructuring. We’re involved at every transaction stage, from the negotiation and conclusion of preliminary agreements to the signing of purchase and sale agreements. In the case of mergers, we assist clients with the corporate resolutions and specific procedures necessary to execute the merger.

AddVANTE’s international taxation unit provides advice in all business areas, covering the entire range of regular company activities, on one-off transactions and also tax planning services for business entities with respect to personal and family property.

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Herbert Smith Spain LLP Paseo de la Castellana, 66 28046 Madrid Tel: 91 423 4000 Fax: 91 423 4001 infomadrid@herbertsmith.com www.herbertsmith.com Our contacts in Spain: Álvaro Sainz, country head, corporate partner alvaro.sainz@herbertsmith.com Miguel Riaño, managing partner miguel.riano@herbertsmith.com Herbert Smith is a leading international law firm that meets the needs of our clients for legal services in the principal economies of the world.

Established in London in 1882, we now have more than 1,400 lawyers across a network of offices in Asia, Europe and the Middle East.

Our main clients are leading global and national businesses, many headquartered outside the UK. We have a long-standing reputation for advice on mergers, acquisitions and takeovers, as well as all forms of financing.

The firm enjoys a formidable reputation for its expertise in both domestic and international litigation and arbitration. Its competition, energy and intellectual property practices are also rated in the top tier.

The breadth of the firm’s practice, our technical and commercial expertise and the consistently high quality of our service are all factors cited by our clients when they choose Herbert Smith to advise them on their transactions and projects.

Our team in Spain is made up of more than 50 professionals led by eight partners, who are responsible for designing, co-ordinating and managing the teams best suited to each transaction. The focus of the Spanish office is to provide the highest quality national and cross border legal advice to important local and multinational clients with operations and interests both in Spain and in the rest of the world.

The key areas of practice expertise of Herbert Smith Madrid office are corporate/M&A, energy and infrastructure, dispute resolution, finance, tax, restructuring and insolvency, private equity, employment (EPI), EU and competition, real estate, public law and regulatory, environment and planning, and intellectual property/IT. Recent trends in Spain - reorganisation of savings banks One of the most distinctive features of the Spanish financial system is the existence of cajas de ahorros (savings banks). Generally speaking (and subject to the recent changes referred to below), Spanish savings banks are regionally based, non-profit institutions with a significant political element that have historically been unable to issue shares or any other rights conferring title to their owners.

As a result of these traditional weaknesses, along with other factors (such as their significant exposure to construction and real estate loans granted during the Spanish property boom or their excess capacity due to branch overexpansion), Spanish savings banks have been gravely affected by the credit crunch, to a greater extent than other Spanish financial institutions.

In addition, the core capital requirements of Basel III (which are likely to be increased by the Spanish government) have also had a serious impact.

It was clear from all these factors that a change was essential and that Spanish savings banks needed easier access to funding. The Spanish legislator has addressed this issue by including different capital raising alternatives and modifying existing ones to encourage the entry of private investors.

The first, and probably most conservative, alternative provided by the legislator enables savings banks to issue units (cuotas participativas), attaching voting and economic rights, up to a 50% of their capital.

One step further, the new regulations have also provided Spanish savings banks with two new alternatives to perform their financial activities: indirectly through a conventional bank in which the savings bank would hold a majority stake (above 50%); and, by transforming into a foundation and transferring the entire financial business to a conventional bank in which the savings bank would hold a nonmajority stake (below 50%).

A third alternative would be to set up an ‘institutional protection scheme’ (IPS). IPSs, also called ‘cold mergers’, were introduced in Spain in 2008 as an alternative to proper mergers and to support savings banks without affecting their regional and social nature.

An IPS is a concentration formula that pools the balance sheets of the participant savings banks around a central entity that has full access to the equity capital markets. As the aim of an IPS is to protect the solvency of all of its participants, the commitment to provide mutual support must materialise in the existence of immediately available funds. In turn, each participant savings bank must have a commitment of at least 40% in the IPS. The new regulations have also introduced some corporate governance principles, bearing in mind the need to professionalise the savings banks’ management teams to meet the minimum requirements sought by potential investors.

In summary, the new regulations governing Spanish savings banks have generated an interesting scenario in the Spanish financial market that will generate market and investment opportunities in Spain. Also, Core capital requirements imposed by the Spanish government will likely lead to public offerings of securities issued to the new ‘banks’ into which the savings banks will have to be transformed to comply with those requirements, the question now being whether there will be funds enough for everyone.

Despite their uncommon structure, Spanish savings banks account for a considerable share of the Spanish banking market and have demonstrated a positive impact in terms of efficiency and competitiveness.

Traditionally, savings banks’ most noteworthy weaknesses have been: their reliance on their own profits to build their equity; their inability to issue shares attaching voting or economic rights; and, their corporate governance structure, which has proved inefficient.

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Country Profile - spain - financial services

Invest in Spain The international flow of foreign direct investment (FDI) has reached a transformative moment. Partly as a direct consequence of the international financial and economic crises in companies, and partly because of the increasingly important role played by the emerging BRIC economies (Brazil, Russia, India and China) and the countries of the Persian Gulf, which are no longer solely on the receiving end of FDI but are now actively investing abroad themselves.

The international flow of foreign direct investment (FDI) has reached a transformative moment. Partly as a direct consequence of the international financial and economic crises in companies, and partly because of the increasingly important role played by the emerging BRIC economies (Brazil, Russia, India and China) and the countries of the Persian Gulf, which are no longer solely on the receiving end of FDI but are now actively investing abroad themselves.

We should highlight here that Spain’s economy is in seventh place in the world for incoming FDI (stock). It has become consolidated as one of the most attractive economies in the world for foreign investors.

Specifically, an average of 46,000 million dollars has been received annually over the past four years, which accounts for an annual average of 3.2% of gross domestic product (GDP).

Spain also boasts the presence of a large number of multinational companies, which means robust job creation. The subsidiaries of foreign companies employ nearly 1.5 million workers and account for around 20% of the country’s industrial activity.

11,000 foreign companies committed to Spain At present, around 11,000 foreign companies have set up shop in Spain, 50 of which are companies on the Fortune 100 list. The UK is the largest investor in Spain, with an FDI stock of €49,607m, or 17.6% of the total. The UK is followed by France (14.4%), the US (12.5%), Italy (9.7%) and Germany (8.6%).

Spain as a launch pad for entering other markets Spain is in a strategic position for accessing a potential market of 1,400 million consumers in Europe, Latin America and North Africa.

The Spanish market is one of the largest in Europe, with 47 million consumers with purchasing power above the European average, to which we can add 50 million tourists visiting Spain every year.

As a member of the EU, Spain has direct access to the European Union (500 million people).

Spain acts as a launch pad for doing business in the EU, Africa and especially in Latin America. Spain has signed more double taxation and investment protection treaties than any other country.

