Global Business Magazine - October 2011

gbm October 2011

global business magazine

THE GLOBAL ECONOMIC STORM Investing For the Shade of

Tomorrow

luxury Brand series safari destinations

international tax

outsourcing roundtaBle

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October 2011 • GBM • 1

a whole new world of fund solutions For innovative fund solutions please contact: Colin Stott Manager, Business Development Tel: + 44 (0) 1624 630660 Mob: + 44 (0) 7624 410660 Email: newbus@ifgfund.com IFG Fund Administration (IOM) Limited is licensed by the Financial Supervision Commission of the Isle of Man. 2 • GBM October 2011 IFG Fund• Administration (IOM) Limited is a member of the IFG Group plc.

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INSIDE This Month:

international tax guide 2011

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outsourcing round taBle

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Business Talk With various tax deadlines looming, our October issue is brimming with international tax guides, taking you on a tour of jurisdictions worldwide. We cover the Dutch Cooperative Association, Australian entities to protect and manage family wealth, investing into debt and real estate in Japan, the UK Foreign Account Tax Compliance Act, tax benefits in Ecuador, Switzerland’s highly advantageous corporate tax reforms and others topics including Ireland, Germany, France and Mexico, among others.

As governments worldwide face new and growing daily demands, our Government & Public Sector Report discusses the future of government and how best to meet these demands. We also cover public bodies and a way to avoid procurement processes, public business in Germany, the Australian PP Market and the rise of third sector organisations.

Outsourcing continues to maintain its prominent position on the agenda, so we tackle the potentials of innovation in future business growth, the avoidance of project pitfalls in Spain, offer a French and a CEE region perspective, and discuss legal risk management when selling outsourcing deals in the UK. We also talk to Miratech’s CEO, voted by CEOs of the other Ukrainian Software engineering companies as ‘the most successful manager in the industry 2010’.

Within the various shifts occurring within the insurance and reinsurance industry, we cover M&A and corporate restructuring regulatory change in Europe, the state of US reinsurance collateral reform, and offer a basic guide to law and regulation in Honduras.

cover story

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Work healthy - managing stress

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success story

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germany & eastern europe drive sustained recruitment groWth

30

editors choice - domes of elounda

34

luxury Brand series - safari destinations 36

Our country focus this issue is Australia, a land of opportunity and profit, and we show why you should ignore it at your peril. We also look at the Australian covered bond regime, trade and investment and protecting and commercialising intellectual property.

technology revieW

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mind Body & Work - pilates

50

countdoWn to euro 2012

56

And as our final destination this issue, we look to Africa and India and profile some of the most incredible Safari Hotels, where you can escape the rat race and take on a whole different kind of animal!

expert forum

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interesting Business

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gbm global business magazine

government and puBlic sector report 64 conferences & events

70

deal directory

72

country profile australia

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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insurance & re-insurance

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October 2011 • GBM • 3

the gloBal economic storm investing for the shade of tomorroW

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the gloBal economic storm Investing For the Shade of Tomorrow It is easy to be swallowed up in the negatives of Global Financial Crisis, but there are positives to be found, and these are the areas that should be built on. There is a need to learn from the negatives, but it is the positives that will haul the world economies out of the Global Financial Crisis. To establish the positives a brief look at the reasons surrounding the crisis will be helpful.

and the effect this had on the banking market was the principal cause of the crisis, but it was rather a catalyst as opposed to a cause.

What caused the Global Financial Crisis?

Trade in the modern economy.

There is no consensus of opinion on this amongst leading economists, but two major theories have been put forward. The first of these suggests that the global imbalance in the economies across the world was the principal cause. Asia, and in particular China, was the cause of a global ‘savings glut’.

However, three or more years on, it remains unclear if excess US demand internally, or excess savings in the rest of the world, can be held responsible for the large current account imbalance between the rest of the world and the US. The second is that poor and inefficient monetary policy was a prime contributor to the crisis. The easy money stance that most economists believe had been present since 1999 is held as being responsible. Global liquidity when measured by M2 to nominal GDP in the US, Western Europe and Japan will support the allegations of easy money.

If easy money exists then a correlation is that interest rates will drop and thus the ‘easy money’ market is created.

This lack of a firm hold over monetary policy cannot stand on its own as a cause for the Global Financial Crisis. The macroeconomic policies reverberated in the area of microeconomic policies where the lowering of the risk levels in areas of financial innovation have lead to unwise risks in hedging, for example. The need to comply with the Basel 1 and Basel 11, and the capital adequacy rules meant that banks were using unregulated off-balance-sheet tools and this led to instability. In the eyes of many the collapse of the sub-prime mortgage market,

A third position is held by Professor Nouriel Roubini of New York University’s Stern School of Business who states that the financial crisis was caused by excess leverage that will have lingering consequences. “It will be an ongoing process of deleveraging as away of reducing debt in the public and private sectors,” said Roubini. “The process of deleveraging would be painful and take a couple of years. It will be a growing process.”

As can be seen, the causes are various, but there are positives that can be drawn.

There has historically been a trend in modern economy that the US and Western Europe took the lead, and that the rest of the world, including Asia, should follow their examples.

As the US was very much a consumer led economy the demand for imports was high, and this benefited the rest of the world, including Asia. However the imbalance in savings will create a different approach.

There has always been a trade-off between savings and consumption, but the Global Financial Crisis has created fresh thinking.

Exports may not have the growth rate of the immediate past as the US and Europe are still in recovery mode, and the US still needs to balance savings and consumption.

Historically it has always been thought that with falling US and European consumption the trade/current account balance in these countries would not assist in the economic growth of the Asian economies, but the crisis has led to a rethinking of these policies. In both the private and public spheres in the US there needs to be an increase in savings levels but does that necessarily link, inter alia, to a drop in consumption levels. That may be the traditional view, but if consumption is at a slower level than GDP then government spending in line with this thinking is inappropriate.

The conventional view has been that if consumption in the US and Europe, in particular Western Europe falls, then the economies outside of these areas that were benefiting from the imports must suffer. The Global Economic Crisis emphasizes the way in which economies are inter-dependent.

Within this dependency is an area known as intra-industry trade and the crisis has created a rise in this area. There is no requirement for economic growth to be a prerequisite for this type of economic trade.

Repositioning of world trade and economy.

The global economic crisis has repositioned the place of the US as the driver of world trade and economic growth, and now there is a broader spread of countries that are contributing to the growth. The growing unemployment in the US, and the lack of movement in the property market, is a clear indication that the US still has to face a recovery situation, and this has opened up opportunities for other economies to expand and strengthen their position. This must be a positive from the Global Economic Crisis, as a world economy that is led by

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the gloBal economic storm investing for the shade of tomorroW

one country, or has one country on which many other countries are dependant, is not a healthy position. The collapse, or the underperforming of one country, will have such a knock on effect as to be a cancer in the world economy.

What is important is how other countries benefit from this decrease in the position of the US economy. It should not be a catalyst for other economies for other countries, including those in Asia, to increase consumption to promote growth. The reverse should be considered to be true if the position of capital, as in economic growth, is considered. The position of the relatively small levels of per capita physical capital within the developing economies indicates that the more effective approach would be to undertake investment growth, as opposed to increases in consumption. This will encourage growth over the longer term.

Position of financial control over banks and financial institutions.

The Global Financial Crisis has meant that numerous governments including the US, UK and Eire, have had to step in and bail banks out of extreme financial difficulties. One may ask if this is a positive, as the support given will undoubtedly mean that the burden of these costs will need to be borne by the taxpayers. However if the Global Economic Crisis has created a need to examine the way in which the banks have positioned themselves in the market, and this leads to a stronger financial and economic base for the future, there can be no doubt this is positive.

Let us take a look at the way in which banks are refocusing and the way in which this will encourage growth in a more stable world economy.

The US stood back from being involved with the banks for as long as they could, as there has always been a non-interventionist policy in the US, but the Global Financial Crisis caused the government to revise this approach. There are those who would see this as not necessarily being positive, but if we take a look at the way in which banks contributed to the economic collapse a tightening of regulations across the market

and government recommendations will aid the economic recovery.

The UK government has laid out plans for the four major banks that encourage them to lend to businesses outside of PLC’s, in a determined approach to add growth to this part of the business world and to stimulate growth on a controlled basis.

High street banks that were not investment banks involved themselves in buying, selling and trading risk. Conversely investment banks, not limiting themselves to buying, selling and trading risk, involved themselves in mortgages etc without the internal systems and management to cope. The split between high street banks and investment banks has been highlighted by the Global Financial Crisis and the UK government is to introduce laws that dictate that the two elements of banking cannot be carried out in one business model; In the US major banks are having their credit ratings reviewed and Moody’s have recently downgraded three banks; This has been done against the supposition that the US government will be reluctant to add to the $45 billion support that they have already given. Whilst any future support may be a matter for future debate, what has been positive is that the government has involved itself in the banking industry in a way that has not happened before. The government, by investing this money in the banks, has positioned itself to have greater input and if this is a move to prevent further bank indiscretions then this must be positive.

Is the Developing World saving the West?

Let’s begin by saying that if there is a greater parity of economies then that must be a positive from the Global Financial Crisis?

The question though is ‘The position of the US as global leader has diminished, but has the position of other countries strengthened?’

At the back end of September 2010, the World Bank admitted that developing countries have ‘come to the rescue’ of the global economy, picking up the slack of the advanced economies which were hurt the worst by the financial crisis.

And so the BWIs developed into an instrument of western power

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Financial Crisis. If the G7 and the G20 are ineffective then BWI will again take effect as it could be said to be tried and trusted.

Joseph Stiglitz in an article in The Guardian, November 6, 2008 said; “We may be at a new ‘Bretton Woods” moment. The old institutions have recognized the need for reform, but they have been moving at glacial speed. They did nothing to prevent the current crisis; and there is concern about their effectiveness in responding to it now that it has hit.” The essence is that BWI brought the world economy together in a depression, and that a recognition that we now need to create a true global economy means a return to the positives of BWI. How do we return to the boom days?

World Bank President Robert Zoellick noted, “The developing world is becoming the driver of the global economy. Led by emerging markets, developing countries now account for half of the global growth and are leading the recovery in world trade.”

In addition to this statement there was acknowledgement that as economic power has shifted, there is an emerging multi-polar world economy. Should the present economic growth trend continue in the developing countries then by 2015 they will have outstripped the developed countries.

If that prediction is correct then there will be less risk of a Global Economic Crisis, as there will no dominant country or continent.

somewhat, and the view of a ‘one size fits all’ approach was adopted which swallowed up any future progress in the developing countries. The policy for the US was the same as France for example.

To quote John Vandaele, Bretton Woods 11:New Lifeline for Ailing Giants, Inter Press Service. October 28. 2008; “From then on the Bretton Woods Institutions (BWIs) were very asymmetrical organizations. The rich countries didn’t need the BWIs any more, but with more than 60 percent of the vote they called the shots in both institutions.

Developing countries really depended upon the BWIs, but didn’t have a lot to say there.

Bretton Woods.

And so the BWIs developed into an instrument of western power.”

The Bretton Woods system of international finance that was created by 44 countries after the Second World War and had a stabilising effect on the post-war global economy. The problem with this Institution was that in the 70s the policies of the BWI were shelved

With the IMF and the World Bank admitting that their policies have not worked the developing countries have been further isolated. The need to return to the principals of BWI has now been acknowledged and this is a positive that has come from the Global

If we look at the boom periods we have experienced, they brought with them wealth and power, so if they do that why criticize the economic policies that created those benefits. Does the Global Financial Crisis mean that we need to revisit those policies?

It is true that these policies are sound in principal, but some minor adjustments are needed according to some economists. Others will argue that this type of approach will lead to capitalism while others will say that government bailouts give market distortion.

Raj Patel in his video ‘The Value of Nothing’ suggests that current markets have a distorted idea of value.

The truth is that the markets need to return to a true sense of value, a better sense of regulation to ensure that stability is at the centre, and these must be allied to a growth of a truly global economy. The boom can return, but in a regulated way, so that no one country dominates the world economy.

Widening of the markets may often be in the public interest but this must never be at the expense of competition. If the blend is correct then the days of the boom can return.

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international tax

international tax The benefits of the use of tax havens whilst shrouded in controversy, are unequivocally legal and undeniably rewarding. But it’s not all private jets and billion pound bank balances, the relocation to a tax haven does have its disadvantages.

Inevitably, the larger OECD members are beginning to clamp down on tax-avoidance, amongst other ways, through the attribution of income from a corporation based in a tax haven, to a taxpayer living within their borders. Several countries including the UK and US implemented the Controlled Foreign Corporate (CFC) legislation, the complex content of which varies from country to country.

The basis of these rules is that a domestic member of a CFC under the control of domestic members should incorporate in such person’s income, said persons share of the CFC’s subject income. The exact rules of this legislation can be very convoluted and each country differs in their understanding.

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Another example of the larger member nations attempting to minimise lost tax revenue is the use of the European Union withholding tax although the name of this legislation is somewhat misleading as the EU itself has no taxation powers. The intention behind the withholding tax is to prevent tax evasion and involves the deduction of tax from interest earned by EU residents on their investments made in other member states. The burden of tax collection falls on the territory in which the funds are held (usually the low-tax territory) which is then returned to the EU country that the individual resides in (usually a high-tax rate OECD member).

The potential saving of moving a company offshore shouldn’t be overlooked and with between 6-8% of global investments (between $5-7trillion) currently held in tax havens such as the British Virgin Islands and the Cayman Islands, there is no doubt that this a major part of the global economy. But it shouldn’t be taken lightly, with the complex laws and varying tax systems in the various low-tax jurisdictions getting the right assistance is of the utmost importance. Each territory has different legislation and different tax rates - both personal and corporate - and with the right advice from an experienced accountant, offshore provinces offer a frequently much-needed relief from the high taxes and lax privacy rules associated with the larger OECD nations.

Similarly, individuals continue to explore offshore options in order to limit tax liability and take advantage of the stringent privacy rules in various territories around the world. From a personal perspective, Monaco has long been the billionaires playground with some of the richest individuals in the world residing in the southern France state including the likes of Topshop owner Sir Phillip Green and Leeds United FC chairman Ken Bates. The small principality levies no income tax on individuals, so the fact that their own natives account for just 16% of the total population comes as no surprise.

The increasing pressure on smaller territories has lead to a decreasing level of privacy and independence amongst the tax havens.

It is likely that the co-operation between the nations will continue to develop which may affect the number of private individuals who relocate to ensure privacy of asset-ownership however with the huge tax savings for both corporate and private clients, tax havens will remain an important part of the global economy.

The impact of the CJEU’s Astra Zeneca case (C-40/09) on the VAT treatment of vouchers in Belgium In the Astra Zeneca case, The Court of Justice of the European Union (CJEU) decided on 29 July 2010 that the provision of retail vouchers by an employer to its employees in exchange of a part of their cash remuneration constitutes a supply of services subject to VAT.

have to pay the VAT to the VAT Authorities;

This judgment could have an important impact in Belgium (refer to the article published in the Revue générale de Fiscalité in May 2011 by E Ceci and E Traversa, ‘L’octroi et l’utilisation de bons d’achat face à la TVA : (r)évolutions récentes et perspectives’), where it has always been considered that the issue and the supply of retail vouchers does not fall within the scope of VAT. Only the use of the retail voucher, ie the exchange of the retail voucher against a good or service, is subject to VAT in Belgium.

The supply of retail voucher by the employer to its employees: this would again be a transaction subject to VAT and VAT would thus have to be paid by the employer to the VAT Authorities;

Unfortunately, the CJEU’s judgment does not provide a clear answer on how to treat in general the issue and the supply of retail vouchers for VAT purposes. However, as the CJEU submitted in its judgment the supply of retail vouchers by an employer to its employees to VAT, their issue and their supply in general should logically also be subject to VAT. Otherwise, two similar transactions would be submitted to different VAT treatments.

The CJEU judgment in the Astra Zeneca case would thus imply a double payment of VAT by the issuer of the retail voucher to the Treasury for the same good or service sold by the issuer in exchange of the retail voucher - first upon issue of the voucher, and second upon the exchange of the voucher for the good or service - while the issuer (retailer) would only have to pay VAT once if he had directly supplied the concerned good or service to the final customer. It may be clear that this double VAT payment would violate some general VAT principles, more specifically the principles of neutrality and transparency.

Application of VAT to the issue and the supply of retail vouchers would, however, result in Belgium in a double payment of VAT by the issuer of the retail voucher (retailer or service provider), as can be illustrated by applying the VAT treatment as described above to the different transactions in the Astra Zeneca case: Issue of retail voucher by a retailer or a service provider to an intermediate party: this transaction would be subject to VAT. Therefore, the retailer would

The supply of retail voucher by the intermediate party to an employer: this supply would also be subject to VAT and the VAT would have to be paid by the intermediate party to the VAT Authorities;

The use of the retail voucher by the employees when purchasing goods or services from the retailer or the service provider: such use would also be a transaction subject to VAT and VAT would have to be paid by the retailer or the service provider to the VAT Authorities.

A solution to avoid this situation could be for the issuer not to pay VAT either at the moment of the issue of the retail voucher or when the retail voucher is used. The first option was chosen by the UK and is the one also apparently adopted by the CJEU in Astra Zeneca. This solution, however, causes two problems: first, two similar transactions are treated differently for VAT purposes; and, second, this solution could result, unlike the situation where VAT is paid twice, in a non-payment of VAT for the issuer. The issuer will indeed receive VAT when he issues the retail voucher, but he can keep this VAT until the retail voucher is used, eg, in his retail outlet. What would happen if the retail voucher were not used? Does it mean that the issuer could keep the VAT? The answer is yes, if we follow the reasoning of the CJEU, considering that the payment of VAT to the VAT Authorities is linked to the use of the retail voucher. This economic advantage to the retailer would, we assume, be considered as unacceptable by the VAT Authorities.

BELGIUM

Guido De Wit Partner, member of the Brussels Bar gdewit@linklaters.com Emanuele Ceci Associate, member of the Brussels Bar emanuele.ceci@linklaters.com Linklaters LLP 1000 Brussels, rue Brederodestraat 13 Tel : (00-32) 02/501.95.34 Fax : (00-32) 02/501.90.58 www.linklaters.com

As indicated, the CJEU’s judgment to submit retail vouchers to VAT would change the former approach of their VAT treatment in Belgium and would have important consequences. Moreover, this judgment could have an impact on products similar to retail vouchers that were also considered as being outside the scope of VAT in Belgium (for instance, luncheon vouchers).

At the moment, the final position of the CJEU regarding VAT treatment of retail vouchers is still uncertain in our opinion: indeed, the CJEU took the position analysed above in a specific case (Astra Zeneca), but in a more recent judgment of the CJEU (case C-270/09 MacDonald Resorts Ltd, 16 December 2010) it seems to support the opposite position, be it that this latter case does not concern vouchers.

In Belgium, the VAT Authorities did not yet take a position in respect of the Astra Zeneca case. This was pointed out in a question to the Belgian Minister of Finance on 12 July 2011 where the Minister was reminded about the urgency to take a clear position regarding the VAT treatment of retail vouchers. The Minister answered by stating that the CJEU took different decisions which do not result in a clear position, and that the VAT Authorities are still analysing the issue before publishing an official position. To be continued certainly…

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international tax

UK

FATCA - a wide-ranging problem

Hogan Lovells International LLP Kevin Ashman (partner, tax) Fiona Bantock (associate, tax) Tel: 0044-20-7296-2165; 0044-20-7296-5369 kevin.ashman@hoganlovells.com fiona.bantock@hoganlovells.com www.hoganlovells.com

Why should we care about FATCA? FATCA, the Foreign Account Tax Compliance Act, was enacted in 2010 with the purpose of trying to combat tax evasion by US persons holding investments in overseas accounts. FATCA will apply to all non-US financial institutions (referred to in the legislation as ‘foreign financial institutions’ or FFIs). The definition of FFI is much wider than might be expected and will catch entities such as banks, investment funds, insurance companies, pension funds and even IFAs acting in a nominee capacity.

FATCA broadly requires all FFIs either to identify and disclose their US account holders or to become subject to a new 30% US withholding tax on both direct and indirect payments of US source interest, dividends and other passive income; and also gross proceeds from the sale of any asset that could give rise to such income (together, referred to as ‘passthru payments’). It is important to note that the fact that the wide definition of passthru payments means that FATCA is relevant not only for FFIs investing directly in the US, but also for FFIs investing in intermediary FFIs, which themselves invest directly or indirectly in the US. For these purposes, it is not necessary that the payments be directly traceable to payments from the US; for example, payments of interest from a UK bank holding both UK and US assets would fall within the scope of FATCA. This means that the scope of entities that may be caught by the FATCA provisions is extremely broad.

How does FATCA work?

The basic mechanism of FATCA is that passthru payments made to an FFI will be subject to FATCA withholding unless the FFI in question has either entered into an agreement with the IRS (referred to as an ‘FFI agreement’) to identify its US accountholders and report them to the IRS (in which case the FFI will be referred to as a participating FFI or PFFI); or alternatively falls within either a “deemed compliant” or “exempt” category (in which case the FFI will be referred to as a DCFFI or exempt FFI). The scope of the deemed compliant and exempt categories is still in the process of being determined, but may cover certain FFIs such as local banks/distributors, publicly traded companies/funds (to the extent the payments relate to their securities/ units), funds restricted to non-US investors and employer-sponsored pension funds. FFIs that do not fall within either category above are referred to as non-participating FFIs or non-PFFIs. Under the terms of an FFI agreement, a PFFI must withhold 30% of passthru payments, where such payments are made to nonPFFIs or accountholders for whom the PFFI has not been able to get information about their status (referred to as recalcitrant accountholders). In order to calculate the extent to which a payment other than direct source US income and sales proceeds is attributable to such amounts, it must be multiplied by an amount broadly equal to the PFFI’s US assets/the PFFI’s total assets (with such amount being referred to as the ‘passthru payment percentage’ or PPP).

What are the problems with FATCA from a legal perspective and what should you be doing about it?

FATCA gives rise to a number of problems from a legal perspective that will not just fly away. Key legal issues include data protection and other privacy law issues (which would arise as a result of any obligation to report information to the US authorities); and legal and contractual restrictions on imposing withholding tax on payments to (or redeeming accounts of) non-PFFIs and recalcitrant accountholders.

In order to get to grips with such issues, FFIs will need to carry out a careful review of their existing contractual documentation to ascertain

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the implications of the FATCA regime for pre-existing accounts; and the amendments necessary to ensure that future documentation takes the new FATCA requirements and procedures into account insofar as permissible under EU and national law. Such review will need to take place alongside and as an intrinsic part of technical and operational implementation projects for FFIs, and will be complicated still further by the fact that the issues will vary, at times materially, from jurisdiction to jurisdiction. Moreover, given that the first draft of the proposed FATCA regulations is only expected to be circulated by the end of the year, legal reviews will need to be responsive to a constantly changing picture.

How can we help you?

With experienced teams in all the world’s major financial and regulatory hubs, including Washington DC, London, Berlin, Brussels, Frankfurt, Paris, Hong Kong, New York, Shanghai, Singapore and Tokyo, Hogan Lovells offers a global perspective on financial regulation that few competitors can match. We have extensive experience advising on multi-jurisdictional legal projects that are similar in scale and complexity to FATCA, including specifically in relation to data protection, banking secrecy, regulatory, sanctions and tax issues, and would be happy to discuss the way in which we would be able to assist your business in becoming FATCA compliant.

GERMANY

Tax on M&A Investments Tax efficient structuring of inbound investments This articles describes two basic tax efficient inbound investment structures. From a German tax perspective, the appropriate inbound investment structure often is driven - among other tax and legal issues, such as financing or management participation - by the tax efficient repatriation of profits. In this respect, the inbound investment structure could either be optimised in respect of the tax efficient repatriation of: exit proceeds from the disposal of the shares in the target; or, ongoing dividends.

The structuring proposals are based on the following fact pattern: a non-German entity (parent) intends to acquire a majority interest in a German corporation (target) through a holding corporation located in Luxembourg (LuxCo) - other EU holding countries such as the Netherlands might also be considered. The target’s profits are subject to 15.825% German corporate income tax and approximately 14% German trade tax.

Capital gains (exit) optimised structure A structure that would aim to minimise the tax burden on capital gains (exit scenario) would, very generally, provide for an acquisition of the target directly through LuxCo. Chart 1

Parent [outside Germany]

Dividends subject withholding Tax of 26.375 %

LuxCo Lux

German Income Tax Act) generally provide for a withholding tax relief, the application of these provisions is subject to the satisfaction of the substance requirements under a specific German anti-treaty shopping provision (sec 50d, para 3, German Income Tax Act). Under this provision, a non-German resident shareholder (foreign entity) may not claim any withholding tax relief, if: sound business or other relevant reasons for the interposition of the foreign entity cannot be established; the foreign entity does not generate more than 10% of its income from an active business activity; and, the foreign entity does not satisfy the minimum substance requirements (such as office space, telephone line, personnel etc).

Generally, a mere holding entity hardly satisfies the requirements for a withholding tax relief. Consequently, dividends distributed by the target would be subject to a definitive German withholding tax of 26.375%, unless further structuring measures provide for sufficient substance at the level of LuxCo. Dividend optimised structure If substantial dividends are expected during the investment phase, the following structure might be more tax efficient: LuxCo would not directly acquire the shares in Chart the 1target but through a German limited Parent partnership (German LP) and the German LP would enters into a profi[outside t andGermany] loss transfer agreement to establish a fiscal unity (Organschaft). To qualify as a group parent in the fiscal unity, the German LP as the top LuxCo Dividends subject tier entity withholding Tax of the fiscal unity would need to Lux of 26.375 % conduct its own commercial business (at least Germany to a relevant extent).

Target

Germany

Target

Ongoing Taxation of Target: 15.825% Corporate Income Tax: approx. 14% Trade Tax

Chart 2 Parent

Chart 2

[outside Germany]

Parent [outside by Germany] The capital gains realised LuxCo in the sale of the shares in the target are exempt LuxCo from both German corporate income tax Lux Germanythe double tax and German trade tax under Withdrawal of cash without convention Germany-Luxembourg. withholding Tax

German

Ongoing Taxation of Target: 15.825% Corporate Income Tax: approx. 14% Trade Tax

Ongoing Taxation of fiscal unity: 15.825% Corporate Income Tax at LuxCo approx. 14% Trade Tax at German LP

This structure, however, is not tax optimised LP with respect to dividends distributed by the target to LuxCo. Generally, such dividends from the targetTarget are subject to an overall Fiscal Unity withholding tax of 26.375%.

Whereas, the double tax convention Germany-Luxembourg as well as the EU Parent-Subsidiary Directive (ie, sec 43b,

LuxCo Lux Germany

Withdrawal of cash without withholding Tax

German LP

Ongoing Taxation of fiscal unity: 15.825% Corporate Income Tax at LuxCo approx. 14% Trade Tax at German LP

Target Fiscal Unity

The participation in the German LP qualifies as permanent establishment of LuxCo in

Latham & Watkins LLP Dr Thomas Fox Tax partner Tel: +49 (0)89 2080 3 8000 thomas.fox@lw.com www.lw.com

Germany, ie, LuxCo is subject to (limited) German tax liability. Due to the fiscal unity, the profits of the target are not taxed at the target’s level but rather at the level of the partners in the German LP with a tax rate of 15.825% (assuming LuxCo qualifies as a corporation for German tax purposes) and subject to German trade tax at the level of the German LP at approximately 14%. As the German LP is transparent for German corporate income tax purposes, LuxCo may withdraw any cash from the German LP free of any German withholding tax (compared to 26.375% in the first structuring proposal above).

However, this tax efficient repatriation of ongoing profits (as compared to the first structure above) comes at the price of a limited tax liability on the capital gains realised in the disposal of the shares in the target by KG: at the level of LuxCo, effectively 5% of such capital gains - being are attributable to the permanent establishment of LuxCo as represented by the German LP - are subject to German corporate income tax (tax rate of 15.825%). Further, effectively 5% of the capital gains are subject to German trade tax at the level of the German LP at approximately 14%. Thus, the overall German tax burden in an exit amounts to approximately 1.5% of the realised capital gains. The final German tax burden on such capital gains may fall short of 1.5% as exit costs are generally deductible from the tax base.

In summary The proper tax structure should be chosen taking into consideration the specific goals of the relevant investor (ie, private equity investor versus strategic investor) and be analysed on a case-by-case basis. Subject to detailed tax planning and structuring, it could also be considered to implement the structuring alternative in a first step and (as the case may be) take further structuring measures to implement structuring alternative once it becomes apparent that the target will distribute dividends in the future.

October 2011 • GBM • 11

international tax

Recent tax developments on French intra-group debt push down transactions In two recent opinions published on 24 January 2011 (BOI 13 L-1-11), the French committee on the abuse of tax law specified the criteria that, from an abuse of law perspective, have to be taken into account when structuring intra-group debt push down transactions in France. These opinions are not binding on the French tax authorities or the French courts but they determine who, between the taxpayer and the French tax authorities, will have the burden of proof before the courts.

In the first case, in the context of an overall restructuring of a US group, bonds redeemable in shares were issued by a French company for €317m and subscribed to by its Danish shareholder (in turn held by the US shareholder). The subscription price of the bonds had been paid by offsetting against a receivable of the same amount, resulting from a distribution of dividends decided at the same time as the bond issuance. The bonds were issued for a period of seven years and were remunerated at Euribor plus 50 basis points. Such interest rate was, however, capped for each financial year to the sum of the results (before tax and deduction of interest under the bonds) of the tax-consolidated group to which the French company belonged.

On the basis of the abuse of law doctrine, the tax authorities challenged the tax deductibility of the interest payments under the bonds, characterising such interest as dividends. The committee confirmed the abuse of law considering that the bonds did not constitute an actual indebtedness of the company given in particular: the absence of actual financial flows generated by the transactions (only an accounting offsetting against a receivable had been undertaken); the absence of any change in the financial situation of the company, especially because, given the mandatory nature of their redemption in shares, the bonds were qualified as equity from both a legal and an accounting standpoint; and, the absence of any change in the shareholding structure of the company.

In the second case, again within a US group and in the context of an overall restructuring, the French subsidiary implemented several share buy-backs. The first share buy-back was financed by a shareholder loan bearing a 4.5% interest rate (granted to the French company by its Luxembourg parent). Then, this shareholder loan was mainly refinanced by a profit participating loan (PPL) (extended by the Luxembourg ‘grandmother’ company)

12 • GBM • October 2011

and partially by the cash reserves of the French company. The PPL, granted for ten years, was remunerated by a fixed interest rate of 1% and a variable part equal to 80% of the consolidated profits of the French company. The amount of the interest was capped at 50% of the consolidated cash flow of the French company and could not exceed 6% per year. Unlike the first case, the committee did not find an abuse of law in this case, taking into account: the effective financial flows between the companies; the improvement of the financial position of the indebted company that had refinanced the shareholder loans through a PPL which is a longer term debt; and, the fact that the transactions resulted in a reduction of the equity of the company, the PPL having the nature of debt. The tax administration accepted the position of the committee.

