HKALB Apr 2012

V I E T N A M F O C U S : W I L L N E W P P P R E G U L AT I O N S M E A N A B O O M I N P R O J E C T S ?

APRIL2012

north Asia edition

ALB INTELLECTUAL PROPERTY RANKINGS Budget carriers

Arbitration

PE Funds

INSIDE

LCCs change the face of the aviation industry

Hong Kong ponders the utility of arb-med

Chinese sponsors mature and look outward

n Deals SPOTLIGHT

05

n THE BIG STORY

07

PAGE 26

PAGE 30

PAGE 40

n LEAGUE TABLES

12

n SUNDRIES

56

a trusted legal resource for global business challenges

Premier Member Firms in the Asia/Pacific Region

Throughout Asia and the Pacific and around the world, Lex Mundi member firms can help you meet the challenges of doing business globally.

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CONTENTS

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26

“A potential medium to long-term opportunity for law firms could come from increased outbound investment activity from China; probably in more varied industries than the natural resources focus we’ve seen until now, and with some of the outbound capital being channeled through the PE industry” John Fadely, Weil, Gotshal & Manges

1

40

NEWS

COVER STORY 14

ALB IP Rankings 2012 The first of our brand new rankings with enhanced methodology and greater transparency; these rankings identify the best intellectual property firms across Asia.

With more than 500 LCCs operating in the Asia-Pacific region today, these are the clients of choice for savvy aviation lawyers, finds Alison Harley

Sowing seeds

Arb-med is thriving in China and Japan, but it has curiously remained absent in Hong Kong. A recent Hong Kong ruling has ignited discussions among the city’s dispute resolution practitioners on whether it can take off, reports Candice Mak

26

30

Vietnam focus

As the government issues new PPP regulations and foreign investor interest remains high, will projects work experience a boom? Seher Hussain investigates the legal marketplace

Flight to quality

With new tougher regulations expected later this year for Chinese private equity funds and a rocky stretch ahead for fund raising, industry watchers predict that only the strongest onshore sponsors will survive. How can Chinese funds stay on top of the game and where are the top players headed? asks Candice Mak

05

APPOINTMENTS

06

BRIEFS

07

LEAGUE TABLES

12

INDEX

53

SPONSORED Regional Updates

FEATURES Budget carriers fly high

DEALS

36

40

— China

Paul, Weiss — Singapore

Loo & Partners — Malaysia

Wong & Partners — Philippines Sycip Salazar Hernandez & Gatmaitan

SPONSORED UPDATES

50 51 52 52

— Emerging Markets

Kelvin Chia Partnership — International Tax AzureTax

54

SUNDRIES

56

54

ASIAN LEGAL BUSINESS April 2012

2

MANAGING DIRECTOR Andrew Goldner andrew.goldner@thomsonreuters.com

ON THE COVER

NORTH ASIA REGIONAL EDITOR Candice Mak candice.mak@thomsonreuters.com SOUTHEAST ASIA REGIONAL EDITOR Ranajit Dam ranajit.dam@thomsonreuters.com MIDDLE EAST REGIONAL EDITOR Shaheen Pasha shaheen.pasha@thomsonreuters.com

ALB INTELLECTUAL PROPERTY RANKINGS

JOURNALISTS Artemisia Ng artemisia.ng@thomsonreuters.com Seher Hussain seher.hussain@thomsonreuters.com Zhen Liu zhen.liu@thomsonreuters.com Kathryn Crossley kathryn.crossley@thomsonreuters.com copy editor Vasundhara Chatterjee HEAD OF SALES May Wong may.wong@thomsonreuters.com

THOMSON REUTERS TRUST PRINCIPLES 01

That Thomson Reuters shall at no time pass into the hands of any one interest, group or faction;

02 That the integrity, independence and freedom from bias of Thomson Reuters shall at all times be fully preserved; 03

That Thomson Reuters shall supply unbiased and reliable news services to newspapers, news agencies, broadcasters and other media subscribers and to businesses governments, institutions, individuals and others with whom Thomson Reuters has or may have contracts;

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Please contact Andrew Goldner with any questions. andrew.goldner@thomsonreuters.com

DIRECTOR, EVENTS Lucinda Maguire lucinda.maguire@thomsonreuters.com ACCOUNT MANAGERS Yvonne Cheung (Senior Account Manager, China) yvonne.cheung@thomsonreuters.com Rebecca Ng (Account Manager, North Asia) rebecca.ng@thomsonreuters.com Brenda Lau (Account Manager, North Asia) brenda.lau@thomsonreuters.com Wendy Tan (Account Manager, Southeast Asia) wendy.tan@thomsonreuters.com Alison Towle (Account Manager, Middle East) alison.towle@thomsonreuters.com DESIGNERS John Agra Yvette Chiu TRAFFIC MANAGERs Ivy Tsang (Hong Kong) Rozidah Jambari (Singapore)

ASIAN LEGAL BUSINESS is available by subscription. Please call +852 3762 3269 (Hong Kong), +65 6775 5088 (Singapore) for details or visit www.legalbusinessonline.com Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor.

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EDITORIAL

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3

Rankings reloaded This issue marks a return to rankings following a hiatus of a few months, and there was a reason for that break: Following the ALB 50 and M&A rankings in the October 2011 issue, we went back to the drawing board to look carefully at rankings and see how they could be improved. No aspect was left untouched, right from the way we solicited submissions to how we put the final list together. The results, visible in our IP rankings in this issue are quite visible in that we have a far more clear process with well-defined criteria, resulting in a more credible list. Note that this is just the start; as we continue to evolve and learn from experience, so will we be able to eliminate the remaining minor kinks in the ranking process. In the meantime, we look forward to your feedback on the same. If you have any questions, comments or suggestions, please do write to me at the e-mail address listed in the magazine’s masthead.

To the rankings, then: We took a conscious decision to create just one list of Asia’s best IP firms, instead of splitting it according to jurisdiction, as we did earlier. The reasons are two fold. For one, we thought it would do more justice to the pan-Asian practices, rewarding them for the work they are doing across countries. Secondly, it seemed a more relevant approach, given how much cross border work is occurring in Asia today as the regional market continues to evolve. As a result, it is no surprise that a number of the usual suspects made it to the top tier of firms; congratulations to Baker & McKenzie, Bird & Bird, Hogan Lovells, and Jones Day for that. But elsewhere, we were particularly impressed by the

strong showing of the Korean firms on the list: Kim & Chang’s presence in Tier 2 and Yulchon’s in Tier 3 are testament to the solid work they are doing.

IP rankings aside, you’ll find this issue has a lot to offer. In our story on projects in Vietnam, we take a closer look at the dynamic marketplace for infrastructure work in the country.

We examine the phenomenal success of low-cost carriers, and how they are changing the Asian aviation industry for good. Chinese private equity funds skyrocketed in number last year, but their fates rest on several factors in the current climate of tight financing; we explore what these are through the eyes of fund formation lawyers and PE participants, and forecast where the top Chinese sponsors are headed. Also, we fix our gaze on the curious case of arb-med in Hong Kong and whether it will ever take off in that market.

Finally, the April issue is the third one of the “new” ALB; while we have received a significant amount of feedback to the changes that we have made, we’d love to hear from more of our readers about what you think. Please e-mail us, call us or tweet us; we’d love to hear from you.

CANDICE MAK North Asia Regional Editor, Asian Legal Business Thomson Reuters

THIS MONTH AT ALB The Brief relaunched On March 14, ALB relaunched The Brief, a monthly magazine and website designed to provide legal professionals with the hard-hitting news and analysis they need to better understand the trends and business developments in the Middle East’s legal sector. The Brief, an English-language magazine acquired by Thomson Reuters last year, will feature key interviews and regular guest columns from top legal experts as well as special country reports and inhouse counsel spotlights. The Brief will also cover the legal opportunities and challenges faced across different sectors throughout the region, issues concerning Islamic finance and sharia law, and also identify top M&A and private equity deals.

EXCLUSIVE INSIG H T: I N A R A B S P R I NG, ECONOMIC GA I N M AY T R U M P PA IN

PAGE 32

MARCH20 12

WWW.LEGALBUSINESSONLINE.COM

EXCLUSIVE INTERVIEW

Michael Hancock, GC of HSBC Middle East

PAGE 6

GULF REFINANCING HURDLES

Asset sales, restructuring s on the cards?

PAGE 22

ESSAM AL TAMIMI

A candid conversation about legislative changes, and more.

PAGE 26

INSIDE

n DEALS SPOTLIGHT n THE BIG STORY

n LEAGUE TABLES n SUNDRIES

04

05

09

43

Follow us on Twitter!

If you’re on Twitter, follow us @ALB_Magazine, where we are posting links to our latest stories on the website www.legalbusinessonline.com, apart from important news and updates related to the legal community.

All-new ALB TV coming soon ALB TV is relaunching soon with exclusive multimedia programming from Reuters and ALB including, breaking news, interviews with key newsmakers, in-depth analysis and insightful commentary on important issues. All delivered from new state-of-the-art production studios with programming supported by Thomson Reuters proprietary content, and resources including our worldwide staff of 2800+ journalists. For content creators, ALB TV will also enable you to distribute your own proprietary content at no charge to build your brand within the legal and business community. In all, ALB TV will present an unprecedented platform to serve the global legal community. For more information on how you can upload your content, launch your own channel, connect related multimedia and drive impact with your intended audience, please contact Andrew Goldner at andrew.goldner@ thomsonreuters.com.