The Spanish language is of vital importance when doing business: it is the official language of 22 countries, with more than 450 million Spanish speakers.

Spain has become a strategic location for decision-making. Numerous European and Asian companies (for example, Alston, British Telecom, Toshiba, Huawei, and so on) and Latin American companies (Cemex, Pemex, Itaú, and so on) have located their headquarters in Spain.

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Main investment sectors Invest in Spain has identified strategic sectors, defined as such because of the major technological contribution they make, value added, growth potential, and business opportunities rooted in Spain’s competitive edges over other economies.

At the present time, Spain offers the following strategic sectors for investment: information and communications technologies (ICTs), the environment, water and water treatment, health sciences, biopharma and biotechnology, aeronautics, automotion, infrastructures and logistics, and renewable energy.

Business climate The current international context of economic crisis, fast-moving transformations and greater competition in capturing investment makes it vital for Spain to continually improve its business climate by providing competitive edges in areas of prime importance for the attraction of foreign investment projects.

More than 11,000 foreign companies established in Spain benefit from a favourable business climate. Company taxes and VAT are lower than the European average and tax credits for research and development (R&D) are the second most favourable in the OECD, for large companies and SMEs alike.

Spain also offers a special tax regime for Spanish holding companies (ETVEs), which is one of the best in Europe. And in addition to all the above, Spain is one of the best-connected countries internally and externally, by land, sea and air, as a consequence of its outstanding and highly developed network of communications and infrastructures.

Its labour force is renowned for being highly qualified, flexible and proactive. And what is more, expatriates can take full advantage of the country’s fantastic lifestyle, which undoubtedly contributes to the success of their projects.

&A

Q&A with Iveta Cherneva

Q

Global Business Magazine Interview

Author in Focus: Iveta Cherneva IvetaCherneva@yahoo.com Twitter @IvetaCherneva

Rather than waving the parade flag of ‘sustainability’ and ‘corporate social responsibility’ with CNN cameras pointed that way, I propose that we strictly look at the business case for human rights, or the business case for clean technology. Businesses are money-making competitive entities. They recognize a good business argument when they see one. Beyond that you don’t need to do much convincing.

Editor: Iveta, thank you for accepting our invitation. How long have you been involved in business and sustainability work?

Iveta Cherneva: I started looking at those issues in 2006. It struck me that very often the public and the private were divided by a white chalk line – similar to the one kids draw when they play a game with two teams.

I worked on Capitol Hill for Congressman Delahunt, Chairman of the Sub-committee on International Organizations and Human Rights in the House of Representatives. I then ventured out into an Association involved with private security and military contractors.

Seeing the two sides from within – the legislators, on one hand, and what is considered a very controversial industry, on the other hand –did two things for me really. It made me see and identify where potential bridges between the public and the private can exist, and most importantly, helped me clarify for myself what issues I wanted to champion in that context.

Editor: Exactly what are the bridges between the public and the private sector? We hear a lot of discourse about this nowadays.

IC: Yes, that’s correct. Everything along the lines of corporate social responsibility (CSR), sustainability, environmental-social-governance (ESG) factors, public private partnerships, businesses’ contribution to the community and cause marketing is very much in vogue.

These concepts have become as pop and mainstream as Lady Gaga, in fact.

“

“

For this issue GBM decided to invite a rising book writer and practitioner for a chat about the current business and sustainability agenda. Iveta Cherneva’s latest book Trafficking for Begging: Old Game, New Name hit the Amazon charts in January this year where in a week it climbed up to the number 1 spot of human rights trafficking ebook titles. When she is not publishing, Iveta pursues a career in the United Nations. Today we talk with her about business and sustainability, public vs. private values and ways of operating, the UN, and Lady Gaga – and what she has to do with all that.

Editor: Interesting comparison. How so?

IC: In this pop context every business is ‘supposed to’ have a cause they champion. Businesses are supposed to show they care. You must have special events, campaigns and projects. In my view, in many cases that is mere rhetoric.

What I suggest instead, going back to your question about realistic bridges between public and private, is to identify the areas where improving social issues, for example, leads to better business. Rather than waving the parade flag of ‘sustainability’ and ‘corporate social responsibility’ with CNN cameras pointed that way, I propose that we strictly look at the business case for human rights, or the business case for clean technology. Businesses are money-making competitive entities. They recognize a good business argument when they see one. Beyond that you don’t need to do much convincing.

March 2011 • GBM • 89

Q&A with Iveta Cherneva

Editor: Can you give us examples of that? Isn’t it more often than not that the value of public and social issues doesn’t have an exact quantitative business case basis?

IC: Yes and no. Social issues (perhaps by virtue of being social and inherently unquantifiable) are said to have this immeasurable impact often contained in risk analysis and reputational assessment. But let me give you the business case measureable bottom line arguments.

In 2007 I founded and developed the first anti-human trafficking compliance training program for private military contractors (PMCs) under the US Federal Acquisition Regulations. Human trafficking, we thought, was a completely new issue to the operation of private military contractors. Nevertheless, the session was attended by senior executives and legal counsels from the PMC industry. The example given by Sam Macahon, the Vice President of the large logistics company Agility, is still vivid in my memory. Agility is committed to a zero-tolerance policy towards human trafficking.

Labor traffickers usually demand fees from their trafficking victims whom they keep through debt-bondage; or force, coercion, and by withholding their passport. However, traffickers also demand fees from the firm they intend to sell workers to. These are illegal broker fees and neither workers nor businesses in need of labor should be subjected to this kind of illegal practice. By absolutely refusing to work with traffickers, Sam and our friends from Agility were saving their company thousands of dollars each year. An illegal practice affects all those involved. When something is ‘fishy’, businesses are not immune and they suffer as well. Not dealing with traffickers serves to benefit both the worker and the enterprise alike – clearly in financial terms, as well.

Editor: What numbers exactly are we talking about?

IC: The numbers can reach very high proportions. The 2010 report by the Special Representative of the UN Secretary General on human rights and transnational corporations, John Ruggie, identified that one major international company had undergone USD 6,5 billion value erosion over a two-year period as a result of ‘non-technical risks’, this costing the company a double-digit fraction of its annual profits. Non-technical risks include political and human rights factors, community acceptance and other public issues we are discussing here. And USD 6.5 billion is a large number.

Editor: This is only one company, however.

IC: Let me give you a few other examples. The current case by the US Department of Justice against British Petroleum (BP) for alleged damages brought by the oil-spill in the Mexican Gulf serves to show the huge litigation costs that a firm risks by not abiding to laws and rules, which have public interest in their core. Here we are talking billions again. According to some estimates, the number can go as high as USD80 billion if BP is found at fault. A large number of high profile investors are behind BP. When BP loses, they lose too. Alongside litigation costs, another criterion, namely eligibility for government contracts or subsidies, is also a business driver for putting one’s house in order. Especially in the US where a large number of federal contracts are awarded to different private companies, it is important to be able to meet the US Federal Acquisition Regulations. Those include human trafficking compliance policies, for example. It is as simple as that: if you as a business are not able to demonstrate how your company complies with these clauses – be it human rights or environment – under the rules of contracting you simply do not win the bid. Your competitor does.