While each debt push down transaction must be analysed on a case by case basis, there are common criteria that result from the opinions, including: the existence of actual cash flows; the improvement of the financial position of the indebted company that had refinanced its short-term debt with a longer term debt; and, the reduction of the net equity of the company due to the legal and accounting characterisation as debt of the instrument used. The legal and accounting characterisation of the instrument seems to be the determining factor.

It results from the opinions that, in order to avoid the abuse of law, the French companies are encouraged to finance debt push down through debt, which must be ultimately repaid by the company using its own cash reserves, rather than with a debt redeemable in shares, which is generally preferable from a financial standpoint because it does require use of cash.

In addition, where a debt push down is structured using a debt instrument, such transaction may still be criticised by the French tax authorities on the grounds of the abnormal management act theory (under which the French company must act in its own corporate interest). In a recent decision, where a share buy-back by a French company was mainly financed by convertible bonds subscribed by its shareholder, the Administrative Court, upholding the position of the tax authorities, ruled that the transaction constituted an abnormal management act for the subsidiary, disallowing the deduction of interest under the loans that financed the transaction

FRANCE

Evelyne Bagdassarian Partner Baker & McKenzie SCP 1, rue Paul Baudry 75008 Paris, France Tel: + 33 (0) 1 44 17 53 29 Fax: + 33 (0) 1 70 92 53 29 evelyne.bagdassarian@bakermckenzie. com www.bakermckenzie.com

(Cergy-Pontoise Administrative Court, September 3, 2010, no 0811640, SAS Yoplait). It should be noted that this decision is highly criticised in France by the authors, since it constitutes a breach of the freedom that French companies have to choose to finance their subsidiary through debt or equity, such freedom being traditionally accepted under French case law, subject to the general tax deductibility limitations (mainly thin capitalisation rules). Since an appeal is pending before the Appeal Court, it will be interesting to follow the outcome of this case.

In conclusion, the merit of the opinions is to confirm that debt push down transactions may be implemented in France by international groups without being considered as an abuse of law, provided they are properly structured.

The Dutch Cooperative Association in tax planning The Dutch cooperative association (coop) is not a well-known tool in international tax structures. This is not surprising since the coop was introduced in the 19th century with an altogether different purpose in mind.

A coop is an association of members that aims to generate profits or cost savings for its members. This legal entity has historically most frequently been used by farmers.

Rabobank is a bank in the Netherlands that has been set up as a cooperative of farmers, the intention being to facilitate affordable banking for farmers and pass any profits of the bank on to farmers. Coöperatieve Zuivelfabrieken is another example. This is a dairy processing factory that the farmermembers use to process their dairy products rather than process it themselves or be dependent on a third party. The idea originates from a certain scepticism towards capitalism; a cooperative would provide a bulwark against unscrupulous profit seeking industryoutsiders.

The cooperative was never very popular, but was rediscovered a decade ago as a vehicle that can be used in international tax structuring, which is based on the attractive feature that it is not subject to dividend withholding tax on distributions to its

members, since the dividend withholding tax in the Netherlands only applies to entities with a share capital. It is subject to Dutch corporation tax.

The coop largely has the same features as a normal member’s association: it needs at least two members, a board of directors, and there are virtually no restrictions in drafting articles of association, unlike those of a company limited by shares. However, an annual meeting of members is required and financial statements need to be presented to the members. The coop is different from a regular association in the following ways: it needs to appoint a supervisory board; it always needs to be registered at the chamber of commerce and the articles need to be prepared by a notary; it is allowed to generate profits or cost savings for its members; and, it always needs to file publish its annual accounts.

The liability of the members for the debts of the coop can be unlimited, or limited in the articles, or excluded altogether. In the latter case, a list of members doesn't need to be filed with the chamber of commerce.

Since there is no withholding tax on distributions to the members, the members could be located in an offshore jurisdiction with which the Netherlands does not have a tax treaty. If a member is located in an EU country, the distribution will benefit from the provisions of the parent subsidiary directive, since the coop is one of the legal entities listed in the directive. For distributions to other countries it should be verified that distributions from a Dutch coop will benefit from any participation exemption in the member’s country in the same way as dividends. Curaçao, for instance, is such a country.

There is one pitfall in particular to beware of for a foreign member of a coop. If a foreign entity holds a substantial interest (an interest of 5% or more) in a Dutch entity (including a coop) that is not regarded as a part of that foreign entity’s business assets, then any income

UAE

Freemont Group Adriaan Struijk, MSc. TEP Chairman Tel: +971 5669 26 245 info@freemontgroup.com www.freemontgroup.com

or gains derived from this interest will be subject to the Dutch corporate tax rate of 25%.

This is an issue, in particular, if a member is located in a non-treaty country or outside the EU, because in that case there is no lower treaty rate to reduce the above rate. In order for a member to avoid the corporation tax charge, it is important to show some level of active involvement by the member in managing the activities of the coop so that it is not regarded as merely holding a passive investment.

As far as incoming dividends and capital gains are concerned, the following is relevant.

Cooperatives can fully benefit from the generous Dutch participation exemption, which applies to shareholdings of 5% or more and does not require that the subsidiary is subject to tax as long as it is not passive, and remarkably real estate investments are not regarded a passive. Because the coop is listed as one of the entities that qualify for the EU parent subsidiary directive, there should not be any dividend withholding tax in the remitting country. Several EU member states, however, have retained the right to levy withholding tax based on domestic anti-abuse legislation. For subsidiaries based in non-EU countries, the qualification of the Dutch coop as a corporate legal entity for tax treaty purposes becomes an important issue and the domestic regulations will have to be taken into account.

A properly planned and executed coop structure, however, can reduce the costs of a holding structure because entities in intermediary jurisdictions can be eliminated while at the same time taking advantage of the Dutch participation exemption and using the broad and favourable network of Dutch tax treaties, which for many items of income provide exemptions rather than tax credits.

October 2011 • GBM • 13

international tax

Investing into debt and real estate in Japan Japan has weathered some significant challenges over the past year, including the huge impact of the triple disasters of 11 March 2011. These events have given rise to a number of responses to help Japan recover from this crisis.

In relation to tax, the reduction in the effective corporate tax rate of 41% to 36%, the centrepiece of the 2011 Tax Reform Proposals, was shelved. Indeed, potential further increases are currently being debated by the Tax Commission. However, targeted tax incentives for foreign investment remain and continue to provide significant opportunities for investors into Japan. This article considers some of the key incentives available for foreign investors into Japanese debt and real estate assets, as well as providing an update of some of the recent tax changes affecting this area.

Investment structures The effective rate of corporate income tax in Japan is comparatively high, at approximately 41%. However, for foreign investors, there are some established routes for structuring investment into debt and real estate assets that can provide opportunities to significantly reduce this effective rate.

Silent partnership A tokumei kumiai (TK) is a contractual relationship between a Japanese operator (typically a company) and a resident or non-resident silent partner. The silent partner contributes funds to the operator and in return shares in the profits or losses generated or incurred by the operator in the TK business. For non-Japan-resident TK investors, tax is withheld at 20% on all TK distributions, which should be the final tax in the hands of the TK investors. For the TK operator, the TK distributions are deductible for tax purposes. As a result, an operator that allocates most of its profits to the silent partners will have very little taxable income subject to Japanese corporate income tax at 41%.

A fundamental requirement of the TK agreement is that the silent partners have no control over the operator or operator’s property and do not have a right to participate in the management of the business. The operator must own the real estate or debt assets and run the business.

A TK can be a simple and cost effective structure and allow flexible entrance and exit from the investment.

14 • GBM • October 2011

JAPAN

Special purpose vehicle A tokutei mokuteki kaisha (TMK) is a Japanese corporation subject to Japanese corporate income tax at approximately 41%.

However, if properly structured such that the TMK meets various detailed conditions, a TMK may be treated as a ‘tax qualifying TMK’ and can be used as a special purpose entity as a vehicle for the securitisation and liquidation of assets. As a tax qualifying TMK, it may deduct dividends declared from its taxable income for corporate tax purposes. Dividend payments are subject to withholding tax at 20%, but may be reduced if the investor is resident in a jurisdiction with a favourable tax treaty. As a result, the effective rate of tax may be reduced significantly.

A number of conditions must be met to obtain and maintain tax-qualifying status, including that at least 90% of the profits are distributed each year and there are requirements to place a majority of bonds and shares in Japan.

The TMK may be actively managed by its shareholders and provides an indirect ownership in the underlying real estate or debt assets. However, there are significant legal requirements and it is more costly than the TK structure to implement. In addition, the TMK exists to hold specifically identified assets. When the assets are liquidated, the structure ceases to exist.

Until recently, it was possible to structure a TMK with an overall Japanese effective tax rate of significantly below 20%.

However, under the 2011 Tax

Deloitte Touche Tohmatsu Nick Walters Director Tel: 81 (3) 6213 3753 nicholas.walters@tohmatsu.co.jp www.deloitte.com/jp

Reform, the requirement for a majority of preference shares to be issued onshore has been clarified to apply to each class of preference share.

Consequently, the effective rate of tax on profits is likely to increase, absent further structuring, and we may see a return to investor interest in the TK as a route to invest into Japanese real estate.

Private Interest Foundations - to tax or not to tax In today’s modern wealth planning spectrum, the use of private interest foundations (PIFs) has become unexpectedly popular with many wealth planners, attorneys and family offices as a holding vehicle for high-networth individuals and families. Generally speaking, PIFs are used by people who wish to control and maintain ownership of foreign corporations and/or foreign assets where, in many circumstances, persons do not wish to own their corporations themselves directly, due to the proliferation of controlled foreign corporation (CFC) rules in their home jurisdictions. Instead of holding the corporations’ shares in their personal name or in bearer form, they establish a PIF as the juridical owner.

The problem faced, however, is the method and manner of taxation of foundation vehicles in worldwide tax jurisdictions if taxable income inures to the foundation.

Further, in a recognised taxing jurisdiction such as the US, the ultimate issue arises when the question becomes how, in a proper case, would a PIF be taxed in the US under its current statutory provisions. As incredible as it may sound, the current US Internal Revenue Code, its regulations, or in its various internal rulings, has yet to specifically address the methodology of taxation for foreign PIFs. This briefing will succinctly discuss the potentials for how the vehicle may be taxed.

PIF particulars The Panama PIF is a legal entity that was developed based on the PIF models from three different jurisdictions, including Liechtenstein, Switzerland and Luxembourg.

Those governments that have established PIF legislation have carefully designed their foundation statutes with the intentions of creating a more modern, flexible and affordable estate planning vehicle for people from around the globe. Countries that are presently utilising such vehicles include Austria, Netherlands Antilles, Liechtenstein, Panama and the Bahamas.

The PIF is a legal entity of hybrid nature that, in simplistic terms, connects two operations: a donation plus a trust with the formation of a legal entity within the laws of a country. Most legislatures deliberately intended this dual nature of the PIF so as to not only provide life to what would have been a non-sui juris trust document, but also provide the corporate-like

LATIN AMERICA AND U.S.A

characteristics of registration of a juridical instrument.

US taxing concerns Although the PIF ‘smells like a corporation but feels like a trust’, a determination must be made for US taxing purposes as to what it may be classified as. The classification of an entity is not merely determined by what it calls itself; the Internal Revenue Code (Code) and Regulations determine and prescribe entity classifications under Federal law and no consideration is given as to whether the entity is recognisable under local law.

Thus, a PIF can only be classified as one of the following recognised entities: a trust; as an association treated as a corporation; a partnership; or, an entity disregarded as separate from its owner.

The above entity classifications apply to “business entities”, defined as any entity recognised for federal tax purposes that is not properly classified as a trust under IRS Reg § 301.7701-4. It would appear that the regulations created a special niche for trusts by excluding it from the definition of business entities in that the traditional uses of trusts were not contemplated for the purposes of business but rather for the purpose of the protection and conservation of property.

Current provisions in the Regulations further refer to “trusts” in the following manner: “Generally speaking, an arrangement will be treated as a trust under the Internal Revenue Code if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit.” (IRS Reg §301.77014(a).)

On the other hand, the reference to a “business trust” states, inter alia, as follows: “There are other arrangements which are known as trusts because the legal title to property is conveyed to trustees for the benefit of beneficiaries, but which are not classified as trusts . . . because they are not simply arrangements to protect or conserve the property for the beneficiaries. These trusts, which are often known as business or commercial trusts . . . are classified as corporations or partnerships under the . . .

Code.” (IRS Reg. §301.7701-4(b).)

Tomas Alonso, LL.M., TEP Managing Director AMICORP SERVICES LTD. Brickell Bay Office Tower 1001 Brickell Bay Drive, Suite 2310 Miami, Florida 33131 Tel. +1 (305) 416-4730 / Fax. +1 (305) 416-4738 / Mobile. +1 (305) 632-7205 t.alonso@amicorp.com www.amicorp.com

or a corporation is likely to depend on its business purpose as stated in its articles and as carried out in reality. A foundation, absent any business entity-type language in its charter, will appear to be a trust for taxing purposes even though it possesses corporatelike characteristics. Otherwise, planners should create a definitive avoidance of the foundation’s corporate characteristics as its major point of focus.

Amicorp Amicorp’s global network of offices provides trust and foundation. For more information, go to: www.amicorp.com.

In summary The actual classification of a PIF as a trust

October 2011 • GBM • 15

international tax

IRELAND

Foreign direct investment in Ireland Ireland continues to win significant foreign direct investment in 2011 despite the global economic crisis Almost 1,000 overseas companies have chosen Ireland as a base, with the result that Ireland is home to some of the word’s leading companies including: eight of the top ten pharmaceutical companies; 15 of the top 25 in medical device companies; and, eight of the top ten technology companies. In fact, looking at the US alone, the total of its investment into Ireland is greater than into Brazil, Russia, India and China combined!

Ireland’s attractiveness stems from our pro-business environment, from being the only English speaking eurozone member and from our competitive corporate tax regime. A 12.5% corporate tax rate on trading profits is very competitive and is legitimate, fully consistent with European policy and accepted by the European Commission as not representing harmful tax competition.

The Irish government’s commitment to the 12.5% corporation tax rate is protected in an EU context by the principle of unanimity in taxation matters. In fact, the effective corporate tax rate can be even lower than 12.5%, depending on how a multinational company structures their operations here by availing of other tax incentives.

Incentives for new start-ups Tax rates can be as low as 0% for the first three years for new companies that set up in 2011, subject to certain conditions. This incentive means that a company can earn profits of up to €320,000 per annum for the first three years of trading and not pay any corporation tax. This represents a saving of €40,000 per annum. For profits between €320,000 and €460,000, they are taxed at a rate between 0% and 12.5%. For 2011 onwards, the relief granted is linked to jobs created within Ireland.

Ireland as an R&D location In addition to the normal corporation tax deduction of 12.5%, an additional tax credit of 25% is available for qualifying expenditure on research and development

16 • GBM • October 2011

(R&D), bringing the total value of the tax break to 37.5%.

For new start-ups, the credit is essentially a volume-based credit. For companies that were operating in Ireland in 2003, the credit is by reference to incremental spend on 2003 R&D expenditure levels. The credit can be used to reduce the company’s corporation tax liability (current or prior year) and unused credits can be carried forward indefinitely against corporation tax. It is also possible for a company having minimal profits, or indeed which is loss making, to obtain a cash refund of the credit over three years, subject to certain conditions.

R&D is extensively defined for the purposes of the credit, but certain activities do not qualify. It is necessary to examine the activities and Russell Brennan Keane can assist companies in determining if the proposed activities would be eligible for the relief, and in maximising the actual claim itself.

Expenditure on buildings used in the R&D function also qualify and the tax credit is in addition to any capital allowances that may already be available.

Irish government policy is to attract R&D activity to Ireland and, in addition to the tax incentives mentioned above, there is also financial assistance in the form of cash grants to incentivise foreign investors to locate their R&D activities here.

Ireland as a holding company location Ireland has become increasingly popular as a holding company location in recent years. It has an extensive double tax treaty network.

An Irish resident company can avail of Irish tax treaties to reduce, or in many instances eliminate, withholding taxes on the payment or receipt of dividends, royalties or interest.

Ireland introduced a participation exemption in 2004 that provides an exemption from capital gains tax in respect of the disposal by a holding company of shares in subsidiary companies (5% or more shareholding) in certain circumstances.

While Ireland does not have a participation exemption in respect of dividends, the fact that most dividends are taxed at 12.5% with credit for underlying tax and withholding tax, coupled with generous onshore pooling provisions, generally results in the tax free repatriation of profits to Ireland with appropriate planning.

Ireland and the ‘Dutch Sandwich’ There has been much commentary in the

Russell Brennan Keane www.rbk.ie Jackie Masterson Corporate Taxation Partner jmasterson@rbk.ie Tel: 01 6440100

press recently on the use of the ‘Dutch Sandwich’, or the ‘Double Irish’ structure, as a method used by US-based multinational corporations to lower their worldwide effective tax rate.

Typically how such a structure works is that the US operation arranges for the rights to exploit intellectual property (IP) outside of the US to be owned by an offshore entity.

Normally this is achieved by entering into a cost sharing agreement between the US parent and the offshore company.

In some cases the offshore company is established as an Irish incorporated nonresident company (NRI). Typically, the NRI licenses the rights to exploit the IP to an Irish tax-resident trading company that is taxable on income from exploitation of the IP at 12.5%, provided it has sufficient substance and activity in Ireland for the income to be taxed at trading rates.

Depending on the nature of the rights protected by the IP, and whether there would be any withholding tax implications on payments to the NRI, the IP is sometimes first licensed to a Dutch entity as an intermediary, hence the term ‘Dutch Sandwich’.

In summary As outlined above, Ireland continues to have plenty to entice foreign corporations to invest here. Our pro-business Englishspeaking entrepreneurs and professionals are supported by a solid attractive corporate fiscal policy that is constantly being enhanced by other incentives designed to create employment and activity here in Ireland.

MEXICO

The Mexican tax regime applicable to foreign residents doing business in Mexico Non-residents obtaining income in cash, goods, services or credit from a Mexican source of wealth, shall be subject to income tax (IT) in Mexico, which, in general terms, shall be withheld by the Mexican resident from which the income is received.

In the case of non-residents with a permanent establishment in Mexico, they shall be subject to taxation in said country, following the tax regime applicable to corporations (30% on the tax result obtained) and considering, for such purposes, the income attributable to such establishment.

Interest The IT withholding rate applicable to interest received by non-residents may vary from 4.9% up to 30% depending on the type of interest and the recipient, and, in some cases, they may be tax exempt.

Royalties Non-residents are subject to withholding IT on royalties. The withholding tax shall be computed by applying the following rates to the income obtained by the nonresident, with no deductions allowed: 5% for temporary use or enjoyment of railroad cars; 30% for temporary use of patents, certificates of invention or improvement, trademarks or advertising; and, 25% for royalties different from those mentioned before.

Dividends Dividends received by non-residents from corporations are not subject to withholding IT in Mexico.

Alienation of shares Non-residents are subject to IT withholding on the alienation of shares when they are issued by entities resident in Mexico or when more than 50% of the book value of said shares derives directly or indirectly from real estate property located in Mexico.

Income obtained from the alienation of shares is subject to a 25% withholding tax rate with no deductions allowed. Alternatively, non-residents with a legal representative in Mexico may elect to apply the 30% rate to the gain obtained, provided that a CPA report is filed, among other requirements.

Financial derivative transactions Non-residents entering into capital financial derivative transactions with residents in Mexico are subject in some cases to IT in such country.

The withholding tax shall be determined by applying the 25% rate on the gain obtained, and, in certain cases, it may be tax exempt.

Alternatively, non-residents may elect to apply the 30% rate on the gain obtained from the transactions executed in the month with the same entity, provided that certain requirements are met.

Ortiz, Sosa, Ysusi y Cía, S.C. Miguel Ortiz Aguilar Managing partner +52 55 1084 7008 mortiz@osy.com.mx www.osy.com.m

Non-residents executing debt financial derivative transactions are subject in some cases to IT in Mexico. The withholding tax rates may range from 4.9% up to 30%, depending on the beneficiary of the income, and, in certain cases, they may be tax exempt.

Preferred tax regime (tax haven) Income obtained by non-resident related parties from a Mexican source of wealth, which are subject to a preferred tax regime (income subject to a tax rate lesser than 22.5%) will be taxed in Mexico at the 40% rate on the total income obtained, with no deductions allowed.

The Mexican tax provisions establish a specific tax treatment for Mexican residents obtaining income subject to preferred tax regimes through foreign juridical entities or figures in which they have a direct or indirect participation, as well as on revenues obtained through foreign juridical entities or figures which are fiscally transparent in foreign countries.

In general terms, the Mexican residents mentioned above, shall consider as income (subject to taxation in Mexico) the revenues in cash, goods, services or credit generated by such foreign entities or juridical figures, even when such revenues have not been distributed to the Mexican residents.

Treaties to avoid double taxation and agreements for the exchange of information Nowadays, Mexico has in force treaties in order to avoid double taxation, as well as agreements for the exchange of information with more than 40 countries (members of the OECD and others). By means of such treaties, withholding tax rates on revenues received by non-residents may be reduced as follows: interest (from 4.9% up to 15%); royalties (10% up to 15%); alienation of shares (tax exempt in certain cases); etc.

Ortiz, Sosa, Ysusi y Cía, S.C. (Mexican Tax Advisers) Ortiz, Sosa, Ysusi y Cía (OSY) is a firm specialised in tax consulting and litigation, founded by Miguel Ortiz Aguilar, Ignacio

Sosa López and Julio Alberto Ysusi Farfán, certified public accountants.

OSY’s solid expertise and background enables it to successfully embrace the most important challenge in the fiscal area: to provide personalised and reliable service to our clients, assisting them with their most important projects and objectives. OSY’s approach is founded on professionalism and the commitment to serve a society eager to take advantage of the specialisation and creativity that experts in the field have to offer. This has generated a high level of expectation from the national and multinational corporations established in Mexico.

OSY is also a member firm of the LATAXNET, a network of advisers composed of Latin American, Caribbean, US and Canadian tax and legal firms.

Services OSY provides: analysis of feasible alternative to maximise in fiscal terms the acquisition of companies and assets, mergers, corporate spin offs, corporate restructuring, among others; request and obtainment of authorisations and rulings before tax authorities; analyses of fiscal law to determine its constitutionally and, when deemed necessary, file an ‘amparo’ (protection of constitutional rights), and establish the means of defence necessary against credits or resolutions issued by tax authorities; and, transfer pricing strategies, which include the preparation of studies to comply with tax legislation, prospective and proactive advice to maximise opportunities and advert problems in the documentation of said transactions.

October 2011 • GBM • 17

international tax

Haven in a hurricane?

Australia has been famously described as the ‘lucky country’. Euromoney magazine has just acclaimed its treasurer as ‘Finance Minister of the Year’. Many Australians would say that luck, not genius, has more to do with that particular award and that the award shows Europe and the US are in a right mess indeed.

Be that as it may, Australia is an English-speaking member of the British Commonwealth standing between Asia, on the one hand, and Europe (the old world) with America (the new world), on the other.

Australia, therefore, offers interesting opportunities for international investors.

Dwyer Lawyers can provide personally designed asset-protection and tax-effective investment vehicles for discerning overseas clients.

Australia is neither a tax haven, nor sees itself as such. Yet Australian entities can be effectively used by both domestic and overseas clients to protect and manage family wealth. Australia is free of any estate or inheritance duties. Australia refunds company tax to domestic shareholders via its imputation system and has legislated capital gains tax exemptions for domestic and foreign investors.

These concessions can deliver excellent after-tax returns (or even tax-free returns)

to domestic or overseas clients who invest in (or through) Australia. For example, Australian testamentary trusts, whether established by local or overseas investors, can offer substantial estate planning and intergenerational asset transfer advantages to the families of both domestic and foreign business people and investors in respect of their worldwide asset portfolios.

Persons investing through or in Australia as part of a global strategy need to make sure they comply with local regulations.

In particular, tax evasion is not to be contemplated. However, proper tax and business planning within the law is unexceptionable. It is, of course, essential to ensure any structure is completely tax compliant.

Ireland introduced a tax deduction for IP in 2009, based on the value of the IP brought into Ireland. Broadly, if IP of €10m is acquired, there are €10m of tax deductions available.

Therefore, in most cases, the Irish tax analysis is simple. The deductions referred to above can drive the tax rate as low as 2.5% (this is the lowest possible rate).

The more difficult part of the analysis can be in the transferor jurisdiction. Grant Thornton has worked with several large clients recently to successfully migrate IP from countries such as the US and the UK into Ireland. For example, working with our Grant Thornton UK colleagues, we have been able to minimise the risk of any UK ‘exit charge’. While the US tax analysis can be more complex, we have worked closely with our Grant Thornton US colleagues to similarly reduce potential US tax exposures.

The net result of the above planning is the transfer of IP from a high tax jurisdiction to a low tax rate territory (Ireland), with 18 • GBM • October 2011

Terry Dwyer BA (Hons) BEc (Hons) (Syd) MA PhD (Harvard), Dip Law (Syd), FTIA Principal Office address Suite 4, Level 6 , CPA Australia Building, 161 London Circuit, CANBERRA CITY ACT 2601 Postal address: GPO Box 2529, CANBERRA CITY, ACT 2601 AUSTRALIA Telephone: + 61 (02) 6247 8184 Facsimile: + 61 (02) 6169 3032 terence.dwyer@dwyerlawyers.com.au www.dwyerlawyers.com.au

As elsewhere, the courts are leaning towards pro-revenue or ‘purposive’ approaches in tax cases. Tax and business or investment or estate planning should be done through individual and specific legal advice that is protected by lawyer-client privilege.

Asset protection through trusts in Australia has become more complex following the High Court’s decisions in the Richstar and Spry cases, which broke open ‘pocket trusts’ in favour of creditors and ex-spouses. However, properly drafted trusts and other structures can still minimise the risk of creditor

Exploiting IP The ability to attract and retain intellectual property (IP) is a key factor in determining how quickly Ireland can enter a phase of sustained growth. We are unlikely to see low level labour intensive operations set up in Ireland while existing such operations are likely to be curtailed, or disappear altogether to lower cost economies. In such a climate, the importance of moving up the value chain is crucial. IP is essential in making this a reality.

AUSTRALIA

attack and safeguard assets from wouldbe claimants. Holistic integration of asset protection, business and tax planning can still achieve very positive outcomes for overseas investors into and through Australia, which, so far at least, has remained a haven in the great depression of the early 21st century.

IRELAND

the further benefit of a tax deduction for the IP transferred, regardless of whether it was recognised in the balance sheet of the transferring company.

Bearing in mind that Ireland also has a competitive research and development (R&D) tax credit regime, the reasons to consider an IP migration to Ireland can be compelling.

The introduction of the IP relief, combined with an approved R&D tax credit regime, meant that there was less rationale for the retention of the patent royalty exemption regime. Accordingly, this was removed with effect from 24 November 2010.

At Grant Thornton, we have come across several companies that continued to charge patent royalties to group companies in 2011.

Previously, these royalties would have been tax exempt in the hands of the recipient and typically tax deductable for the payor.

With the abolition of the tax exemption, the receipt of the royalties can now be taxed at 25%, depending on the level of activity in the company holding the patent.

Peter Vale | Partner Grant Thornton Grant Thornton Financial and Taxation Consultants Limited 24-26 City Quay | Dublin 2 | Ireland T (direct) + 353 (0)1 6805952 T (office) + 353 (0)1 6805805 T (mobile) + 353 86 8555 232 F + 353 (0)1 6805806 E peter.vale@ie.gt.com W www.grantthornton.ie

We have worked with clients in recent months in implementing a structure that effectively retains the benefits of the patent royalty exemption for the recipient company. This can be used to successfully reduce the group’s effective tax, or retain it at the 2010 level.

a critical piece of the tax strategy jigsaw for many companies. There are many opportunities, but also some potential pitfalls for the unwary. At Grant Thornton, we have worked closely with many clients in putting in place a tailored solution specific to their needs.

In summary, IP tax planning has become

Please do not hesitate to contact us if you would like to discuss IP tax planning in more detail.

Tax benefits in Ecuador The Ecuadorian Organic Code of Production, Commerce and Investments (the Code) published in December 2010 created interesting tax benefits. The Code provide for a specific benefit for new investments and other benefits for the general taxpayer, as will be explained below.

Benefit for new investments All new investments in specific areas detailed below will obtain a five-year corporate income tax exemption (which also includes the minimum income tax).

The Code intends to encourage investments in cities other than Quito and Guayaquil, the most commercial and wealthy cities in Ecuador. Hence, only new investments made outside of Quito and Guayaquil will obtain the benefit, as long as the investment is made in the following areas: production of fresh, frozen and industrialised food; the forestry and agro - forestry chain, and its products; metal mechanics; petrochemical; pharmaceutical; tourism; renewable energy, including bio energy or energy from the biomass; logistics foreign trade services; applied biotechnology and software; and, sectors for strategic substitutions of imports and enhancement of exports and determined by the president of the Republic.

As it is occurring in many other countries, operations and business transactions between Ecuadorian residents and their counterparts residing in tax havens are being heavily scrutinised and in some cases prohibited. Therefore, the new tax benefit is likely applicable to foreign and national investors; however, benefit may not apply to investments for tax havens.

Benefits for general taxpayers The Code also provides for general benefits for all taxpayers, whether or not the investments are new and regardless of where the investments have been made (even in Quito and Guayaquil). The most important benefits are: a reduction of the corporate income tax rate from 25% to 22% that will be gradually implemented (24% in 2011, 23% in 2012 and 22% in 2013 onwards); the possibility of duplicating the deductible expenses and amortisation of investments intended for cleaner and eco- friendly production processes; and, an exemption of the tax on remittance of currency (which is currently 2%) on payments of principal and interest paid abroad (with certain exemptions).

Despite the economic crisis and the difficulties experienced by the Swiss financial market, the Swiss economy is performing high. Switzerland is strong and able to weather the current rough seas. Both efficient handling of the issues by the Swiss government and ongoing improvement of the Swiss tax system help the country to maintain its position as an attractive place for investors.

In Switzerland, highly advantageous corporate tax reforms were phased in as of 2009. Among others, foreign and domestic corporations, as well as private investors, now benefit from a more favourable taxation of dividend income. The parameters for participation relief at corporate level were improved as of 1 January 2011. In addition, dividend income received by individual shareholders is no longer subject to full taxation - a highlight of the tax reform.