ALB SE Asia In-House Legal Summit held More than 150 in-house counsel from companies across a wide cross section of industries attended the ALB SE Asia In-House Legal Summit at the Hilton in Singapore on March 13. The event kicked off with a presentation from Watson Farley & Williams’ Asia Practice on arbitration, which was followed by a talk by partners at KhattarWong on “The Life and Death of M&As in Singapore”. A panel of in-house counsel followed immediately after lunch, with Maija Burtmanis of Novartis, Rohan Harith of DBS Vickers Securities, Foo Chek Tsang of Atos, and Gabriel Nguyen of SITA discussing how in-house counsel could add value to their organisations. Chandler & Thong-ek Law Offices rounded off the event by speaking about project financing in Thailand and Myanmar.

RE S E RV E YO U R TA B LES A N D SE ATS

THE MOST HIGH-PROFILE LEGAL EVENT OF THE YEAR The ninth annual ALB Japan Law Awards will be held in Tokyo on Thursday 7 June 2012 at 6:30pm.

This well established and reputable event recognises the excellence and outstanding achievements of Japan’s leading law firms and in-house legal teams as well as the top deals and dealmakers of the past year. Join this prestigious event as Japan’s best legal practitioners assemble to celebrate with all the finalists and winners.

Table and seat reservations are now open and welcomed.

Includes: cocktail reception, gourmet dinner, awards ceremony, fine wines

BOOK NOW! DON’T MISS ALB JAPAN LAW AWARDS 2012 Ritz-Carlton,Tokyo

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DEALS Spotlight

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5

n your month at a glance

$9 billion Equity BoCom private placement • China’s fifth-largest lender is under regulatory pressure to shore up capital after rapid loan expansion.

• Placement was largest since Glencore International issued shares totaling $9.9 billion last May via its Hong Kong and London dual listings.

• Simpson Thacher’s team leader, partner Celia Lam, acted for BoCom on its $1.8 billion HKEx listing in 2005 while she was at Linklaters.

Deal name

Bank of Communications’ private share placement

Firm

Simpson Thacher & Bartlett King & Wood Mallesons Orrick, Herrington & Sutcliffe

Asiana Airlines’ asset-backed securities

Kim & Chang Anderson Mori & Tomotsune Linklaters

ALB_210x87mm_bleed10mm.pdf 1 2011-8-12 11:04:50

Korea, Ireland, Japan, Cayman Islands

Deal type

9000

Equity

370

Debt

Skadden, Arps, Slate, Meagher & Flom

Youku-Tudou proposed merger

Fangda Partners TransAsia Lawyers

Cayman Islands, China, U.S.

1100

Japan, U.S.

2200

M&A

China, Hong Kong, Mongolia, Bermuda

917

M&A

M&A, Privatisation (Tudou)

Conyers Dill & Pearman

M&A Youku-Tudou proposed merger • First merger attempt of two U.S.listed PRC companies with variable interest entity (VIE) structures. If the merger is approved, the new company will likely capture one-third of China’s Internet video market.

• New entity to be named Youku Tudou Inc, and will use Youku’s current listing on the NYSE. Tudou Holdings will go private.

• The combined entities do not meet MOFCOM’s antitrust filing threshold.

But the deal is being scrutinised by antitrust lawyers and rivals of the two Internet video giants.

China, Hong Kong, U.S.

Value ($ mln)

Walkers

Kirkland & Ellis

$1.1 billion

Jurisdiction

Maples and Calder Asahi Kasei Corp’s proposed acquisition of Zoll Medical Corp

Cleary Gottlieb Steen & Hamilton Goodwin Procter Sullivan & Cromwell Norton Rose Zhong Lun Law Firm

China Daye Non-Ferrous Metal Mining reverse takeover of Prosper Well Group

Paul Hastings Haiwen & Partners Conyers Dill & Pearman Legal Consulting

6

APPOINTMENTS

ASIAN LEGAL BUSINESS APRIL 2012

LATERAL HIRES NAME Yuet Ming Tham

Leaving DLA Piper

GOING TO Sidley Austin

PRACTICE

LOCATION

Dispute resolution

Hong Kong

Corporate, Energy

Hong Kong

Energy and Infrastructure

Hong Kong

Vivien Yang

Clifford Chance

Simmons & Simmons

Lynia Lau

Mallesons Stephen Jaques

Clyde & Co

Lesli Ligorner

Paul Hastings

Simmons & Simmons

Employment

China

Mao Tong

Bryan Cave

Squire Sanders

Corporate, Energy sector

Hong Kong

Peter Chow

Bryan Cave

Squire Sanders

International dispute resolution, Arbitration

Hong Kong

William Park

Apex Law

Karen Lee

Covington & Burling

Korea practice

Seoul

Goldman Sachs

Tanner De Witt

Insolvency and Restructuring

Hong Kong

FIRM

PRACTICE

FROM

TO

Washington D.C.

Seoul

RELOCATION NAME Dan Spiegel

Covington & Burling

International policy

BRIEFS

04.2012

07

FORUM HOW MIGHT THE ENTRY OF FOREIGN FIRMS INTO SEOUL AFFECT COMPETITION FOR CLIENTS? “In terms of availability of lawyers to be stationed in Korea and the existing client relationships that they have already built up in Korea, I believe the U.S. firms have a slight advantage over the European firms.”

DOO-SIK KIM Shin & Kim

the big story

Seoul beckons

AS The doors of korea open, law firms JOIN THE QUEUE

By ARTEMISIA NG

S

ince South Korea signed trade pacts with the U.S. and the European Union last year, the country has enjoyed the influx of foreign beef and automobiles.

Soon, a brainier import will arrive on its shores — international law firms.

A slew of law offices, including at least eight U.S. firms and one UK firm, has made its Seoul ambitions public. Since March 6 – the first day that applications for U.S. firms were accepted – American players have lined up for operating licenses. Many of them are busy shopping for office space while awaiting the South Korean Ministry of Justice’s approvals that are expected to come through in three to six months.

The anticipated arrival of global players has kicked up some dust in a market where local firms have largely stayed close to home, and been dominant.

“The presence of foreign firms will certainly increase competition, particularly for outbound transactions. It is this type of work that Korean law firms have a particular weakness in, when competing with foreign firms,” says Shin & Kim’s managing partner Doo-Sik Kim. Since the liberalisation of the Korean market will be phased in gradually over the next few years and because new entrants tend to refrain from expanding aggressively during a down

cycle, industry watchers believe the new development is unlikely to unleash dramatic changes right away.

“For the first five years, there’s no competition really because U.S. firms with Korean practices cannot practice Korean law, and we cannot hire Korean lawyers,” says Yong Guk Lee, a Hong Kong-based partner at Cleary Gottlieb Steen & Hamilton. “It’s really the cross border, international transactions or litigation, arbitration… those are the things that we will be working (on) for Korean clients, and that’s no different from what we are currently doing.”

As some of the more established foreign firms with sizable Hong Kong-based Korea practices position their lawyers in Seoul, their smaller peers are testing waters cautiously and striving to formulate the right strategy.

“We are going to start with a modest size, with what will be a total of four to five lawyers,” says Dan Spiegel, an of counsel at Covington & Burling who will relocate to Seoul from Washington D.C. “The Japanese market has been difficult, and a lot of American law firms that have been in Japan have closed their shops and left.

A lot of it (success in the Korean market) will depend on so many factors, and many people hope this will help long term relationships with Korean companies,” he adds.

“The number one problem is Koreans don’t really pay good legal fees. In the Korean market, Korean clients are extremely aggressive on fees. I really wonder if foreign firms are willing to work for Koreans on terms that Koreans demand.”

BRENDON CARR Yulchon

“For the first five years, there’s no competition really because U.S. firms with Korean practices cannot practice Korean law, and we cannot hire Korean lawyers.”

YONG GUK LEE

Cleary Gottlieb Steen & Hamilton

8

BRIEFS

ASIAN LEGAL BUSINESS april 2012

eMerGinG AsiA PACiFiC P/e rAtio Price to Earnings Current – Feb 26, 2012 Philippines Taiwan Indonesia Malaysia China Thailand India South Korea 11.1 05

10

Vietnam 15

20

25

Source: Thomson Reuters Reuters graphic/Christine Chan

01/03/12

Steady growth

GC INTERVIEW

Jeremy Lee General Counsel, Asia Dragages Hong Kong / Bouygues Asia

As the financial graphic indicates, Asia’s emerging markets as a whole are performing strongly, with P/E ratios above 10. Investors may expect higher growth rates in the most highly valued countries. Filipino economists are expecting a minimum gross domestic product growth rate of 4.2 percent (up to the government’s forecast of 5 or 6 percent), up from last year’s bleak 3.7 percent. According to the Philippine Board of Investments and the Philippine Zone Economic Authority, foreign investment is booming, and the country’s banks remain strong and unaffected by uncertain global market conditions.

ALB: How many lawyers does the Dragages Asia legal team consist of, and how does the structure work as a whole?