Editor: How about another example for companies whose core business is not in government contract bids or subsidies?

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IC: In 2006 a large company operating in Mexico discovered that they were losing a lot of money because of poor safety standards.

Workers were easily injured by the machines, or in some cases even killed by the equipment. The company – based on a costbenefit analysis – showed that the costs of people dying and the company having to re-train new employees over and over again were simply too high. They decided to improve safety standards.

Interesting motive, you might say, raising your eyebrow. And you would be right. However, I do believe that the more bottom line cost arguments of this kind we can distill, the closer we are to shifting behavior and reaching what we aim for – a safer and better life.

Amanda McCluskey from the asset management firm Colonial First State made an argument in a recent video that there is a link between safety standards and quality of management. When deciding where to invest, an asset manager has to consider where the money would multiply. No investor wants to see an enterprise or project fail because of poor management and lack of holistic analysis. And all these public issues are a part of that holistic analysis.

The convergence between public interest and bottom line business case is mainly the reason why I decided to call my next book ESG Factors: From PR to the Business Case for Sustainable Finance. I thought that in the pop context of all the CSR rhetoric, there is need to focus on exactly those no non-sense business arguments. I decided to invite some established experts from the finance industry with whom we will distill the business case breaking it down by finance sector, topic and region. I think in the end it is okay if the public and private motives differ as long as the result of the business case brings us a step closer to a win-win situation and a better safer life.

Editor: Final question. How far should business regulation reach?

To what extent should we let the business case incentives for public values compliance crystallize on their own?

IC: If I may paraphrase a famous commercial, business regulation with regard to essential public interest norms should go as far as possible. For everything else, there is Business Case Card.

Editor: Thank you for this, Iveta.

IC: I would like to thank you and wish success to GBM – a magazine, which in my view established itself globally in a matter of months. I look forward to the next GBM issue.

Iveta Cherneva’s latest book Trafficking for Begging: Old Game, New Name is available on Amazon: http://amzn.to/gnCMRg. Visit her Author Page at: http://amzn.to/hGAOL3

&A

Q

cOMpetitiOn law

Competiton law

March 2011 • GBM • 91

cOMpetitiOn law

cOMpetitiOn law USA

Will your deal close?

Antitrust risk in the M&A recovery

By Matteo Bay, Michael Egge and Amanda Reeves members of Latham & Watkins Global Antitrust and Competition practice group

M&A activity is happily on the rise as companies shift from cost cutting and recovery to growth through acquisitions. Slow times and short memories hide, however, the reality that there are more than 100 antitrust enforcement regimes around the world today, most with pre-merger notification requirements that prohibit closing of notified deals until they are either cleared by reviewing regulators or a waiting period ends without a formal challenge to the deal. Those merger control regimes never went away; their workforces are intact, some even grew. They simply lie in wait for strategic deals that combine companies with overlapping or complementary product lines, and hence might raise competitive concerns.

Moreover, the likelihood of having to notify a deal in more than one jurisdiction, and the compounding risk that entails, is higher than ever. Companies looking to close mergers and strategic acquisitions need to prepare for and address antitrust deal risk on a global basis because it does little good to clear a deal in the US but not in Europe or in China.

As we step into a more active transaction environment, it helps to take stock of the current state of merger control, and especially the trends that might inform deal risk. While China, Brazil and other large-economy enforcement regimes will continue to grow in influence over time, the US and EU remain the two most established and influential antitrust enforcement regimes in the world. A quick look shows that each have sharpened their tools over the M&A downturn and suggests an aggressive enforcement environment going forward.

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Merger enforcement in the US Halfway through the Obama administration, the US antitrust agencies - the Federal Trade Commission (FTC) and the Department of Justice (DOJ) - appear to show no signs of slowing down when it comes to merger enforcement. We briefly comment on three trends in US merger enforcement that we expect will continue into the foreseeable future.

First, the agencies continue to view competitive effects evidence as paramount to, if not altogether displacing, the question of market definition in horizontal merger analysis. Nowhere is this trend more apparent than in the agencies’ 2010 revisions to the Horizontal Merger Guidelines, which obliquely concede that the agencies must continue to prove a relevant market, but which emphasise that the agencies need not do so at the outset. The US Court of Appeals for the Eighth Circuit will get its first crack at evaluating the agencies’ approach later this year when it considers the FTC’s appeal in FTC v Lundbeck, Inc (2010 US Dist. LEXIS 95365 (D Minn 31 Aug 2010)). In Lundbeck, the district court rejected the FTC’s challenge to Lundbeck’s acquisition from Abbott Laboratories of the US rights to NeoProfen (a drug used to treat a heart condition in premature babies). The court held that the acquisition did not violate section 7 of the Clayton Act because Lundbeck’s two products at issue were not in the same product market. On appeal, the Eighth Circuit will confront whether the district court’s reliance on market definition as a threshold issue was wrong as a matter of law and, by extension, whether the agencies’ approach in the merger guidelines goes too far.

Second, whichever US antitrust agency reviews a merger continues to have practical consequences because the agencies are subject to different standards when it comes to challenging mergers. By statute, the FTC must establish that “weighing the equities and considering the Commission’s likelihood of success,” a preliminary injunction pending an administrative trial on the merits “would be in the public interest”(15 USC § 53(b)). That standard recently has been interpreted to require merely that a “substantial, serious question” regarding potential competitive harm be raised (FTC v. Whole Foods Market, Inc, 548 F3d 1029 (DC Cir 2008)). In contrast, the DOJ must comply with the more onerous preliminary injunction standard and demonstrate, among other things, a likelihood of success on the merits. In reality, most deal parties walk away once a court issues an injunction against closing, so this difference can have a profound impact on the risk calculus as to whether an agency bothers to sue or not, and hence outcome; since the beginning of 2009, for example, the FTC has sued to enjoin or unwind six mergers, while the DOJ has sued to block just one merger. So long as these procedural and substantive differences remain, there is no reason to expect that these enforcement patterns will change anytime soon, absent congressional intervention.

Third, the US agencies remain committed to seeking relief in conjunction with vertical mergers. The DOJ has been particularly active in this area over the last year, obtaining relief in three vertical mergers; the DOJ has obtained consent decrees in Ticketmaster/LiveNation, GrafTech/Seadrift Coke, and Comcast/NBC Universal. One of the most widely-watched vertical mergers in 2010 was Ticketmaster/LiveNation, which the DOJ cleared after imposing various licensing, divestiture, and behavioural remedies, followed in early 2011 with rather novel remedies apparently intended to stoke online video distribution competition in NBC/Comcast.