As a part of the corporate tax reform, in addition to share capital, paid-in surplus funds will no longer be taxed when repaid to the shareholders. Furthermore, income tax rates are being decreased in many cantons to the lowest ever level. A majority of the cantons reduced their corporate income tax rates dramatically - some even by 50%. In half of the cantons, corporate income tax rates now range between 12-16%. The so-

Pérez Bustamante & Ponce Abogados Juan Gabriel Reyes Associate Tel: (593)226-0666 Fax: (593) 224-4462 jreyes@pbplaw.com www.pbplaw.com

comprises more than 20 professionals in the legal, financial and accounting areas exclusively devoted to providing complete tax advisory services. The tax unit has assisted several multinational and local clients in analysing the best alternatives to access to the tax benefits described above.

Pérez Bustamante & Ponce’s tax unit was created almost ten years ago. Now, the unit

Taxation Switzerland gets more and more attractive

ECUADOR

SWITZERLAND

called ‘foreign-oriented businesses’ enjoy a more favourable tax regime under the rules for mixed companies. Mixed companies may attract an income tax rate as low as 6-10% depending on their specific activities.

Important tax benefits are also offered under the Swiss holding privilege.

Tax reductions and several important tax incentives were also introduced for individuals so that the maximum net income tax rates went down to between 20-30% in many cantons, in some municipalities in Schwyz even to 19%.

Stephan Pfenninger is one of nine partners at Tax Partner AG, the Swiss leading independent firm of tax advisers and member of TAXAND. He has over 15 years experience in national and international tax. His activities are mainly focused on real estate tax mandates. He also has a broad experience in M&A, corporate tax, and restructuring, as well as advising individual investors. His languages are English, German and French.

Tax Partner is focused on Swiss and international tax law and is recognised as an important independent tax boutique in Switzerland. With currently more than 24 professionals, the firm has been advising important multi-national and national corporate clients, as well as individuals, since it was established in 1997.

Tax Partner AG Dr Stephan Pfenninger Partner, attorney at law Tel: +41 (0) 44 215 77 77 stephan.pfenninger@taxpartner.ch www.taxpartner.ch

As tax specialists, Tax Partner offers the full range of tax advice services including indirect taxes, etc, thereby offering a unique in depth service quality to its clients. Since the very beginning of its operations, Tax Partner has repeatedly been nominated as a leading tax firm in Switzerland in several international rankings.

October 2011 • GBM • 19

Work healthy - managing stress in the workplace

Managing stress in stressful times We all struggle from time to time with managing our stress, but in today’s economy with high unemployment, huge corporate layoffs and bad economic news at every turn, the volume of stress has been turned up for everyone, no matter the job or walk of life.

Consciously recognizing the signals our body gives us when stress arrives is a huge step in preventing stress from taking over our physical and mental health. Once we recognize the symptoms we can address the source and go to work on eliminating the stress.

Of course stress is a natural part of living and working, but during times like these when the pressure seems to be mounting, and we spend more and more of our days in frenzied action to cope with the difficult economic environment, our health and productivity can suffer severely. How do we get a handle on this without having to change our whole life or rethink our career? Well, the good news is the person who puts the most stress on you is also the person who can help you learn to manage it. That person is you!

Stress manifest its self differently on different people. For some it’s a headache, while others become grumpy or their stomach becomes upset. You know what your key stress factors are, when you feel them coming on, track them back to when they began. It might be that phone call from the boss reminding you of a deadline, or an upset customer. Identifying the stress signal and tying it to what brought it on, will help you realize and learn to control how stress affects your life in every facet.

You put the pressure on; you can learn how to take it off!

We catch the news and it says unemployment is up, or company xyz is laying off 5,000 employees. Our stomach tightens; we begin to think about the sustainability of our job or company.

Our fear starts to mount, we feel uncertain about our future and we begin thinking about what we would do if that happened to us. Our stress level rises, we get agitated, our body language shows our anxiety and we get a little snippy when we talk to those around us. In turn our actions give concern to others, especially if we are the boss and the snowball starts barreling down that imaginary hill of stress, taking everyone in its path and rolling them into a huge ball of uncertainty.

Stop! We build ninety percent of our own stress, and we can learn to control it by just addressing four areas of our lives and taking control: • Manage your physical and emotional health.

• Become aware of your negative habits stress brings on.

• Improve your communication skills.

• Step up as a stress relieving leader.

If it was only that simple, right? Well with a little work on your part, it can be. Here are a few steps you can take to reduce your stress and help reduce the stress of those around you.

Step #1 – Become aware of stress signals In our fast paced lives, we often don’t realize when stress is stealing its way into our lives. We just plow ahead until we become irritable, angry or just can’t seem to get motivated. Our productivity suffers, we can’t shine like we usually do and we begin to withdraw from others.

20 • GBM • October 2011

Step #2 - Take control of your well being Just like an athlete trains for their sport, you need to train to have yourself in shape to handle the stress of your job. Diet and exercise are just as important to being on top of your game, as it is for the athlete.

Here are just some of the reasons diet and exercise matter and how they can help: •

Eating too much makes you tired and lethargic, adding to you already low mood. Try eating smaller meals, with higher frequency. This helps to balance your blood sugar level, which in turn, makes you less vulnerable to mood swings and more energetic.

• Eat less sugar. Sugar may give you a momentary lift in energy, but it is always followed by an even longer low, due to spiking your blood sugar.

• Reduce your alcohol intake. Alcohol may reduce anxiety temporarily, but too much can cause anxiety when it wears off.

• Cut back on your nicotine. Although a lot of people smoke because they feel it calms them, nicotine actually is a strong stimulant that adds to anxiety and nervousness.

• Get your heart pumping. Cardiovascular exercise like walking, running or aerobics for at least 30 minutes a day is a huge stress reliever. Exercising your body helps it to relax, and the focus on expelling energy will relieve your mind.

• Make sure you get enough sleep. This gives your body and mind both time to recharge and be ready to focus the next day.

Step #3 – Get organized During difficult economic times fewer workers have to carry larger loads, and stress is soon to follow. The quickest ways to relieve the stress of an overwhelming work load is by organizing your time and your priorities, putting you back in control. Here are a few tips on getting organized: • Get to work a little early. Just giving yourself 10 to 15 minutes of time early in the morning to organize day will make you feel more in control.

• Prioritize task and knock out the most important ones first. Tackle that one you hate early on and get it out of the way.

• Organize your day by spreading out the work and not scheduling yourself to closely. A tight schedule always leads to undue anxiety.

• Take breaks when you need them. If you feel the walls closing in, stop for just a few minutes, walk down the hall or get something to drink.

so learn to delegate. Accept other people’s ways of doing things, by remembering as long as the job is done satisfactory; it doesn’t really matter if they took a different course to get there. Bad habits make us feel bad about ourselves, affect our attitude towards others, and perpetuate our stress. Kick those bad habits to the curb by refusing to let them bring stress back into your life.

Step #6 – Become a stress relief leader Whether you are a manager or just one of the troops, it doesn’t matter.

You can still become a stress relief leader. Learning to control your stress and keeping a positive attitude will help fellow workers have a less stressful environment, but you can go beyond that. Here are some quick ways a non-manager can take a stress relief leadership role.

• Always try point out the positives in conversations about their job or the company.

• Listen to you co-workers and share your concerns and the positive actions you are taking.

• Balance your work schedule with your home schedule. A schedule that works well with your responsibilities at home also reduces personal stress that leads to stress in the work place.

• Share your stress relief list with them and encourage them to do the same.

• Delegate and learn to compromise. The most efficient ways to get more done and to delegate. You can’t do it all yourself and by letting others help when they can, they become more confident because you believed in them. Don’t try to control it all, and if you are asking someone to change their plans, you need to learn to compromise as well.

As managers we always have to keep in mind, that our role as leaders magnifies our actions. If you come to work in a bad mood, soon the whole office is in a bad mood. On the flip side, your positive attitude will also spread to the rest of the team. Here are some strategic things you can do to relieve the stress of your employees:

• Learn how to eat an elephant. The old adage of how do you eat an elephant is good advice. “One bite at a time.” If you have a big project, break it down into small parts that can be easily managed and reduce the feeling of being overwhelmed.

Step #4 – Practice your people skills People skills, influence or emotional intelligence are all words used to describe how you interact with the people. The practice of being aware and managing your emotions while trying to understand and consider the emotions of those around you is a key element in relieving stress. Managing relationships with the people you interact with through positive influence and aspiration can help you solve issues, manage conflicts and reduce stress for all involved. Three key issues to help you manage these relationships are: • Keep your emotions in check. Knowing when you’re stressed and stopping it from influencing outward behavior is the key. Learn what stresses you and what calms you. Use all your senses of sight, sound, touch, taste and smell, to keep you in sync with your emotions and those around you. Use them for positive influence.

• Watch your body language and non-verbal communications.

How we act and how we say things, speak a louder volume than what we say. Over 95% of what we communicate is non-verbal.

Watching our own body language and voice tone as well as those of our co-workers is the foundation for successful relationship building. Good relationships, means lower stress for all involved.

• Help them share the load when possible.

• Make them part of the solution by sharing information, seeking their ideas and encouraging participation in finding answers.

When employees know what’s going on, it reduces their anxiety and eases the uncertainty that causes them stress.

• Make sure their duties and workload are obtainable. Nothing is more demoralizing and stressing than being given a task you know can’t be completed.

• Let them know you appreciate them, the work they do and their accomplishments. Recognize them both personally and officially through programs that highlight the desired skills of their position.

• Find out what they are looking for in a career path and give them the resources for them to accomplish those goals.

• Make sure your actions and responses are consistent with the company’s values and goals.

• Promote a work environment that gives the employees the opportunity to become entrepreneurs in their work area, with more control over their work.

By implementing these six steps you will be well on your way to reducing your stress, increasing your productivity and promoting a healthier life for you and those around you. Take control, and start today!

• Get a sense of humor. A little humor goes a long way in defusing tense situations. Just don’t use your humor at the expense of others.

• Look for the positive in everything you do or every conflict you face and focus on that. Positivity is contagious and defuses difficult circumstances.

Step #5 – Kick your bad habits to the curb Many of us have bad habits that stop progress in reducing stress.

Habits like always running late, consistently looking at the down side, trying to perfect everything or being controlling. Stop these habits before they start. If you’re late all the time, set your clocks and watches forward. When negative thoughts come to mind, try to focus on the positives. Perfection and control go hand in hand

Disclaimer: This article is for general information only, and should not be treated as a substitute for medical advice.

Global Business Magazine is not responsible or liable for any diagnosis based on the content of this article. Always consult your doctor before commencing any kind of dietary or health and fitness regime.

October 2011 • GBM • 21

outsourcing roundtaBle

outsourcing roundtable IT Outsourcing in CEE Outsourcing services are increasingly penetrating the business practices of a widerange of companies. Transfer of non-core and IT activities on a long-term basis to independent contractors allows the business to focus on its core business activities. The development of global IT industry encourages growth of outsourcing to other countries where the particular services are well developed and cheaper than in home markets.

Traditionally, India, the Philippines and China are considered to be the global IT outsourcing hubs. Many offshore IT projects are sent to these countries. However, a rapid increase in customer demand for offshore and nearshore outsourcing services has helped the growth of other outsourcing centres.

The CEE region is now capturing great amount of attention as an attractive outsourcing destination with more than 5,000 companies and 100,000 specialists operating in the industry of IT outsourcing and software development services in the 16 CEE countries, according to Central and Eastern European Outsourcing Association (CEEOA).

The CEE market can be divided into three clusters: First, Ukraine, Romania, Poland, Belarus - some of the leading countries in the European outsourcing space, undisputed leaders in market growth and the number of IT specialists providing around 80% of IT outsourcing services in the region, and large companies prefer to outsource their large projects to these countries; emerging markets like Bulgaria, Serbia, Slovakia, etc, are second - middle-sized countries capturing a lot of attention due to their advantageous geographical proximity to some Western countries, eg, many German companies prefer to outsource their IT projects to the Czech Republic, and many French companies are partnering with Romanian providers because of the language similarities; and, new locations coming to the fore like Croatia, Moldova, Latvia, Slovenia and Albania, attracting projects with specific language requirements or based on personal contacts.

One trend prevailing in the CEE region is the considerable consolidation of the CEE market resources into large-sized companies.

In the region, 44% of IT specialists work in companies with more than 1,000 employees and 55% of IT outsourcing and software development services are produced by companies with more than 1,000 employees.

22 • GBM • October 2011

At the end of 2009, the software development and IT outsourcing services industry in Central and Eastern Europe successfully overcame all of the challenges of the recession of 2008 and 2009 and resumed its trajectory of growth; although 2009 was the toughest year, when the industry indicated 2-5% decrease in the volume of IT outsourcing service provided. The industry used the recession to reorganise internal business processes within companies, optimise costs, and further develop more qualified operational business management processes. 2010 and 2011 showed the rising demand to outsourcing to the region and the significant market growth that reached 15-20%. The volume of outsourcing market in the CEE region has increased over two years and reached $5bn in 2010. It is forecasted that in 2011, the market volume will reach more than $6bn.

The stable market growth attracts the large market players that transfer their IT operation to Central and Eastern Europe and set up their research and development (R&D) offices here. Along with market development, the service rates also renewed growth. Ukraine, Belarus, Bulgaria and Romania remain the lowest-cost countries of the region. The reason, in Ukraine and Belarus, is that the countries are not EU members, meaning the cost of life in these countries is lower comparatively to other EU members, which allows it to sustain the low service rates.

Currently, outsourcing is booming in the region, as the CEE countries show actual progress in terms of government incentives to attract foreign capital and create favourable conditions for IT business and successful international partnerships.

Low cost, highly skilled IT labour, multiple languages skills and favourable time zones are making CEE markets increasingly attractive destinations for nearby countries and for the US. The reasons? A shortage of resources in IT sector in Western European, complicated regulatory environments and high taxes drive demand to Central and Eastern Europe.

According to a survey conducted by IT Sourcing Europe, there is a huge gap in IT talent and resources in Western Europe.

The technological potential of graduates, specifically in the former Soviet Union countries, is one of the primary reasons, along with low labour costs, that Western

companies choose to outsource to the CEE. Higher education and comprehensive schools that formed the base of educational systems in the former Soviet Union and socialist countries were mainly focused on engineering specialties. This legacy, and the presence of strong science schools, fuelled the rapid increase in the number of companies providing IT outsourcing and software development services in the CEE region, according to the Central and Eastern Europe Outsourcing Review 2010.

Educational systems in CEE countries are improving on their already strong focus on fundamental engineering education, one of the most important factors contributing to the preparation of qualified specialists in the industry.

Other features that make the CEE very attractive for outsourcing include such incentives as simplified tax structures, visafree entry into the Ukraine and construction of high-tech parks in Belarus, Ukraine and Romania.

The acceleration of economic development, further growth of IT outsourcing services market volume, implementation of quality management systems within companies, government incentives and programmes intended for the support of the industry and preparation of IT specialist will positively affect the IT outsourcing industry development in the CEE region.

Central and Eastern Europe have great potential to become perfect nearshore destinations for UK and Western European businesses and offshoring destinations for large North American companies, primarily because of higher quality of delivered products and services and a better understanding of business needs compared to traditional outsourcing centres.

Inna Sergiychuk Central and Eastern European Outsourcing Association (CEEOA) innas@ceeoa.org http://ceeoa.org Phone: +380 44 458 1753

Although France has been moving towards greater outsourcing maturity with increased appetite for IT and business process outsourcing, offshore outsourcing arrangements have always suffered from some form of reluctance. This may be due to regulatory constraints (eg, data protection obligations and specific requirements for regulated sectors, such as the finance sector), but also to language and time difference issues. Some companies may also find that an outsourcing approach is not always the most suitable model, particularly where the risks of moving core business services into the control of a third party service provider located abroad outweigh the apparent benefits.

This particular context has enabled nearshore platforms located in Eastern Europe, and now moving further south to North Africa, to become more attractive than Asia in the eyes of French clients. This solution offers more comfort to companies in terms of control.

This trend may be impacted by different factors. There is no doubt that the outsourcing market is standing at the crossroads of three key challenges, relating respectively to the world economic and financial crisis, the emergence of cloud computing technology and the evolution of the European legal framework.

The financial factor The current financial turmoil following the global recession of 2008 and 2009 is impacting on large corporate and bank organisations that are increasingly confronted with cost cutting and optimisation issues. This could be an opportunity for outsourcing providers to the extent that they take into consideration the specific social and political climate in France. It is likely that the option consisting of relying on cross-border outsourcing, with all the associated effects on employment, for instance, could be subject to some form of resistance from the French government, especially for companies and banks that have benefited from state loans. Therefore, even the term ‘outsourcing’ could be effectively banned from the vocabulary of providers and companies, even when negotiating an agreement that, by all appearances, relates to outsourced services.

with cloud computing technology increase clients’ concerns notably in terms of security, location and transfer of personal data. Other issues such as jurisdictional risks, conflict of laws and regulatory requirements also require specific attention. The following examples illustrate the issues at stake: Having recourse to outsourcing companies using cloud computing technology can expose organisations to increased risks of service disruption because of the variety of software vendors involved (eg, where the provider is unable to provide services to its customers due to a breach of licence terms with its key technology vendor).

Similarly, there is increasing reliance on telecommunications networks to access the services.

With regard to data security, French data protection legislation (French Data Protection Act dated 6 January 1978 as amended on 6 August 2004) is strict and imposes very stringent rules to be complied with by companies outsourcing services to third party providers (obligations in terms of notification to the French data protection authority, information provided to the data subjects, obligations in terms of confidentiality and data security for the outsourcer). The legislation also requires the prior authorisation from the French data protection authority when the outsourcing project triggers a transfer of data outside the EEA, even when the cross-border transfer is based on the EU model clauses. This issue could be even more complex to handle when data is located in the cloud.

French banks need to comply with the requirements of the outsourcing regulation (French Regulation 97-02 of 21 February 1997 relating to internal control in credit institutions and investment firms as amended from time to time) that imposes, in particular, strict confidentiality and security obligations, as well as audit and performance obligations that banks must integrate into their agreements with providers.

The evolution of the legal framework The third factor that may impact the outsourcing market is the current evolution of EU legislation having direct consequences

Allen & Overy LLP Paris Ahmed Baladi Partner (outsourcing/IT/data protection) Tel: +33 1 40 06 55 07 ahmed.baladi@allenovery.com www.allenovery.com

FRANCE

A French perspective on the evolution of outsourcing practice

on outsourcing projects. In this respect, the European legal framework for data privacy (Data Protection Directive 95/46/EC) and financial instruments (Markets in Financial Instruments Directive 2004/39/EC) is currently being revised.

With regards to data privacy, for instance, outsourcing practice is likely to be affected by the changes that may occur pursuant to the revision of the Data Protection Directive. The revision of the Data Protection Directive should, in particular, focus on the harmonisation, and simplification, of the data protection legal framework of EU member states (eg, via the strengthening of cooperation between EU member states’ protection authorities) and the improvement of transparency vis-à-vis individuals. This revision should, in theory, facilitate the rather bureaucratic process that applies today when clients need to transfer certain data to their outsourcing providers.

In summary Outsourcing practice in France should therefore continue its evolution under the influence of the factors mentioned above.

In light of such factors, it is likely that the development of shared services centres that provide outsourcing services to a group of companies, while remaining under the control of the group and located in a near-shore jurisdiction, may become more popular. This could represent an appropriate compromise, helping clients to manage risks while facilitating compliance with applicable legal requirements in France.

The cloud computing effect The emergence of cloud computing technology may boost the outsourcing market. Cloud computing offers an attractive operating model that can satisfy the everpresent cost-cutting requirements faced by clients. It also offers flexibility and elasticity that can be used ‘on demand’ by clients.

Nevertheless, outsourcing projects associated

October 2011 • GBM • 23

outsourcing roundtaBle

Q&A with Valeriy Kutsyy, Miratech CEO We talk with Valeriy Kutsyy, Miratech CEO, voted by his colleagues, CEOs of the other Ukrainian Software engineering companies, as: “The most successful manager in the industry 2010.”

1. Ukraine ranks 145th out of 183 countries in terms of ease of doing business, according to the World Bank’s Doing Business report. Is it really hard to do business in Ukraine?

Doing successful business anywhere is not easy. On important business critical indicators, such as ‘getting credit’ and ‘enforcing contracts’, Ukraine ranks fairly well - 32nd and 43rd respectively. The indicators where Ukraine is ranked very low, such as ‘starting a business’ and ‘registering property’, are less important for us.

We can also refer to a more recent Global Competiveness Report from the World Economic Forum ranking Ukraine 82 out of 133. What is even more important is that this year Ukraine has strengthened its position by going up by seven points compared with the last year’s results (ranked 89).

According to the report, Ukraine is 37th by the domestic market size. Such a size is very attractive for strategic investors and the high costs of entry can be compensated by the volume potential. Often, the higher entry costs are rewarded by better margins on those markets, and I am confident that Ukraine is not an exception - there are many foreign businessmen who were able to earn substantially higher returns on their investments than they normally earn in the most of developed markets.

as one of three last year’s leaders on cost attractiveness out of all the EMEA countries listed in the report. Furthermore, according to the World Bank, Ukraine was the only country from the top offshore services list in Europe that demonstrated the information and communications technology (ICT) exports growth in crisis year 2009.

3. What changes have you seen in the IT industry over the past years?

Over the past few years, the Ukrainian IT outsourcing industry experienced permanent and swift growth. It concerns both ICT exports and the internal IT outsourcing market in Ukraine. The World Bank report reveals that ICT service exports were US$504m in 2007, US$597m in 2008 and US$777m in 2009. Experts estimate that ICT service exports were around US$900m in 2010, and believe that in 2011 this amount will exceed US$1bn. Thus between 2007 and 2011, the market doubled.

The Global Competitiveness Report ranks Ukraine 36th in ‘quality of math and science education’, 7th in ‘tertiary education enrolment’ and 3rd in ‘adult literacy rate’.

That’s why Ukraine, with its population of nearly 50 million, becomes the best nearshore location in Europe. In addition, labour market efficiency indicators, such as ‘hiring and firing practices’ (17), ‘redundancy costs’ (21) and ‘pay and productivity’ (40), further strengthen Ukraine in the IT outsourcing market. ‘Internet tariffs’ put Ukraine in the 11th place globally according to the World Economic Forum.

As for the internal IT market, IDC might be absolutely correct that it has decreased by more than 40% in the crisis year 2009.

However, the IDC report also shows that volume of IT services has dropped only by 24.8%. According to IDC, in 2008 the IT outsourcing market accounted for 5.9% of the IT services market that equalled US$301.2m; thus the volume of the Ukrainian IT outsourcing market was US$17.8m in 2008.

The Ukrainian experts believe that in 2011 this market will be US$100m. It is evident that the market has grown almost six-fold over the past three years, which accounts for over 80% annually. At first this figure might seem aggressive, but it is absolutely in line with our financial results. During this period, revenue of Miratech from the domestic market has been doubling year on year.

Besides that, Gartner again includes Ukraine in its ‘top 30 countries for offshore services’ in its 2010-2011 report. It also rates Ukraine

The main change is obvious: over the past five years, the IT outsourcing market developed from the ground up.

2. What can you say about your industry? Is your IT industry position strong?

24 • GBM • October 2011

4. How does Ukraine’s regulatory regime affect the industry and what changes do you expect in the near future?

First, it should be taken into account that Ukraine’s regulatory regime is still in the making in many ways. There are some regulations that stimulate the development of the IT industry. IT companies of the country cooperate within the IT Ukraine Association.

In March 2011, under the umbrella of this association, they put forward reformative initiatives to the Ukrainian parliament and the State Agency of Ukraine for Science, Innovation and Information. Discussions between IT businesses and the government have resulted in the production of two bills: No 8267 - “About an economic experiment on creating auspicious conditions for the development of the software industry in Ukraine”; and, No 8268 - “About introducing changes to the Tax Code of Ukraine regarding an economic experiment that will create auspicious conditions for the development of the software industry in Ukraine”. These bills have been submitted to the parliament of Ukraine and will be dealt with in this session. Hopefully, the critical mass in the parliament will be reached to pass the bills. For the next five years, this experiment stipulates special rates of the obligatory payments for IT companies and their employees. This initiative is

5. In case a customer is not willing to establish its physical presence in Ukraine, but at the same time is keen on getting access to competences and volumes, how should they approach the market?

There are a number of domestic and international services providers present in Ukraine offering outsourcing services for the customers in Europe and globally. Small customers have a range of choices starting from freelancers, at very affordable rates, up to major providers. The enterprise customers typically consider establishing a relationship with the major providers of outsourcing from Ukraine. The major providers charge somewhat higher rates, but these are still highly competitive and definitely compensate the risks of dealing with a small provider.

The history and size are basic criteria for short-listing the providers.

Second, the financial history should be evaluated. If the company has been operating

for many years and has successfully overcome rises and falls in the local market, then it is likely to be able to overcome possible further cataclysms. The company’s financial reports have to be regularly audited by independent companies.

Third, the company has to be recognised as a socially important employer and taxpayer and supported by the local authorities and community.

Miratech Valeriy Kutsyy CEO Tel 380 (44) 206 4090 Fax 380 (44) 206 4091 info@miratechgroup.com www.miratechgroup.com

UK RA IN E

aimed at reducing the amount of taxes paid

by IT companies: the company’s profit tax rate is set at 16% instead of 24%; payroll tax rate is set at 10% instead of 17%; and, single social tax is decreased from 36.71% to 5%.

This economic environment will give Ukraine an outstanding competitive advantage over other IT outsourcing destinations.

Last but not least, the business of the potential strategic supplier has to be diversified by territory, industries and products.

6. What about Miratech? To which extent do you fit these criteria?

Miratech makes a perfect fit! We have been in the IT outsourcing business since 1989, and since 2008 our financial reports are audited by a Big Four list company. According to the State Statistics Committee of Ukraine, Miratech is number one by compound criteria of reported sales volume, profits, wages and productivity. Based on these data, National Business Rating awarded Miratech the 2010 Industry Leader in the category of software engineering. Therefore authorities have recognised our contribution to the economy.

Our sales come primarily from four industries - bank and finance, government, telecom and technology - and from three geographical markets - domestic, European and North American. Each of the industries and markets makes sizable contributions to the total sales and none exceeds half of our sales.

Unlike many traditional providers in our region, Miratech is competitive both internationally and domestically. This is illustrated by the fact that the largest strategic IT outsourcing agreement in Ukraine belongs to Miratech - the five-year value of this contract is estimated to be in range of US$5560m.

7. What qualities do you believe it takes to be a successful manager?

If you mean the Executives’ 2010 rating that ranked me the most successful manager of 2010 in software engineering, it evaluated the executives based on five criteria. The rating assessed: efficiency; innovation; public activity; social responsibility; and, reputation.

8. How will Euro 2012 affect your organisation and the wider IT outsourcing industry in Ukraine?

Two points are worth mentioning. First, on the threshold of Euro 2012, the government strives to take the infrastructure under control. It allocates funding to modernise numerous infrastructure objects, including the IT systems. As many other businesses, IT companies expect to face the increased demand for their services.

Our greatest expectation is that Ukraine will stop being a white spot on the map for millions of guests that will come to see Euro 2012. We hope that they will see for themselves that Ukrainians are friendly people who are competent in what they do.

Consequently, we will make new friends and find new partners from all over the world, which may ultimately lead to new projects. The successful outsourcing business is not a formal client-provider relationship; instead it is all about partnership. This is the prerequisite that guarantees success in our business area.

October 2011 • GBM • 25

outsourcing roundtaBle

Avoid the pitfalls when dealing with outsourcing projects in Spain

Bird & Bird is an international legal practice whose services are underpinned by deep client and industry knowledge. We aim to be focused primarily on industry sectors in which the following are of central importance: technology, high value of intangible assets or complex regulation. We have 23 offices in key business centres across Europe, the Middle East and Asia, including in Abu Dhabi, Beijing, Bratislava, Brussels, Budapest, Düsseldorf, The Hague, Hamburg, Helsinki, Frankfurt, Hong Kong, London, Lyon, Madrid, Milan, Munich, Paris, Prague, Rome, Shanghai, Singapore, Stockholm and Warsaw. We also have a dedicated group focusing on India and close ties with firms in other key jurisdictions in Europe, the Middle East, Asia and the US. We are well-placed to offer local expertise within a global context.

We have in-depth knowledge and expertise in the field of outsourcing, which is widely recognised both at international and local level. Both our Spanish office and Bird & Bird as an international firm are ranked in the top tier of all relevant categories, including IT and IP, of each major legal directory, such as Chambers & Partners or Legal 500. Our Madrid office is ideally placed to assist both Spanish customers and suppliers during an outsourcing deal, as well as advising on international transactions having a significant impact within the Spanish market.

The following are, in our experience, some of the main legal issues that you need to realise when dealing with outsourcing projects in Spain: Remember that Spaniards speak Spanish! Even though

26 • GBM • October 2011

parties and their counsel use international outsourcing standards as precedent, Spanish language prevails during the negotiation and drafting of the contractual documents on IT projects in Spain. So do not assume that very standard expressions, such as ‘benchmarking’ and ‘step-in rights’, will be properly understood. This may have an impact not only from a cost perspective, but also indirectly affecting the adaptation of usual international contractual practices and concepts in Spanish transactions.

Likewise, there is a strong pressure to choose Spanish law as the governing law of the contract, not only for those aspects of the deal where application of Spanish law might be partially or totally mandatory (such as employment, corporate law, data protection or even IP), but also in relation to the whole commercial relationship.

Adaptation of some of the key international outsourcing practices (and of contracting policies of global outsourcing suppliers) to Spanish legislation, case law and legal practice involves a complex and challenging exercise, both from the perspective of the Spanish judiciary, and also, even more significantly, when considering the commercial culture enjoyed by Spanish customers and advisers.

A number of key legal issues include the following: The limitation of liability provisions that outsourcing suppliers request from customers usually leads to tough negotiation, not only because of the economic relevance of the issue itself, but also because this is one of the points where the difference between continental and common-law legal systems and other cultural legal differences clearly appear (frequently at later stages of the negotiation) between global outsourcing operators and Spanish customers and advisers. Generally speaking, reasonable and justified caps are better understood and accepted by Spanish lawyers and courts, while limitations or exclusions on different types of damages, based on common

S P A IN

This article focuses on the main legal issues and challenges that need to be dealt with when designing, negotiating and implementing IT and business process outsourcing projects within the Spanish market. We set out how some of the key legal issues that global outsourcing suppliers typically raise are dealt with by Spanish legal teams over the negotiation table and by the Spanish judiciary in the courts and arbitration forums.

Bird & Bird LLP Javier Fernández-Samaniego Managing partner and Head of Commercial/IT department of Bird & Bird Madrid.

Tel: +0034 91 790 60 00 javier.fernandez.samaniego@ twobirds.com www.twobirds.com

law systems, imply strong differences and, in some cases, serious concerns on the adaptation and enforceability of contractual provisions before Spanish courts.