Lee: Currently, we have four lawyers (including myself) and one legal executive. Although physically based in Hong Kong, the team is responsible for the full spectrum of legal affairs related to Bouygues Construction’s interests in Asia through five subsidiaries across six countries. It is our team’s culture to be very “hands on” with managing all the legal aspects of the Asian entities we service - from drafting complex interface agreements and advising/implementing corporate/project structuring through, to the management of contentious proceedings and regulatory filings, and everything in between.

ALB: How would you describe your strategy for the legal team?

Lee: The strategy for our team has always been driven by two key objectives: (1) Optimising efficiency of resources to achieve professional, responsive and solution-oriented legal services; (2) Simultaneously offering each team member a dynamic set of

responsibilities/opportunities to allow for individual development into wellrounded legal advisers.

By centralising the resources into a regional legal “hub” in Hong Kong (rather than embedding one in-house counsel per country), we have been able to strike a good balance in achieving these two objectives. We hope to increase the resources of a regional legal hub in the near future.

ALB: What are the most important qualities someone in your role must possess?

Lee: I believe the qualities we strive towards are ever-evolving depending on the stage we are in our careers and the experiences we have amassed so far. However, at the core, we are legal professionals, and so, the virtues of integrity should always underpin our actions as lawyers.

ALB: What kind of work keeps you busy on a daily basis?

Lee: Generally, my time is fairly evenly split between my “legal/advisory function” and my “management function”. The legal/advisory function involves day-to-day legal advisory work on all matters that come across our desk.

A large part of this work nowadays is inextricably intertwined with nurturing talent development within the legal team by working closely with each team member, as well as collectively in small teams. The management function involves participating as a member of various management committees and board of directors in the region as well as in Paris (our group headquarters).

ALB: In the construction/ infrastructure/projects space, what are the major trends you’re seeing in 2012?

Lee: Despite the global economic woes of late, the outlook for the construction and infrastructure industry across Asia has been, and continues to be, very positive. The last 12 months have seen numerous large-scale projects being awarded and implemented in Hong Kong, Singapore and Thailand, and this trend looks set to continue in 2012.

However one of the key challenges will be the shortage of skilled labour in the region and the associated legal, insurance, and safety issues which may arise.

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Sponsored profile

9

Li & Partners

PAY HK$1 AS CONSIDERATION? HOW IPRS ARE BEING EVALUATED

A

bottle of normal California white wine costs only US30 to US50, but Yao Ming 2009 Napa Valley Cabernet Sauvignon costs 3,800 yuan (£384) a bottle, with a limited edition of only 1,200 bottles.

So, how much does the brand/mark of a product cost, and how is the value of a mark or other IPR being evaluated?

Barbara Tsang, Senior Associate

Generally, there are three basic methods of valuation of the IPR, namely the cost model, the market model and the income model.

Li & Partners (offices in Hong Kong, Shanghai, Beijing) A: 22/F, World-Wide House, Central, Hong Kong T: +852 2501 0088 F: +852 2501 0028 E: barbaratsang@ li-partners.com W: www.li-partners.com

The cost-based method means the substitute costs of developing a competitive technology or a solution with the same properties as the one to be evaluated. However, if this model is adopted, a potential seller or buyer in a transaction may only follow the book value and sometimes fail to take into consideration the changes in time value of money or the maintenance expenses that have been spent.

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always practical as it is difficult to find two comparable IPRs or a market value of a brand/name.

On the other hand, the income model may simply explain the Yao Ming scenario above. This uses the simple formula to calculate (i) the gross difference in price of a branded product with an unbranded product or generic product; or (ii) the excess profits method. Sometimes other method under this limb can be used, e.g. (iii) the capitalization of historic profits, i.e. that it will take into account the historic profits and multiplying it by a multiple to come to an estimated projection of future economic value; and (iv) the relief from royalty, being the amount that a potential purchaser of the IPR (usually a patent or technology) is willing to pay in lieu of a continuing royalty or licence fees.

Barbara is a qualified solicitor in Hong Kong with more than 10 years’ experience in the practice of IP law. She often advises MNC and China state-owned enterprises on management of their IP portfolio, strategy, protection and enforcement of IP rights. She was recently involved in the acquisition of Motel 168

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10

BRIEFS

ASIAN LEGAL BUSINESS april 2012

REUTERS

Yen could drop further as carry trade picks up steam

By Antoni Slodkowski

Spiking U.S. bond yields and super-loose Japanese monetary policy are reviving the yen carry trade, which could spell more weakness in the currency after its biggest two-month drop in three years.

The yen was last in vogue as a cheap global funding vehicle for buying higher-yielding assets in 2005-2008, before the global financial crisis sent investors fleeing to the exits.

Now with a global economic recovery slowly picking up steam and Europe’s debt crisis seemingly off the boil, traders are again looking to sell the low-interest rate yen to raise cash for forays into riskier and more rewarding assets.

With U.S.-Japan interest rate differentials narrow until mid-March and geopolitical risks troubling investors, many investors were skeptical the yen carry trade would make a comeback for the first time since the Lehman Brothers collapse.

But after a steady stream of encouraging news in recent months about the U.S. economy, traders expect the carry trend to make a comeback - and this time for good.

“We are coming out of a very long period of severe risk aversion and the liquidity pumped in by the central banks is eventually being put to work. That’s why the yen carry trade is not a bad place to be,” Pierre Lequeux, head of currency management in London at Aviva Investors, which manages about $424 billion.

“Look at what happened to all yen crosses from the beginning of the year. We have seen big gains because long-term investors have to move away from bonds and go for higher risk premia.”

Rising U.S. short-term bond yields are making the dollar less attractive as a funding currency, leaving the yen as the main alternative.

A surprise decision by the Bank of Japan in February which signaled a more aggressive policy easing stance has cemented those expectations.

YEN BEARS WATCHING To be sure, the interest rate gap between Japan and the U.S. is still too small now to directly spur investors to sell yen and buy U.S. bonds, but it is likely to widen further, keeping pressure on the yen. That in turn would make it more attractive for investors to sell it and buy higheryielding currencies.

Indeed, some traders say this has already bolstered growth-linked currencies such as the New Zealand dollar against the yen. It has soared 11.3 percent on the yen this year, compared to its 5.1 percent rise on the dollar.

“In an environment of abundant liquidity, and one in which Japanese investors have uncharacteristically stayed at home over the last two years, 2012 should prove to be a good year for the JPY-funded carry trade,” said Chris Turner, head of currency strategy at ING in London.

“We now see USD/JPY ending 2012 at 85 and rallying to 95 through 2013 as Fed tightening expectations build,” he said, referring to views that the U.S. central bank may have to start unwinding its ultra-loose policy sooner than expected if America’s economy continues to improve.

The yen was trading at around 82.60 to the U.S. dollar on Monday, after sliding more than 7 percent so far this year.

Jens Nordvig, global head of FX strategy at Nomura Securities, recommended bearish yen bets versus both the kiwi and the high-yielding Canadian dollar earlier in the year.

“The latest shift in U.S. rates has put pressure on traditional funding currencies, and we have seen the yen weaken materially versus the dollar,” he said.

Bearish bets against the yen placed by speculators more than doubled in the week to March 13 and exceeded those of yen bulls by roughly $6.4 billion - the largest net yen short bet since last April, Commodity Futures Trading Commission data showed.

This compares to some $19 billion worth of net yen shorts in late June 2007, when the yen shorts on CFTC hit an all-time high and the dollar peaked out, having risen roughly 20 yen over 2-1/2-years, partly on the popularity of the carry trade.

SOAKING UP BONDS With an improvement in risk appetite across the globe, the two-year U.S. Treasury yield hit an eight-month peak of 0.414 percent in March.

The fact that it is still only half of what it was a year ago shows it could go higher still.

By contrast, the yield on the two-year Japanese government bond has been stuck below 0.110 percent since the BOJ said on February 14 it will ease policy by spending an

extra 10 trillion yen on JGBs as part of its assetbuying program.

It also set a 1 percent inflation target, signaling a more decisive policy to end deflation.

“The BOJ’s steps have changed market sentiment and that’s what helped the spread widen,” said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.

The BOJ is effectively capping yields at the shorter end of the curve by soaking up bonds with up to two years left to maturity in the program, in contrast with the Fed, which sells short-term paper as a part of its “Operation Twist.”

As a result, the U.S.-Japan two-year spread widened to as much as 28.9 basis points in March, compared with around 10 bps before the BOJ easing. That was the widest since July 2011.

The yen and the U.S.-Japan yield spread have historically enjoyed a close relationship, suggesting wider yield spreads will help push dollar/yen higher.

REDUCING HEDGES U.S. yields coming off historic lows may also prompt Japan institutional investors to unwind currency hedges on their hefty overseas bond holdings, boosting the dollar further.

On top of that, starting in April Tokyo life insurers could become more active in taking on forex exposure, especially since they have kept their currency hedge ratios high up to now, said a trader for a major Japanese bank in Singapore.

Barclays Capital’s strategist Masafumi Yamamoto estimates that if “lifers” were to cut hedge ratios by 10 percent, it could spur 1.25 trillion yen ($15.2 billion) worth of dollar buying.

“More than rate differentials, it is further weakening in the (yen) spot price on Japanrelated factors that could help the carry trade,” said Yamamoto, who raised his three-month dollar target to 88 yen earlier this month.