Behavioural remedies, in particular, which prevent merged entities from retaliating against competitors and require dealing with new, alternative distribution providers, demonstrate that the DOJ remains intent on applying section 7 aggressively to vertical mergers. Although the agencies had the option of updating the 1984 non-horizontal merger guidelines when they issued the 2010 Horizontal Merger Guidelines, they chose not to do so. For now, then, one can only assume that the DOJ’s interest in this area is a harbinger of things to come.

Merger enforcement in the EU It is more difficult to clearly discern merger enforcement trends in the EU. With 28 merger control regimes at play (the EU level and the 27 member states), the variety of rules and approaches to merger control present a layer of complexity just to determine where a deal gets filed, let alone cleared. For instance, while most jurisdictions follow the principle

that a notifiable transaction must entail a change in control, two of the largest economies, Germany and the UK, may require notification of a non-controlling minority interest below the 25% level. This ‘where to file’ complexity is compounded by complicated rules that allow referral of some or all of a particular deal review between the European Commission (EC) or any of the competent authorities at the member state level.

A notable development at the EU level in 2010 was the appointment of a new Competition Commissioner when Joaquin Almunia replaced Neelie Kroes. Commissioner Almunia is a former Commissioner for Economic and Monetary Affairs, so he is used to the current financial distress agenda. This is an element that has played an important role in several areas of competition law enforcement in Europe (mostly state aid). In the merger control area, perhaps because the effects of the 2008 economic crisis had become less apparent in 2010, Commissioner Almunia has been considerably more conservative about granting acquirers of ailing companies (especially banks) an exception to the standard prohibition against closing a deal until the deal has been formally cleared. He allowed this to occur under his watch only once in 2010 while there were five and six such decisions in 2009 and 2008, respectively, under Commissioner Kroes’ watch.

Moreover, under Commissioner Almunia, the EC is already showing signs of stiff resolve, notwithstanding having substantially fewer notified mergers to review in recent years. On 26 January 2011, the EC blocked the proposed merger between Aegean Airlines and Olympic Air, two Greek airlines, in the first outright prohibition decision under Commissioner Almunia and only the third by the EC in over eight years.

Another interesting practical trend that has emerged through 2010 is the EC staff’s insistence on more demanding economic information from the parties, often at the earliest stages of the notification process, before a merger filing is formally submitted, which adds to both the burden and length of the merger control process. This trend may be explained by a series of EU Court rulings that criticised EC analytical work and lack of economic support. If that is the case, the EC’s demanding approach was vindicated in the July 2010 EC General Court decision on an appeal brought by Aer Lingus against the prohibition decision in the Ryanair/ Aer Lingus case (Case T-411/07, ruling of 6 July 2010, Aer Lingus Group v Commission), where the Court upheld the decision based on a detailed assessment of economic evidence and an analysis prepared by the EC. Buyer and seller beware Be ready - more often than not even antitrust-sensitive strategic deals get done, but, like any challenge, you have to be prepared to identify risks as early in the process as possible, and address them smartly with a coherent merger defence strategy. Today, that strategy has to anticipate that whatever position you take in one jurisdiction will affect what you can or should say or do in another. Enforcers talk to, and rally, one another, and opponents (especially your competitors) will routinely wage an attack wherever your deal is reviewed. So arm yourself with good counsel as early in the process as possible, get a frank assessment of risk worldwide and what it will take to address it, and chart a course that positions your deal for quick approval and close.

Latham & Watkins LLP’s global antitrust & competition practice group offers one of the world’s premier global merger control practices with more than 150 dedicated lawyers located in 15 cities across three continents. Latham’s seamless international platform handles all phases of multi-jurisdictional merger work, including pre-deal counseling, merger notifications, full investigations, and defence of strategic deals through trials and appeals. Latham successfully litigated some of the most complex and challenging antitrust merger cases in the US and Europe, including recent complete defence wins in US v Oracle/ Peoplesoft and FTC v Lundbeck and the reversal on appeal of the EC prohibition decision in Tetra Laval/Sidel. Latham is also one of the few international firms with the diverse footprint across Europe necessary to appropriately deal with all aspects of merger practice at the EU and/or member state level. Latham & Watkins is a full-service international law firm with approximately 2,000 lawyers in 30 offices around the world.

Latham & Watkins currently serves as counsel to Lundbeck in the FTC v Lundbeck litigation and represented LiveNation in the Ticketmaster/ LiveNation merger.

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LW.com

Michael Egge

+1.202.637.2285 michael.egge@lw.com

Amanda Reeves

+1.202.637.2183 amanda.reeves@lw.com

Matteo Bay

+32.2.788.6211 matteo.bay@lw.com

Abu Dhabi Barcelona Beijing Brussels Chicago Doha Dubai Frankfurt Hamburg Hong Kong Houston London Los Angeles Madrid Milan Moscow Munich New Jersey New York Orange County Paris Riyadh* Rome San Diego San Francisco Shanghai Silicon Valley Singapore Tokyo Washington, D.C.

* In association with the Law Office of Mohammed A. Al-Sheikh

Latham & Watkins LLP’s Global Antitrust & Competition Practice Group offers one of the world’s premier global merger control practices with more than 150 dedicated lawyers located in fifteen cities across three continents. Latham’s seamless international platform handles all phases of multi-jurisdictional merger work, including pre-deal counseling, merger notifications, full investigations, and defense of strategic deals through trials and appeals. Latham successfully litigated some of the most complex and challenging antitrust merger cases in the US and Europe, including recent complete defense wins in US v. Oracle/ Peoplesoft and FTC v. Ovation and the reversal on appeal of the EC prohibition decision in Tetra Laval/Sidel. Latham is also one of the few international firms with the diverse footprint across Europe necessary to appropriately deal with all aspects of merger practice at the EU and/or Member State level. Latham & Watkins is a full-service international law firm with approximately 2,000 lawyers in 30 offices around the world.

cOMpetitiOn law

ICELAND

By Helga Melkorka Ottarsdottir, partner, and Halldor Brynjar Halldorsson, associate

LOGOS legal services Helga Melkorka Ottarsdottir Partner Tel: +354 5400300 Fax:+354 5400301 E-Mail: helga@logos.is Web: www.logos.is

As Iceland is a party to the EEA Agreement, Icelandic competition law is broadly in line with the competition rules of the EU. For example, article 10 of the Icelandic Competition Act No 44/2005 (the Act) prohibits any agreements or concerted practices between competitors that have either the objective of or result in competition being disrupted. Article 10 is comparable to article 101 of the Lisbon treaty (previously article 81 of the Rome treaty).

Likewise, article 11 of the Act prohibits an abuse of an undertaking’s dominant position, comparable to article 102 of the Lisbon treaty (previously article 82 of the Rome treaty).