Other key issues on outsourcing agreements are, among others: service levels and related penalties; pricing review mechanisms where there has been a change of the service requirements; the impact of new technology (such as benchmarking provisions, which can be of particular relevance in the context of the development of cloud computing services); detailed regulation of causes, proceedings and consequences of termination for breach of contract by any of the parties; termination for convenience by the customer and compensation to the supplier; protection of IP rights (with particular challenges where a joint venture is being used in the context of the outsourcing project); transfer of assets; employment aspects (with special complexities in the case of transferring workers); control and management of changes on the service requirements; governance; and, resolution of conflicts procedures, etc.

Finally, from the perspective of the enforcement of the agreements where disputes arise and cannot be solved by the parties, given the highly complex and sectorspecific nature of the legal issues mentioned above together with the international nature of some of the legal concepts typically used and the technical matters implied in IT outsourcing projects, escalation clauses (including mediation and arbitration) become options to be seriously considered.

The advantages and disadvantages of such dispute resolution mechanisms in comparison with those of the submission to courts must be carefully assessed (an assessment that needs to be done on case-bycase basis in light of the particular features and circumstances of the specific outsourcing project and the companies involved).

Outsourcing sales are complex and often conducted in a competitive and highpressure environment. Sales people have admirable skills in bringing the customer and their organisation together. The best are invaluable. However, a recent case in the English High Court exposed what happens when sales people go off-piste.

BSkyB’s victory over EDS provided a case study of the worst dangers in selling something you cannot deliver. There is also new UK law in the form of the UK Bribery Act to look out for, which has serious implications for organisations who do not manage procurement and sales risk effectively.

EDS lost its £710m legal battle with BSkyB over the failed implementation of a new customer relationship management (CRM) system. BSkyB claimed that EDS’ salesmen fraudulently misrepresented what EDS could deliver and by when. Fraudulent misrepresentation is the gloves-off approach to suing a supplier. It is a claim that the supplier lied to get the customer to sign a contract. Under English law, a fraudulent supplier is denied any limitation of liability and therefore a disappointed customer can bring financial claims and leave a supplier with a hole in its books and damaged reputation. Organisations accused of fraud find it psychologically hard to settle such claims and are often forced to fight all the way.

In the EDS case, BSkyB threw the book at EDS but won on a single point - milestones.

EDS’ sales lead promised EDS would meet delivery deadlines but failed to assess whether the quoted timescales were achievable. The Court found he dishonestly intended BSkyB to select EDS on the back of those timescales. EDS’ case was not helped by their salesman being dramatically exposed in Court lying about his qualifications. The finding of fraudulent misrepresentation rendered the £30m liability cap in the agreement useless, exposing EDS to potentially unlimited liability. The case was eventually settled at a reported £318m.

Claims for misrepresentation are not uncommon in outsourcing disputes, even if alleging fraud is an aggressive move. More generally, every dispute over broken promises creates the potential for deterioration in margin or value resulting in significant effort to recover the situation.

Suppliers simply cannot afford frequent disputes and litigation has a tangible effect on long-term profitability, reputation and future sales opportunity. Added pressure comes from customers wanting contractual comfort that the supplier has adequate resources ready, will be implementing proven technology and established methodology and can deliver on time and on budget.

Key pitch documents may be subject to management review, but it is almost impossible to cover all aspects of the sales process. Yet litigators will examine the whole process if the worst comes to pass and mistakes may become public and embarrassing. Companies cannot afford this to happen. They need their sales teams and management to ensure behaviours are aligned with corporate standards and best practice. All of which now needs greater scrutiny with the coming in to force of the UK Bribery Act. The UK Bribery Act creates four criminal offences. The first three cover, in broad terms, offering bribes, accepting bribes and bribing foreign officials. Penalties can be severe: imprisonment for up to ten years or an unlimited fine and a conviction could lead to a company being disbarred from tendering for public contracts under the EU procurement laws.

Recently, the World Bank blacklisted Macmillan from competing for future contracts in the wake of bribery payments relating to a project in Southern Sudan. This followed a number of long running bribery and corruption scandals involving Siemens and BAE Systems.

However, it is the fourth offence that is attracting most attention from companies,

Paul Barton Partner Field Fisher Waterhouse LLP Tel: +44 (0)20 7861 4708 Email: paul.barton@ffw.com

UK

Managing legal risk in selling outsourcing deals

because of the organisational changes it requires. Commercial organisations will be guilty of an offence if they fail to prevent persons associated with them from bribing another person on their behalf. Because it is a defence to show that adequate procedures were in place to prevent bribery being committed, organisations need to properly understand the extent of this new law and ensure that their procedures are aligned to it. Companies can expect to be measured on whether they have sufficient procedures to cover any activity, even hospitality, which may affect decision making in relation to outsourcing sales opportunities.

The BSkyB case and the ramifications of the UK Bribery Act remind us of what can happen if sales activity in outsourcing deals crosses the line. A clear understanding of where the boundaries lie and a culture of adopting best practice, strong processes and professionalism should mitigate against exceptional and reckless behaviour. As can be seen, there are significant risks when boundaries are crossed and these boundaries have been crossed in the past and are still being crossed by reputable international companies. It is no longer enough to discipline the odd salesman to encourage the right behaviour in others. Failing to institutionalise the right approach will leave companies exposed and it will not take many such exposures to radically affect the financial standing, reputation and future success of an outsourcing service provider.

October 2011 • GBM • 27

outsourcing roundtaBle

UK & IR EL AN D

Arvato UK & Ireland Matthias Mierisch Chairman and CEO Tel: +44 844 846 0800 info@arvato.co.uk www.arvato.co.uk

Innovation in outsourcing can unlock future business growth Innovation is often the ultimate desired outcome of outsourcing. This is particularly true within ambitious organisations that are striving to expand. But what do people really mean when they talk of innovation in outsourcing? How can it be delivered? And is there a way to quantify innovation and measure its impact?

The key to success is to define innovation clearly within the context of your business.

Ultimately, innovation needs to be based on an identified need. New concepts need to be supported by purpose for them to function in reality. Consider your primary objective: do you want to generate new revenue opportunities, uncover the next new thing, or capitalise on changing market dynamics? All of these examples have a common denominator - they are all focused on an end result that will add value to a client and benefit their customers. For example, the introduction of a new portal accessible via mobile devices may reduce customer service costs, but it could also revolutionise customer experience and increase loyalty, ultimately

resulting in revenue growth.

Cost will undoubtedly remain a key driver for outsourcing, but for smart organisations, it’s increasingly about adapting for the long-term and facilitating growth.

These innovators want to transform their organisation for the better - to increase competitive advantage through greater speed and flexibility or improve quality of service to their customers.

A collaborative culture creates an environment where people listen and ideas are considered and discussed. Employees, who may have worked in an organisation for years with a very established routine, can suddenly come up with revolutionary ideas if properly facilitated. Equally, an outsourcing partner that has established a deep understanding of an organisation will be able to provide an external viewpoint that may uncover potential opportunities for growth.

Risk aversion can block transformation, but a partnership based on trust, long-term commitment and shared reward creates more of a willingness to explore change. A collaborative governance model provides a level of comfort and control, helps turn ideas into action, and creates a mechanism to track and evaluate success.

Measuring innovation ultimately depends on the motivation driving the change. From the outset, it’s vitally important to agree on precisely what success looks like.

For some, this is about regular communication, measurement and reporting, but for others it can come down to something as simple as gut feeling.

While innovation isn’t a magic bullet, the behaviour and endeavour it represents can often be the missing piece in successful outsourcing relationships. Make no mistake - transformational innovation isn’t for everyone. But, a clear rationale and definition, combined with a partnership based on trust, can turn innovators into leaders.

28 • GBM • October 2011

success stories

success

stories

Mark Zuckerberg: Networking King Some have called him a boy genius—Time Magazine named him person of the year in 2010, others simply know him as the guy who created Facebook. But unlike the founder of MySpace, Tom Phillips, what Zuckerberg created in his college dorm room at the tender age of 19, was nothing short of a worldwide phenomenon that changed the way people and businesses interact forever.

Growing Up Born to well-off Jewish parents, Karen and Edward Zuckerberg, in the suburb of White Plains, New York, Mark was raised in the trendy village of Dobbs Ferry, New York. But don’t let his upper class upbringing fool you: Zuckerberg excelled in his studies at Phillips Exeter Academy. Along with his three sister, Randi, Donna and Arielle (Randi worked for Facebook at one point) they won numerous prizes for science, math and other subject throughout middle school and high school years.

Known as “Zuck” to his friends and family, he developed a fondness for communications and computers early on. When he was 12 years old, he developed a messaging system with Atari BASIC, which his father, a dentist, used regularly in his practice. He graduated high school with a focus on literary classics and enrolled in Harvard in 2002.

The Concept of Facebook Obviously Harvard has and is known for cultivating great talents born out of great individuals. Poet Ralph Waldo Emerson, President Barack Obama, businessman Bill Gates and cellist Yo Yo Ma are among the many Harvard graduates that have gone on to become leaders and innovators. For Zuckerberg, graduation was too far away to become a success and a leader of the networking industry. It was during his sophomore year at Harvard when he created Facebook; the social networking site that now connects over 550 million people worldwide.

While the movie, The Social Network, may have made Zuckerberg out to be a greedy, introverted kid, the reality of that story was

far from the truth. There was some confusion about the initial concept of who created the basic idea of Facebook while Zuckerberg was at school, but until his company became well-known, nothing was said about his creation. As Zuckerberg stated in many interviews from the New York Times to the Atlantic Wire, he wanted to be mature about the situation and settled with an out-ofcourt payment to appease those who may have been involved in Facebook’s inception.

Ultimately, it is clear that only Mark could take Facebook to the heights he had planned for it to be.

Who is the man/boy really? He is modest, dresses in jeans and t-shirts most days and rents out a small home near fellow Harvard dropout, Steve Jobs. He talks quickly, gets excited about anything to do with technology and is, above all, highly creative. He has a tight-knit family, a close group of friends and desires fervently to further the success of his company rather than himself.

Facebook started as a connection for Harvard-only students. It then grew to allow all Ivy League schools. When Facebook received a huge investment of $12.7 million dollars from a capital firm named Accel Partners, he decided to take the company to the next level. He moved his operation to Palo Alto, California –also known as Silicone Valley. Soon after, he decided to not go back to his Ivy League education, and instead devoted his time to creating a social network that is now worth more than $50 billion dollars.

Zuckerberg’s Present

$6.9 billion. Fortune 500 companies like Viacom and Yahoo both have offered deals in the billions to acquire his concept. But Zuckerberg is sticking to his guns, working to constantly improve the site, making it easier for people to share messages, photos, videos, updates, play games, and more.

While most companies at this point in its obviously wild success would be turned to a public company, Zuckerberg has kept it private to maintain the most control on decisions regarding the site and the service.

There has been discussion of Facebook becoming a publicly traded company, but for now, those thoughts are a couple of years away.

The Future While Zuckerberg had his hands full in the past turning down offers and tightening Facebook’s privacy issues, the future of Facebook is somewhat hazy. As he states, “I am here to build something for the long term. Anything else is a distraction.” It may seem to some that Facebook has reached its pinnacle, that being the youngest, the biggest and the best networking site in the world means you have achieved it all. However, “Zuck” isn’t done yet. Just as Steve Jobs’ continued to reinvent the proverbial wheel with Apple computers, the iPod and the iPhone, Facebook may very well be the start of a conglomeration of ideas that Zuckerberg plans to share with the world. With a near-perfect score on his SATs, that alone should tell you that the inner-workings of Zuckerberg’s mind are far from resting.

As the world’s youngest billionaire, his personal net worth is approximately

October 2011 • GBM • 29

germany and eastern europe drive sustained recruitment groWth

germany and eastern europe drive sustained recruitment growth, reports monster employment index europe

30 • GBM • October 2011

August 2011 Index Highlights: •

The Monster Employment Index Europe exhibits 21 percent annual growth in August, maintaining last month’s trend

•

Industrial production continues to lead in the Index in August

•

All industries continue to exhibit positive annual growth except public sector, defence, community

•

Craft and related workers continue its lead with the strongest growth of all occupations for the fifth consecutive month

•

Germany continues to drive the highest growth across the EU, while the Netherlands notes a slight easing

The Monster Employment Index Europe is a monthly gauge of online job demand based on a real-time review of millions of employer job opportunities culled from a large representative selection of career web sites and online job listings across Europe. The Index does not reflect the trend of any one advertiser or source, but is an aggregate measure of the change in job listings across the industry.

“Strong double-digit growth trends in Germany, France and Sweden have driven the notable 21 percent increase in year-over-year growth for Europe,” commented Alan Townsend, Vice President of Sales Readiness and Business Operations for Monster Europe. “Employers, particularly in the public sector and banking/ finance, continue to remain cautious but in general are still hiring for critical positions across all occupational groups.”

Monster Employment Index Europe

Monster Employment Index Europe results for the past 18 Monster Employment Index Europe forforthe months are as follows: Monster Employment Indexresults Europe results the past past 1818 months are as follows: months are as follows: Mar

Apr 10 Jul

May Jun 10 Aug 10

Jul Aug 10 10 Sep

Sep

Dec

Mar

Apr May 11 Mar 11

Jun 11 Apr

Aug Jul 11May 11

Y-O-Y

May 10

Jun10 10104

104

108

112

114 115 115 117 122 122 122 116 125 131 136 135 140 Industry Year-over-year Trends: 23 of the 24 industry sectors monitored by the Index in August exhibited positive annual growth trends.

112

10114

115 10

115

122 10 122

10 Dec 122 10

Jan Feb 11Jan 11

Apr 10

108 10

10 Oct 117 10

Oct Nov 10 Nov 10

Mar 10

11611 125

11 Feb 131 11

136

11135

140 11

13911 139

Jun 21% 11

Jul 11

A 1

139

1

Lowest Growth Industries

Top Growth Industries

• Production, manufacturing maintenance and repair (up 42 percent) was this month’s star performer by measure ofAug annual Aug growth where ongoing escalation has Aug been Aug strongest for % % Industry Industry 10 10 11 Eastern Europe 11 Germany, as well as throughout

Production, manufacturing, 190 269 42% Accounting, audit, taxes 98 7% Lowest Growth92 Industries maintenance, repair Transport post and logistics (up 40 percent) slipped back to second position by measure of Top Growth •Industries Transport, post and Arts, entertainment, sports,

138however 193 40% 107level 113of demand 6% annual growth in August, the current leisure rate still reflects a high logistics across this sector Engineering 119 167 40% Legal 112 117 4% Aug Aug Aug Aug % Telecommunication 78 109 40% Banking, finance, insurance 87 88 1% Industry • Engineering (up Industry and Telecommunication (up 40 percent) also reported10 10 40 percent) 11 11 Public sector, defence, continued strong growth ranked top for the professional85services in Hospitality and tourismannual191 247 and 29% 81 segment -5% community Production, manufacturing, August 190 269 42% Accounting, audit, taxes 92 98 maintenance, repair • Public sector, defence, community (down fi ve percent) was the only industry to report Transport, post and Arts, entertainment, sports, 138 in August 193 in a 40% 113 decline in activity continued response to cutbacks in this sector 107 logistics leisure

Top Growth Occupations

Engineering

119

Telecommunication Hospitality and

Occupation

78

Craft and related trades workers tourism Plant and machine 191

167

Aug 10910

Aug 11

163

242

247

Lowest Growth Occupations

40% 40%

Legal

%

48%

29%

Occupation

Banking, finance,

112

%

7%

6%

117

4%

88 October 201187 • GBM • 31

1%

Aug Aug 10 11 insurance

Skilled agricultural, forestry 174 and fishery workers Public sector, defence, Technicians and associate

205

%

18%

85

81

-5%

Monster Employment Index Europe results for the past 18 months are as follows: Mar 10

Apr 10

May 10

Jun 10

Jul 10

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Jan 11

Feb 11

Mar 11

Apr 11

May 11

Jun 11

Jul 11

Aug 11

Y-O-Y

104

108

112

114

115

115

117

122

122

122

116

125

131

136

135

140

139

139

21%

germany and eastern europe drive sustained recruitment groWth Lowest Growth Industries

Top Growth Industries Top Growth Industries

Industry Production, manufacturing, maintenance, repair Transport, post and logistics

Lowest Growth Industries

Aug 10

Aug 11

%

190

269

42%

Aug 10

Aug 11

%

Accounting, audit, taxes

92

98

7%

107

113

6%

Industry

138

193

40%

Arts, entertainment, sports, leisure

Engineering

119

167

40%

Legal

112

117

4%

Telecommunication

78

109

40%

Banking, finance, insurance

87

88

1%

Hospitality and tourism

191

247

29%

Public sector, defence, community

85

81

-5%

Occupation Year-over-year Trends: All nine occupational groups monitored by the Index in August continued to exhibit positive annual growth.

• Craft and related trades workers (up 48 percent) maintained a steady lead and matched its Top Growth Occupations Growth Occupations rate of annual growth in July, followed by PlantLowest and machine operators and assemblers (up 24 percent), suggesting relative stability in underlying demand drivers, mirroring the Aug Aug Aug Aug % % overarching trends seen in the manufacturing and related sectors Occupation Occupation 10 10 11 11 Skilled agricultural, forestry

Craft and related trades

174in August 205 18% 163 continued 242 48% •workers Managers (up 14 percent) to register and increased annual growth with fishery workers an and increase Professionals Plant machineof two percent on last month’s rate, while Technicians and associate (up 14 percent) grew at a 100 124 24% 110 125 14% operators, assemblers professionals slowerand than average pace Elementary occupations

164

202

23%

Managers

101

115

• Elementary occupations (up 23 percent) edged up among occupational groups, claiming third place among groups by measure of annual growth

32 • GBM • October 2011

14%

Industry Production, manufacturing, maintenance, repair Transport, post and logistics

Aug 10

Aug 11

%

190

269

42% 40%

138

193

Aug 10

Aug 11

%

Accounting, audit, taxes

92

98

7%

Arts, entertainment, sports, leisure

107

113

6%

Industry

Engineering

119

167

40%

Legal

112

117

4%

Telecommunication

78

109

40%

Banking, finance, insurance

87

88

1%

Hospitality and tourism

191

247

29%

Public sector, defence, community

85

81

-5%

Top Growth Occupations

Occupation Craft and related trades workers Plant and machine operators, and assemblers Elementary occupations

Aug 10

About The Monster Employment Index Europe

Lowest Growth Occupations

Top Growth Occupations

Lowest Growth Occupations

Aug 11

Occupation

%

163

242

48%

100

124

24%

164

202

23%

Skilled agricultural, forestry and fishery workers Technicians and associate professionals Managers

Aug 10

Aug 11

%

174

205

18%

110

125

14%

101

115

14%

The full monthly Monster Employment Index reports for Belgium, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom will be made available on Tuesday, 13th September at 06:00 CET at: aboutmonster.com/employment/index/17.

Data for the month of September 2011 will be released on October 7, 2011.

By Region

By Region

By Region Region Region

Belgium Belgium France France Germany Germany Italy Italy Netherlands Netherlands Sweden Sweden United Kingdom United Kingdom

Aug Aug 10 10 105 105 116 116 124 124 132 132 91 91 123 123 130 130

Sep Sep 10 10 106 106 116 116 128 128 127 127 86 86 134 134 131 131

Oct Oct 10 10 108 108 135 135 131 131 134 134 90 90 140 140 138 138

Accounting, audit, taxes Accounting, audit, taxes Administrative, organisation Administrative, organisation Agriculture, fishing and forestry Agriculture, fishing and forestry Arts, entertainment, sports, leisure Arts, entertainment, sports, leisure Automotive Automotive Banking, finance, insurance Banking, finance, insurance Construction and extraction Construction and extraction Education, training and library Education, training and library Engineering Engineering Environment, architecture and Environment, architecture and urbanism urbanism Healthcare, social work Healthcare, social work Hospitality and tourism Hospitality and tourism HR HR IT IT Legal Legal Management and consulting Management and consulting Marketing, PR and media Marketing, PR and media Production, manufacturing, Production, manufacturing, maintenance, repair maintenance, repair Public sector, defence, community Public sector, defence, community Real estate Real estate Research and development Research and development Sales Sales Telecommunications Telecommunications Transport, post and logistics Transport, post and logistics

Aug Aug 10 10 92 92 94 94 114 114 107 107 117 117 87 87 125 125 180 180 119 119 87 87 551 551 191 191 85 85 88 88 112 112 105 105 127 127 190 190 85 85 102 102 105 105 100 100 78 78 138 138

Sep Sep 10 10 91 91 94 94 104 104 104 104 106 106 85 85 126 126 183 183 122 122 97 97 594 594 215 215 85 85 89 89 117 117 107 107 128 128 200 200 85 85 94 94 105 105 102 102 82 82 143 143

Oct Oct 10 10 94 94 98 98 116 116 107 107 107 107 87 87 126 126 199 199 128 128 95 95 600 600 217 217 87 87 92 92 117 117 109 109 133 133 208 208 89 89 102 102 109 109 105 105 89 89 150 150

Jan Jan 11 11 101 101 124 124 133 133 135 135 89 89 143 143 128 128

Feb Feb 11 11 113 113 136 136 139 139 134 134 90 90 163 163 139 139

Mar Mar 11 11 120 120 138 138 151 151 145 145 95 95 161 161 137 137

Apr Apr 11 11 125 125 146 146 159 159 147 147 97 97 167 167 138 138

May May 11 11 119 119 144 144 158 158 145 145 98 98 170 170 136 136

Jun Jun 11 11 118 118 150 150 164 164 142 142 97 97 161 161 141 141

Jul Jul 11 11 113 113 148 148 166 166 148 148 96 96 149 149 140 140

Aug Aug 11 11 109 109 139 139 172 172 140 140 92 92 146 146 138 138

Y-O-Y Y-O-Y GROWTH GROWTH 4% 4% 20% 20% 39% 39% 6% 6% 1% 1% 19% 19% 6% 6%

Nov Nov 10 10 92 92 98 98 112 112 104 104 113 113 85 85 126 126 207 207 130 130 99 99 572 572 221 221 86 86 94 94 118 118 111 111 131 131 212 212 88 88 100 100 111 111 103 103 88 88 150 150

Dec Dec 10 10 92 92 97 97 101 101 108 108 109 109 84 84 122 122 215 215 134 134 98 98 576 576 212 212 88 88 94 94 118 118 109 109 136 136 209 209 87 87 103 103 111 111 103 103 88 88 151 151

Jan Jan 11 11 91 91 95 95 90 90 105 105 101 101 80 80 113 113 192 192 130 130 91 91 575 575 195 195 85 85 93 93 111 111 109 109 131 131 200 200 81 81 104 104 107 107 97 97 86 86 144 144

Feb Feb 11 11 93 93 102 102 109 109 106 106 113 113 83 83 122 122 211 211 143 143 93 93 612 612 217 217 90 90 97 97 121 121 109 109 136 136 218 218 84 84 111 111 115 115 106 106 97 97 150 150

Mar Mar 11 11 99 99 107 107 125 125 111 111 117 117 88 88 129 129 200 200 152 152 95 95 635 635 243 243 93 93 100 100 121 121 113 113 144 144 238 238 87 87 122 122 118 118 107 107 99 99 162 162

Apr Apr 11 11 102 102 107 107 131 131 112 112 122 122 91 91 134 134 215 215 163 163 102 102 628 628 257 257 95 95 101 101 121 121 115 115 149 149 251 251 84 84 130 130 122 122 108 108 112 112 176 176

May May 11 11 101 101 108 108 130 130 113 113 125 125 88 88 135 135 218 218 157 157 96 96 623 623 257 257 95 95 100 100 118 118 111 111 143 143 248 248 82 82 126 126 121 121 107 107 113 113 182 182

Jun Jun 11 11 102 102 112 112 140 140 119 119 135 135 86 86 141 141 233 233 161 161 103 103 640 640 256 256 96 96 104 104 119 119 115 115 149 149 259 259 83 83 123 123 123 123 112 112 102 102 190 190

Jul Jul 11 11 101 101 109 109 134 134 116 116 126 126 89 89 140 140 218 218 164 164 102 102 633 633 244 244 95 95 103 103 117 117 114 114 147 147 264 264 81 81 121 121 121 121 110 110 105 105 195 195

Aug Aug 11 11 98 98 112 112 133 133 113 113 132 132 88 88 144 144 208 208 167 167 102 102 624 624 247 247 95 95 101 101 117 117 114 114 148 148 269 269 81 81 120 120 120 120 109 109 109 109 193 193

Y-O-Y Y-O-Y GROWTH GROWTH 7% 7% 19% 19% 17% 17% 6% 6% 13% 13% 1% 1% 15% 15% 16% 16% 40% 40% 17% 17% 13% 13% 29% 29% 12% 12% 15% 15% 4% 4% 9% 9% 17% 17% 42% 42% -5% -5% 18% 18% 14% 14% 9% 9% 40% 40% 40% 40%

Mar 11

Apr 11

May 11

Jun 11

Jul 11

Aug 11

Y-O-Y GROWTH

By Occupation

By Occupation Occupation

Dec Dec 10 10 110 110 134 134 134 134 152 152 92 92 152 152 133 133

By Industry

By Industry

By Industry Industry Industry

Nov Nov 10 10 110 110 133 133 135 135 148 148 92 92 150 150 130 130

Aug 10

Sep 10

Oct 10

Nov 10

Dec 10

Jan 11

Feb 11

Managers

101

102

105

103

114

112

113

115

117

113

118

118

115

14%

Professionals

114

116

121

121

122

117

126

131

136

133

137

137

136

19%

Technicians and associate professionals

110

111

116

112

113

108

116

122

123

126

127

124

125

14%

Clerical support workers

121

125

130

128

127

123

133

138

142

143

146

144

147

21%

Service and sales workers

242

257

258

265

260

234

265

286

301

298

311

300

297

23%

Skilled agricultural, forestry and fishery workers

174

159

179

172

153

136

164

189

200

196

220

208

205

18%

Craft and related workers

163

174

181

183

180

172

190

206

220

221

230

236

242

48%

Plant and machine operators, and assemblers

100

101

105

110

108

100

110

119

124

122

129

125

124

24%

Elementary occupations

164

165

165

169

166

153

162

178

187

180

194

195

202

23%

The Monster Employment Index Europe provides monthly insight into online recruitment trends across the European Union. Launched in June 2005 with data from December 2004, the Index is based on a review of millions of employer job opportunities culled from a large, representative selection of corporate career sites and job boards, including Monster. The Monster Employment Index’s underlying data is validated for accuracy by Research America, Inc. – an independent, third-party auditing firm – to ensure that measured national online job recruitment activity is within a margin of error of +/1.05%.

The Index monitors online job opportunities across all European Union member countries.

The monthly reports for Belgium, France, Germany, Italy, the Netherlands, Sweden, the United Kingdom and Europe are available at: http://about-monster.com/ employment/index/17.

About Monster Worldwide Monster Worldwide, Inc. (NYSE: MWW), parent company of Monster, the premier global online employment solution for more than a decade, strives to inspire people to improve their lives. With a local presence in key markets in North America, Europe, and Asia, Monster works for everyone by connecting employers with quality job seekers at all levels and by providing personalised career advice to consumers globally. Through online media sites and services, Monster delivers vast, highly targeted audiences to advertisers.

Monster Worldwide is a member of the S&P 500 index. To learn more about Monster's industry-leading products and services, visit www.monster.com. More information about Monster Worldwide is available at http://about-monster.com.

Special Note: Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Except for historical information contained herein, the statements made in this release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve certain risks and uncertainties, including statements regarding Monster Worldwide, Inc.'s strategic direction, prospects and future results. Certain factors, including factors outside of Monster Worldwide's control, may cause actual results to differ materially from those contained in the forward- looking statements, including economic and other conditions in the markets in which Monster Worldwide operates, risks associated with acquisitions, competition and the other risks discussed in Monster Worldwide's Form 10-K and other filings made with the Securities and Exchange Commission, which discussions are incorporated in this release by reference.

October 2011 • GBM • 33

editors choice domes of elounda

EDITORS CHOICE

Domes of Elounda GREECE

The Domes of Elounda is a fantastic resort on the island of Crete in Greece, located between the villages of Elounda and Plaka.

You will find it hard to find another resort in the Mediterranean with more breath-taking views.

The resort itself is made of villas and suites so not your typical hotel, each villa or suite comes with its own outdoor hot tub or swimming pool.

The service and organisation of the resort is second to none, from check in to check out they will make you

34 • GBM • October 2011

feel at home and everything will run smoothly.

The staff at the resort take the saying of ‘service with a smile’ to another level, you will be constantly greeted by the staff and they will go out their way to make your holiday that much more special. The service can only be compared to some of the luxury resorts found on the exclusive islands of South East Asia, a region renowned for service.

All in all this is an exceptional resort from top to bottom.

Domes of Elounda Domes reinvents Elounda, restoring its lost principal of exclusivity. The essence of the Mediterranean, the culture, the cuisine, the temperament, the architecture, are holistically captured in the form of a luxury resort consisting for the first time of only suites & villas that provide a small number of exclusive guests with all the amenities of a resort, while offering an abundance of living space, privacy and extraordinary service.

Minimally interfering with the natural habitat and harmonically blended with their surroundings, domed structures with breathtaking ocean views emerge from the ground.

Respecting its natural contours and creating a Mediterranean settlement on a hillside of flower gardens, stone pathways, and olive groves just a stone’s throw away from the Venetian castle on the island of Spinalonga, the setting for Victoria Hislop’s bestselling novel “The Island”...

It is all is part of our new design inviting the senses to feast on sights, scents and Thomas Kostopoulos Reservations Manger +30 2310 810624 +30 2310 810634 info@domesofelounda.com www.domesofelounda.com

tastes from the rich outdoors through large windows, and spacious verandas that capture sea breezes and provide the perfect setting for the ultimate fantasy getaway. We invite you to experience... Domes of Elounda.

Honeymoon In this special time of your life, let us make your honeymoon in Greece a time to remember. Domes of Elounda honeymoon resort specializes in creating the honeymoon of your dreams. Located in Elounda, Crete, one of the most exclusive romantic destinations of the world, let us cater to your needs while you immerse yourself in luxury and celebrate your love.

Whether you plan on relaxing in your honeymoon suite by your personal pool, soaking in the sun on our sandy beach by the crystal blue waters of the Mediterranean, or self-indulging at the Domes spa we have ensured that your honeymoon in Greece will be more than you ever imagined!

luxury Brand series – safari destinations

Luxury Brand Series

Safari Destinations

The Leading Safari Resorts of the World

36 • GBM • October 2011

The Safari Collection East Africa Welcome to The Safari Collection, a portfolio of East Africa’s finest destinations. Each of the camps and lodges in our collection offer an exceptional experience, extending a unique and personal hosted stay, in the best location of their area.