(Additional reporting by Hideyuki Sano, Dominic Lau and Lisa Twaronite in TOKYO, Masayuki Kitano and Kevin Plumberg in SINGAPORE and Anirban Nag in LONDON; Editing by Kim Coghill)

Opportunity to join leading Matrimonial Practice Withers is seeking to recruit a matrimonial solicitor to join its busy and expanding practice in Hong Kong.

Successful candidates for the matrimonial solicitor's position should ideally have at least 5 years’ PQE with extensive family law experience and be fluent in English. There will be the opportunity to work alongside the other 9 matrimonial solicitors in the Hong Kong office and with the 28 matrimonial solicitors in the pre-eminent London family team, as well as the 15 solicitors of the worldwide contentious trusts’ team, as a member of the firm’s new and innovative Wealth Preservation Group.

Withers is the first international law firm dedicated to meeting the legal needs of successful people, their families, businesses and philanthropic interests and was recently named by Asian Legal Business as Matrimonial Law Firm of the Year 2011 in Hong Kong, and by the Sunday Times as one of the Top 100 companies to work for in 2011. The firm has just announced that it will be opening a new office in Singapore in May 2012.

Please send a full CV with covering letter to Marcus Dearle, Managing Partner, via email: marcus.dearle@withersworldwide.com Visit our website at www.withersworldwide.com All applications and enquiries will be treated in the strictest confidence.

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LEAGUE TABLES

12

ASIAN LEGAL BUSINESS April 2012

CHINA Announced M&A Legal Rankings

HONG KONG Announced M&A Legal Rankings

Slaughter and May

2,531.4

Slaughter and May

2,531.4

VALUE ($mln)

DEALS: 1 MARKET SHARE: 18.5

DEALS: 1 MARKET SHARE: 7.2 RANK

LEGAL ADVISOR

VALUE ($MLN)

VALUE ($mln)

DEALS

MARKET SHARE

RANK

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE

2

Vinson & Elkins LLP

2,500.0

1

7.1

2*

Freshfields Bruckhaus Deringer

1,275.1

1

9.3

3

King & Wood Mallesons

2,029.1

3

5.7

2*

Allen & Overy

1,275.1

1

9.3

4

Jingtian & Gongcheng

1,797.3

5

5.1

4*

Rajah & Tann LLP

494.0

1

3.6

5

Sullivan & Cromwell

1,640.3

1

4.6

4*

Linklaters

494.0

1

3.6

6

Baker & McKenzie

1,580.6

4

4.5

4*

Machado Meyer Sendacz & Opice

494.0

1

3.6

7

Skadden

1,179.7

3

3.3

7

Baker & McKenzie

260.6

3

1.9

8

Fangda Partners

1,007.2

2

2.9

8

Mayer Brown JSM LLP

254.4

3

1.9

9*

Conyers Dill & Pearman

991.3

1

2.8

9

Paul Hastings

169.9

1

1.2

9*

Maples and Calder

991.3

1

2.8

10*

Universal Legal Firm

99.4

1

0.7

(*tie) Based on Rank Value including Net Debt of announced M&A deals (excluding withdrawn M&A)

(*tie) Based on Rank Value including Net Debt of announced M&A deals (excluding withdrawn M&A)

JAPAN Announced M&A Legal Rankings

SOUTH KOREA Announced M&A Legal Rankings

Jipyong & Jisung

Nagashima Ohno & Tsunematsu

9,230.0

1,773.2

VALUE ($mln)

DEALS: 19 MARKET SHARE: 29.1 RANK

LEGAL ADVISOR

VALUE ($mln)

DEALS: 3 MARKET SHARE: 31.9

VALUE ($MLN)

DEALS

MARKET SHARE

RANK

LEGAL ADVISOR

VALUE ($MLN)

DEALS

MARKET SHARE

2

Nishimura & Asahi

5,430.3

17

17.1

2

Bae Kim & Lee

658.6

4

11.8

3

Bennett Jones

3,347.2

3

10.5

3

Lee & Ko

650.2

10

11.7

4

Burnet Duckworth & Palmer

2,912.2

2

9.2

4

Kim & Chang

460.7

4

8.3

5*

Dewey & LeBoeuf LLP

2,630.0

1

8.3

5

Allen & Overy

429.9

1

7.7

5*

Mintz Levin Cohn Ferris Glovsky & Popeo

2,630.0

1

8.3

6

Minter Ellison

330.6

1

5.9

7

Clifford Chance

2,321.2

3

7.3

7*

DLA Piper

308.0

1

5.5

8*

Cleary Gottlieb Steen & Hamilton

2,122.1

1

6.7

7*

Vinson & Elkins LLP

308.0

1

5.5

8*

Goodwin Procter LLP

2,122.1

1

6.7

9

Ogasawara Konno & Rokugawa

117.6

1

2.1

10

Mori Hamada & Matsumoto

2,027.9

28

6.4

10

Wachtell Lipton Rosen & Katz

35.2

1

0.6

(*tie) Based on Rank Value including Net Debt of announced M&A deals (excluding withdrawn M&A)

(*tie) Based on Rank Value including Net Debt of announced M&A deals (excluding withdrawn M&A)

160 140 120 100

Series1

80

64.0 63.0

60

114.6 103.4

94.5

94.0 72.8 54.5

143.7

130.3

Series2

104.9

99.8

92.2

70.3

61.7

84.1

81.9

76.1

3,000 129.7 127.0 2,500 114.9 105.8 2,000

137.0 128.1

130.2 112.2 101.9

1,500

54.2

1,000 500

40

0

20 1Q 05

3Q 05

1Q 06

3Q 06

1Q 07

3Q 07

1Q 08

3Q 08

1Q 09

3Q 09

1Q 10

3Q 10

1Q 11

3Q 11

NOTES: League tables, quarterly trend, and deal list are based on the nation of either the target, acquiror, target ultimate parent, or acquiror ultimate parent at the time of the transaction. Announced M&A transactions excludes withdrawn deals. Deals with undisclosed dollar values are rank eligible but with no corresponding Rank Value. Non-US dollar denominated transactions are converted to the US dollar equivalent at the time of announcement of terms. North Asia includes China, Hong Kong, Taiwan, South Korea, Japan. Data accurate as of March 28, 2012

No. of Transactions

Rank Value US$ Billion

ANY NORTH ASIA INVOLVEMENT ANNOUNCED M&A ACTIVITY - QUARTERLY TREND

REUTERS /BEawihaRTa

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14

IP RANKINGS

ASIAN LEGAL BUSINESS April 2012

ASIA INTELLECTUAL PROPERTY RANKINGS FIRMS

TIER 1

TIER 2

TIER 3

TIER 4

TIER 5

- Baker & McKenzie - Bird & Bird** - Hogan Lovells - Jones Day

- Deacons - Kim & Chang - King & Wood Mallesons - Mayer Brown JSM - Morrison & Foerster - Ropes & Gray - Wilkinson & Grist

- Allen & Gledhill - DLA Piper - Drew & Napier - Freshfields - Norton Rose - Tilleke & Gibbins - Vivien Chan & Co - Yulchon

- Amica Law - Jun He Law Offices - Luthra & Luthra - Rodyk & Davidson - Skrine - Winkler Partners

- Colin Ng & Partners - Mori Hamada & Matsumoto - Run Ming Law Office - Tay & Partners - WongPartnership

* Firms are in alphabetical order within the groups ** Bird & Bird and Singapore associate law firm ATMD Bird & Bird are considered collectively for this ranking

WWW.LEGALBUSINESSONLINE.COM : @ALB_Magazine : Connect with Asian Legal Business

IP RANKINGS

15

Introduction

By SEHER HUSSAIN

L

ooking back over the last year, it is clear that intellectual property has never been hotter. Whether it was the headline grabbing dispute between Proview and Apple in China, Samsung v Apple in Korea, or Novartis suing the Indian government over a cancer treatment drug, intellectual property matters have grabbed the limelight across Asia.

Several significant trends have emerged, and will continue to define the intellectual property landscape throughout 2012. The most notable is a flurry of activity in China; hardly a new phenomenon, but intellectual property practitioners continue to report that IP-related litigation is on the rise here, as PRC companies flex their muscles against multinationals, in both the trademark and patent sectors. Sources report that patent litigation in China has also become increasingly sophisticated. Another noticeable area of growth is enforcement actions. As online investigations gain popularity, lawyers are becoming more creative and inventive in their race to catch infringers. Legislative developments have also come up fast and furiously, as the Chinese government tries to keep up with the rapid pace of growth in the country.

As the United Nations World Intellectual Property Organisation reports, international patent filings grew by 11 percent in 2011 as compared to 2010, and China, Japan and the U.S. were responsible for 82 percent of this growth. It comes as no surprise then, that the company which filed the most patent applications in 2011 was Chinese telecommunications company ZTE Corp.

While in two other key markets, Korea and Japan, significant developments are underway, practitioners report. The Korea Fair Trade Commission has been actively reviewing the intellectual property industry, and undertaking several investigations which are being watched closely by local and international companies. Across the Korea Strait in Japan, lawyers affirm an increase in Japanese companies filing patents, as well as a corresponding rise in litigation. Legislative measures include the amendment of the Patent Act, which will take effect from April 1, 2012, enhancing protection for licensing agreements and facilitating dispute resolution procedures.