Finally, articles 17 and 17.a-f authorise the Competition Authority to nullify or condition a merger, if it creates or strengthens a dominant position (either sole or joint) or otherwise significantly impedes competition. The test is intended to be comparable to the test provided for under the EU’s Merger Regulation.

The Icelandic Competition Authority has in its decisions repeatedly referred to the judgments of the European Court of Justice (ECJ) and Court of First instance (CFI), the decisions from the EU Commission and the writings of EU scholars. Accordingly, Icelandic Competition Law should in general be interpreted in line with EU Competition Law. The experts at LOGOS legal services have acted as advisers in most of the largest competition law cases in Iceland over recent years. One recent case in particular has been of significant importance for the developments in Icelandic Competition Law. A short summary of the case follows.

Following the well publicised banking crisis that hit Iceland in 2008, and the reduction in value of the currency, many companies have been in difficulties due to significant debts.

During the restructuring of these companies, several large companies have fallen into the ownership of banks and financial institutions.

With its decision no 34/2009, the Competition Authority decided neither to nullify nor condition one such merger, whereas one of the largest banks in Iceland, NBI hf, gained control of Iceland’s second largest telecommunication company, Teymi hf, the subsidiaries of which include Vodafone in Iceland.

Síminn hf, Iceland’s largest telecommunication company, which LOGOS has represented for a long time, believed that the takeover of Teymi

by NBI, combined with a substantial debt write-off, would be detrimental to competition.

LOGOS acted for Síminn in an appeal of the decision to the competition appeals committee.

The Competition Authority argued that it was not authorised to intervene as the merger neither created nor strengthened a dominant position, nor did it significantly impede competition, as that term had been defined in practice, both in Iceland and the EU. Síminn, however, argued that the exceptional circumstances in the Icelandic economy needed to be taken into account. The takeover by banks, combined with substantial debt write-off of certain companies, could place others in a disadvantageous position. This was especially the case as, bearing in mind the oligopolistic market for retail banking in Iceland, conflicts of interests were likely to arise within the banks.

For instance, the bank could be a lender to a competitor of the company it has taken over.

With so many companies burden by debts, banks could, as lender, exercise a large degree of control over them.

In short, the Competition Appeals Committee agreed with Síminn and by its ruling no 18/2009, considered that there were several risks to competition being affected if long-term ownership of companies by banks was not restricted; such risks included the financial strength of the owner and the large potential for conflict of interests. As a result, it annulled the decision of the Competition Authority.

Following the ruling, the Competition Authority adopted a new decision, conditioning the merger. The conditions set included the requirement to ensure the relative independence of Teymi from NBI, that a normal return on investment is requested by NBI, that several information about the operations of Teymi are published and, last but not least, NBI was obliged to sell Teymi within a specified timeframe.

The Appeals Committee’s ruling has had significant effect on merger control in Iceland.

In 2010 alone, the Competition Authority took 13 decisions on the takeovers by the three largest banks of Icelandic companies, placing identical or similar conditions on all of them.

This is only one of the several large competition cases LOGOS’ competition law experts have advised on in recent years. Our clients include many of the largest companies in Iceland, as well as foreign companies needing legal assistance in Iceland. The lawyers at LOGOS dealing with competition law have broad knowledge and experience in dealing with competition law, making the competition law department very strong.

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technOlGY review - sMartphOnes

Technology SMARTPHONES Apple iPhone 4 The Apple iPhone range has been a game changer, and the iPhone 4 has raised the bar even further. The handset is sleek and contemporary with stainless steel edges combined with reinforced glass on both the front and back and certainly gives the impression it is worth the premium price that accompanies the handset.

Smartphones – The Smart Buyer’s Guide Gone are the days when the primary function of a phone is to make a call. These days, it is all about receiving and sending information on the move. The market changes at an exceptional rate, and as Apple to brazenly state, their flagship devices have changed everything, again.

But which one is for you?

Which one handles your emails most effectively or lets you keep stock of your portfolio at a touch of a button?

Which one has a keyboard for drafting that all important email? Which one can multitask between all the above? And crucially, which one will keep going the longest without running out of juice?

Here we take a look at the features of a range of leading Smartphone’s out there on the market at present.

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The screen however, is what really sets this handset apart.

Steve Jobs made no secret of the ‘Retina Display’ whereby there is more detail in their high-res device than the human eye can actually compute. The crispness is fantastic and has to be seen to be appreciated.

The iPhone supports POP3/ IMAP email accounts, Gmail, Yahoo! Mail and the Microsoft Exchange hosted network all at once so you will never be out of touch. There is the option to push these emails to your handset so they appear almost instantly on your handset, or you can choose to scan for new messages from the server at your convenience. Switch the phone onto its side and the qwerty keyboard becomes landscape – more than adequate for typing emails.

The lack of ability to multitask on previous models has been the main flaw when compared to competitor handsets, but the iPhone 4 has stepped up and delivered. It is now perfectly capable of browsing the web while playing music without draining the battery.

Then there is the App Store. They claim there is an app for everything – something that is becoming closer to reality every day.

BlackBerry Torch 9800

HTC EVO 4G

Nokia N8

BlackBerry has long since been held in very high regard for their advanced email capabilities and has therefore been the most compelling handset on the market for remaining connected through both business and personal emails at the touch of a button. The slide out QWERTY keyboard and use of RIM’s secure email technology makes the BlackBerry Torch 9800 a breeze to email with and can be trusted to boot.

The HTC EVO 4G is the latest aggressively named, supercharged phone with Android at the core, and is a major player in the current market. There is not a lot not to like about their latest offering that again makes fantastic use of an incredibly simple user interface.

Nokia have long been a formidable player in the mobile handset market but has come under scrutiny as the industry has developed at considerable pace.

However, having wiped the slate clean by creating a new OS packing in a variety of new technologies, the Nokia N8 has gone a long way to rectifying this.

Couple this simplicity with the clout of the new OS 6 operating system, and the Torch is a very neat device packing plenty of power. The battery life is outstanding and can be relied upon not to die while waiting for an important document. Browse the web, download apps and play music in the confidence that you do not have to carry an emergency charger or spare battery pack in your pocket.

And that is one aspect that has seen a significant improvement in the Torch than previous models – web browsing. The load time of web pages is considerably quicker as well as the auto zoom feature whereby a double tap of the text will enlarge the font while reformatting the page layout. Reading an article on the web is now a pleasure rather tedious and frustrating chore.

Then there is the lost art of actually making calls! The sound quality is crisp and clear as well as having the ability to conference call others in with ease. The speakers are loud and precise, ensuring that no details are lost above any background noise.

Samsung Galaxy S Samsung have packed in plenty new technology in an attempt to rub shoulders with the major market players, couple with a 4-inch screen while remaining relatively light at only 118g.

TouchWiz 3.0 is the user interface overlaid on top of Android that significantly improves the experience of operating the different functions available. Personalised home screens are easy to create so that your favourite apps are immediately displayed.