Giraffe Manor Giraffe Manor is one of Nairobi’s most iconic historical buildings dating back to the 1930s and is reminiscent of the early days of Europeans in East Africa.

Leleshwa Camp The camp design projects elegance and style in a relaxed environment and blends in harmoniously with the majestic landscape.

Guests are hosted by the owners for whom camp is home and we aspire to offer you a truly authentic African Safari experience.

Sala’s Camp Sala’s camp has the good fortune to be located on the convergence of two rivers, and in the heart of the Masai Mara. This secluded spot, offers tranquillity, and tremendous views over the Sand River towards Tanzania and the Serengeti. From your tents you will be able to enjoy an abundance of birdlife and wildlife and the indigenous environment.

During the Great Wildebeest Migration in the months of July to September, Sala’s Camp is extremely well located as many of the animals move back from the Serengeti in search of lush grasslands in the Mara. The game viewing during this time is exceptional, with dramatic river crossings, and plentiful predators.

Sasaab Lodge

in area allowing for enormous open air bathrooms and huge comfortable beds.

Couple this with expansive views and a cooling plunge pool, and you have the perfect formula.

the landscape which is framed by Mount Kenya. Each room has a private lounge area warmed by a corner fire, as well as large bathrooms with double sink, bath and shower.

Solio Lodge

Majestically situated on the high banks of the Ewaso Nyiro River (Kenya’s third largest watercourse), Sasaab commands breathtaking views across the arid landscape of the Northern Frontier District towards the jagged peak of Mt Kenya, and offers a truly exceptional safari experience in an area renowned for its variant species.

Nestled in the valley between the dramatic slopes of Mount Kenya and the rolling peaks of the Aberdare Mountains, Solio Lodge is our newest property which opened in August 2010.The Lodge is located on the Solio Reserve, which part of a private ranch, and is home to a diverse and numerous population of wildlife, including both black and white rhino.

Sasaab’s design is based on strong Moroccan principles, in which African heat is a central consideration. Each room is over 100m²

The lodge has just six cosy and luxurious rooms, each ensuite with large glass pane windows to take in the panoramic views of

The Safari Collection info@thesafaricollection.com Phone: +254 (020) 502 0888 Phone: +254 (0)725 675 830 Phone: +254 (0)731 914 732

October 2011 • GBM • 37

Luxury Brand Series – Safari Destinations

SYNA Tiger Resort Bandhavgarh, Madhya Pradesh, India Take the friendliest attributes of a hospitable country and drop them on one of the most beautiful forests in the continent, and you get Syna Tiger Resort at Bandhavgarh National Park.

Nestling in the natural beauty of the wilds, The Syna Resort is the ultimate luxury jungle resort right on the edge of Bandhavgarh National Park. The perfect base from where one can explore the territory of the majestic Royal Bengal tiger.

The resort setting is picture-perfect with an azure plunge pool surrounded by fifteen tastefully appointed luxury cottages with modern amenities, network connectivity and private walled gardens, striking the perfect balance between luxury and serenity. The more adventurous can opt for our signature tree-house to get closer to nature.

An essential stop on any serious tiger safari, Bandhavgarh is renowned for one of India’s highest concentrations of the magnificent cat. A relatively small park with a thriving tiger population, it offers guests a great chance of encountering the king of the jungle, as well as a wide selection of other exotic wildlife.

Cradled between the picturesque Vindhya and Satpura mountain ranges, Bandhavgarh boasts a breathtaking mixture of dense green valleys and rocky hills. Mixed deciduous forests and woodlands are interspersed with flat grasslands and serene waterholes. A network of spring-fed gurgling streams provides water source for the park’s wildlife. The stealthy leopard, gentle spotted chital deer, four-horned chousingha antelope, wild boar, sloth bear and jungle cat are only some of the animals that inhabit this beautiful nature reserve.

The park is also home to more than 250 colorful bird species. The main bird species spotted here are white browed fantails, steppe eagles, green pigeons, grey malabar hornbills, black and white malabar hornbills, blossom headed parakeets, parakeets, blue bearded bee eaters, green bee eaters, white bellied drongos, owls, jerdon's and gold fronted leaf birds, minivets, woodshrikes and the lovely paradise flycatchers.

Set out in a private 4x4 SUV with a specialist birding ranger to enjoy the varied bird species found in the park. This specialist safari is available during the dry seasons. We have been able to identify as many as 90 bird species in and around our property itself. Syna has over 3 kilometers earmarked for bird walks on the land and separate tracks for cycling.

Rising abruptly from the plains, the highest hill in the park is topped by the ruins of the ancient Bandhavgarh Fort. Gazing majestically over captivating views of the entire reserve from its perch atop a steep cliff, the fort is accessible by an old pilgrim path.

Halfway up the hill, a massive reclining statue of Lord Vishnu, god of wealth and wellbeing, lies in the shade of dense evergreen trees, with an underground spring bubbling to life at the statue’s feet. Vultures, blue rock thrushes and crag martins nest among the crumbling ramparts of the old fort.

Bandhavgarh offers a humid sub tropical climate, with large temperature swings between the seasons. Much like a continental climate, winters are dry with occasional sub-zero readings. Summers are mostly uncomfortable and the mercury could veer close to 113°F.

38 • GBM • October 2011

In between come unpredictable showers, moderating the sweltering heat, turning the foliage lush green. The park is kept closed and allowed to rejuvenate, undisturbed in the peak monsoon, between July and October every year.

We can design special programs for guests interested in wildlife photography or indeed for those with an evolved scientific interest in wildlife conservation. The tour is designed for outstanding wildlife watching & recording experience, by an established wildlife photographer, keeping photography in mind but not necessarily only for snappers. An expert ranger specializing in spotting can take you in a safari vehicle,tracking your specific 'wish list' of photographic subjects, accompanied by a professional photographer fully conversant with the jungle. Opportunities to watch & photograph not only tigers but a host of other amazing wildlife like langurs, cheetals, sambars, wild boar, jackals and birds etc. are aplenty.

We, at Syna consider ourselves fortunate for being able to contribute in developing the entire community literally right from the grass-roots level. As a confluence of Tourism, Conservation and eco-friendliness, Syna is more than happy to lead by examples. Syna harvests rainwater and recycles waste. Most printed consumable are made from recycled paper. Syna is free of plastic and no chemical is allowed to seep back to the earth, via meticulous water treatment.

Using local produce, employing local people and utilizing locally relevant skills we keep Syna's carbon-footprint minimal.

Ever wondered what's the secret behind the ever happy Indian villager? Discover the joy of simple living in nature-inspired clayhuts, the liveliness of colorful village markets and the cheerful evenings around a sparkling communal kitchen-fire. Enjoy rustic relaxation, sipping sweet Chai from eco-friendly earthen cups. You may even venture to chew on a fragrant paan (betel-nut and sweet spices wrapped in a mouth freshening leaf).

Syna offers a naturally inspiring venue for corporate congregations.

Come and experience how refreshingly new business ideas and decisions crystallize, away from the noisy metros. We offer a fully equipped, modern day “tapovana” (forest of spiritual practice) for holding truly effective training programs. Syna plays a perfect host to banquets and weddings.

A haven for Locavores, Syna uses the freshest local ingredients to rustle up favorite cuisine from across the world. Our Indian spread is amazing and will add to the overall magical experience. Then head to the resort's well stocked watering hole after a sunny day's trek.

Cherish fine wine and spirits from all corners of the globe while the jungle gets dark around you.

Syna's Wildwood Spa is run by a team of therapy professionals. Apart from holistic indigenous treatments the Spa is the perfect destination to let your mind and body relax in tune with the serene surrounding.

SYNA TIGER RESORT Village Tala (Bandhavgarh), Tehsil Manpur, District Umaria Madhya Pradesh, India www.synatigerresort.com marketing@synatigerresort.com synatigerresort@yahoo.com

October 2011 • GBM • 39

Luxury Brand Series – Safari Destinations

Thanda South Africa Winner of the 2010 World Travel Awards as ‘World’s Leading Luxury Lodge’, Thanda Private Game Reserve is situated 23km north of Hluhluwe in northern Zululand, South Africa, and is set on a 14 000-hectare Big Five private game reserve.

Thanda, meaning ‘love’ in Zulu, unites romantic decadence and exclusivity with Zulu culture and wildlife. The nine luxury bush villas at the main lodge have private infinity pools, viewing decks, private salas, lounges, fireplaces and full bathrooms with both indoor and outdoor showers. The individual bomas at each villa offer guests dining privacy. The public facilities at the main lodge include a lounge, library, dining room, boma, dining deck, wine cellar, cigar bar, fully equipped business centre and viewing decks.

The royal private villa can accommodate 10 people, offering accommodation as a unit or five separate suites. Each suite is individually decorated and very private, with own viewing deck. Public facilities at the royal private villa include a boma, library, cellar, business area, heated Olympic-size pool and a magnificent deck overlooking a waterhole.

40 • GBM • October 2011

The tented camp is built in colonial safari style, offering an authentic yet luxurious bush experience in five tents. The luxury tents have viewing decks and en-suite canvass bathrooms. Public facilities at the tented camp include a dining tent, a boma area, and a sala consisting of an ‘open-air’ lounge and a splash pool.

conducted exclusively for Thanda guests on the malaria-free reserve.

The Honeymoon Tent offers a sophisticated mix of romance, privacy and refined comfort in the heart of the African bush. The Honeymoon Tent features a king-sized bed in a spacious bedroom, and a comfortable separate lounge area for relaxation. The honeymoon tent is air conditioned for comfort against KwaZulu-Natal’s humid summers. A highlight of the tent is the outdoor shower and Jacuzzi which has spectacular panoramic views of the 14000-hectare reserve.

PO Box 3854, Dainfern 2055, South Africa +27 (0)11469 5082 +27(0)11 469 5086 reservations@thanda.co.za PO Box 441, Hluhluwe 3960, South Africa +27(0)35 573 1899 +27(0)35 573 1877 lodge@thanda.co.za www.thanda.com

Thanda’s award-winning wellness centre offers treatments such as reflexology, aromatherapy and massages using African essential oils in a base of shea butter and the Africology range.

Safaris in open game viewing vehicles are

Vula Zulu, a traditional homestead adjacent to Thanda is a showcase of traditional Zulu warriors performing age-old dancing rites, as was done prior to and after battle.

Lanzerac Hotel & Spa South Africa Welcome To The Lanzerac Hotel & Spa Set in the heart of a 300-year-old, 155-hectare wine estate on the outskirts of historic Stellenbosch, The Lanzerac Hotel has long been the residence of choice for discerning travellers everywhere. Here, attention to detail is the order of the day and the highest standards of service are maintained as guests simply relax and enjoy the gracious living of a bygone era.

Location: Situated 25 minutes from Cape Town International Airport and 55 minutes from Cape Town’s city centre, The Lanzerac Hotel is ideally positioned for exploring the famous wine estates of the Western Cape. The estate is set far away enough to ensure guests’ privacy, whilst the town’s craft and antique shops, art galleries, museums and restaurants are conveniently located just minutes away.

Dining facilities: guests are offered the choice of three quality restaurants, ranging from casual terrace-style cuisine right through to more formal á la carte dining. As a fitting end to the perfect meal, guests are invited to retire in the evenings to the elegant Craven Lounge with its authentic antiques, where champagne is served courtesy of a champagne bar, followed by a selection of coffees, liqueurs, cognacs and cigars.

Leisure facilities: In addition to spectacular sightseeing opportunities, The Lanzerac Hotel offers guests three outdoor pools, room service, nearby golfing, hiking, and mountain biking facilities, as well as cellar tours, wine tasting, plus the chance to purchase wine directly from The Lanzerac Estate. The Spa offer a range of treatments, hydrotherapy facilities and the incredible Dr. Fish.

Guest rooms: Forty-eight luxurious en-suite bedrooms and suites help The Lanzerac Hotel maintain its air of intimacy, and guests’ every need is catered for with private bath and separate shower, international direct dial telephone, electric safe, a mini bar, DSTV, and air-conditioning. Classic decorating and genuine antiques perfectly complement the authentic Cape Dutch architecture, whilst every room opens out onto a private patio with views over landscaped gardens, lush vineyards and the majestic Helderberg mountains.

Spa & Wellness: Treatments at the world-class Lanzerac Spa & Wellness Center take place against a stunning backdrop of mountains and vineyards, ensuring you leave feeling relaxed and rejuvenated.

The spa has recently added the revolutionary “Dr.Fish” Therapy to its repertoire, where tiny fish are utilized to exfoliate the skin and give it a micro-massage.

Lanzerac Hotel & Spa Stellenbosch Tel: +27 21 887 1132 Fax: +27 21 887 1941 info@lanzerac.co.za www.lanzerac.co.za 1 Lanzerac Road, Stellenbosch, 7600

October 2011 • GBM • 41

technology revieW - laptops

Technology LAPTOPS Apple Macbook Pro The Macbook Pro is first on our review list, and as ever, it’s an expensive option. Pricing starts at £999 for the 13” version. The 15” version will set you back £1549, and the stunning 17” version an eye-watering £2099. The different Macbook models vary in processor speed depending on the screen size you choose, from dual core 2.3Ghz Intel i7 processor through to the 15” and 17” versions which are fitted with quad core i7s. If you need lots of processing power you may find that the improvement between dual core and quad core is worth paying for, but for home users it’s unlikely you’ll feel the benefit. There is something to be said for future-proofing your purchase, but other than that, you may find your money is best spent on other ugrades.

All Macbook Pros are factory fitted with 4GB or 8GB RAM. 4GB is likely to be enough for home users, but again, if you’re planning to use demanding software, such as Adobe Photoshop, After Effects or Premiere, the increase in RAM is likely to make a real difference to the

HP ENVY 17-1195ea The HP ENVY 17-1195ea laptop is certainly stunning to look at, with a brushed aluminium case.

The sheer size of the screen makes it almost monolithic; 17.3” of high definition Ultra Brightview display, plus the same Intel i7 processor and 4GB memory as the Macbook Pro. For a laptop of this spec it’s surprising not to see 6GB RAM as in the Asus G53JW 15.6” 3D, or even 8GB RAM, but at least this is one of the easier user upgrades.

This HP laptop will catch your eye for more than one reason, though the HP ships with a pair of 3D glasses, which work in the same way as the glasses provided with 3D TVs. Remember, though, that 3D glasses

42 • GBM • October 2011

performance of your machine. In the same way, the slower 5400RPM hard drive in the 13” Macbook Pro may well feel sluggish compared to the 7200RPM drive in the more expensive models, but for most casual users this is unlikely to be an issue. You have the option of upgrading to SSD (solid state flash memory) for your hard drive, a feature that recurs through our reviews. SSDs are still very expensive and unlikely to offer much benefit in a business environment, except in limited circumstances which we’ll talk about later.

Two things to be aware of with these new Macs. Firstly, the battery is not removable. If you’re likely to need more than the estimated 7 hours between charges you may well be stuck; there’s no way you can add a bigger battery or swap your battery over when commuting.

Secondly, previous generations of Mac laptops have had problems with their SuperDrives, and once your Mac has passed the one-year guarantee cut-off these can be expensive to replace. The one huge plus with a Macbook Pro is that business users can now dual-boot Windows XP or Windows 7 alongside OS X, meaning they have all options available to them when choosing software. This combination of the stylish OS X interface with Windows business compatibility means more and more Macbook Pros are appearing in offices that were previously dominated by Dell, HP and Microsoft.

are still a long way off being portable, not to mention stylish.

However, as 3D gaming becomes more popular - thanks in no small part to the Nintendo 3DS console - it will undoubtedly spread to the PC market. If gaming is your thing, there’s probably little else on the market at the moment with 3D capability that can boast the same sheer size and presence.

HP are currently offering the ENVY 17-1195ea with a £100 discount, making it £1499 at RRP. With the price of 3D TV sets dropping rapidly in 2011, you’re unlikely to feel the value in this laptop if you have the option of watching 3D TV in the comfort of your front room. Gamers may feel it’s a worthwhile investment, but they will struggle to play games on the go: while viewing 3D content the battery life drops to under one hour. For business users, there is really little benefit in having a 3D experience, unless you’re planning to create some seriously innovative presentations.

Sony Vaio Z series

Asus G53JW 15.6” 3D

Dell Latitude E6400 XFR

Sony were undoubtedly at the forefront of the netbook revolution with their P-series Vaio line. With the Z series, focus shifts back to the business market with top-ofthe-range solid state technology, Blu-Ray DVD burners and Windows 7 Ultimate as standard issue.

As we mentioned in the Apple Macbook Pro review, it’s unlikely that business users will benefit from a SSD hard drive, unless portability and nippy performance are at the top of the wish-list. The Sony Vaio VPCZ13Z9E/X is at the top of the Vaio Z range with a price that makes the most expensive machines in the Apple shop look positively economical. It’ll set you back a whopping £3129, yet the hard drive capacity only tops out at 256GB. It’s worth considering whether you’re likely to need more in the long run.

The processor varies between Intel i5 and i7 depending on price, and with up to 6GB RAM, 1GB Nvidia graphics, HD output, 3G capability built-in and N speed wireless network adapters, these laptops are really built for performance. With the option of an online upgrade to carbon fibre casing, it’s clear Sony are marketing these laptops squarely at the professional market.

Whether you want to take a gamble on the solid-state drive is very dependent on your business need.

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

Arguably this makes the laptop more portable, although a serious gamer is likely to want the biggest display they can find.

This laptop is a real wild-card in our reviews. You won’t be surprised to hear that this is a business laptop, but with a very specific purpose. The Dell Latitude E6400 XFR boasts Ballistic Armor and sealed ports to keep liquid, sand and dust out of the case. If that hasn’t grabbed your attention, it can be dropped four feet onto concrete and looks like a tank with a carry-handle.

These laptops have been purchased by farmers, farriers and US Marines for their rugged protection against rough handling.

An optional dock allows the laptop to be mounted on a dashboard of a vehicle and the backlit keyboard enables work to continue in the dark. In short, these laptops are designed for environments none of our other laptops would dare to approach.

User feedback on the Latitude E6400 XFR is mixed, though. Shock mounted hard drives have been withdrawn, reportedly due to numerous problems and hardware failures. Instead, Dell now issue solid-state hard drives as standard. In some ways this is a good choice, but older models with shock-mounted drives may well be vulnerable and they are not always replaced under warranty. This is also a heavy laptop, weighing twice as much as some of the other laptops we reviewed, and having a battery life of just four hours. Good news for Arctic explorers, though: Dell will guarantee this laptop will work at -29 degrees celsius, which is a pretty impressive feat.

As with the HP we reviewed, nerdylooking 3D glasses are included, as is a gaming backpack - a real clue as to the audience Acer are looking to attract. The laptop also supports full EAX and THX audio, a technology developed by Creative specifically for a better gaming experience, and something serious players are going to be looking for. Interestingly, the air vents on the case are arranged to encourage air flow away from the user for less distraction.

The Asus G53JW 15.6” 3D is really not a business machine, although there are a limited number of business users who will find use for the advanced audio and video features. The two-year warranty is a nice bonus over the HP laptop’s one-year plan, but really, neither machine is going to be the primary focus for a professional purchase.

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

Our recommendation

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

Apple’s signature wafer-thin creation. This is a direct competitor, make no mistake; the spec sheet reads like an echo. It has a backlit keyboard. It has a multi-touch trackpad. But - and this is quite a marked difference - the Series 9 has an Intel i5 processor, which is actually an improvement on the AIr’s ageing Core 2 Duo, a processor that has now been offered on the Macbook Air for around three years. At 4GB RAM, the memory in the Series 9 is substantial, and works well with the solid-state drive in providing a really slick and speedy machine.

You’ll pay for the upgrades, though. Taking the US RRP as a guide (the UK RRP has not yet been announced), the price is likely to exceed the top-end Macbook Air by a couple of hundred quid.

If you want Windows 7 Professional, Samsung will charge you extra for that too. At least you can say your laptop is made out of Duralumin - usually found in aircraft components.

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

October 2011 • GBM • 43

country profile - australia

great land, great people and great opportunities Australia is a stable, culturally diverse and democratic society with a skilled workforce and a strong, competitive economy. With a population of more than 21 million, Australia is the only nation to govern an entire continent. It is the earth’s biggest island and the sixth-largest country in the world in land area.

Australia has the 14th biggest overall economy in the world and the 9th biggest industrialised economy (2007). Australia is the 15th richest nation in per capita terms, and is the 6th oldest continuously functioning democracy in the world.

Australia’s economy is open and innovative, with a commitment from the Australian Government to maintain the strong economic

Did you know?

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44 • GBM • October 2011

growth that has taken place since the early 1990s. Over the past decade, solid productivity gains have been accompanied by low inflation and interest rates.

Australia is one of the few countries belonging to the Organisation for Economic Co-operation and Development (OECD) where general government net debt has been eliminated. According to the OECD’s 2006 economic summary of Australia, living standards have steadily improved since the start of the 1990s and now surpass those of all the industrialised nations that form the Group of Eight except the United States.

Australian exports, which in 2007 totalled $218 billion, are a mix of minerals and energy, manufacturing, rural products and services.

Australia has a well-developed education system with participation rates among the highest in the world. Each year, Australia welcomes an increasing number of international students, with current figures rating Australia 3rd among English-speaking

countries as a student destination (2007).

The quality of life enjoyed by people in Australia is one of the highest in the world.

Australia’s clean physical environment, health services, education and lifestyle combine to make it an attractive place to live.

Australia’s ancient Indigenous traditions and multiculturalism are reflected in the diverse cultures and forms of artistic talent present in the country.

The Australian flag was raised for the first time in Melbourne on 3 September 1901, following a design competition that drew 32 823 entries. The stars of the Southern Cross represent Australia’s geographic position in the Southern Hemisphere, the large Commonwealth star symbolises the federation of the states and territories and the Union Jack embodies Australia’s early ties to Great Britain.

Source: Australian Government – Department of Foreign Affairs & Trade

Andrew Hudson Partner Hunt & Hunt Lawyers T +61 3 8602 9200 F +61 3 8602 9299 Inbound trade in goods In terms of trade in goods, the importation of goods is subject to levels of restriction that are consistent with those in other developed nations and are conducted in accordance with the provisions that are consistent with WTO Agreements. However, this does not mean that the importation of goods is without risk.

Australia maintains a number of government agencies operating at the border, such as the Australian Customs, Border Protection Service (Customs), the Australian Quarantine, Inspection Service (AQIS) and the Australian Taxation Office (ATO), together with other regulators depending on the nature of the relevant goods. Each of these imposes their own level of regulation and it is important to ensure that the regulations are properly observed as even inadvertent breaches of the law carry penalties or other liabilities.

Inbound financial investment In terms of financial investment, the relevant Australian regulations does impose restrictions on investments and property, shares and assets that are governed by foreign takeover legislation and administered by the Foreign Investment Review Board (FIRB) and the Australian Federal Treasurer.

In addition, there are some areas within the Australian economy where there must be a majority Australian ownership and control.

Relevant government agencies The Federal and state governments have agencies that are tasked to assist trade and investment. The lead agency is the Australian Trade Commission (otherwise known as ‘Austrade’ - www.austrade.gov.au). In addition, state governments operate their own departments to assist with investment in their own states.

The legal services of Hunt & Hunt Hunt & Hunt is flexible and responsive to local requirements and capable enough to support nationally. Across our legal network, we employ approximately 65 partners and 350 professionals who strive to provide the highest-quality legal services available.

Our high standard of service is evidenced by our independent accolades - being named as a finalist in the BRW Client Choice Awards for 2011, featuring in the category of ‘Best provider by the professional services sector’ and in 2010, featuring in the category of ‘Outstanding client care’. Hunt & Hunt was awarded ‘International trade law firm of the year for 2011’ by Finance Monthly (UK) in its Law Awards 2011.

We have also carved out an enviable position in the Australian legal market by positioning our firm at the mid-point on price, and cost-

E ahudson@hunthunt.com.au W www.hunthunt.com.au

consciously delivering premium services to our clients. In doing so, we will assist you to contain your legal costs without compromising results, extending you our most competitive terms.

This offer extends to valued-added services, such as training or development of processes or systems, at no cost to our clients yet which improve how they do business.

Our global reach Interlaw is an established association of 66 independent law firms with 5,000 practitioners across 120 cities. As the only Australian member of Interlaw, Hunt & Hunt is strategically aligned with commercial lawyers in every industrialised country in the world. Interlaw firms provide clients with access to a range of specialities, expertise in local jurisdictions and a roadmap through the legal, cultural and linguistic difficulties that cross-border commercial transactions can involve. For large or complex international transactions, teams of experts from member firms work together to provide a depth of international legal knowledge and experience required.

Specific legal services Hunt & Hunt has a demonstrated sustained commitment to customs, trade and foreign investment law.

Hunt & Hunt provides a comprehensive range of services to those involved in this industry and also has close relationships with complementary service providers, including the Customs, Brokers and Forwarders Council of Australia (CBFCA).

We provide legal and advisory services to importers, exporters, customs brokers, freight forwarders and trade financiers. Our international relationships through Interlaw (www.interlaw.org) enable us to provide assistance across the world in a timely and efficient manner.

We are at the forefront of Australia’s free trade negotiations and are well placed to advise on how free trade agreements (FTAs) and other international conventions and agreements will affect Australian and international organisations.

Hunt & Hunt has good relationships with all associated Commonwealth and state government departments, including the

Department of Foreign Affairs and Trade (DFAT), the Department of Transport and Regional Services, and the Office of Transport Security and Customs.

Additionally, Hunt & Hunt has entered into a strategic alliance with the Australian government’s export and investment promotions agency, Austrade and works closely with the Australian Institute of Export (AIEX). By sharing knowledge and best practice, Hunt & Hunt will be able to provide practical assistance and the latest information to entities that are seeking to export their products, services, to Australia or who wish to invest in Australia.

Our services We provide: advice on the terms of any FTA and corresponding Australian domestic legislation, including Rules of Origin and entry requirements; advice on FIRB requirements for inbound investment; assistance with finding service providers for the carriage of goods to and from overseas markets; tariff and valuation advice; advice on reporting obligations to customs authorities; dumping investigations; advice on aviation and maritime security obligations and insurance; structuring of trade financing; advice on international trade conventions and all manner of related litigation, including arbitration on international sales and shipping contracts; advice on legislative developments and government affairs; advice on charter party, bill of lading and air waybill disputes; advice on the sale and purchase of vessels and aircraft; and, advice on structuring inbound investment and onshore Australian operations.

October 2011 • GBM • 45

country profile - australia

Kepdowrie Chambers Julian Gyngell Principal Tel: +61 (0)2 9988 0067 julian@gyngellslaw.com www.gyngellslaw.com

Protecting and commercialising intellectual property in Australia Julian Gyngell (principal at Kepdowrie Chambers, Sydney, Australia) is a corporate lawyer who, since 1984, has specialised in working with clients operating in a number of complementary (and converging) intellectual property (IP)-rich industry sectors: information and communications technology (IT and ICT) systems and services; telecoms/3G product development and licensing/wireless and mobile content applications; internet-based e-commerce/ebusiness/multi-media solutions; biotech/ pharmaceutical/life sciences; entertainment/ sports and event management; and, franchising/merchandising brands and personalities One of the most important common denominators for companies that operate in these sectors is the protection and commercialisation of their IP. Recognition and protection Australia has a modern and effective IP regime that has been ranked in the top ten in the world (and ahead of countries such as the UK and Japan).

The Australian Designs Act 2003, Trade Marks Act 1995, Copyright Act 1968, Competition and Consumer Act 2010, Plant Breeder’s Rights Act 1994, Circuit Layouts Act 1989 and Patents Act 1990 reflect well over 100 years of statutory and judicial development and refinement of the IP regime. In addition to these statutes, there are common law rights and remedies, including passing off and injurious falsehood. In the context of IP-rich companies, one of the most important of these general law rights is the protection of confidential information, including not only trade secrets/know how, but also business and personal information.

Australia’s IP laws provide a comprehensive system of protection, both for Australian companies and companies in many other countries with which Australia has multilateral and/or bilateral treaties. Australia is a member of important IP treaties, such as the Madrid Protocol, Paris Convention and Patent Cooperation Treaty, which provide a streamlined option for overseas companies seeking protection of their IP rights in Australia.

Because Australia’s IP laws reflect international best practice, companies operating in Australia have the most 46 • GBM • October 2011

comprehensive protection possible for their IP and technology, meaning that they can invest in research and development (R&D), commercialise their technology and develop new products with considerable confidence.

Commercialising IP IP is treated as personal property and can be commercialised in any number of ways, including: in-house use and exploitation developing products and providing services using the company’s IP and leveraging the competitive advantages that necessarily flow from the exclusive rights that are conferred by the statutes and common law referred to above; licensing its IP to other companies, such as under manufacturing agreements, marketing and distribution agreements, thereby earning royalties and licence fees; developing a business model that can be franchised; or assigning its IP to another company and receiving a lump sum payment, perhaps also with ‘trailing’ royalties.

This list is not exclusive and the subtle variations associated with each specific transaction are too numerous to address in a summary. Instead, mention will be made of two specific aspects of commercialising IP in Australia.

M&A transactions IP is the single most valuable asset of many companies, especially those that operate in the technology, pharmaceutical and entertainment industries. However, the reality is that every company owns IP of some description, if only in its business name and/or product names. Companies and businesses of all shapes and sizes will often merge with, acquire, or be acquired by, other companies (M&A transactions).

Due diligence is a crucial function in all M&A transactions. Due diligence in relation to ascertaining the provenance and value of IP is, at best, challenging. Companies involved in M&A transactions in Australia must establish a well thought-through and appropriate due diligence strategy. This will include: conducting relevant searches of databases and registers maintained by IP Australia and other government bodies and regulators; reviewing relevant contracts, in particular with employees, contractors and other companies that were involved in the R&D of the relevant IP; and, conducting

‘clearance searches’ to ascertain whether there may be conflicts with the Australian IP rights of other companies - many companies have set up business in Australia only to find that the IP that they have used in their ‘home’ country for many years cannot be used in Australia because they infringe the rights of a local Australian company.

Undertaking IP due diligence in Australia is made easier by the fact that most databases and registers are well kept and easy to search online. That said, one should not underestimate the challenges of IP due diligence and the importance of tailoring the process to the nature/value of the transaction and the nature of the IP. Franchising The heart-and-soul of most franchise agreements is the IP owned by the franchisor that will be licensed to the franchisee.

Franchising is a regulated industry in Australia and franchisors wishing to appoint franchisees in Australia will need specialist, professional advice. The regulator is the Australian Competition and Consumer Commission and all franchise agreements must comply with the requirements of the Trade Practices (Industry Codes Franchising) Regulations 1998. These Regulations include a Franchising Code of Conduct that requires the preparation of a disclosure document that must meet mandatory minimum disclosure requirements concerning the franchised business.