Hopping across to India, all eyes are on the pharmaceutical industry. The legal world affirms that multinationals, especially in the pharmaceutical space, continue to ramp up their interest in their Indian operations, and are adopting aggressive strategies to protect themselves. Indian companies are also getting into the act, and are steadily increasing their portfolios outside India.

In the Lion City, a mature intellectual property marketplace has ensured little dramatic change over the last year. Lawyers report that interest in patents and franchising continues to grow as local Singapore companies license and franchise their trademarks and business models, while the proposed changes to the positive grant system promises increased clarity in terms of registering ability.

Thailand and Vietnam saw similar increases in patent filings, especially in the former country, as they enacted new intellectual property legislations.

Enforcement activities in the two markets continued to expand as well, particularly in Vietnam, given its lengthy land border with China and associated smuggling problems.

Lastly, in Malaysia, lawyers describe several positive developments for the industry, including the government’s efforts to update legislation with a new Copyright Amendment Act coming out in March. Online filing has also gained popularity in the marketplace.

Overall, it has been an undeniably busy 12 months, and it is safe to say that the rest of the year will see intellectual property lawyers in the region continue to be inundated with work. Stay tuned for our continuing coverage of the IP marketplace in upcoming issues.

People walk past an Apple billboard advertising the iPad 2 in downtown Shanghai REUTERS/Carlos Barria

RANKINGS METHODOLOGY OUR RESEARCH ALB‘s professional legal journalists spoke to a wide variety of lawyers and clients who were drawn from firm submissions, our own resources, and market suggestions. All the interviews were off-the-record and confidential, and have been conducted entirely for research purposes.

Only firms that sent in a submission by the deadline were considered for ranking.

OUR RANKINGS Our rankings are based on the following metrics: • Portfolio of clients • Client feedback • Firm’s visibility and profile in the marketplace • Volume/complexity/size of work • Presence across Asia The intellectual property rankings are divided into five tiers, with the first tier identifying the strongest intellectual property firms across Asia.

Below the five tiers, ALB has identified firms that are the “ones to watch”.

These are practices that are making a push in the market, but don’t otherwise rank in the tiers.

16

IP RANKINGS

ASIAN LEGAL BUSINESS April 2012

TIER

1

BAKER & MCKENZIE This global juggernaut holds a top tier position in the market, and offers a full service which covers transactional matters including portfolio management as well as litigation, dispute resolution, anti-counterfeiting and unfair competition work. With an unparalleled presence across Asia, the firm has offices in Shanghai, Hong Kong, Tokyo, Taipei, Bangkok, Vietnam. It also has member firms of its global network in Indonesia, Malaysia, Philippines and Singapore.

Highlights from the last year include counseling the LVMH Group on the enforcement of a $3.5 million judgment; successfully representing Clinique Laboratories, a subsidiary of Estée Lauder Inc, before the Singapore Court of Appeal; acting for Abbott Laboratories and Abbott GmbH on obtaining a groundbreaking court judgm e n t w h i c h r e co g nised infringement of a pharmaceutical patent through the importation of samples of generic LOKE-KHOON TAN pharmaceutical drugs.

Other notable clients include Polo Ralph Lauren, Microsoft, Li & Fung and K-Swiss.

Peers report that the firm is considered a “front runner and a full-service competitor,” as well as a

BIRD & BIRD IP TEAM IN HONG KONG

“The service is efficient, responsive and very to-thepoint. Their local knowledge on particular nuances of the law is excellent.” “top-tier global name.”Clients affirm that “the service is efficient, responsive and very to-the-point. The advice is commercial and that’s very appreciated.” One client adds that “they know our business well, and always go the extra mile to offer pertinent tailored advice which adds value to their service. Their local knowledge on particular nuances of the law is excellent.”

Loke-Khoon Tan leads the Asia- Pacific Region IP Group in Hong Kong.

BIRD & BIRD A well established presence in the market, Bird & Bird is sought after for its expertise in a wide range of transactional and contentious matters.

With offices in Shanghai, Beijing and Hong Kong as well as Singapore associate law firm ATMD Bird & Bird, the firm is well placed to offer comprehensive advice across the region. The team has in-depth knowledge of the life sciences, aviation, media, communications and electronics industries, and it frequently advises on trademark, copyright, design protection, patent protection and litigation matters. Recently, the team has been expanding, and has been welcoming new arrivals at its Singapore and Hong Kong offices as part of this move.

Notable work from the last year includes counseling

“They have a good network around the region, and provide quality advice.”

Yahoo! Southeast Asia in a lawsuit regarding alleged copying of news articles and fair dealing, and representing Microsoft in coordinating a multijurisdictional raid in Singapore, Malaysia and Australia in which over 1,000 pieces of counterfeit software were seized. The group also advised Singapore Airlines on the branding and registration of its new budget airline, Scoot. Key clients include Fuji Xerox, ESPN Star Sports, Cisco Systems and Nestle Singapore.

Peers describe the group as “a standout international firm doing a lot of work in China,” as well as “a strong competitor with a good reputation.” Clients reveal that “that they are generally professional, efficient with a fast turn-around time, and knowledgeable of IP matters.” One source further adds that “they have a good network around the region, and provide quality advice.”

The team is led by Matthew Laight in Hong Kong, while the Singapore associate firm ATMD Bird & Bird is helmed by Alban Kang.

WWW.LEGALBUSINESSONLINE.COM : @ALB_Magazine : Connect with Asian Legal Business

HOGAN LOVELLS This intellectual property titan maintains a leading position in the market due to a deep bench of exceptionally experienced lawyers, and a strong geographic reach across the region.

With over 70 lawyers spread across Japan, Hong Kong, China and Vietnam, the team is sought after for its comprehensive knowledge of both transactional and litigation matters.

It has specific expertise in trademark and patent portfolio management, HENRY WHEARE trademark prosecution and enforcement, patent and trade secret advice, and litigation and copyright-related matters.

In China, the team continues to handle brand protection and trademark/copyright matters, recently advising Levi Strauss & Co, Amazon.com and ExxonMobile (China) Investment Co Ltd. In Hong Kong,

“A very strong presence, especially in pharmaceuticals and brand enforcement.” the firm counseled Merck in relation to all its Hong Kong patent dispute work regarding pharmaceutical products. In Tokyo, the group represented NEC in cloud computing issues across 35 countries, as well as patent litigation and arbitration in Germany, Italy and the UK. In Vietnam, the firm acted for Caterpillar in several trademark matters, and also advised Aviva on trademark licensing.

Peers hail the group as “a very strong presence, especially in pharmaceuticals and brand enforcement,” and note that “we see them often on the other side of cases.” Clients describe the team as “very impressive in handling litigation.”

The IP group is led by Henry Wheare in Hong Kong,

IP RANKINGS Hanoi and Ho Chi Minh City. Other key contacts include Gabriela Kennedy, also in Hong Kong, Eiichiro Kubota in Tokyo, and Gregory Buhyoff in Vietnam.

JONES DAY Positioned at the high end of the intellectual property market, this group has a strong reputation for litigation matters, especially those regarding patents. It is well known for trademark infringement and counterfeiting issues, while portfolio management and regulatory work also featured on the team’s work-

“The group is definitely top tier, and the lawyers have all the necessary technological background.” load in the last year. The firm has a presence in China, Japan and Taiwan.

In China, the team has particular knowledge of the biotechnology and pharmaceutical sectors, having recently advised several multinationals on extensive patent litigations.

The firm has handled multiple complex trade secret, copyright, criminal prosecution, and civil litigations in the last year. The Hong Kong group has also seen a growth in licensing and franchising matters.

Peers affirm that the “group is definitely top tier, and the lawyers TONY CHEN have all the necessary technological background.” Marketplace sources further add that “they are strong in brand protection and see a lot of work.”

Tony Chen helms the team in China and Hong Kong, Nobutoshi Yamanouchi is the main contact in Japan, and Jason Chen heads the Taiwan team.

17

18

IP RANKINGS

ASIAN LEGAL BUSINESS April 2012

TIER

2

DEACONS This firm has a well respected intellectual property practice, and is strong on complex patent trademark work. It has expertise across a broad range of matters from handling cross border patent litigations, patent invalidation actions, copyright, data privacy and internet issues to trademark infringement actions and unfair competition issues.

Sp r ea d a cr o ss B e ijin g, Shan ghai, Guanghzou and Hong Kong, the team recently advised a U.S. IT solution provider serving the global hospitality industry on cloud computing and relevant data piracy issues in China. The team is “top of the list for prosecution work,” according to peers.

Notable lawyers in Hong Kong are Christopher Britton and Annie Tsoi.

KIM & CHANG This Korean powerhouse has over 75 intellectual property partners on board who handle a vast range of matters including patent infringement suits, patent invalidation actions, and trade secrets work.

The team frequently counsels high-profile multinationals; in the last year, it advised Caffe Bene Co, Scholastic, BASF, 3M and GM Korea.

One impressed client noted that “the team brought a wealth of legal and technical knowledge to deal with a very complex litigation, and provided excellent strategic advice over an extended several-year period of time.”

The intellectual property practice head is the highly experienced Jay (Young-June) Yang.