The screen offers an instant reaction to the lightest of touches and the 1GHz processor rarely offers any delay. Browsing the web on such a large screen makes it remarkably

The vibrant 4.3-inch WVGA 800 x 480 touchscreen dominates proceedings that amplify all visual elements of the handset.

Web pages are large and clear with no lag while watching multimedia and is therefore all the more attractive. The handset comes built in with an 8GB microSD card as well as 512MB of RAM and 1GB ROM that handles a multitude of apps with ease and can accommodate a plethora of multimedia files.

All the major social networks come built in as standard as well as Friend Stream to aggregate all the feeds into once. The open source nature of the Android OS means that there is an ever expanding availability of affordable apps that personalise the device to your specific needs. With Google at the helm, you can expect the usual array of preloaded apps such as Google Maps (with navigation), PDF reader, YouTube player and the ability to use your handset as a 3G/4G router to share the connection with other WiFi clients.

The large display makes typing that bit easier via HTC’s own custom format with auto-correction and word prediction as standard. The EVO 4G supports Microsoft Exchange, Gmail, IMAP4 and POP3 email as expected with the ability to load in ten different accounts (one Exchange, and 9 Gmail/IMAP4/POP3).

Overall, the HTC EVO 4G is a very capable competitor to any other device on the market and the wealth of content available via the open source market broadens its scope even further.

An update of the underlying software system to the Symbian^3 platform has improved the computing performance of the device and is more touch centric which has expanded their touchscreen capabilities while maintaining ample battery life. It is by far and away the fastest and most stable Nokia Smartphone on the market at present.

The platform also supports Microsoft Exchange and can by synced with MS Outlook with ease, as well as supporting the standard email clients such as POP3, IMAP and Gmail. In addition, there is also the capability to edit Office documents on the move.

A great feature of the N8 handset is the HDMI Mini connector that displays all screen content on TV, including music and video. The sound and picture is dependent on the file quality but has so far proved flawless in performance. The market leading on board 12-megapixel camera is an outstanding addition, and these crystal clear images can be displayed straight onto screen via HDMI. The handset is made from a stylish unibody Aluminum shell provide a very solid and well built unit featuring a GorillaGlass screen that gives piece of mind that it can withstand the daily knocks.

easy to read ever the most detailed of pages, with clarity improved through in browser adjustments.

largest battery on the market, it is most likely to last the longest without needing to be plugged in.

Again, access to the Android application market broadens the scope of the phone’s offering through open source apps. Gmail comes as standard, and there is the option to sync with IMAP, POP3 and Exchange accounts.

The usual connectivity options are included, with GPS, WiFi, Bluetooth 2.1 all available.

The OLED screen provides improved longevity from the available charge as there is much less strain on the 1500mAh battery. Being the

Each phone has its very own features that are worthwhile, but the iPhone 4 sets the benchmark if you are willing to pay the premium.

March 2011 • GBM • 97

Deal Directory

PeerTV Plc admission to AIM: Update Further to its admission to AIM at the end of last year (details in an admission document dated 30 December 2011), on 26 January 2011, PeerTV Plc (PeerTV) announced that it had authorised the issue and allotment of a further 888,444 ordinary shares of 0.5p each in the capital of the company. In the 30 December 2010 admission document, it was reported that the company anticipated issuing a further 928,168 shares in respect of additional shares to be issued to CSS Alpha Fund Limited, Libertas Capital Corporate Finance Limited (Libertas) and a number of private investors. At that time, the allotment of shares to private investors was expected to total 499,198 ordinary shares; the final actual total was 459,444 shares at 45p per share, the difference of 39,724 shares arose from subscriptions in which the subscribers failed to submit the funds.

There were two further allotments of shares at par of 104,000 shares to CSS Alpha Fund Limited and 325,000 shares to Libertas as reported in the 30 December 2010 admission document. Application was also made for 888,444 new shares to be admitted to trading

Peer TV admission to trading on AIM Nominated and Broker to the company Libertas Capital

English legal counsel to the company Fladgate

Israeli Law counsel to the company MacLeod Dixon

Reporting accountants to the company Haysmacintyre

on AIM on 1 February 2011.

On 1 February 2010, PeerTV then announced that, as a result of certain technical problems, it had incurred additional costs that would have a material negative impact on the profit margin for H2 2010. To better manage production and outsourcing issues, the board stated that it was evaluating a potential acquisition of an outsourcing manufacturer in which PeerTV would acquire the merger partner with shares. If the transaction were to happen, it would require shareholder approval and could constitute a reverse takeover under AIM Rules.

On 17 February 2001, the board then clarified that the negative impact on profit margin was not limited to increased costs affecting the profitability of the company, but also had a material negative impact on sales in terms of cancelled and delayed orders, only some of which will be recuperated in 2011. As a result, the company expected revenues for 2010 to be around $5.5m and expected to be able to publish audited results for the year ended 31 December 2010 by the end of April 2011.

Finally, on 2 February 2001, PeerTV shares were temporarily suspended from trading on AIM pending publication of a new admission document or an announcement that a reverse takeover is no longer being contemplated by the board.

PeerTV, headquartered in Herzlyia, Israel, develops and markets proprietary technology solutions that enable TV services providers to deliver specific, live, streamed channels and VOD over the Internet for viewing on TV sets.

PeerTV’s core customers comprise TV services providers looking to deliver

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specialised content to customers distributed across the globe. To date, PeerTV has been particularly successful in servicing providers of ‘narrowcasting’ content - niche content with appeal to specific communities of interest. This market encompasses the delivery of ethnic or national content to customers outside of their place of origin.

PeerTV’s ability to deliver a cost effective solution for the delivery of such content, while providing the end customer with a content rich and high quality viewing experience, has been central to its ability to attract business from such content providers.

While the delivery of TV or video content over the Internet brings many advantages to content providers, there are a number of technical and practical challenges facing such providers that impact on the quality of service and control over the content.

The Group’s product strategy has been formulated on delivering solutions that meet the needs of content providers and consumers, in that the PeerTV solutions are quick and simple to implement, costeffective and provide a high quality viewing experience. In order to meet these needs, PeerTV’s product set has been developed such that it can be deployed across the globe over many different Internet network environments.

Cohen Legal Partners acted during the listing of PeerTV Plc on behalf of its wholly owned Israeli subsidiary PeerTV Ltd. David Cohen at Cohen Legal Partners led the deal. “Our firm was responsible for conducting a complete legal due diligence report in relation to PeerTV Ltd, drafting and reviewing various sections of the AIM admission document with an emphasis on the Israeli aspects. We also played a significant role in the verification process of the admission document managed by the NOMAD and English solicitors to the transaction,” David commented.