Compliance with the Regulations and the Code is not unduly onerous provided that one works carefully through the detailed requirements and, most importantly, establishes internal compliance processes and systems. A number of amendments (in favour of franchisees) were made to the Code on 1 July 2010 and therefore franchise agreements and disclosure documents should now be drafted in accordance with these amendments.

The underlying message is that Australia is an excellent option for companies wishing to commercialise their IP and expand their businesses in a democratic, politically and economically stable country.

The learning curve is not significant and the systems available to protect and commercialise IP are well established and robust.

Securing the future: The Australian covered bond regime Interest in covered bonds has exploded around the world in the wake of the market crisis over the past few years. While covered bonds have long been used by European banks as a key funding tool, and more recently by banks in other jurisdictions, up until now Australian banks have been prevented from tapping into this market.

Covered bonds offer investors security unmatched by other debt instruments as they provide investors with full recourse to both the issuer and the cover asset pool. For this reason, covered bonds proved to be one of the most resilient funding sources throughout and following the market turmoil.

The Banking Amendment (Covered Bonds) Bill 2011 was introduced into the Australian parliament on 15 September 2011 to facilitate the issuance of covered bonds by Australian authorised deposit-taking institutions (ADIs). Under the proposed legislation, covered bond issuance is limited to 8% of an ADI’s assets. It is open for this cap to be amended through the regulations. However, until APRA (the Australian banking regulator) becomes

comfortable with the product and its impact on an ADI’s other creditors, the cap is unlikely to be amended. It is also worth noting that, until now, Australian banks have been kept out of the covered bond market because, in APRA’s view, by giving bond holders priority access to a cover pool, a covered bond circumvents the depositor priority regime established by the Banking Act 1959 (Cth).

It was expected, based on discussions between the government and the industry, that Australia would follow the Canadian model of a mandatory senior ranking demand loan. The proposed legislation, however, provides flexibility for either a senior or subordinate ranking demand loan (referable to voluntary over-collateralisation) comparative to payments due to bondholders.

Where an ADI structures its programme with a senior ranking demand loan, it will have the benefit of excluding the assets referable to that senior ranking obligation from the 8% cap.

APRA has also been given the power to direct the special purpose vehicle (SPV) to return assets to the ADI referable to a senior ranking obligation

(other than in respect of swaps and fees for services). This may potentially cause some practical issues with regard to the identification of the assets referable to a senior ranking demand loan and the calculation of the value of such assets.

Further, APRA’s powers are subject to secrecy requirements, which potentially mean that investors will receive no notice that APRA has given any such direction.

Although it is typical for cover pool assets to be only high quality, the types of assets that are eligible for inclusion in the cover pool under the proposed legislation are even more limited than in other jurisdictions. For example, other than substitution assets, the pool is limited to mortgage loans. The proposed legislation also gives value to assets only up to the specified LVR limits (similar to the position under the European directive).

The proposed legislation also requires a cover pool monitor to be appointed to provide some independent oversight of the programme and the cover pool.

Asset monitors for Australian structures must assess the ADI’s compliance with the minimum over-collateralisation requirement of 3% and the keeping of a register of the cover assets and conduct audits on a six-monthly basis, which is a more extensive role than required in typical UK and New Zealand structures.

Smaller ADIs had been lobbying for an aggregated issuance model that relies on the creation of a new limited purpose ADI (like in Norway) and this was contemplated in previous drafts of the legislation; however, it has been removed from the Bill.

The proposed legislation does, however, retain the flexibility for aggregation of individual covered bond programmes through an SPV. This is a missed opportunity that will likely make it extremely difficult for smaller ADIs to access the offshore covered bond market.

The Treasury is anticipating the legislation will be passed later in

Allen & Overy International Capital Markets, Sydney Karolina Popic Partner Tel: +61 2 9373 7791 karolina.popic@allenovery.com www.allenovery.com Sonia Goumenis Partner Tel: +61 2 9373 7802 sonia.goumenis@allenovery. com www.allenovery.com the year (with APRA’s prudential standards to shortly follow) enabling, hopefully, for the first issuance of covered bonds by Australian ADIs in late 2011 or early 2012.

A&O’s covered bond expertise A&O is the global leader in this market and its track record speaks for itself. It advised on the first covered bond programmes in New Zealand, the UK, Greece, Hungary, Italy, Korea and Switzerland and it also acted on the establishment of programmes in Canada, Finland, France, Germany, the Netherlands, Norway, Spain, Sweden and the US. A&O is at the forefront of developments in strategy with extensive experience in both structured and legislative covered bonds and has worked closely with the authorities, issuers and investment banks on the implementation of domestic legislation across both Europe and Australia. A&O’s pre-eminence in this market has been recognised by IFLR 1000 in 2011, which described A&O as “comfortably the best in terms of strength in depth”.

--Our Australian team welcomes the opportunity to meet with you and your team to discuss the issuance of covered bonds and answer any questions you may have.

October 2011 • GBM • 47

country profile - australia

UHY Haines Norton Allen Bolaffi Partner Tel:+61 8 81100999 allen@uhyhn.com.au www.uhyhainesnorton.com.au

Australia: The land of opportunity and proďŹ t - ignore it at your peril Australia today is one of the fastest growing countries in the western world and one of the only countries that did not slide into recession during the global financial crisis. It has a stable government and a strong currency. It has a pressing need for population and skills leading to greater migration.

With Europe in crisis, Australia is a natural magnet for people and businesses. With its resources in demand from China and India, it has a guarantee of future prosperity, and only the brave will ignore this country when considering investment and a footprint in Asia Pacific. In essence, Australia is your insurance policy!

48 • GBM • October 2011

UHY Haines Norton is a specialist provider of services to business and individuals that can see the benefits of having operations in Australia. There are state government incentives too for foreign businesses, and our firm has had great success in assisting migrants and businesses for many years.

quality of work is undertaken by all firms.

Our office is skilled at assisting those companies that require guidance into the Australian markets from migration assistance, capital markets transactions, corporate advisory and the traditional areas of compliance including statutory audit.

For more information please contact Allen Bolaffi, partner, UHY Haines Norton.

The global reach of the Urbach Hacker Young association of firms means that there are no cross border translation issues and the same

We are engaged by our clients because of our attention to detail, our relationships with government agencies and the business community, and the concept of no surprises when it comes to fees.

Global vision and local expertise for the sustainable growth of your business in Brazil.

The fifth largest country in the world is an emerging market, investment graded and giant in natural resources that offers to your business a fast growing economy combined with legal and regulatory safe environment.

The corporate world talks about that and Baker Tilly Brasil can transform it into competitive advantage to your business with innovation and expertise.

Our more than 400 professionals in eight strategically located offices are ready to assist you to succeed in an increasingly competitive and attractive business scenario.

Visit us: www.bakertillybrasil.com.br

Assurance

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Outsourcing

São Paulo • Belo Horizonte • Fortaleza • Manaus • Porto Alegre • Recife • Rio de Janeiro • Vitória

mind Body and Work - pilates

put some ‘pep’ into your life with pilates

What do the names The Mermaid, The Saw, Scissors, The Bicycle and The Hundred have in common? No, they’re not some weird new game involving awkward hand movements.

Neither are they characters in a spectacular new up-andcoming X-Men Hollywood blockbuster.

They’re exercises - in what has become the fastest-growing alternative therapy in the world. You’ll no doubt have heard of it before (after all, around 12 million people practice Pilates). Added to that, just five years ago there were 14,000 Pilates instructors in the United States alone.

So what’s the big deal? And anyway, being a business entrepreneur you don’t have time to fit exercise into your life right now. In fact, you’re hard-pushed to even devote the time to reading this article…

Well think again. The beauty of Pilates, say devotees, is its simplicity and the way that – once you’ve mastered the basic techniques – twenty minutes of this therapy can become as regular a part of your routine as embarking on your ablutions every night and morning.

The former being far more enjoyable.

But why should you invest the time? Well, hello! Is your health important to you? Pilates has been billed as an exercise method which not only strengthens the body physically but restores balance in a threefold manner – mentally, spiritually and, of course, physically.

Perfectionists will love it because it’s all about precision and quality rather than quantity.

In other words, once you’ve mastered the exact techniques you don’t have to embark on many repetitions (which makes it a lot less boring than many other forms of exercise we’ve encountered over the years).

Pilates has often been compared to yoga and, like the ancient ‘bending and flexing’ art, it focuses on the body’s muscular and skeletal systems and breathing technique. However, unlike certain forms of yoga (Ashtanga – see Madonna) and body building, Pilates practitioners will never be Arnold Schwarzenegger look-

50 • GBM • October 2011

alikes. In fact, you can often tell a Pilates tutor by their long, lean look. And wouldn’t we all love to be long and lean?!

The body’s Powerhouse, according to the granddaddy of Pilates, the predictably named Joseph Pilates, is the core muscles of the stomach and the back. In fact it’s all about supporting the spine. If this is working properly, Pilates believed, then the rest of the body’s muscular and skeletal system would fall into perfect alignment.

The beauty of Pilates is you can go into a class and see eighty-year-olds bending alongside their grandchildren. We kid you not! That’s because the exercise regime is low-impact and appropriate for ages 12 and upwards (with no upper age limit).

The elderly like it because it helps combat osteoporosis, improves posture and relieves those nigglesome back problems that seem to be a regular feature of 60-plus living.

Other conditions the exercise benefits include those involving balance (such as Menieres disease), neurological conditions eg Parkinson’s and Multiple Sclerosis, arthritis, circulatory problems and anxiety.

But even if you are not at the mercy of one particular illness, prevention – as they say – is better than cure and Pilates is excellent for strengthening the bones, aiding mobility of the back, boosting muscle tone and flexibility and making sure joints are healthy. It’s said the exercise can also result in quicker recovery from soft tissue injuries.

Specific

groups of people take up Pilates because, quite simply, it makes their life easier.

Pregnant mums use it to learn how to breathe better to help them with delivering their baby while dancers can’t get enough of the precise movements involved.

Athletes like the flexibility it gives them.

Both David Beckham and Andy Murray have been quoted in the press extolling its virtues.

Beckham underwent one hour a day of Pilates while at AC Milan. In fact the whole team engaged in it. Another team which swears by it is the fearsome New Zealand rugby team, the All Blacks.

Legendary German heavyweight boxer Max Schmeling also did a spot of bending and breathing while getting back up-to-date, Scottish tennis ace Murray swears by core strength training to prepare for international matches.

Other well-known fans of Pilates – whose talents lie in non-sporting directions - are the Four Weddings and a Funeral actor Hugh Grant and Friends co-stars Jennifer Aniston and Courtney Cox. And, in corporate terms, the German police training school engages in Pilates when it comes to toughening up recruits.

So it’s an exercise popular with men as well as women? Not quite… Jennifer Wilson, 32, is a Pilates instructor at ForwardFitnessGlasgow – a company she runs with fellow instructor and friend Elle Morrison, 34. Both women are qualified level 2 gym instructors and started their business earlier this year.

For every class they run the ratio is 1/30 male to female.

“Most of the men we have in our classes have been referred to us by a physiotherapist,” said Jennifer. “That’s because one of the main benefit of Pilates is in strengthening the pelvic floor muscles. Do that and you can prevent prostrate problems in later life.

“We have to get the message out there that

men can benefit from Pilates too. Every woman who has been pregnant is aware of how to strengthen her pelvis but men well, they don’t know until often it’s far too late.”

The girls have recently begun going into schools and teaching to classes of 16 and 18-year olds.

“They’re often surprised at how strenuous the exercise can be,” said Jennifer. “They tell us they’ve seen their mums do Pilates and aren’t expecting to be put out much at the beginning of a class but by the end they’re pretty taken aback at just exactly how much strength they’ve been required to use. Pilates is a full bodywork out after all. It’s not just about abs.”

Even if you’ve tried a Pilates workout before, it’s not necessarily a case of ‘done that, got the tee-shirt.’ According to Jennifer, not all Pilates classes are equal. Sometimes we’re not even talking the same ballpark.

“I’ve been in classes before where the instructor has gone around mid-lesson and sprayed the room with lavender oil,” she said. “I left that class floating on air and semimeditating.

“At others I’ve emerged sweating from head to foot with the same feeling I had after running a half marathon several months earlier. What I’m saying is there’s an enormous amount of variation when it comes to Pilates teaching.

At the time he called it Contrology due to the therapy’s emphasis on precise movements. It wasn’t until he died in 1967 that the therapy was renamed Pilates. The name has since become an anagram for Proximal Integrating Latent Agile Toning Exercise.

Of course those keen to pounce on the bandwagon have developed weird and wonderfully-named ‘offshoots’ such as Yogalates, the newer Menezes Method (named after Australian exercise instructor Allan Menezes) or the Canadian Stott Pilates (which puts more emphasis on the shoulder blade than the other forms).

Today, just to add an element of toughness, you can even invest in a whole host of Pilates-orientated exercise machinery such as power balls, Pilates rings and soft weights.

Joseph Pilates himself saw the value in this and came up with his own inventions. For instance his first piece of equipment – or rather apparatus – the Universal Reformer, came into being in 1925 and involved lying horizontally on a bench-like structure.

Another, the Wunda Chair, had a dual purpose as once used for exercise it converted into a rather pleasing piece of furniture.

In all Joseph Pilates came up with around five solid pieces of equipment and 500 different types of exercises. Not bad for a man who already had quite a time-consuming day job.

If he could find the time, couldn’t you?…

“If you go to one class and don’t like it don’t just give up and think ‘I’ve tried Pilates and it’s not for me.’ It’s just that that particular instructor’s style didn’t suit you personally.

Look around long enough and you’re sure to find a class you click with. It’s worth the search.”

But is Pilates just a passing phase? Well, depends what you mean by passing.

Considering it was first introduced to bedridden soldiers on the Isle of Man after the First World War by a young physicist named Joseph H Pilates, it’s proved pretty durable.

The Six Principles of Pilates • Precision – all movements (exercises) should be perfect. Imprecise or halfhearted movements would be futile. Pilates believes that one part of the body affects all the others hence the need for precision.

• Centring – the core of the body is the main feature of Pilates (ie the back and stomach area). The focus should be here. Get this right and the extremities and limbs will benefit in a bonus fashion

• Breathing – every single exercise in Pilates involves a specific breathing instruction.

This is because it is believed that breathing properly (ie swapping oxygen for carbon dioxide) enhances the circulatory system resulting in a more energised and alert body

• Concentration – an essential of Pilates.

Only through total focus can an individual reach perfect movement • Flowing – like the body’s energy all exercises in Pilates should take on a gentle, free moving and uninterrupted motion

• Controlling – all exercises should be controlled by the Pilates practitioner.

Control leads to focus which in turn achieves precision, according to founder Joseph Pilates who believed the individual should be in control of their own body and not vice versa.

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

October 2011 • GBM • 51

insurance and re-insurance

Insurance and Re-insurance The economic crisis caused many multinational insurance companies to go into their shell and control expenses throughout their organisation.

The insurance companies have adapted accordingly to the markets and crisis and are now ready to invest in markets that have been earmarked for substantial growth.

52 • GBM • October 2011

UK AND CONTINENTAL EUROPE The impact of regulatory change in Europe on M&A and corporate restructuring activity in the insurance sector The big elephant in the room that is currently overshadowing, if not crowding out, insurance sector M&A activity is the EU’s Solvency II Directive proposed to be in force from 1 January 2013. What impact will the introduction of a risk based capital adequacy regime across the EU have on the growth and prospects of the European insurance industry? The shadow cast by Solvency II is constricting current inorganic growth by acquisition and merger. The focus of those running insurance companies is to put their own house in order, conserve capital especially as the legislators responsible for the introduction of Solvency II have responded to the global banking crisis by erring on the harsher side of capital requirements, and to get their own internal capital models approved by the regulators, without which they may struggle to satisfy those future capital requirements.

Retrenching to a group structure comprised of branches rather than subsidiaries is a restructuring that may make sense from a capital efficiency viewpoint and is certainly an area of focus of activity for a number of larger insurers.

insurance business is disposed of. The buyers, in turn, are well motivated to retain the disposing bank’s distribution reach.

En passant, a sure sign of the times is that the interested potential acquirers are more frequently financial buyers.

One of the possibly unintended consequences of the advent of Solvency II and high capital requirements is the erosion of competition and the raising of yet higher barriers to entry across the sector. The small insurer is going to be squeezed, without the benefits of diversification in its portfolio; start-ups have a huge mountain to climb not only with the amount of capital that they will have to stake to participate but also to work with, by turns and by its own admission, an intensive/ intrusive/aggressive regulator barring the way. The smart money is on the larger established insurers being well positioned after 1 January 2013 to gain market share and to be able to acquire their more capital constrained and smaller brethren.

Indeed, a perennial issue for many insurance companies is effective distribution and access to markets. In the UK, this is to be yet further disturbed by the introduction of the measures arising from the Retail Distribution Review (RDR), which also have a commencement date of 1 January 2013. Life, pensions and other investment products are only to be sold by financial advisers charging fees rather than commission. Financial advisers are to be categorised either as “independent” (aka whole of market) or “restricted”. Professional standards are to be raised and training and qualifications are to be more strictly required.

Whether these changes will have a significant impact on the market remains to be seen, but it would certainly appear that they might make sales volumes dip in the short to medium term. The successful businesses in the future are likely to be those who get their distribution and marketing right. Some insurers have had a clear strategy to acquire further distribution, buying IFA and broker chains. Others are developing Internet- and platform-based solutions, particularly as a low cost mass-market solution. Over time, we may even see a return to direct sales forces owned and operated by the producing insurer. Whether in a ‘fee only’ environment, this will prove to be the most successful model remains to be seen.

An interesting foray into the insurance sector was undertaken last year by private equity (PE) houses, Apollo and CVC, and may presage greater Lloyd’s market consolidation.

A lightly leveraged bid for Brit Insurance was successfully completed this March. Clearly, PE houses see sufficient returns in a sector not traditionally renowned for the outperformance that one does tend traditionally to associate with the high-end PE players.

The change, what we at Clifford Chance have termed the ‘sea of change’, in the regulation of insurers, banks and other financial institutions is clearly driving behaviours.

The capital cost of holding non-core assets and the consequences of new US legislation, including Dodd Frank and the Volcker rule, are all requiring, or at least encouraging, financial institutions to divest themselves of non-core assets and to rethink earlier bancassurance or financial conglomerate strategies. An example of a strategic noncore asset disposal is Aviva’s announced sale of the UK and Irish roadside recovery (including insurance broking) business RAC to US PE house, Carlyle. We have also seen a marked shift to a bancassurance model where banks are no longer prepared to retain insurance risk but remain interested in continuing to act on the sale and distribution of those products once the underlying

An era of radical regulatory flux and change in the financial services sector, in which the market is currently engaged, does necessarily create difficult circumstances for M&A, but not ones without opportunity for the bold and well-funded.

Clifford Chance LLP acted both for Apollo and CVC on their acquisition of Brit Insurance and for The Carlyle Group on its acquisition of RAC. Tim Page and Katherine Coates are financial institutions M&A and regulatory partners in London and members of the firm’s global insurance sector group.

Further detail on Clifford Chance’s ‘Sea of Change’ initiative can be found at www. cliffordchance.com/sectors/banks/sea_of_ change_financial_regulatory_reform.html

Clifford Chance LLP Tim Page & Katherine Coates Partners Tel: +44 20 7006 1558/1203 tim.page@cliffordchance.com katherine.coates@cliffordchance.com www.cliffordchance.com October 2011 • GBM • 53

insurance and re-insurance

USA

David Alberts, Mayer Brown LLP (New York) Mayer Brown LLP David W. Alberts Partner Phone: +1.212.506.2500 dalberts@mayerbrown.com www.mayerbrown.com

US reinsurance collateral reform picks up pace Reform of reinsurance collateral requirements in the US continues to progress, with four individual states already allowing unauthorised reinsurers to qualify for posting less than 100% collateral and the National Association of Insurance Commissioners (NAIC) taking action this month nearing the final step toward amending its model credit for reinsurance law and regulation. Florida, Indiana, New Jersey and New York already allow unauthorised reinsurers to qualify for posting less than 100% collateral depending on their financial strength ratings as well as other factors. The proposed amendments to the NAIC models allow for ratings-based reinsurance collateral reductions and will set a floor for collateral requirements that many states may follow. This article summarises the current state of US reinsurance collateral.

The pace of US reinsurance collateral reform received a boost when Congress adopted the Dodd-Frank Act in 2010. On 21 July 2011, subtitle B of title V of that Act became effective and, among others, imposed the pre-emption of state credit for reinsurance credit rules with respect to nondomestic ceding insurers. Section 531(a) NRRA provides that if a state of domicile of a ceding insurer is a NAIC-accredited state, or has solvency requirements substantially similar to the requirements necessary for NAIC accreditation, and permits the ceding insurer to take credit for reinsurance on a ceded risk, then no other state in which the ceding insurer is licensed may refuse to recognise that credit for reinsurance. As all 50 states are currently NAIC-accredited, section 531(a) NRRA effectively pre-empts all nondomestic state credit for reinsurance rules for all reinsurance agreements involving a ceding insurer based in the US. Florida was the first state to adopt reduced collateral requirements, amending its credit for reinsurance laws in 2008. Since then, at least 16 unauthorised reinsurers have received approval from Florida. In 2011, Indiana, New Jersey and New York joined Florida adopting adopt reduced

54 • GBM • October 2011

collateral requirements. Florida’s reduced collateral status is open only to property/ casualty reinsurers, while Indiana, New Jersey and New York permit the status for both property/casualty reinsurers and life reinsurers (although New Jersey’s law will not be applicable to life reinsurance until earlier of 24 months from the effective date of the Act or the implementation of principlesbased standards of life insurance reserving by the NAIC). A number of legislatures in other states considered reinsurance collateral reform legislation in 2011, including Illinois, Louisiana and Texas. Similar state legislative activity in those and other states is anticipated in 2012, particularly if the NAIC adopts its model amendments at the end of this year as expected.

The NAIC is in the process of evaluating proposed amendments to its Credit for Reinsurance Model Law (#785) and Credit for Reinsurance Model Regulation (#786), which, if adopted, will provide for reduced collateral requirements for credit for reinsurance.

Many states base their credit for reinsurance statutes and regulations directly on the NAIC models or have a framework in place that is substantially similar. NAIC models are not recognised as law in any of the states, but the models are influential as accreditation standards. If the proposed amendments are adopted by the NAIC, states may choose to amend their laws and regulations to conform to the models. However, since the proposed amendments establish a floor for collateral requirements, states that choose to maintain their current stricter requirements will still meet the accreditation standard.

On 18 September 2011 the long process toward NAIC amendments reached its next to last step in the process, with the NAIC Reinsurance Task Force making its final last minute amendments and approving them after several years of deliberation.

That same day, the parent committee of the NAIC Reinsurance Task Force, the E Committee, adopted the amended models by a vote of nine to two. The final step is for

the NAIC Plenary to adopt them at the Fall NAIC meeting the first week of November.

Then the activity is likely to turn to state legislatures in 2012 to see what additional states adopt legislation to implement the amended model law.

One of the last minute amendments proposed

by New York and adopted by the Task Force and E Committee, was somewhat of a surprise and controversial. The amendment to section 8(A)(5) was as follows: “Credit for reinsurance under this section shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer.

Any reinsurance contract entered into prior to the effective date of the certification of the assuming insurer that is subsequently amended after the effective date of the certification of the assuming insurer, or a new reinsurance contract, covering any risk for which collateral was provided previously, shall only be subject to this section with respect to losses incurred and reserves reported from and after the effective date of the amendment or new contract.”

This could severely limit the ability of parties to take advantage of the new collateral scheme for in force business that is already reinsured and has existing collateral. In proposing the amendment, New York said it was intended to tighten up the wording to make clear that the new scheme would apply only prospectively and specifically noted the regulators’ desire to limit affiliate retrocessions currently in place with substantial collateral that could ‘fall off a cliff’ overnight if permitted on in force risks. However, many participants in the life reinsurance industry in particular felt surprised by this last minute addition and that the Task Force was not considering the unique nature of the life reinsurance sector and its long-term risks. We will have to wait until the November NAIC meeting and the legislative efforts in individual states in 2012 to see how this long and winding road to US reinsurance collateral reform ends.

honduras

Arias & Muñoz Ricardo Montes Associate Tel: (504) 2221-4505 ricardo.montes@ariaslaw.com www.ariaslaw.com

A basic approach to Honduran insurance law and regulations Insurance and underwriting activities that take place or have legal effects within the national territory of Honduras (currently, there are ten national insurance companies and two foreign insurance companies legally authorised to operate in Honduras) are regulated by the following laws: the Commercial Code (1950), the National Banking and Insurance Commission Law (1995) and the Insurance and Underwriters Institutions Law (2001), respectively.

In order to understand the legal standing, as well as the scope of application of each of the legal bodies mentioned above, following are some general remarks and also, a brief description of some of the most important legal mandates contained in each one.

Commercial Code The Honduras Commercial Code (Code) sets forth rules that apply to commercial matters in general. Therefore, it is clearly stated that the provisions of the Code and all other commercial laws apply to merchants (individuals and corporations), commercial acts and commercial matters. In the absence of specific provisions contained therein, commercial ways and customs will be applicable and if there are none, the corresponding provisions contained in the Civil Code (1906) will prevail.

The Code contains provisions that specifically regulate the insurance contract; the provisions can be found in Book IV, Title II, chapter X (articles 1105 – 1264). In this regard, insurance contracts are deemed to be always of a commercial nature. The Code ordains that only dully authorised national and foreign insurance companies or their agents (brokers), as well as insurance brokerage firms, can offer and manage insurance contracts within the Honduran market.

The Code presents general and specific provisions regarding insurance policies, risks, premiums, coverage, information and obligations of the parties to an insurance contract. The Code also includes regulations regarding insurance against damages, fire, for crops and livestock, transport, responsibility, credit, cars, and personal insurance. Lastly, some provisions regarding underwriting are also included.

National Banking and Insurance Commission Law This law creates the National Banking and Insurance Commission (Commission), as the regulating authority for the banking, financial and insurance sector. The Commission is part of the Presidency of the Republic and is legally attached to the Honduran Central Bank; notwithstanding, the Commission operates as an independent governmental agency.

The Commission is headed by three commissioners that approve all internal decisions needed to properly manage the entity. With the technical support provided by the Superintendence (divided in threes separate internal departments: banking, finance and savings and loan; insurance and pensions; and, securities and other institutions), the commissioners are also responsible for the approval of all regulatory actions applied to the institutions under the jurisdiction of the Commission (supervised institutions).

The Superintendence practices periodical audits based on the mandate derived from the law, which also authorises the use of recommendations derived from international practices. The Commission can order the amendment of certain actions or proceedings, as it also has sufficient authority to impose fines, as well as other type of sanctions against supervised institutions.

Here are some of the topics related to insurance and underwriting that have been regulated by the Commission: registration and contracting of external auditors; accounting manuals for insurance companies and for independent agents and insurance brokerage firms; registration of independent insurance agents (brokers), national and foreign insurances brokerage firms and underwriters; unlawful use of insurance services for money laundering purposes; and, insurance consumer protection.

Insurance and Underwriters Institutions Law The law regulates all matters related to the creation, organisation, operation, merger, transformation, separation and liquidation of

insurance and underwriting companies (the current law repeals the Insurance Institutions Law (1963). All national and foreign persons and companies domiciled in Honduras, dedicated to the trade of insurance and bonds, are subject to the provisions of this law, as well as to the regulations approved by the National Banking and Insurance Commission (Commission) and the Honduran Central Bank.

Insurance companies are classified into three groups: personal insurance; insurance against damages and bonds; and, those engaged in both. The law mandates that only fixed capital corporations can operate national insurance companies. The authorisation to operate an insurance or underwriter company is granted by the Honduran Central Bank, provided the Commission has previously dully documented its opinion.

The same process must be followed by all foreign insurance and underwriter companies that wish to establish a branch office in Honduras.

Under this law, the Commission is granted with complete authority to supervise the appointment of the members of the board, as well as senior officials of insurance operators. The Commission is also authorised to monitor the financial solvency of all insurance operators. In this regard, the Commission can order whatever actions are necessary, including the creation of financial reserves in order to avoid capital loss.

The assignment of credits between insurance operators must be authorised by the Commission. The law includes a list of activities that are limited and even prohibited to such operators, including the endorsement of third party credits.

With respect to underwriting, the law mandates that all underwriting contracts and amendments thereof, as well as all underwriting agents (brokers) must be registered in a special registry managed by the Commission.

By Ricardo Montes Belot

October 2011 • GBM • 55

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countdoWn to euro 2012

countdown to the european football championship 2012 The finals of the 14th UEFA European Football Championship will be hosted by Poland and Ukraine between 8th June and 1st July 2012. The joint bid was chosen by UEFA’s Executive Committee on 18th April 2007, ahead of the other short-listed bids from Italy and Croatia - Hungary.

In 2008, Ukraine reported several delays in the renovation of Kiev’s Olympic Stadium and difficulties funding infrastructure work following the global economic recession.

Poland’s progress also ran into difficulties that year when its government suspended the Polish Football Association (PZPN) over corruption allegations. UEFA issued a letter warning Poland that it risked losing the right to co-host. However, in April 2009, UEFA president Michel Platini stated that preparation work in both countries was firmly back on course.

The railway system in Poland is in the process of a major overhaul to cut journey times and stations in Poznan, Warsaw and Wroclaw are all being significantly upgraded.

There will be a new airport shuttle in Warsaw, the main traffic route into Poznan from its airport has been reconstructed and there will be a new ring road around Wroclaw.

"We estimate that all these improvements would not have happened for another three years if it had not been for the Euro 2012 event," said Mr Herra.

In September 2009 the Polish cities of Warsaw, Poznań, Wrocław and Gdańsk were confirmed as venues. After a delayed decision on the Ukrainian venues, in order to meet specific conditions regarding infrastructure, Platini later confirmed that their four cities (Donetsk, Kharkiv, Kiev and Lviv) would host matches with Kiev to host the Final.

Apart from Donetsk and Kharkiv, the host cities are all popular tourist destinations. The improvement of the football infrastructure includes the building of six new stadiums, whilst those in Poznań and Kharkov have undergone major renovations.

In Ukraine, Kharkiv's Metalist Stadium and the Donbass Arena opened in 2009. The New Lviv Stadium is due to open at the end of October and will host Ukraine's friendly against Austria on 15th November. On 11th November, Ukraine play Germany at Kyiv's revamped Olympic Stadium, venue for the Euro 2012 final.

Airports serving all four venues have undergone major improvements and roads are being reconstructed across the country. In Kyiv, several bridges have been constructed across the Dnipro to avoid congestion. There has also been a significant investment in hotels in the capital.