KING & WOOD MALLESONS

Going from strength to strength after the recent merger, this group has an established reputation for a wide range of intellectual property work. In the last year, the firm has been sought out for its cutting-edge patent litigation skills. However, the team also handles portfolio management and commercial IP transactions. It frequently counsels multinational clients in China, offering them a seamless service across the country considering that they can now draw on additional

REUTERS/Aaron Tam

resources throughout the Asia-Pacific region.

The recent arrival of former Chief Intellectual Property Judge at the Supreme People’s Court, Jiang Zhipei, has also bolstered its market position.

Peers say that it is “a prolific and standout firm in the marketplace for intellectual property work.”

Nongfan Zhu is a key contact in Beijing.

MAYER BROWN JSM In addition to complex contentious work, this Hong Kong-based team also has significant strength in handling trademark, patent and design matters. The firm is often sought out for its commercial

intellectual property skills, and its frequent handling of heavy M&A transactions.

Recent highlights include counseling Wynn Resorts Holdings on their trademark filings in Asia and enforcement matters in Hong Kong and China. Other notable clients include the HSBC Group, Procter & Gamble and Ann Taylor.

Clients say that “we’re very happy with the way the firm handles our portfolio.”

Kenny Wong, who heads the practice, is based in Hong Kong.

MORRISON & FOERSTER This strong global intellectual property practice earns

20

IP RANKINGS

accolades for its Japan focus, often advising regional and international clients on patent licensing, litigation and technology transactions. The team also has a presence in China and Hong Kong.

High profile work from last year includes counseling Huawei Technologies and its U.S. subsidiary Futurewei Technologies on the defence of a patent infringement case, and representing Harbin Pharmaceutical, a Chinese stated-owned enterprise, in its acquisition of Pfizer’s swine vaccine business in China - the first such divestment resulting from a MOFCOM antitrust conditional approval.

Peers say that the firm is “a very strong player for patent litigation,” and is “a long established group that we go head to head with all the time.”

Max Olson leads the team in Japan, while Gordon Milner is the contact for China.

ROPES & GRAY A force when it comes to patent, trademark and copyright disputes, this team has a presence across Japan, China and Hong Kong. The intellectual property practice also has a reputation for handling complex transactional matters, especially those with highly technical IP components.

Notable work from last year includes acting for NEC Japan and its U.S. subsidiary against allegations of infringement brought in the United States District Court by VirnetX Inc, a publicly traded patent licensing entity.

The firm also advised Honeywell in developing its China IP protection and overall strategy projects. Sources say that “the team has the technical background necessary, and is energetic and quick to respond.”

Hiroyuki Hagiwara is a key lawyer in Japan, while Geoffrey Lin is the contact for China.

WILKINSON & GRIST This longstanding intellectual property team is known for handling the full range of transactional and litigation matters. Spread across Beijing and Hong Kong, the team frequently handles patent prosecutions, infringements, portfolio management and domain name protection.

Key work from last year includes issuing nearly 50 court actions in Hong Kong on behalf of two clients against companies suspected to be “shadow” companies on the basis of trademark infringement/ passingoff. Peers say that the firm has “a large and respectable IP practice.”

Anne Choi is the key contact based in Hong Kong, and Howard Tsang handles Chinarelated work from the Beijing office.

ASIAN LEGAL BUSINESS April 2012

age the whole of HSBC’s trademark portfolio.

TIER

3

ALLEN & GLEDHILL In Singapore, this talented intellectual property group handles contentious and non-contentious work, often advising clients in the technology, bio-sciences, pharmaceutical and telecommunications sectors. Key work includes representing Martek in two patent revocation proceedings, marking the first and second time that a patent invalidation made by the Patent Registry has been overturned.

DLA PIPER Spread across Hong Kong, Japan, China, Singapore and Thailand, this team is highly regarded for its patents, licensing and litigation skills. The group recently acted for HSBC on its trademark opposition and litigation work in Hong Kong and PRC, as part of the firm’s worldwide mandate to man-

DREW & NAPIER Drew & Napier has a strong track record in advising clients on litigation matters. The Singapore-based team handles patent, trademark and copyright matters, with niche expertise in counseling life sciences clients. In the last year, it acted for AstraZeneca AB on patent infringement proceedings against Ranbaxy (Malaysia).

Sources say “they have a well established reputation, and are commercially practical.”

YULCHON With offices in Korea, Vietnam and China, this dynamic group has rapidly grown its presence throughout last year. Headline work includes representing Samsung Electronics in an intellectual property infringement action filed by Apple against Samsung in Korea. Clients report that “we found the team to be brilliant as well as precise in their work.”

FRESHFIELDS This dynamic group is extremely well regarded for multijurisdictional, complex IP work. The team focuses on trademark portfolio strategy, copyright protection,

An Apple Inc’s iPhone 4 smartphone and a Samsung Electronics’ Galaxy S smartphone are seen in this picture illustration taken in Seoul. REUTERS/Truth Leem

22

IP RANKINGS

ASIAN LEGAL BUSINESS April 2012

TIER

4 REUTERS/Shannon Stapleton

patent and trademark litigation, unfair competition, and commercial IP disputes. The firm recently counseled PepsiCo on its strategic alliance in China with Tingyi-Asahi to increase the former’s market share.

NORTON ROSE This group has broad experience in intellectual property and technology matters, and advises on contentious and non-contentious issues. In the last year, the team counseled Siano Mobile Silicon on several patent litigation proceedings in the Beijing Intermediate People’s Court. Clients affirm that “they responded quickly and efficiently to our time-critical issue, and their advice is always precise and easily understood.”

AMICA LAW This Singapore-based team is sought out for its broad IP and technology expertise in handling trademarks, patent, franchising and enforcement work.

Notable clients include Warner Brothers Entertainment, Raffles International and Burger King Asia Pacific.

JUN HE LAW OFFICES This China-based group has grown rapidly in the last year, and its close ties with its Silicon Valley office ensure a steady stream of patent work from California companies and universities.

Clients report that “they provide exceptional representation, especially for complex projects.”

LUTHRA & LUTHRA Headquartered in India, this 24-strong IP team handles litigation, transactions, trademark prosecution and

regulatory advice. Headline work includes counseling Tata Global Beverages on its joint venture to bring Starbucks to India.

RODYK & DAVIDSON Highly regarded for IP litigation, this Singapore-based group is also strong in transactional matters. In the last year, the team advised Asahi Glass Co in a patent infringement action, the first case regarding a selection patent and involving Japanese companies litigating in Singapore.

SKRINE A strong player across Malaysia, this team handles patent and trademark work with a particular emphasis on litigation. Regulatory and licensing matters are also practice strengths. Notable clients include sanofi-aventis, Bruan and Abbott Laboratories. One client says “I was very impressed by the high quality of the work done.”

WINKLER PARTNERS In Taiwan, this team is best known for handling the IP portfolios of several global brands as well as trademark, copyright and infringement matters. The firm recently counseled one of the world’s largest semiconductor companies in obtaining favourable judgments from Taiwan’s Intellectual Property Court and the Supreme Court against a local company.

TILLEKE & GIBBINS A Southeast Asia powerhouse, this IP team focuses on trademark and patents, and advises on enforcement, franchising and trade secrets work. The team is noted for its expertise on the technical side, frequently counseling clients from the pharmaceutical and technology sectors. Of note was its representation of Magnequench (Korat) in trade secrets litigation, in which it won the largest amount of damages ever awarded by Thailand’s Central Intellectual Property and International Trade Court.

VIVIEN CHAN & CO F e e d b a c k f r o m clients indicates that this attentive team provides practical solutions to a variety of intellectual property issues. The 20-strong team is spread across Shanghai, Beijing and Hong Kong, and offers expertise in litigation and trademark infringement. The team also handles IP portfolios for international clients.

Notable clients include Research In Motion, Ikea and Ford.

President of Starbucks China and Asia Pacific John Culver attends a news conference in Mumbai January 30, 2012.

Starbucks Corp said it will open its first outlets in India in August or September and plans to have 50 stores in operation by the end of the year in a joint venture deal with Tata Global Beverages. REUTERS/Danish Siddiqui

24

IP RANKINGS

ASIAN LEGAL BUSINESS April 2012

gence against landlords, who have continued to allow their tenants to sell pirated material on their premises.

WONGPARTNERSHIP This Singaporebased firm made headlines recently by representing Singapore Press Holdings (SPH) in the Singapore High Court action against Yahoo! Southeast Asia for alleged copyright infringement in relation to unauthorised reproduction of news content from SPH.

REUTERS/Fred Prouser

TIER

5 COLIN NG & PARTNERS This compact team is based in Singapore, and frequently advises companies on trademark portfolios.

Notable clients include Elsevier Properties, Zouk Holdings and Stun Services. Clients reveal that “the team is supportive, responsive and always provides clear communication.”

MORI HAMADA & MATSUMOTO With a presence in Tokyo, Beijing, Shanghai

and Singapore, this team undertakes licensing, trade secret, trademark and patent litigation matters. Recent work includes representing a high-profile Japanese company in a copyright and trade secret infringement case in the Tokyo District Court, which was filed by a Taiwanese company.