Also involved in the admission were: Avram Kelman, corporate partner at Fladgate with assistance from corporate solicitor James Wilkinson - Fladgate previously advised PeerTV on a private placings in February and November of 2010, raising approximately £2.5m; Ian Cliffe at Haysmacintyre as reporting accountants to the company; and, Thilo Hoffman at Libertas as nominated adviser and broker to the company. On 7 January 2011, the board of PeerTV also announced the appointment of Rivington Street Corporate Finance as joint broker to the company.

Botswana Diamonds PLC - admission to trading on AIM

On 2 February 2011, the directors of Botswana Diamonds (AIM:BOD) announced the admission of Botswana Diamonds shares to trading on the Alternative Investment Market (AIM) with a closing price of 6.25-pence. Botswana Diamonds emerged from the Lucara Diamonds takeover of African Diamonds (AFD).

Lucara Diamonds only wanted the AK6 diamond discovery, so the final deal was that for every AFD share, shareholders received 0.8 of a Lucara share and one new Botswana Diamonds share.

Botswana Diamonds is focused on advanced stage projects in Botswana where the company holds three exploration licences led by an experienced management team that discovered AK6 diamond mine in Botswana. These licences have known kimberlites containing diamonds.

AK8 and AK9 are between the Orapa and Letlhakane mines and are less than ten kilometres from the AK6 mine, expected to commence production in Q4 of this year.

BK5 is five kilometres from Damtshaa.

PL7/2004 is a prospecting licence in the east of the Orapa region. Botswana Diamonds is also looking at exploration opportunities in Zimbabwe and Cameroon and has $2m in cash to fund exploration through 2011.

The board running Botswana Diamonds is widely experienced in African mining and is responsible for the creation, development and sale of African Diamonds.

They have been joined by Andre Fourie, a registered professional geologist with the South African Council for Natural Scientific Professions, who has 19 years of experience with Anglo American and DeBeers and over 13 years of experience in diamond exploration and mineral resource management.

John Teeling, chairman of Botswana Diamonds, commented: “Botswana is the best diamond address in the world.

[Botswana Diamonds] holds good ground where exploration and drilling has already discovered kimberlites containing diamonds. As we have held these licences for a considerable amount of time, we are exploring options such as bulk sampling AK8/AK9 and core drilling BK5. We see excellent potential, though early stage, in licence PL7/2004 in the east of the Orapa region. A sampling and drilling programme is planned for this year.

“The contacts and experience of the board will also be leveraged to examine opportunities in the emerging diamond markets of Zimbabwe and Cameroon.

“I am delighted to welcome Andre Fourie as technical director. He has a wealth of diamond experience. He will manage the exploration programmes. This is a very good time to be in resources. Diamond demand is rising as are prices. Diamonds are hard to find. We have the team, the expertise and the ground.”

Botswana Diamonds plc is a newly listed diamond exploration and project development company that was incorporated in September 2010 to acquire certain assets and interests, demerged from African Diamonds plc, as part of its acquisition by Lucara Diamond Corp.

The Company holds prospecting rights in Botswana through a wholly owned subsidiary incorporated in Botswana, a 35.42% equity interest in a private Belgian company with exploration interests in the Democratic Republic of Congo and a minority interest in Stellar Diamonds plc.

It is the Company’s intention to pursue and seek to participate in exploration opportunities in other African countries, including Zimbabwe and Cameroon.

(Source: http://www.botswanadiamonds. co.uk/Business.html) involved in the admission were Matthew Robinson and Henrik Persson at finnCap as nominated adviser and broker, and Nick Elwes at College Hill.

The admission document can be found at www.botswanadiamonds.co.uk

March 2011 • GBM • 99

Deal Directory

Frontier IP Group - placing & AIM admission

On 28 January 2011, Frontier IP, which specialises in the commercialisation of university intellectual property, announced details relating to its proposed admission to AIM and associated placing, as well as its intention to seek cancellation of trading in its shares on PLUS.

Frontier IP has conditionally raised £1m (gross) by way of a placing of 2,000,000 new ordinary shares at 50 pence per share. It has also applied for the admission of the Enlarged Share Capital to trading on AIM. The placing is conditional on admission.

Arbuthnot Securities Limited is acting as nominated adviser and broker to Frontier IP in relation to the placing and admission to AIM. At the placing price, Frontier IP’s market capitalisation will be approximately £3.5m. Admission to AIM and dealings in the Enlarged Share Capital were expected to become effective on 31 January 2011.

The last day for dealings in the Company’s shares on PLUS was Friday 28 January 2011.

The Board believes the placing and admission to AIM should assist the Company as it continues its development.

Expected benefits include: enhanced brand and market recognition; increased liquidity; improved funding opportunities; and, greater flexibility in executing possible acquisitions and investment opportunities.

The Company already has two existing long-term relationship agreements with the University of Dundee and Robert Gordon University, Aberdeen. Under the terms of these agreements, Frontier IP has preferential access to spin out opportunities to generate equity and licensing revenue and has established a fledgling portfolio of equity. In addition, in 2009, the Company launched dedicated funds for each university relationship, in line with its strategy to generate revenues from long term venture funds.

Commenting on the placing and admission, Neil Crabb, executive chairman of Frontier IP, said: “We are very pleased to have completed the placing and to have expanded our shareholder list to include a number of new institutional and other investors, including IP Group plc. We have

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ambitions to develop the significant growth opportunities we see for Frontier IP and the move up to AIM is a positive step forward in our plans for the business.”

The following has been extracted from the letter from the chairman of the Company, set out in the Admission Document regarding the background to and reasons for the proposals: “Frontier IP Shares were admitted to trading on PLUS in May 2009 following a reverse takeover

by ARH Leisure Investments Plc. Since the Company’s admission to PLUS, the Directors have continued to develop the business by fostering its relationship with its existing university partners, seeking new commercialisation relationships with a number of additional universities and research institutions, establishing dedicated funds to invest in spin-out opportunities, seeking to establish sector specific IP commercialisation funds and strengthening its management team by the appointment of two new Directors to support the Company’s growth plans.

“The Directors believe that moving the Company’s quotation to AIM, through the cancellation of its existing quotation on PLUS and by way of Admission, will enable the Company to continue its development in the following ways: enhance the status of the Company’s brand and market recognition; assist the Company in raising additional equity capital for the further development of the Company’s business; enable the Company to take advantage of future acquisition and investment opportunities by using its quoted shares as consideration; enable the Company to recruit and retain key personnel more effectively through a suitable incentivisation programme; and enhance liquidity for investors through the ability to buy and sell Ordinary Shares.”

The following has been extracted from the letter from the chairman of the Company, set out in the Admission Document regarding details of the placing and use of proceeds: “Under the terms of the Placing Agreement, Arbuthnot Securities has agreed to use its reasonable endeavours, as agent on behalf of the Company, to procure placees for the Placing Shares at the Placing Price and has conditionally placed the Placing Shares with institutional and other investors.