Warsaw's deputy mayor Jacek Wojciechowicz is certain the investment in his city will bring long term benefits. "We have spent around €8bn in preparing intensively for this special

In Ukraine, over half a million people are estimated to be involved in preparations.

Professor Christopher Old, dean of the Griffith Business School, Griffith University (Australia), who studies the phenomenon of international sports events, believes that the impact of Euro 2012 on the economy and life of Ukraine may continue for up to 10 years. event. Most of our investments, especially in transport and communication, are very important for our city."

Marcin Herra, chief executive of PL 2012, the private company set up to organise the Polish half of the event, is also predicting significant economic benefits.

"We see a positive impact for the economy over the next eight years of 6bn to 7bn zlotys (£1.32bn to £1.44n) extra," he says. Mr Herra also hopes the event will bring an extra one million tourists to the country, with 250m euros (£219m) being spent by visitors during the event.

"Organising this event gives us a chance to speed up development and modernisation of the country. It is also a chance to improve our brand - the image of the country."

Almost 3,000 volunteers will be taken on across the country to help work in facilities that include fan zones, guest services, fan embassies, security service support, medical care and media assistance.

“I am convinced that in this area we can expect an influx of a large amount of visitors from all over the world. The emergence of European tourists will make us build new hotels, open good restaurants and improve service. This, in turn, will create jobs. On the other hand, a social positive will work – because sports, victories, success give people positive thinking and faith in themselves.”

The first president of Poland, Nobel Peace Prize winner Lech Walesa, believes that the Championship will strengthen both countries. The legendary Polish politician said in a recent interview, "Ukraine and Poland are not superpowers. But the organisation of this championship may reinforce the influence of these countries in the world. The tournament will oblige Ukraine and Poland to manage the existing infrastructure and create many new facilities. But even if the countries fail to fulfill all pre-planned activities associated with preparations for Euro-2012, this great inheritance will remain after the tournament, thanks to the joint initiative of our people.”

October 2011 • GBM • 57

expert forum

expert forum Investment funds and ensuring a joined up approach among the UAE’s regulators In January 2011, the UAE Securities and Commodities Authority ("SCA") published draft investment funds regulations (the "Regulations") for consultation. When implemented, the Regulations will transfer regulatory responsibility for the licensing and marketing of investment funds and for a number of related activities from the UAE Central Bank to the SCA. This move forms part of a wider project intended to broaden the remit of the SCA (which is currently limited to regulating local securities exchanges and activities concerning securities listed thereon) and to move regulatory responsibility for non-banking products and services from the Central Bank to the SCA. Pursuant to the draft Regulations, all funds made available to UAE investors (irrespective of minimum investments, the size, number or sophistication of investors, and of whether contact results from reverse solicitation) would need to be approved by the SCA and offered through a locally licensed placement agent. If implemented, this may cause problems for many firms located in the Dubai International Financial Centre ("DIFC") or elsewhere outside the UAE, who currently engage in a limited amount of cross-border business with non-retail investors in the UAE in a manner that was previously tolerated by the Central Bank. The proposed regime is more stringent than that applied by many other regulators in the region (where there is often an informal "tolerated practice" for nonretail business) or in Western jurisdictions (where there is generally an explicit exemption for private placements or exempt offers), and would be most comparable to the position in Saudi Arabia.

Whilst this approach may serve a useful function in protecting retail investors, it provides little benefit to sophisticated or institutional investors, and makes it more difficult for foreign firms to offer fund units to sophisticated investors. Even where a fund manager is willing to incur the costs of having the fund approved, translating offering documents into Arabic, and hiring a local placement agent, timing issues (SCA approval may take up to 30 business days) and the limited number of UAE target clients for non-retail funds may mean that that the number and variety of investments available to UAE investors will sink dramatically.

Additionally, the finished Regulations may

58 • GBM • October 2011

MIDDLE EAST

Tim Plews, Partner tim.plews@cliffordchance.com +971 56 683 3427 Max-Justus Rohrig, Associate max-justus.rohrig@cliffordchance.com +971 4 362 0665 Jodi Griffiths, Associate jodi.griffiths@cliffordchance.com +971 4 362 0687

include an obligation to publish daily NAV figures and to submit audited accounts within 30 days from the end of each financial quarter, with which it may be difficult or impossible for funds investing in less liquid assets (e.g. real estate, private equity, illiquid securities) to comply. Whilst exemptions may be available on a case-by-case basis, many fund managers may decide that the cost and uncertainty involved are unacceptable and may simply not offer their funds to UAE investors. This may reduce investor choice, increase prices, and ultimately force wealthy investors to conduct more business offshore (as many Saudi investors already do e.g. in Switzerland). As a result, the draft Regulations may ultimately operate to the detriment of both the UAE funds industry and of UAE institutional and retail investors.

Whilst some initially thought that the Regulations would benefit local firms (who would increasingly act as local placement agents and would be sheltered from foreign competition), local institutions have their own concerns regarding the Regulations.

Placement agents may be required to "insure" investors against non-investment losses (such as those resulting from fraud or operational errors by the manager), and may be unwilling to take that risk in return for a relatively small placement fee. Firms establishing their own domestic funds would be subject to stringent investment restrictions (investing more than 10% of invested funds outside the UAE would require SCA approval) and to equally stringent limitations on borrowing and leverage. Proposed requirements that fund management, fund administration and custody services should be performed by separate and unaffiliated entities may require firms to significantly change their business model and to give other banks "access" to their balance sheets.

The SCA received a significant number of consultation responses, including an industry response prepared by Clifford Chance LLP and endorsed by 19 firms, as well as individual submissions from many firms and trade associations. The target date for implementation of the Regulations has been extended more than once (most recently to late June), and many fundamental aspects of the Regulations (including the potential creation of an exemption for funds marketed

by DIFC firms) remain under discussion within the SCA. Notwithstanding the fact that regulations requiring Central Bank approval for funds to be publicly marketed in the UAE have not been formally repealed and that the draft Regulations have not been finalised or implemented, the SCA has already begun to approve funds to be marketed in the UAE (and the Central Bank has stopped issuing new approvals). The precise allocation of responsibilities between the SCA and the Central Bank remains unclear, and the position is further confused by the fact that local placement agents and fund managers would, under the draft Regulations, need to be licensed and supervised by both regulators.

Whilst the current position is far from satisfactory, it remains to be seen whether (and how) these concerns will be addressed.

Unfortunately, the SCA have indicated that the next published draft of the Regulations is likely to be final, which operates to limit the scope for further consultation.

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

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

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.

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.

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.

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

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.

Due to the complexities of Repetro - a tax incentive for importation of oil and gas equipment and one of the main pillars of

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

October 2011 • GBM • 59

expert forum

A guide to Islamic Finance KPMG has long been supporting the industry by advising and working to meet the needs of banks, takaful providers and other Islamic financial institutions (IFIs) across national boundaries. KPMG maintains a dedicated Islamic finance group (IFG), which comprises of a global network of professionals with in-depth knowledge of Islamic finance and provides practical, value-added assistance to KPMG firms’ clients across a range of issues. Members of the team are based in KPMG’s three operating regions: EMA (Europe, Middle East and Africa), Asia Pacific and the Americas. KPMG firms have received accolades as the advisers of choice for the Islamic finance industry on multiple occasions, including the ‘Best Islamic Assurance and Advisory Services Provider’ award in Euromoney’s Islamic Finance Awards for four years in a row.

Islamic finance, in the aftermath of the global financial crisis, is becoming an increasingly attractive proposition to a large number of consumers, not only in the emerging eastern economies, but also in the West. There is an ever-growing desire for a greater focus on responsible, sensible and principled behaviour in the banking sector - something held by politicians, regulators and customers across the spectrum, which sits well with the basic ethos of Islamic finance.

The Islamic financial system is based on a unique set of underlying principles that aim to enforce greater transparency and stability.

Three activities are prohibited in the system: Gharar, Maisir and Riba. The first is defined as excessive uncertainty in commercial transactions under Islamic law, and was one of the reasons why IFIs did not participate in the sub-prime mortgage market. Maisir is the undertaking of unnecessary risk, and this too is outlawed. In practising this principle, whereby transactions are more carefully considered, risk exposure should be reduced.

The relative absence of highly speculative trades is a concept that differs greatly from conventional finance. Riba relates to the charging of interest on loans. This is a major structural issue for Islamic finance, which contrasts greatly with the Western system.

Feedback from KPMG member firms around the world shows that meeting the needs of the customers will be crucial going forward.

Islamic finance needs to better match liability providers, such as depositors with asset seekers, to include investment and financing within the holistic customer choice range.

Launching Shariah-compliant products can, however, pose a variety of challenges to the practitioners. These could generally be classified as either compliance or resource-

60 • GBM • October 2011

UNITED KINGDOM

KPMG UK Samer Hijazi Director – Financial Services Tel: +44 (0) 207 694 2807 Fax: +44 (0) 207 311 5837 samer.hijazi@kpmg.co.uk www.kpmg.com.uk Ahmed Alvi Position: Associate Tel: +44 (0) 207 311 8098 ahmed.alvi@kpmg.co.uk www.kpmg.co.uk

related. Compliance-related issues can include accounting standards compliance, where the specific nature of many Islamic products, in conjunction with the increasing complexities of reporting generally accepted accounting principles (GAAPs) and international financial reporting standards (IFRS) in particular, can make financial reporting for many IFIs complex. Compliance with Shariah law also remains subjective, and is interpreted almost on a case-by-case basis at some IFIs. Risk management compliance, based on practice by conventional financial institutions, can be difficult to customise for many IFIs. Moreover, issues can also arise with the tax treatment of Islamic financial products in instances in certain jurisdictions where this differs to that of conventional products. Practitioners are also faced with resource-related issues. Human capital shortage has been a key restraint on the growth of Islamic finance and it has been noticeable that there are a limited number of individuals who possess both expert knowledge of Shariah laws and also a comprehensive understanding of modern financial instruments.

While different countries naturally impose different regulatory requirements, KPMG member firms worldwide have observed that many clients are no longer concerned about barriers facing the implementation of Islamic banking in new markets. Many now see both Shariah compliance and regulatory approval merely as additional steps in the inevitable processes of governance. Rather, the major challenge is seen as getting the strategic positioning and business model right, and managing the image and branding of Islamic finance institutions and customer expectations appropriately.

Islamic insurance, also known as takaful, is another unique product based around compliance with the Shariah laws regarding Gharar, Maisir and Riba - in contrast with conventional insurance, which obviously is not. It revolves around the principle of collective responsibility whereby a group of people pool their funds to protect themselves against a specific risk. While takaful remains well behind conventional insurance’s share of the market, it is growing quickly and is expected to continue doing so.

Islamic finance is well placed for growth in the aftermath of the global financial crisis.

The institutions most likely to successfully capitalise on these prospects are expected to be those with robust governance structures and a clear focus on their business priorities.

Additionally, they will need to be able to manage well their asset and liability portfolios, while having the resources and industry knowledge to bring products to the market that meet the needs and expectations of their customers.

China’s Emerging Financial Services Industry

By Edward E. Lehman, Managing Director Throughout 2010 China’s financial services sector has presented strong growth by means of healthy credit advancements and a more confident promotion of its financial derivatives sector. As a result of the rapid expansion of available credit, experts anticipate a corresponding increase in Non-Performing Loans (NPL); this, in turn, has created an ongoing concern about the financial stability of what is otherwise a rapidly developing and robust credit sector.

Although the Chinese banking system has recently improved credit standards, there is doubt concerning system sustainability in relation to the future levels of nonperforming loans. In accordance with such anticipation, there is a fear that an overabundance of non-returning credit may result in the market not only lagging, but also becoming unstable in the face of China’s economic development.

Foreign financial institutions have always been concerned about the presence of a level playing field. Unfortunately there are many aspects of China’s regulatory environment that remain opaque and uncertain for a number of foreign financial institutions.

Rules involving locally-rooted foreign banks, holds placed upon RMB licenses, and delays on certain financial procedures due to extensive sanction requirements have ensured that the balance of power in China’s financial services industry is tilted towards local, rather than foreign firms. In order to further support China’s financial environment for more innovative products, I would recommend that Chinese authorities implement the type of standards and transparent administrative guidelines that will provide further liquidity and improve on China’s 25% household savings rate. By opening up domestic funds to wholly-foreign owned banks the Chinese will have access to the proper financial products that will allow them invest and put their savings to work.

Chinese savings have not been able to expand at the same rate as the overall economy.

In order to maintain a healthy and robust financial services sector, the Chinese authorities need to promote competition and address the presence of monopolization. Currently China Union Pay controls the market for transaction clearing – this creates a faulty foundation for the overall financial services industry.

By ending this monopoly and advocating for a more competitive environment the Chinese government could provide consumers with the type of environment that promotes innovation, not duplication.

CHINA

LEHMAN, LEE & XU A Licensed Chinese Law Firm 10-2 Liangmaqiao Diplomatic Compound No.22 Dongfang East Road Chaoyang District Beijing 100600 China Tel: (86)(10) 8532-1919 Fax: (86)(10) 8532-1999 elehman@lehmanlaw.com www.lehmanlaw.com Edward E. Lehman Managing Director elehman@lehmanlaw.com Zhang Dan Legal Counsel dzhang@lehmanlaw.com

By eliminating this monopoly, the electronic payment industry would not only be able to provide its customers with a greater variety of products and services, but would also be able to ensure a more stabilized, well-protected industry base in case of possible system failure.

By distributing the market share amongst a competitive group of companies, the industry would be able to minimize its risk factor and further protect the economy’s driving force—the Chinese consumer.

October 2011 • GBM • 61

Business facts

interesting business…

The world of business is full of fascinating and interesting facts that many do not know about. We consistently see, hear, interact, use and buy many brands from across the world including Microsoft, Google, McDonalds and many more, yet there are some interesting facts about many businesses that we don’t know about.

Women own 10.4 million businesses in the United States (nearly 50% or more), generating $1.9 trillion in sales.

Walt Disney World generates about 120,000 pounds of garbage every day If Facebook were a country, it would be the fifth-largest country in the world, after China, India, the U.S., and Indonesia.

The largest employer in the world is the Indian railway system, employing over a million people The word budget comes from the French word “bougette”, a little bag, which explains why the Chancellor “opens” his Budget.

The first Fords had engines made by Dodge.

The “stock market” began in May 17th, 1792 when 24 stock brokers and merchants signed the Buttonwood Agreement.

Despite the New York Stock Exchange’s notoriety, it was not the first stock exchange in the United States. That distinction belongs to the Philadelphia Stock Exchange, which was founded in 1790.

The highest price per share stock on the NASDAQ is none other than Google.

Flatbush National Bank of Brooklyn, New York was the first bank to issue a credit card in 1946.

62 • GBM • October 2011

MicroSoft was founded in 1975.

Dell was originally called PC’s unlimited.

If the Chinese, one day, use as much oil per person as Americans, then the world will need seven more Saudi Arabias to meet their demand.

Richard Branson’s first business, a used record store, was called “Virgin Records” because it was his first business venture ever.

McDonald’s’ $24 billion in revenue makes it the 90th-largest economy in the world Bangladeshi economist Muhammad Yunus and the Grameen Bank he founded won the 2006 Nobel Peace Prize on Friday for grassroots efforts to lift millions out of poverty.

Americans pay more for medical prescriptions than anywhere else in the world Mohamed Fayed’s career began selling CocaCola in his home town of Alexandria.

Rolex are the largest watchmaker making 800,000 watches a year! They sell every watch they make!

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October 2011 • GBM • 63

government and puBlic sector report

Government & Public Sector Report ryms provides indust c sector practice fir public the oss acr Government & publi es vic tax, and advisory ser ort, focused assurance, lth, education, transp al government, hea loc ing lud ational ern int d sector inc an e enc def ng, social care, deliver home affairs, housi p the public sector ms and advisors hel fir e Th . ent pm elo dev possible. als as efficiently as services to individu and fresh ideas in d greater innovation an dem w no nges es vic Public ser ironments. Any cha the ever changing env policy the hin wit d order to deal with ere sid en need to be con tak ach pro ap the within framework.

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64 • GBM • October 2011

Global The future of government ---------------------------------------------------------------------------------Around the world, governments are faced environmental sustainability: socially -------------------------with new demands, increased expectations sustainable, demographically sustainable, and a fast growing array of new technologies and tools by which such demands and expectations can be met. This is particularly striking in times like the ones we are living, as the emergence of global challenges (eg, climate change, water management, migrations, and global governance) combine with a deep economic crisis. Beyond the traditional pendulum swings of big versus small government (the public sector being called to the rescue when the economy suffers, and being urged to ‘get out of the way’ when conditions improve), we see in all parts of the world an unprecedented wave of new ideas about what government could and should do, and how.

Against this new and rapidly changing background, and in the face of growing global and systemic challenges, the institutions and governments inherited from the 19th Century (dominated by the importance of stabilising nationstates borders) are losing relevance and effectiveness.

Over the past two years, the World Economic Forum (Switzerland) established the Global Agenda Council on the Future of Government. During our meetings, we debated these issues and their potential consequences: how do all these phenomena affect our ability to address current and future global issues, and how can government be reshaped and rejuvenated to help us do it?

Today, our governments are in danger of becoming irrelevant. There are four ‘inconvenient truths’ about government.

First, the future of government is not anymore what it used to be: basic ‘public functions’ have been re-defined already, as various combinations of public and private entities have been tested around the world (in education, in health, even in the military and in tax matters).

Second, the future of government is less and less in the hands of governments alone - technology (in particular, the Internet and social networking) have empowered ordinary citizens by offering them a way to make their voices heard, and to challenge both leaders and wannabes about their ability and willingness to address public concerns and requests. Government 2.0 is a transformative process to be reckoned with.

Third, definitions have changed, and so have expectations from governments - innovative government has ceased to be an oxymoron, and sustainability is now understood beyond the somewhat limited scope of

economically sustainable and politically sustainable proposals are now expected to emerge from a much more open process in which governments, business and citizens can actively contribute.

Finally, information technologies are opening new possibilities to move mankind closer to ‘global democracy’, through higher degrees of inclusion and participation, and higher levels of transparency and accountability in particular. However, they also raise new issues (privacy, security, cyber-criminality and cyber-terrorism, for example) while not eliminating the need to address long standing ones (such as inequality in access to information infrastructure and services).

Government of the future will need to continuously prove relevant, efficient and coherent: relevance will imply speed and responsiveness to rapidly changing conditions and citizens expectations; efficiency will require accountability and transparency, as citizens will demand more and more visibility in the ways in which public resources are being used; and, coherence may prove the biggest of those three challenges. As new communication tools keep spreading and gaining in sophistication, ‘good ideas’ will continuously emerge from a growing number of sources, governments will remain the ‘chamber’ through which arbitrages need to be made among such ideas and proposals, which will require that somehow, the authority of its leaders be recognised and accepted.

In this context, we need a new form of leadership in the public sector to drive Government 2.0. This poses a huge challenge in governments around that world - how to attract and retain the best talent and nurture this new form of dynamic public sector leader?

The future is now and there is an urgent need for ‘new’ leadership for government excellence. The key challenge impacting levels of innovation and learning in government is organisational culture and public sector adversity to change. The ‘new’ leadership has an important part to play in this regard, as it provides a vision and cultivates an organisational culture that embraces positive change towards the achievement of that vision.

In order to maintain the fine balance between the creation of public value and achieving greater efficiency, government leaders are required to combine strong personal commitment and passion with out-of-thebox conceptualised thinking. While learning

PwC Yasar Jarrar Partner Tel: +971506407281 yasar.jarrar@ae.pwc.com www.pwc.com

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from best practices in the private sector is important for drawing applicable lessons, government leaders need to recognise the fundamental differences between public and private organisations and their intended outcomes.

Future government leaders must have a clear understanding of the performance anatomy of the public sector along with a strong vision for the future that is citizen-centric in all respects. While the former will allow future government leaders to navigate public sector organisations, employees, citizens and stakeholders, the vision will ensure that the end goal is clear and not lost in the journey. Furthermore, future government leaders must recognise the increasing level of collaboration between different sectors of society and leverage on multi-stakeholder partnerships to create public value.

October 2011 • GBM • 65

uk government and public sector report

Public sector partnerships: Avoiding procurement processes by creating joint-venture public-sector delivery companies.

---------------------------------------------------------------------------------It has long been recognised that a decision by The increasing pressure on public bodies -------------------------public body to keep a service ‘in-house’ (that to cut ‘back office costs’ will inevitably lead to pressure for more use of shared services across different public bodies, including joint ventures between different public authorities.

These types of arrangement are not new, and have proved to be both successful and disastrous in practice, depending on the thoroughness of the strategic planning, efficiency of the management and the quality of service delivery by the joint-venture.

However, one of the perceived constraints to the efficient development of these types of partnerships is the fear that they cannot be put in place unless the joint-venture has been successful in an EU-compliant public procurement process where it competes against a range of private sector providers.

This article examines whether this type of arrangement can be put in place without a procurement process, recognising that any need for that type of competition would stop many such processes starting in the first place.

The law in this area has recently been examined by the Supreme Court in Brent London Borough Council and others v Risk Management Partners Ltd [2011] UKSC 7 (9 February 2011). The message from the Judges in that case is that public sector partnerships can be structured so as to avoid a time-consuming, expensive and uncertain procurement process. The facts of the Risk Management Partners case were relatively simple. Following the demise of Municipal Mutual Insurance Ltd, a group of London Boroughs attempted to set up their own insurance company because they believed that a mutually owned, non-profit insurer could save them between 15% and 20% of their insurance costs. Brent was in the process of tendering for its insurance needs and, when the new mutual company became an option, they abandoned their tender processes and threw their lot in with the new mutual company. This was challenged by one of the commercial insurance bidders.

There were several points taken in the case, including a dispute as to whether local authorities had the power to set up a mutual insurer in the first place. That point was overtaken by new legislation that confirmed that local authorities had the necessary powers. However, the impact of the case spreads far wider than insurance services because of a wide interpretation given by the judges to the Teckal exemption under EU procurement law.

66 • GBM • October 2011

is for it to be provided by direct employees of the public body) does not engage EU procurement duties. A public body that sets up a service company that remains under its own control to deliver a service back to the public body is treated in the same way. The public body must retain “power of decisive influence over both strategic objectives and significant decisions” in the service company (see Parking Brixen GmbH v Gemeinde Brixen (Case C-458/03) [2005] ECR I-8585).

In contrast, if one public body contracts with another public body for the delivery of service, procurement rules may apply because the contracting public body does not retain effective control over the providing public body. Hence, if council A contract with council B for the provision of payroll services without going through a procurement process, council A may be acting in breach of the Public Contracts Regulations 2006 because council B is, in reality, a service provider where the service could be subject to a competitive tender.

The crucial issue in Risk Management Partners was whether the Teckal exemption applied if two or more public authorities set up a joint venture that was under their joint control. The problem was that the joint venture was not under the sole control of any individual public authority. Could the members of the consortium therefore say that this was equivalent to arranging the service through their own internal department, and therefore come within the Teckal exemption?

The message from the High Court and Court of Appeal was ‘no’; but the Supreme Court disagreed. Lord Hope confirmed that public bodies that cooperate to set up a joint-venture to deliver services back to the member public authorities, where the joint-venture is under their joint control, do not need to go through EU procurement processes in order to contract with the joint-venture company.

Thus, in the above example, council A and council B could lawfully contract with a company under their joint control to provide payroll services to both local authorities without a prior procurement process.

There are many reasons why public bodies may wish to set up joint arrangements with other public bodies for the delivery of a variety of their functions, including the delivery of back-office services, rather than contracting them out to private sector suppliers. Procurement processes are

David Lock QC, Barrister, No5 Chambers, London, Birmingham and Bristol. www.no5.com/areas-of-expertise/ administrative--public-law/david-lock-qc Tel: 0845 210 5555 Website: www.no5.com Clerks: Andy Bisby (0121 606 5938) and Robert Woods (0207 420 7500).

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notoriously slow, absorb vast amounts of management time and, however many promises are made within the tenders, once the contract is signed, the public body loses a large measure of control. Key staff can also be resistant to transferring to a private sector employer and there are frequently pension problems - real or perceived. The Risk Management Partners case opens door to creating joint venture vehicles between public bodies that could avoid the delay, cost and uncertainty of procurement processes, but should, if the joint-venture is managed properly, deliver economies of scale and savings on service delivery costs.

England & Wales Government transformation: Rise of the ‘third sector’?

----------------------------------------------------------------------------------------------------------Over the past three years, there is much creation of Big Society Capital. The challenge evidence of a growing wave of political support behind the notion that the ‘third sector’, or ‘civil society’ if you prefer, has something material and tangible to offer the wider economy. There is debate over what should and should not be considered as a third sector organisation, but, for the purpose of this article, it refers to any organisation that is set up primarily to pursue objects other than maximising the profits of its equity holders.

In recent history, there has been a marked change of tack, which is not surprising given the transition from the previous Labour regime to the current Coalition government.

The first noticeable difference is the increased level of profile. Some radical initiatives were introduced under Labour, which went largely unnoticed. An example of this was the ‘Right to Request’ scheme that has resulted in the spin out of many local health services from the NHS to social enterprise. Compare this with David Cameron’s announcements on ‘the Big Society’ and well publicised initiatives in relation to mutualisation and Big Society Capital. This is an extremely important development as natural caution can often be overcome by vocal support and by identifying with analogous case studies.

The second is the link between the third sector and funding. This is a tricky area as there is often a significant cultural divide between third sector and potential private sector investors. Is it easier to ask for donations or investment? In truth, many of the issues are the same: Do you respect the people? Do you trust the brand? What are their prospects? There is also precedent; for example, in the height of the recession some of the largest fund raising achieved in the UK was by large social housing associations placing bonds in overseas markets.

Nevertheless, for many smaller third sector organisations, raising the extra funding associated with a significant increase in activity levels will remain challenging.

Being able to offer sufficient collateral and demonstrate a managerial track record to satisfy cautious funders in a fragile market will be no different to the well publicised difficulties faced by small private sector organisations.

There is also the view that we may be on the cusp of a new market in social investment, a path that has been started by the likes of Bridges Ventures and Social Finance. The previous government started consultation on a Social Wholesale Bank, and this concept has been accelerated by the Coalition into the

now is for this new bank to achieve some quick wins. Another interesting development is the concept of social impact bonds, which is now being piloted across certain English local authorities. These are effectively equity investments geared towards driving down cost for the mutual benefit of public sector purse holders, third sector service providers and private sector funders. The main challenge for social impact bonds appears to be adequately identifying the cost savings achieved. These products will undoubtedly need to mature before insurance companies and pension funds will be comfortable to invest; however, there are opportunities for government-supported schemes, niche funds and private sector corporations looking to preserve their market share.

The final change relates to the overarching belief that certain services will be better delivered outside of the public sector by third sector providers. Under the Labour administration, the emphasis was a transfer to social enterprise and charity, often focusing on specific, local needs and objectives. The new mantra is a move towards ‘mutuals’; autonomous organisations that aim to give greater power and reward to the wider workforce. Whether a mutual, or co-operative, can be a social enterprise is an ongoing argument. What is clear is that the UK government is serious about its mutuals programme and significant parts of central government and related services will need to transform in order to achieve anything close to the ‘one million public workers’ in mutuals envisaged by Francis Maude (Cabinet Office minister).

Eversheds LLP Paul Pugh Partner Tel: 0845 498 7539 paulpugh@eversheds.com www.eversheds.com

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If one combines a rainbow of political will together with enhanced funding possibilities and employee incentivisation, one has a heady mix of policy that is difficult to ignore. It seems inevitable that the third sector will grow significantly in the next five to ten years, mainly through governmentcreated mutuals and through greater collaboration and joint venturing with private corporations. The challenge now is aligning the expectations of stakeholders, building individual business cases and overcoming the significant legal hurdles required to deliver the vision.

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germany government and puBlic sector report

Public business: challenges and opportunities ----------------------------------------------------------------------------------------------------------In Germany, the state invests an annual regulations over the past few years has sum of €461,84bn just in those contracts awarded throughout Europe. Together, all of the European member states spend around €2.288bn on public procurement, which amounts to almost 17% of the EU’s GDP. Goods and services from almost all economic sectors are in demand, from consumer goods to large-scale technical equipment, from every-day services such as cleaning, maintenance and repair work to longterm concessions, and from infrastructure projects to research and development commissions. Public procurement therefore represents a key economic factor and, both on a national and European level, offers almost every company participating actively and successfully in the private sector a considerable market that should not be underestimated.

Public procurement law is strongly influenced by the basic principle of economic efficiency on the one hand, and by the principles of free and fair competition in a transparent procedure without discriminating against any one company on the other. Having developed from national budgetary law and European competition law, public procurement law is based on a very complex and constantly developing body of rules and regulations established by both European and national legislators, and it can be broken down into many individual and in part conflicting standards: Recently in Germany, public procurement regulations have increasingly begun to impact the health sector and the awarding of discount contracts has been a major topic over the past five years.

Public procurement law is having a growing influence upon the grant of subsidies: by means of an incidental provision, the recipient is obliged to spend the subsidy on contracts awarded according to public procurement rules. If he infringes this obligation, the recipient may be required to pay the subsidy back with interest from the date of the grant.

Directive 2009/81/EC on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security has been in force in Germany since 21 August 2011.

Legislation to transpose the directive into German law is in the pipeline. Significant changes are ahead.

Aside from this, procurement regulations in Germany have recently undergone the latest series of reforms in 2009/2010, with considerable amendments relating to procedural process and legal protection.

Meanwhile, the EU Commission has already announced the next judicial reform for 2012.

The development of public procurement

68 • GBM • October 2011

clearly shown that public procurement is no longer merely a central instrument for economical budget management and supporting and strengthening competition. It has also become a tool for pursuing political goals, such as the advancement of innovation, social issues and environmental protection, encouragement of research and technological development or pushing electronic purchasing techniques.

Against this background, the aim of ensuring a successful procurement process, however, places high demands on the public contracting authority and the company participating in the tendering process. The invitation to tender required for this process and the decision regarding the award of contract are subject to a fixed procedure and detailed regulations. These legal and procedural regulations also constitute the basis and the referential framework for an unsuccessful tenderer to have the award decision judicially reviewed in the case of a violation of the regulations and thus secure legal protection. Knowledge of these court decisions and a detailed understanding of the regulatory structures behind public procurement law are a basic prerequisite for successful participation in public invitations for tender. Particularly where Europe-wide invitations for tender are concerned, the procurement procedure is complex, so that an efficient overall strategy is required in order to avoid the pitfalls of the applicable regulations.

The regulatory objective behind the procurement regulations consists of ensuring that justice is done to the special responsibility the state has in terms of using taxpayers’ money effectively and in preventing actions on the part of market participants that may distort competition, such as, e.g., price-fixing agreements or bribery. Therefore, last but not least, public procurement also represents the point of convergence between anti-corruption and compliance.