RUN MING LAW OFFICE Trademark and patent litigation is this team’s forte. Over the last year, the China-based group advised Johnson & Johnson China on a series of trademark infringement and unfair competition litigation cases in Beijing and Shenzhen.

TAY & PARTNERS This Malaysia-based group has seen a significant growth in its workload over the last year. High-profile work includes representing the Recording Industry Association of Malaysia in action for negli-

ONES TO WATCH

The firms listed here are being recognised for making a push in the intellectual property market, and are the players to keep an eye on in the future.

• Allen & Overy • Eagle IP • Gateway Law • Khaitan & Co • Lee Hishamuddin Allen & Gledhill • MMLC Law Group • MdME|Lawyers • Nagashima Ohno & Tsunematsu • Rahmat Lim & Partners • Raja, Darryl & Loh • Stephenson Harwood

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26

FEATURE

ASIAN LEGAL BUSINESS APRIL 2012

LOW COST, HIGH FLYING

ASIA’S BUDGET CARRIERS SPREAD THEIR WINGS DESPITE RISING FUEL COSTS AND A CHALLENGING ECONOMIC CLIMATE, IT SEEMS THE SKY IS THE LIMIT FOR LOW-COST CARRIERS IN THE ASIAN REGION. WITH TIGER AIRWAYS’ NEW JOINT VENTURE TAKING OFF THIS MONTH, THE LARGEST COMMERCIAL AIRCRAFT ORDER TO DATE BEING FINALISED AT THE 2012 SINGAPORE AIRSHOW, AND THE RECENT ANNOUNCEMENT OF A NEW LOW-COST CARRIER TERMINAL AT CHANGI AIRPORT, THE FUTURE OF ASIAN AVIATION SEEMS TO BE BUDGET CARRIERS, THE CLIENTS OF CHOICE FOR SAVVY AVIATION LAWYERS, FINDS ALISON HARLEY

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27

“LCCS TEND TO BE LED BY CHARISMATIC INNOVATORS WHO SEE OPPORTUNITIES EVERYWHERE, ARE PREPARED TO TAKE MORE RISKS, AND WANT TO DO EVERYTHING IMMEDIATELY. LCC CEOS DRIVE THE GROWTH OF THEIR COMPANIES VERY HARD. FOR THEIR LAWYERS, IT CAN BE A CHALLENGE TO KEEP UP.” PAUL NG, Stephenson Harwood

A

ccording to a forecast released by Boeing, in the next 20 years, approximately half of the world’s air traffic growth will be driven by travel to, from, or within the Asia-Pacific region. Approximately a third of all new airplanes will be headed to the region with Asian airlines expected to require some 11,450 new airplanes valued at $1.5 trillion. Boeing also anticipates that 70 percent of its orders will be for single aisle airplanes, the aircraft of choice for most low-cost carriers (LCCs). Clearly, if the time for LCCs is now, the place is certainly here.

“The growth of LCCs is phenomenal,” says Shukor Yusof, an aviation analyst at Standard and Poor’s. “We are forecasting a growth rate of at least 12 percent to 15 percent annually until the end of the decade, and that 35 percent of passenger air travel in Asia will be on LCCs by 2020.”

Malaysia’s AirAsia was the first of the LCCs to arrive in Asia in 2001, with the vision “to be the largest low-cost airline in Asia and serve the three billion people who are currently underserved with poor connectivity and high fares.” The first few years were not easy. But over the past six or seven years, the Asian LCC market has boomed. In fact today, the Centre for Asia-Pacific Aviation (CAPA) lists the number of LLCs operating in the Asia-Pacific region as 51 with the recent addition of Jetstar Hong Kong, the territory’s first LCC. “There are 3.9 billion people in Asia,” says Neil McCarthy, senior associate, aviation at Norton Rose, “and a massive growing middle class.”

“There’s exceptional growth in disposable income,” agrees Siva Subramaniam, partner, asset finance at Watson, Farley & Williams, “and (a) lack of safe and reliable land-based transport infrastructure.”

Another factor that has aided the growth of air travel is the Internet by raising awareness of airlines, and making the booking of your next flight just a click away. LCCs have particularly tapped into this with easy booking systems, and discounted Internet offers.

However, as with all business ventures, a large part of the success comes down to correct timing. LCCs were in the right place at the right time when the 2008 financial crisis ushered in an era of corporate austerity. “The LCC market shone in the downturn,” says Paul Ng, global head of aviation at Stephenson Harwood, adding: “LCCs are nimble footed by nature.” In contrast to the legacy carriers, which are often seen as conservative and bureaucratic, LCCs react faster when an opportunity presents itself − react they did, with the introduction of business or premium services for business travellers. “LCCs tend to be led by charismatic innovators who see opportunities everywhere, are prepared to take more risks, and want to do everything immediately,” says Ng. “LCC CEOs drive the growth of their companies very hard. For their lawyers, it can be a challenge to keep up. Since I joined Stephenson Harwood in 2009, our team has tripled in size and is still

growing. Their mission to expand air travel to the masses is a noble one, and we want to help.“ Aerodynamics This ability to adapt can be seen in the evolving LCC business models, the original of which was the LCC short haul – flights between one to three hours. It proved to be very successful with customers happy to pay less for tickets that did not include the hidden costs of “free” services they did not want or need.

With the arrival of the airbus A380 and the potential to carry over 800 passengers in economy seats, the idea of long haul LCC was born. In 2007, AirAsia X, the low-cost long haul division of AirAsia, took to the skies.

However, this has proven to be a more challenging business model for AirAsia X, perhaps evidenced by the recent cancellation of unprofitable routes to Mumbai, Delhi, Paris, and London. However, Ng sees this as a strategic move rather than a failure of the business model. “It is an astute move,” he says, “better utilisation of their aircraft on shorter, quicker turnaround routes.” AirAsia has called it a “realignment” to enable them to focus on their core markets of Australasia, China, Taiwan, Japan, and Korea – a move to the medium-long haul business model to be adopted by Tiger Airways’ new “cub” Mandala, and Scoot, Singapore Airlines‘ medium long haul low-cost prodigy.

A further example of seizing opportunities can be seen in Indonesia with LCCs developing their own full-service, operational offsprings. “Indonesia has a huge middle and upper class,” explains McCarthy, “and there is a growing reaction against flying LCCs. So LCCs are setting up full-service or premium providers, catering to this domestic premium market. This trend is evidenced by the arrival of Space Jet, Lion Air’s business charter start up, due to start operations later this year and the new Indonesian start up Pacific Royale,

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FEATURE

ASIAN LEGAL BUSINESS APRIL 2012

also due to take to the skies in 2012.

Low cost legal services?

So do LCCs require different legal services compared to flag or legacy carriers?

“LCCs are very cost conscious,” says Ng. “However, legacy carriers are going the same way; it’s the current commercial reality.”

However, Subramaniam believes that in this complex financial climate, legal costs may “no longer be a primary differentiator.

As traditional bank funding sources become scarcer and more complex structured finance solutions are taken up by LCCs, the level of expertise required from external counsel will also increase. This higher level of expertise, meanwhile, will come with a higher price tag.

LCCs will see these higher legal costs as part of the higher transactional costs involved. But the cost savings delivered by such products should offset these higher costs. Law firms with more structured finance capacity (especially capital markets capability) would have

“[LEGAL COSTS MAY] NO LONGER BE A PRIMARY DIFFERENTIATOR. AS TRADITIONAL BANK FUNDING SOURCES BECOME SCARCER AND MORE COMPLEX STRUCTURED FINANCE SOLUTIONS ARE TAKEN UP

BY LCCS, THE LEVEL OF EXPERTISE REQUIRED FROM EXTERNAL COUNSEL WILL ALSO INCREASE. THIS HIGHER LEVEL OF EXPERTISE, MEANWHILE, WILL COME WITH A HIGHER PRICE TAG.” SIVA SUBRAMANIAM, Watson Farley Williams Asia Practice a competitive advantage.”

Another growth area for legal services is joint ventures. With Asian air rights being still highly regulated, consolidation or strategic alliances are a useful way to access markets.

“This has spurned a wave of joint ventures,” says Ng, “Tiger Airways’ joint venture with Thai Airways forming Thai Tiger, AirAsia’s joint venture with ANA (All Nippon Airlines) in the formation of AirAsia Japan, and Jetstar’s joint venture with JAL forming Jetstar Japan.”

Of the three “divisions” of aviation work, namely financing and leasing of aviation assets, “metal” contracts (operation, maintenance and acquisition) and litigation and regulatory advice, “metal” contracts is often taken to be the most time consuming.

However, it is the orders and finance side that attracts the most media attention and none more so than the Boeing-Lion Air deal, valued at $22.4 billion. It is the largest commercial aircraft deal to date with its memorandum of agreement having been officiated by

President Obama in November 2011. The deal is expected to create 100,000 new U.S. jobs over the next 10 years. So how did it feel to lead the legal team for Lion Air on this deal?

“With the amount of press coverage around the transaction,” says Ng, “there was a lot riding on getting this deal done. Pressure was tremendous. I had to deploy multiple teams to deal with the various aspects of the transaction − all of which had to be done concurrently. It was not only the fact that the transaction was for an unprecedented number of aircraft, but that it was also for a new model of aircraft which was to be delivered over a long period. There are many uncertainties when we are dealing with aircraft to be delivered years from now. As counsel for the airline, we try to anticipate probable events and cater for them − some would say we are pessimists. But I would rather say we are realists. We, and the documents we prepare, are our client’s first line of defence. This is a history-making transaction − one to tell the grandchildren.”