“The Placing is conditional upon the Placing Agreement becoming unconditional and not being terminated in accordance with its terms, and on Admission. The Placing Agreement contains provisions entitling Arbuthnot Securities to terminate the Placing Agreement at any time prior to Admission in certain circumstances that are customary for an agreement of this nature. If this right is exercised, the Placing will lapse. The Placing has not been underwritten by Arbuthnot Securities.

“Application has been made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the ordinary share capital of the Company following Admission.

“The Company intends to use the net proceeds of the Placing primarily to provide working capital for: resource to support new commercialisation relationships; resource to support complementary advisory roles; and capital commitments to new funds to be launched in the foreseeable future.”

Diploma PLC - acquisition

Diploma has acquired Carsen Medical Inc for a maximum of £16.1m (c$25.5m) Diploma PLC, the international group of businesses supplying specialised technical products and services announced on 21 December 2010 the acquisition of Carsen Medical Inc, a leading distributor of medical devices and related consumables and services to GI Endoscopy suites in hospitals and private clinics across Canada. Carsen Medical Inc operates from a leasehold facility based in Markham, a suburb of Toronto, Ontario. Diploma PLC employs 34 staff.

Carsen Medical Inc is the leading supplier in Canada of automated endoscope reprocessors, disinfectants and enzymatic detergents, which are used in hospitals and private clinics to clean and disinfect endoscopes. A growing proportion of Carsen Medical Inc’s revenue is also derived from the distribution of flexible endoscopes and other related products used in the diagnosis and treatment of gastrointestinal diseases. The majority of Carsen Medical Inc’s products are distributed under long-term exclusive agreements with leading manufacturers of specialised medical equipment.

Carsen Medical Inc supplies products that are complementary to those currently being supplied by the Group’s existing AMT Endoscopy business in Canada.

The addition of Carsen Medical Inc to DCHI, Diploma PLC’s healthcare business in Canada, will provide considerable opportunity for accelerating growth and increasing penetration in the GI Endoscopy market by offering a more complete range of products to existing and new customers.

Prior to acquisition by Diploma PLC, Carsen Medical Inc was owned equally by its management comprising Bill Vella and Paul Heck, both of whom will remain employed by Diploma PLC after acquisition and will work closely with management of AMT to realise the full potential of the DCHI businesses in the GI Endoscopy market.

Carsen Medical Inc’s revenues in the year ended 31 July 2010 were C$13.1m (£8.3m).

Its profit before tax was C$1.1m (£0.7m) after shareholder bonuses, which will not apply after acquisition. Gross assets at 31 July 2010 were C$7.7m (£4.9m). The financial statements of Carsen Medical Inc at 31 July 2010 were audited. At completion, net assets are expected to be approximately C$3.8m (£2.4m), including net debt of approximately C$0.1m (£0.1m).

The initial cash consideration to be paid for the business, which will be met from the Group’s existing cash resources, is C$22.5m (£14.2m), before acquisition costs. This may be subject to minor adjustment based on the net assets at completion. Further deferred consideration up to a maximum of C$3.0m (£1.9m) may be payable depending principally on the operating profit of Carsen Medical Inc in the year ending 30 September 2011. The board of Diploma PLC expects this acquisition to be earnings enhancing for the Group in the 2011 financial year.

services funded by operating, rather than capital budgets.

The Group employs circa 850 employees and its principal operating businesses are located in the UK, Germany, US and Canada.

Over the past five years, the Group has grown adjusted earnings per share at an average of circa 14% per annum through a combination of organic growth and acquisitions. The current market capitalisation is circa £300m.

Bruce Thompson, chief executive of Diploma PLC said: “This acquisition provides an excellent opportunity to build a broader and more substantial business serving the growing GI Endoscopy market across Canada.”

Diploma PLC is an international group of businesses supplying specialised technical products and services to the Life Sciences, Seals and Controls industries. Diploma PLC achieves stable growth and attractive margins from its focus on supplying specialised technical products to markets that value high levels of customer service, technical support and value adding activities. A high proportion of revenues are generated from essential products and

March 2011 • GBM • 101

Deal Directory

BTG PLC: Acquisition of Biocompatibles International plc - offer update

Scheme effective BTG, the specialist pharmaceuticals company, announced on 27 January 2011 that the Court orders had that day been delivered to the Registrar of Companies and the Scheme had therefore become effective.

Biocompatibles made an application to the London Stock Exchange for the cancellation of the admission to trading of Biocompatibles shares on its main market for listed securities and to the UK Listing Authority for the cancellation of the admission of the Biocompatibles shares to the Official List, in each case to be effective from 8am (London time) on 28 January 2011.

Admission of new BTG shares On 28 January 2001, BTG announced, following the Scheme becoming effective in accordance with its terms the day before, that applications had been made to the UK Listing Authority and the London Stock Exchange for 68,723,244 new BTG shares to be admitted to the Official List and to trading on the main market of the London Stock Exchange respectively, in each case to be effective from 8am on 28 January 2011 (admission).

Valid elections for the partial CVN alternative were received in respect of 10,722,465 Biocompatibles shares and accordingly BTG will issue (in aggregate) 10,722,465 contingent value notes. A total of £3,034,920 will be paid in cash to Biocompatibles shareholders who did not elect for the partial CVN alternative.

102 • GBM • March 2011

The new BTG shares were credited to CREST stock accounts at 8am on 28 January 2011. Share certificates for new BTG shares, certificates in respect of the contingent value notes and cheques in respect of the partial cash consideration were expected to be dispatched to Biocompatibles shareholders no later than 10 February 2011.

Following admission, the issued share capital and voting rights of BTG will be as follows. The Company’s issued share capital will consist of 326,720,846 ordinary 10p shares with voting rights attached (one vote per ordinary share). There are no shares held in Treasury. Therefore, the total number of voting rights in the Company upon admission will be 326,720,846.

BTG BTG is an international specialist pharmaceuticals company that derives its revenues from sales of its own products and from royalties from other companies that have licensed products from BTG. BTG has an internal pipeline of products still in development and also a broad pipeline of out-licensed products being developed by its commercial partners.

BTG’s core activities are: sale of its existing products direct in the US; development of products to demonstrate safety and efficacy to gain product approvals and to achieve the desired target product profile; commercialisation of its current development pipeline through out-licensing or self marketing; and,

manufacture of polyclonal antibodies.

BTG employs approximately 290 people principally in London, Wales, Philadelphia, Nashville, Utah and South Australia.

Biocompatibles Biocompatibles is a medical technology company in the field of drug device combination products. Biocompatibles’ business is divided into an oncology products division and a licensing division.

The oncology products division supplies medical devices from facilities in Farnham, UK and Oxford, CT, US. These include bead products and brachytherapy.

Biocompatibles’ distribution partners include AngioDynamics, Terumo and Eisai. Biocompatibles’ licensing division has two components, CellMed and PC Licensing.

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