Bird & Bird’s consultancy approach with regard to projects and client mandates in the public sector and public procurement, in particular, combines a solid legal specialisation with an in-depth understanding of the specific needs of the sector, gained over many years of practical experience. Thanks to our detailed knowledge of the market, we are able to support our clients in successfully meeting the constantly changing demands of the national and international procurement markets in every field of business in the public sector.

Don’t shy away from the challenges associated with business in the public sector - let’s make the most of your opportunities together!

Bird & Bird LLP Dr Jan Byok LLM Partner, head of German public sector group, co-head of international public sector group Dr Nicola Ohrtmann Senior European consultant Tel: +49 (0)211 2005 6224 E-Mail: jan.byok@twobirds.com nicola.ohrtmann@twobirds.com www.twobirds.com

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australia An overview of the PPP market ----------------------------------------------------------------------------------------------------------With the number of new public-private DLA Piper can help investors that are partnership (PPP) deals in the pipeline in Europe dwindling, the past few years have seen a considerable number of foreign entrants into the Australian PPP market.

The Gold Coast Rapid Transit project, which reached financial close in June, with Australian and foreign equity investors and a club of foreign banks (Intesa SanPaolo SpA, Export Development Canada, Banco Bilbao Vizcaya Argentaria and KfW IPEX - Bank Gmbh) providing an 18-year term loan, is a good example of this.

What makes the Australian PPP market attractive to investors?

Australia offers investors a highly developed PPP market with a long history of successful delivery in several states, particularly Victoria. While the recent problems faced by the concessionaire of the Clem 7 tunnel in Brisbane, Rivercity Motorways, bring to eight the number of toll-road PPPs that have caused substantial losses to investors over the past five years, there is now recognition from state governments that the market will not bear the same level of demand risk going forward.

For this reason, the most recent PPP road project to reach financial close in Australia (Peninsula Link) was structured by the Victorian government on an availability payment basis (with no toll revenue risk transferred to the concessionaire), this model having been successfully used in a number of states to deliver social infrastructure such as schools, hospitals and prisons.

Australia also offers a PPP model that will be familiar to investors active in other English-speaking jurisdictions, including the US, Canada, South Africa and the UK. There are some notable differences, however, particularly in the areas of compensation on termination, force majeure, compensation and extension events and the way in which interface issues are handled between the major subcontractors.

This latter issue, if not handled carefully, can lead to unacceptable risks being left with the concessionaire.

unfamiliar with the Australian market to manage their way through these issues.

Another attraction of the Australian market when compared to, say, the UK, is that where projects are cancelled during the procurement phase, while not obliged to do so, state governments have generally reimbursed bidders for a large proportion of their bid costs

Alex Guy Partner

Pipeline While the number of PPP deals coming to market is relatively small, Australia stands out for having a continued steady pipeline of new sizeable deals. PPP projects in the early stages of procurement or likely to launch procurement imminently include Eastern Goldfields Regional Prison ($232m mixed security prison) in Western Australia, the Bendigo Hospital ($630m new acute hospital) in Victoria, Sydney Convention Centre and a new housing PPP in New South Wales and the Sunshine Coast University Hospital ($2bn new tertiary teaching hospital) in Queensland. In addition, there is a range of other projects on the drawing board for the coming years. These are supplemented by projects that, while not PPPs, offer similar opportunities for providers of debt and equity including government and public sector projects (recent examples being the Gold Coast University Hospital and Queen Elizabeth II Medical Centre Car Parking projects) and private infrastructure projects supporting the mining industry.

Pitfalls for foreign investors The approach taken by Australian governments to procurement is very different from that which investors will be used to in the European market. Australia is not a party to the Plurilateral Agreement on Government Procurement (GPA). It became an Observer to the GPA in 1996, but no steps have yet been taken to become a party to it.

Australia is party to a number of bi-lateral free trade agreements (for example, with the US, Singapore and New Zealand).

However, subject to these, evaluation criteria that would be unlawful in Europe by favouring local suppliers are the norm in the procurement of major Australian infrastructure projects. Typically, both the Commonwealth and the states will give a relatively high weighting to bidders’ proposals for local industry participation.

Although this may initially deter foreign investors, with the right local partners and advisers, a foreign bidder can meet these criteria so that it is able to compete effectively with local bidders.

+61 7 3246 4072 alex.guy@dlapiper.com Scott Alden Partner +61 2 9286 8128 scott.alden@dlapiper.com

-------------------------the Foreign Acquisitions and Takeovers Act 1975 (Cth), which can often mean that the approval of the Foreign Investment Review Board is required for investors’ participation in Australian PPP projects, including the holding of interests in Australian entities and property interests. We would advise that the best approach is to submit an application and seek approval as early as possible in the bid process as this gives greater credibility to the bid.

While there are pitfalls for the unwary, Australia offers an attractive PPP market for foreign investors, supported by experienced advisers.

DLA Piper DLA Piper is a law firm at the forefront of international PPP developments. We have closed more than 180 PPP projects around the world - approximately 30% for financiers, 50% for sponsors and 20% for government.

We act for over 45 different Commonwealth departments and agencies and for state and local government throughout Australia. We bring this experience to bear in everything we do, helping ensure the bankability and deliverability of our clients’ projects.

Foreign investors also need to be aware of

October 2011 • GBM • 69

conferences

corporate and Business conferences FT – YES Bank|International Banking Summit Date: 15-16 November 2011 Location: The Taj Mahal Palace, Mumbai, India Maximising Future Opportunities in India’s Fast-Growing Financial Sector The Indian banking sector has undergone a profound transformation since the first key liberalisation moves two decades ago. Although the financial industry remains largely state-controlled, private banks have multiplied and grown rapidly, with an increasing presence abroad, while foreign institutions have a notable, though still constrained, share of the market.

As it becomes increasingly integrated into the global financial system, India’s banking sector faces new and pressing challenges, both regulatory and competitive. The Reserve Bank of India is expected to allow large conglomerates to acquire banking licenses, with the main aim of boosting financial inclusion, while foreign banks may be allowed to expand their

business by setting up wholly owned subsidiaries. These changes are being discussed as the better performing emerging economies such as India gain ever-increasing global attention.

The Financial Times and YES BANK will gather senior bankers, policy-makers and other key decision-makers and thought leaders for a two-day Summit that will analyse the latest global and domestic challenges facing India’s financial industry and explore how they can be turned into opportunities for local and foreign institutions in one of the world’s fastest growing economies.

For Delegate Booking and Registration enquiries, please contact: Pamela Lam Telephone: 852 2905 5515 Email: pamela.lam@ft.com http://www.ftconferences.com/yesbank2011/

The European Retail Banking Summit 2011 Date: November 8, 2011 Location: The Dorchester, London The challenge for retail banks around the world is clear – seize the opportunity.

The landscape has changed. Banks will never be the same. New competitors will enter the marketplace, new technologies will change the operational model, but most importantly the consumer wants a different kind of bank. But what does this new landscape look like? How should the financial services industry respond to these new consumer habits, concerns and expectations?

On November 8th, The European Retail Banking Summit will bring together a leading group of experts from across the industry to seek ways to tackle this challenge - but also, people with visions and ideas from other markets where firms are successfully building new relationships with consumers.

Topics to be covered include • The changing moment of truth: New channels, traditional values • In search of growth: Where’s hot and where’s not • Every cloud has a silver lining: Seeking opportunity through regulation • The regulator’s view: Drawing the new regulatory landscape • The banker’s view: How do strategies and banking models need to change • The dynamics of demographics: How your markets will change • The new social bank: A rock and a hard place? Not necessarily • Changing the status-quo • The big banker’s response: Crossing all the channel www.economistconferences.co.uk/event/european-retail-banking-summit/5556

The Global Agenda 2011 – Where next for Economics, Politics and Business?

Date: November 10th 2011 - November 11th 2011 Location: Trinity House, London AN EXCLUSIVE DINNER AND BOARDROOM MEETING The Economist’s Global Agenda Meeting is much more than a simple gettogether of global leaders from many fields. Those invited to participate represent the cream of global business, politics and thought-leadership. Invitees range from heads of $1 billion-plus global corporations to prize-winning academics and senior policymakers.

The Global Agenda has two parts: a dinner on Thursday November 10th, with a specially invited speaker, followed by a meeting from 08.30-13.15 on Friday November 11th.

BE INSPIRED—JOIN THE DEBATE OF GREAT MINDS At the end of last year, no one could have predicted the events that would dominate the global stage at the beginning of this one. The revolutions in the

Arab world served to highlight how technology can accelerate the speed and ease with which forces can be mobilised, while the earthquake in Japan may have far-reaching effects not only on the economy but also on global energy policy Alongside The Economist’s Editor-in-Chief will be four other members of his senior editorial team who will lead the discussion on the topics that are dominating the boardroom and world economy. In the spirit of The Economist, the meeting focuses on a free and open exchange of ideas.

Last year, the proceedings were kicked off by the Rt Hon Dr Vince Cable MP, Secretary of State for Business, Innovation and Skills, UK Government, who gave a keynote address at the dinner. The meeting closed the next day with an interview with Justin King, Chief Executive of Sainsbury’s. This year we have confirmed Douglas Flint, Chairman, HSBC for a business conversation with Daniel Franklin, Executive Editor, The Economist.

To apply for an invitation or for any enquiries, call (0)207 576 8118

View From the Top: The Future of America Date: October 13, 2011 Location: Harvard Club, New York President Barack Obama described it in his State of the Union address as a “Sputnik moment”. Weakened by the financial crisis and the deepest recession in decades and faced with the surge of China, the US is losing its lead in the global economy and needs to adjust fast.

Improving US competitiveness is not going to be easy. The administration’s room for maneuver is limited by strong opposition in Congress, a massive fiscal deficit and a hesitant economic recovery, and it remains to be seen what American business can do to take up the slack.

Friction with America’s trading partners meanwhile has intensified, with US quantitative easing adding to the wave of hot money flowing into emerging markets. Against a potential scenario of currency wars and capital constraints, the US relationship with China continues to be crucial, with opportunities for 70 • GBM • October 2011

both sides but the renminbi’s managed float still a bone of contention.

This “Sputnik moment” may be about more than just economics. To what extent are the emergence of China and the increasing wealth of Asia and Brazil diminishing America’s overall influence in global affairs? Does the US also have to regain its geo-political competitiveness? And to what extent is the increasingly divisive tone of US domestic politics hampering progress?

At this crucial juncture in US economic and political life, the Financial Times will gather policy-makers, economists, business leaders and financial decisionmakers for a unique, high-level strategic discussion on America’s place in the world and whether it is prepared for the challenges and opportunities ahead.

For registration and general inquiries: Caroline Henry +1 212-641-6136 caroline.henry@ft.com

The Innovation Awards Ceremony and Summit 2011 Date: October 20-21, 2011 Location: London Who’s the greatest Innovator of the Past Decade?

A Decade of Innovation isn’t a Long Time, it’s a Lifetime.

Since 2002, The Economist have handed out awards to some of the world’s leading entrepreneurs, thinkers, creators, scientists and innovators. De Soto.

Miyamoto. Gates. Zuckerberg. Wales. Jobs. People who map our future by pushing themselves to break down boundaries. Those who refuse to stand still.

Changing the way we work, think and live.

This year’s ceremony is special. So to mark it, The Economist have invited all of our past winners and judges from around the world to attend.

The theme is ‘the essence of truly great innovation’. And this year we’ll be giving the Anniversary prize to an Innovation Award winner from the last ten years, as voted for by you. The voting window is open from May 31st to October 14th 2011.

For bookings call +44 (0)207 576 8118

The High-Growth Markets Summit The World of Opportunity Date: September 29th 2011 - September 30th 2011 Location: Grand Connaught Rooms, London There are hundreds of reasons why your company should be investing in highgrowth markets; it’s a world of opportunity.

But this is a two-way situation: for every new opportunity in a high-growth market there are new high-growth competitors. They operate not only in their home environments but are also expanding globally. Consequently competition is escalating very quickly around the globe. In this new world

of hypercompetition, how can businesses operate successfully? What are the strategies companies adopt to stand out?

Building on the success of our award-winning Emerging Markets Summit, The High-Growth Markets Summit will help you, and your business, answer these questions and provide real insight into the best strategies and tactics for success in a new world. With The Economist’s top editors alongside over 350 business leaders, top thinkers and politicians, it is the one place where you can build a whole new world of opportunity over two days.

To book, call +44 (0)207 576 8118

Simultaneous Technology Seminar - Cloud Communications for Global Business Date: Thursday 3rd November 2011. 9am New York, 1pm London Location in London: Polycom Executive Briefing Centre, 16th Floor, 69 Old Broad Street, Broadgate, London EC2 Location in New York: Polycom Solution Center, 1 Penn Plaza, Suite 2832, New York NY 10119 22 Industry Insights, delivering Global IP Communations over the Private Cloud ABOUT THE SEMINAR Our 22 industry insights on cloud communications infrastructure and service delivery will be presented in both New York and London, giving you the opportunity to experience Polycom’s HD video conferencing.

Gage Networks’ global Cloud Communications platform is an innovative, next generation deployment of industry-leading technology, delivering enterprisegrade quality Unified Communications.

What you will learn • How cloud-based implementations can save your company money while improving productivity and reliability • How to use the cloud to implement business continuity and disaster recovery • What is MPLS, SIP, RTP and a CODEC? • Why you need Class of Service (CoS) to prioritise your traffic and ensure Quality of Service (QoS) • How High Definition (HD) Voice works and is used to increase business productivity • How 3D, stereoscopic imagery and holography are shaping the future of Immersive Telepresence

• Why global organisations outsource IP Telephony, Hosted Contact Centre and Telepresence • Latest product updates from Polycom and Cable&Wireless Worldwide.

What you will see • Global video conferencing in action – personal and room-based Telepresence • New innovations: the latest integrated mobile applications • An international contact centre in action across two continents • The revolution of High Definition audio and video communications • The ability to tour and try out the full range of Polycom Immersive Telepresence solutions Polycom’s European Executive Briefing Centre is ideally located next to Liverpool Street underground station in London.

The state-of-the-art centres have been designed to offer exciting experiences that are unlike any others in the world of corporate briefings. During the seminar you will have the opportunity to explore the technology hands-on and envision how the solutions can work specifically in your business. Polycom’s executive teams will be on hand to assist.

Who Should Attend Do you have IT operations in the UK and/or US with 100 to 2000 employees dispersed across multiple office locations?

The 22 industry insights are tailored towards Communications and IT Directors, Contact Centre Managers, Facilities Managers, Network Professionals, Voice & Video Services Managers, C Level Executives and CTOs. Int: +44 (0) 207 339 1701 Email: info@gagenetworks.com

Dispute Resolution in the International Oil and Gas Business Date: Paris, 3-4 October 2011 Location: Salons Hoche, 9 Avenue Hoche, Paris, France This conference will inter alia: Discuss sovereign boundary disputes involving oil and gas fields;Find out about commercial disputes amongst companies, arising from joint operating or confidentiality agreements, service contracts, gas pricing and acquisition of oil & gas properties;Review investment treaties & fora as well as national laws implementing and sometimes contradicting those investment treaties;Learn about oil & gas disputes in the CIS and Central Europe, as well as in Latin America;Present valuation methods and compensation standards applied in oil & gas and how damages are assessed in energy transactions.

Who should attend?

Discussion topics will be of particular interest to in-house counsel of oil and gas companies, law firm counsel practicing in oil and gas, senior executive and management personnel of oil and gas companies, commercial, economic and technical personnel of oil and gas companies, senior personnel of energy ministries and national oil companies, arbitrators and mediators wanting to know about oil and gas disputes, advisors and consultants in the oil and gas business.

ICC Services - Training and Conferences 38, cours Albert 1er, 75008 Paris France October 2011 • GBM • 71

deal directory

deal directory Abcam plc: Acquisition of specialist provider of biochemicals On 13 September 2011, Abcam plc, a global leader in the supply of protein research tools, announced it had entered into an agreement to acquire the entire issued share capital of UK-based Ascent Scientific Ltd (Ascent Scientific), a specialist provider of biochemical reagents with international sales.

The total consideration for Ascent Scientific, a privately held company, is £10m, which is being settled by way of a consideration of £6m in cash and £4m in Abcam shares issued at 345.58 pence per share, being derived from

the rolling 25-day average price terminating three trading days prior to completion.

This acquisition extends Abcam’s product portfolio into specialist small molecules and is in line with the Company’s vision of becoming the world’s leading supplier of protein research tools.

Commenting, Jonathan Milner, Abcam’s CEO, said: “Ascent Scientific has built an excellent reputation as a provider of high quality biochemical products and has been

quick to bring new, best-in-class reagents to market backed by specialist technical support, which is very much in line with Abcam’s ethos…

“By becoming part of Abcam, Ascent Scientific will benefit from our proven eCommerce model and global market reach.

I look forward to welcoming its talented employees into the Abcam team and making its existing and pipeline products available to our customers.”

Braveheart Investment Group plc: Further investment in Chargemaster Plc On 23 September 2011, Braveheart (AIM: BRH), the AIM-listed specialist in growth capital investments for business angels, highnet-worth individuals and family offices, announced that Envestors Limited, its wholly owned subsidiary, had closed a £2.7m equity fundraising for Chargemaster Plc, the provider of innovative products enabling the practical day-to-day use of electric vehicles. Envestors raised £1.98m of the total from its network of high-net-worth investors and family offices, and acted as corporate finance adviser to Chargemaster.

The funds will be used by Chargemaster to

finance the rollout of POLAR, its network of vehicle charging bays. Some 4,000 sites are planned over 18 months to serve 100 major towns and cities throughout the UK. POLAR sites are currently being installed, initially across the south of England. Envestors previously led an £1.5m equity financing of Chargemaster, in December 2010.

Chargemaster’s team has more than 25 years experience of developing and managing telematics and motoring orientated infrastructures. With annual revenues of £3.5m, the company is experiencing demand as motor manufacturers develop electric cars and plug in

hybrids. The company’s charging posts include single, dual and fast charge solutions, and units for home use.

Scott Haughton, director of Envestors, said: “In a tough market for growing companies, members of our network were impressed by the Chargemaster team’s experience and the progress made from a standing start.”

“Envestors has again done a highly effective job for us,” said David Martell, chief executive of Chargemaster Plc, who previously founded Trafficmaster Plc.

Capita acquires police HR specialists Cedar On 23 September 2011, the Capita Group Plc announced that it had acquired Cedar HR Software Limited (Cedar) for £15m on a debt-free, cash-free basis. Cedar, part of the Advanced Computer Software Group, is a leading provider of human resource management software to UK policing.

Alongside Capita’s acquisition of SunGard Public Sector last year and Beat Systems Ltd earlier this year, the acquisition brings new market opportunities to Capita, particularly

in the area of outsourced services to police authorities. Cedar already provides software to 30 of the UK’s 53 forces and its largest clients include Greater Manchester, North Yorkshire and Thames Valley police.

Andy Parker, joint COO of Capita said: “This acquisition adds both innovation and

breadth to our solutions for police forces. It will allow us to offer a full, end to end, back office solution integrating payroll, rostering and scheduling, finance and procurement; in essence a platform for transformation in what is an important new market for Capita. Given the challenges the sector faces, we believe our offering will provide police forces with real opportunities to drive down costs, improve services to citizens and accelerate their transformational journey.”

acquisition is conditional on Rontec completing its transaction with Total, which is expected to take place in late 2011.

satisfied in cash at completion. The goodwill at completion will be approximately €43m (Stg£37m).

The acquired businesses together employ 550 people and sold 1.5 billion litres of fuel in 2010.

Tommy Breen, chief executive of DCC plc, said: “This acquisition represents a further significant step forward in DCC’s growth strategy in oil distribution in Britain. It will considerably extend DCC Energy’s presence in England and Wales and will also enhance our ability to serve customers throughout the market.”

The company made a pro forma operating profit for its financial year to 28 February 2011 of £2.0m on turnover of £6.2m.

DCC PLC: Acquisition On 23 September 2011, DCC plc, the sales, marketing, distribution and business support services group, reached a conditional agreement with Rontec Investments LLP (Rontec) to acquire certain oil distribution assets currently owned by Total in Britain, the Isle of Man and the Channel Islands (the acquired businesses). Rontec reached conditional agreement in June 2011 to purchase the acquired businesses as part of a larger transaction with Total. DCC’s

72 • GBM • October 2011

The expected total consideration payable by DCC for the acquired businesses together with the estimated value of stock to be acquired is €67m (Stg£59m), and will be

Hambledon Mining plc: Acquisition of Akmola Gold LLP Hambledon Mining plc (Hambledon) (AIM: HMB), the Kazakhstan gold mining and development company, announced that it had entered into an agreement for the purchase of 100% of Akmola Gold LLP (Akmola), subject to certain government waivers and consents. The vendors are Central Asian Gold Corporation and Mr Yerkin Sadykov, who each have a beneficial interest of 50% in Akmola.

The acquisition covers two wholly-owned precious metals projects, Tellur and Stepok, both situated in central Kazakhstan, some 140 km North of Astana. The combined resources

make up some 440,000 ounces of gold plus silver and other metals, with considerable upside potential after further drilling.

Total consideration payable is US$5m, payable 50% in cash and 50% in ordinary shares of the Company.

Tellur is an underground mine with a resource totalling over 140,000 ounces of gold at an average grade of over 17 g/t and is expected to be in production before the end of Q2 2013. Stepok is an advanced exploration project with estimated resources of some 300,000 ounces of gold together with

significant quantities of copper, lead and zinc.

Tim Daffern, CEO of Hambledon said: “The new acquisitions fit well with Sekisovskoye. Taken together with the ongoing development of the underground mine at Sekisovskoye, the Group is now poised to become a growing gold producer with diversified production from more than one mine. Gold production is expected to rise progressively over the next five years. With our new appointments, we are putting in place the skills we need for the development of our expanding group.”

Kerry Group confirms agreement to acquire Cargill’s global flavours business Kerry Group confirms agreement to acquire Cargill’s global flavours business On 22 September 2011, Kerry Group, the global ingredients and flavours and consumer foods group, confirmed that it had entered into an agreement to acquire Cargill’s global flavours business. Cargill Flavor Systems (CFS), with annual revenues of approximately US$200m, is being acquired for a consideration of US$230m subject to closing adjustments.

Kerry Group is the global leader in food ingredients and flavours serving the food and beverage industries and a leading consumer foods processing and marketing organisation in selected EU markets. Serving

a wide customer base in 140 countries, Kerry employs some 23,000 people across the Group’s manufacturing and product development facilities in 23 countries and its network of international representative offices. Kerry Ingredients & Flavours develops, manufactures and delivers technology-based ingredients, flavours and integrated solutions for food, beverage and pharmaceutical markets.

CFS has well-established international flavour technology development expertise serving a global customer base through provision of flavour ingredients and flavour systems for beverage, dairy, sweet and savoury applications. The business has long-standing relationships with leading global food

and beverage manufacturers and employs 700 people through its integrated flavour development and application centres in France, the UK, South Africa, India, Malaysia, China, the US, Puerto-Rico, Mexico and Brazil, supported by a network of sales representative offices in 12 other countries.

The acquisition of CFS will strengthen Kerry’s capability to provide integrated customer solutions across all food and beverage end-usemarkets and extend the Group’s market spread in emerging markets.

The transaction, which is subject to regulatory approval, is expected to be completed by yearend.

Staffline Group PLC: Acquisition of TFR Limited On 16 September 2011, Staffline Group plc, a national outsourcing organisation providing people and operational expertise to industry, announced the acquisition of TFR Limited (Taskforce), a Peterborough-based recruitment agency.

The acquisition is in line with Staffline’s existing business strategy of targeting selective bolt-on acquisitions to both expand their customer base and broaden their revenue mix.

Established in 1989, Taskforce, provides

temporary personnel to a number of blue chip customers and local authorities throughout the East Midlands region, managed through a network of four branch offices and seven OnSites and employing up to 1500 temporary personnel. Taskforce works in a wide variety of industrial sectors including manufacturing, transport and logistics, public services and food. It has also built a strong specialist driving division.

Staffline will build on Taskforce’s solid customer relationships and believes the

acquisition is well positioned to further expand the Group’s successful OnSite platform.

Commenting on the acquisition, Andy Hogarth, Staffline’s chief executive, said: “We are delighted to complete the acquisition of Taskforce, a business we have long since admired. We look forward to leveraging their strong regional presence and excellent knowledge base in the field of specialist driving and recruitment.”

Strategic Minerals: Proposed acquisition of Ebony Iron On 19 August 2011, Strategic Minerals Plc (AIM: SML) announced that it had entered into a heads of terms agreement with Ebony, a privately held Australian mining company, for its acquisition. The acquisition is subject to the completion of satisfactory due diligence and Strategic Minerals agreeing a sale and purchase agreement with the shareholders of Ebony (SPA). Further announcements will be made in due course.

of £10m to be satisfied by the issue of 100 million new fully-paid ordinary shares in SML to Ebony at an issue price of 10 pence per share. Ebony shareholders will, in aggregate, receive a further consideration of 50 million new ordinary SML shares subject to the confirmation of an Australasian Joint Ore Reserves Committee Code indicated resource of a minimum of 200 million tonnes of iron ore

by Ebony.

It is intended that under the SPA, Strategic Minerals will acquire 100% of the issued share capital of Ebony for a consideration

Pat Griffiths, CEO of Strategic Minerals, commented: “We see the Ebony acquisition as a positive step towards the development

of Strategic Minerals into a well balanced mining and exploration company with short term positive cash flow providing additional security to shareholders.”

Peter Bennetto, chairman of Ebony, commented: “Melding SML’s exploration assets and capital markets access with our production expertise and the Ebony team’s ability to acquire positive cash flow operations to fast track growth, we feel we can build a great company and a powerful business.”

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Deal Directory

Tawa acquires Chiltington International Group Tawa plc announced that it had entered into a share purchase agreement to acquire Hamburger Internationale Ruckversicherung (HIR), the holding company for the Chiltington Group of companies (Chiltington).

The purchase of HIR includes Chiltington, which provides consultancy and outsource services to the international (re)insurance industry. Chiltington specialises in compliance, audit and investigation work, litigation support, restructuring services, claims management and commutations.

Tawa has agreed to acquire 100% of HIR for a combined consideration of €3.6m cash,

conditional deferred dividend rights of up to €3m and three million new ordinary Tawa shares of 10 pence par value each.

An application will be made for the three million shares to be admitted to trading on AIM following completion of the transaction.

These shares are subject to a five-year lock-in.

service the existing, and new clients, of the combined entity.

The transaction is is subject to the usual closing conditions including regulatory approvals.

The transaction will provide Tawa with a stronghold in Continental Europe along with a platform in the growing South American market. Chiltington and Tawa’s insurance service provider, Pro, have complementary operations in both the UK and US that will generate operational synergies, and provide broader resources and skill base in order to

TelecityGroup acquires UK Grid Group Limited On 23 September 2011, Telecity Group plc, Europe’s industry-leading provider of premium carrier-neutral data centres, announced that it had acquired UK Grid Group Limited (UK Grid) for a total consideration of £11.7m in cash.

hub with strong customer demand.”

UK Grid provides TelecityGroup with a further 1.5MW of customer capacity in central Manchester, with the potential for further expansion.

These data centres are the places in which separate networks that make up the Internet meet and where bandwidth-intensive applications, content and information is hosted. As such, they are the key network hubs, or enabling environments, of the European digital economy

Michael Tobin, TelecityGroup’s CEO, said: “I am delighted to welcome the UK Grid team to TelecityGroup. UK Grid enhances TelecityGroup’s growth platform in Manchester, which is an emerging technology

TelecityGroup is the leading provider of carrier-neutral data centres in Europe, operating highly connected facilities in key cities.

in Europe. Capacity expansion is ongoing in all of the Group’s key markets. This provides its growing customer base with visibility as to how their needs for capacity can be met into the future.

In addition to organic investments, TelecityGroup aims to make acquisitions within Europe, either for the purpose of entering new markets, or to provide growth capacity in existing markets where its data centres are fully occupied.

TelecityGroup has an unrivalled multi-year announced capacity expansion programme

Tube Lines (Fin) Plc: Acquisition On 23 August 2011, Transport for London (TfL) announced that its wholly owned subsidiary, Tube Lines (Finance) plc (TLF), had acquired

£217,063,000 in face value of Class A-1 5.5400% guaranteed notes due 2031 (the notes) issued by TLF. The notes will be cancelled

immediately following the acquisition.

Velti announces entry into definitive agreements to acquire Air2Web and CASEE Velti plc (Nasdaq:VELT), a leading global provider of mobile marketing and advertising technology, announced that it had entered into a definitive agreement to acquire Air2Web, for consideration of approximately $19.0m in cash. Air2Web is a provider of mobile customer relationship management (mCRM) solutions in the US and India for many of the world’s largest and most trusted consumer brands.

comprehensive mobile marketing platform and global capabilities to increase the scope, scale, geographic reach and overall effectiveness of their mobile marketing strategies,” said Alex Moukas, CEO of Velti.

“Through this acquisition, Air2Web’s customers can now leverage Velti’s

Velti also announced that, pursuant to its previous announcement, it had signed a

74 • GBM • October 2011

“Together with Velti, I’m excited to say we now have the industry’s leading end-to-end mobile marketing solution,” said Jay Sheth, president and CEO of Air2Web Inc.

definitive agreement to acquire the remaining equity ownership interest of CASEE. CASEE is the largest mobile ad exchange and mobile ad network in China and was founded in 2006 by CEO, Xin Ye and a team of successful technology entrepreneurs. Velti will pay up front consideration of approximately $8.4m for the remaining interest in CASEE, such consideration to be comprised of approximately $3.9m in cash and, at Velti’s discretion at close, $4.5m in cash or common shares of Velti plc.

© luca kleve-ruud/save the children

WE CaN’t prEDICt WHat WILL HappEN. But we can Be prepared.

We don’t know when or where the next emergency will hit.

All we know is that children will be the most vulnerable.

In the past year, we’ve responded to over 40 emergencies including Haiti, Pakistan, Niger and Japan. Please give what you can so that more young lives can be saved.

www.savethechildren.org.uk/donate

buy a hygiene kit £25 could to keep children healthy. buy 30 buckets to £50 could help families transport water.

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PleAse HelP us be reAdy to Act quIckly ANd save lives.

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registered charity england and Wales (213890) and scotland (sc039570).

October 2011 • GBM • 75

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

THE Tipping poinT

Sustained stability in the next economy

Tipping point (physics): the point at which an object is displaced from a state of stable equilibrium into a new, different state.

Tipping point (sociology): the event during which a previously rare phenomenon becomes dramatically more common.

Tipping point (climatology): the point at which global climate changes irreversibly from one state to a new state.

What is the next tipping point...?

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

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

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

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