Crowded skies but empty pockets?

So who is footing the bill? With Europe facing an economic crisis and the implementation of Basel III, there is talk of a liquidity gap growing in the aviation market. “It’s a genuine concern,” says Leigh Borrello, partner and head of Asia aviation finance at Norton Rose, “given the position of Europe and the lack of U.S. dollars in the market.”

There seems no doubt that the traditional funding sources have reduced in number with certain institutions having disappeared from the market all together. “ECA stepped in during the last recession – now we’re seeing less activity,” says Borrello.

However, what is still available from the international financial houses is coming to Asia, and any shortfall is being picked up by local sources. China, for example, has traditionally funded the domestic aviation market.

But it is has now moved to an international level with aircraft financial services company ICBC Financial Leasing being particularly active in the market. “It’s no longer unusual to see foreign airlines these days at air finance conferences in China,” says Ng. “Over the last 18 months, we have done a lot more work for Asian banks,” says Borrello, adding that, “Australian banks are also seeing it as a good opportunity to get into the market.”

But while the funds might be available, they may be harder to come by. “One of the issues for borrowers is that there are fewer players in the market. Rates are higher and

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lenders more selective; they can choose best creditors and ask (for) high prices,” says McCarthy.

A third and a new source of funding in Asia is the bond market. The first Asian airline to issue a U.S. Ex-Im backed bond was Air China (at the end of 2011). A South Asian one is imminent.

Islamic financial sources are also being tapped, with rumours that AirAsia X is working on an Islamic bond similar to the recent Emirates bond, but perhaps to a lesser extent than had been anticipated.

The fourth route of finance is via the equity market: IPOs or further share issuances for those already listed. Rumours of possible LCC IPOs for 2012 include AirAsia X, Thai AirAsia (expected in the third quarter) and Spring Airlines, with Lion Air’s IPO getting delayed for 2012, but an imminent possibility for 2013.

Open skies After demand for service and finance, the next essential component for aviation expansion is air rights. In this context, the traditionally heavily regulated Asian sky has presented a challenge with its bilateral agreements leaving airlines constrained by allocated routes and quotas.

All that is set to change, thanks to the ASEAN Single Aviation Market (SAM) initiative. Signed in Manila in 2009 by the 10 ASEAN countries, the ASEAN Multilateral Agreement on Air Services and its air freight equivalent have paved the way for open ASEAN skies by 2015.

“This is very significant,” says Yusof.

“ASEAN is a grouping of 600 million people.

This has huge infrastructure implications in addition to passenger travel figures,” he adds. SAM is being introduced in phases with “freedoms of the air” restrictions being lifted to an agreed timetable. At least that is the plan. There are reports of heel-dragging and lingering protectionism, but regardless of any air pockets encountered, this is a landmark initiative and one that is set to lead liberalisation across all Asian skies.

In the meantime, joint ventures or consolidations are being used to break into regulated markets, such as Tiger Airways’ recent venture into the lucrative Indonesian market through a 33 percent share acquisition in Mandala. “There is still a lot of protectionism in the region as seen by the unsuccessful attempts of Qantas to establish a premium carrier in Asia,” says Subramaniam. “However, the multitude of joint ventures between Asian carriers is an encouraging development for future consolidation of the aviation industry

FEATURE

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REUTERS/Beawiharta Beawiharta

in Asia,” he says.

“Another country to watch (out for) is India,” says McCarthy. “In light of (the) Kingfisher (airline crisis), there is pressure on the government to allow foreign ownership. If that were allowed, it would open up the market.”

New horizons Right now, with the Lion Wing deal and Tiger’s acquisition of Mandala, all eyes are on Indonesia − a vast archipelago which spans three time zones (prime aviation territory), but with poor land infrastructure. So where is the next hot hub?

“Indo-China,” says Yusof. “It has a low penetration of LCCs at the moment. But they (the Myanmar government) are quietly talking to Malaysia and Singapore about opening up their air infrastructure.”

“Pacific islands, like Fiji, with increased tourism could be (the) next boom,” says Subramaniam.

“China is still growing,” says Borrello, “and Thailand will become more established.”

So, it looks like busy times ahead for LCCs. But are there any clouds on the horizon?

“Fuel (prices) keeps aviation CEOs awake at night,” says Ng. “It’s the essential component whose cost can’t be controlled, at least not easily.”

“LCCs tend to use narrow bodied, newer aircrafts that are more fuel efficient. This combined with low operating costs and labour costs means they can be more maneuverable,” says Yusof, adding that “however, in the face of rising fuel costs, no one is immune.”

Fuel Hedging, if used properly, can flatten out the cost of fuel.

But if misused, it can be a disaster. “2009 was one of the darkest years for aviation, and fuel hedging losses were a silent and material contributor to the poor performance of the industry,” says Ng. When fuel prices dropped dramatically, even the conservative airlines were losing money. Chinese carriers in total were reported to have lost about $1 billion.

So with the current rising fuel costs and tension in the Middle East, there must be a few CEOs counting sheep; or is that planes?

Fuel and financial concerns aside, LCCs in Asia still have higher heights to soar to. CAPA data shows that within South Asia, LCCs have moved from a market share of 0.1 percent in 2003 to 56.9 percent in 2012. It can only be imagined what they can do in another 10 years.

So, it looks like busy times ahead for Asia-based aviation lawyers.

Perhaps time to grab a holiday now while you can – I hear there are some pretty good deals on flights these days.

30

Arb-med

ASIAN LEGAL BUSINESS April 2012

Sowing seeds

A Hong Kong Court of Appeal judgment from last December has now cast a spotlight onto arb-med, a dispute resolution approach routinely used in China and Japan. Although the mechanism is allowed in Hong Kong, it has curiously never been utilised there. Candice Mak finds out why What is arb-med?

When the Hong Kong Court of Appeal (HKCA) laid down its judgment in the Gao Haiyan and Xie Heping v. Keeneye Holdings Ltd and Another (please see box out on page 34 for more details on the case), the dispute resolution community in Hong Kong sat up and took notice. The case was unique because it involved an arb-med procedure in China, and forced the Hong Kong Court to grapple with its understanding of the low profile (at least in Hong Kong) approach.

Arb-med or med-arb is a practice where the arbitrator also acts as the mediator, or the mediator becomes the arbitrator, within the same dispute.

To put it more simply, the same person acts both as the mediator seeking to encourage a settlement between parties, and as the arbitrator to determine the facts of the case and issue a binding, final award. This mixing of arbitration and mediation is quite common in civil law jurisdictions, but is still regarded with skepticism and suspicion in common law ones such as Hong Kong. Although the practice is permitted in Hong Kong’s

Arbitration Ordinance (in section 33), it has not taken root – none of the lawyers who spoke to ALB could name a case that had utilised the arbmed option in Hong Kong. Justin D’Agostino, a Hong Kong-based arbitration partner at Herbert Smith and council member of the Hong Kong International Arbitration Centre (HKIAC), says: “As a common law lawyer, one tends to be nervous of a judge or arbitrator conducting a mediation. Switching from the role of arbitrator into the role of mediator – and then back again if the process fails – is not within one’s normal contemplation.”

Pros and cons The main obstacle to arb-med, lawyers say, is

Arb-med

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that there is a legal requirement in Hong Kong to disclose confidential information that is obtained over the course of the dispute resolution process. This is not the same for arb-meds conducted in China. “If there is a widespread objection to arb-med in Hong Kong or even a suspicion about it, it’s about the confidentiality issues,” says Abdulali Jiwaji, a Hong Kong-based disputes partner at Simmons & Simmons. If the mediator were to become an arbitrator during a case, the revelation of confidential information to all parties by the mediator-turned-arbitrator would discourage parties from having frank discussions with the mediator and defeat the purpose of an arb-med.“The difficulty is that, under Hong Kong’s Arbitration Ordinance, if an arb-med procedure fails, then any confidential information the arbitrator learned during his time as mediator must be shared with the other side,” says D’Agostino. “This is likely to dissuade the parties from speaking freely and openly during the mediation, which is likely to hamper its effectiveness significantly.”

Arbitrations and mediations are considered to be quite different, and as such, most international arbitration rules (such as the ICC’s – International Chamber of Commerce) have kept the two processes separate. An arbitration involves a neutral arbitrator or tribunal, and it has no additional knowledge of the dispute or the positions of the parties beyond the facts presented in the case. Mediations require parties to share extra information in confidence and are largely conducted through shuttle diplomacy.

Any confidential information shared with the mediator is kept private, and is not released to the other side. Concerns about blending the two procedures rest in the disclosure of confidential information to all parties, and the possible tainting of the arbitrator’s or mediator’s neutrality and fairness of the existing arbitration or litigation. “In theory, whatever is discussed in private should not be given regard to when you consider the parties’ formal position,” says Friven Yeoh, a dispute resolution partner at O’Melveny & Myers in Hong Kong. “But I think it is very difficult as we are all human.”

Despite the murky waters of confidentiality and its potential impact on fairness and neutrality in a judgment, there are advantages to arb-med. For clients, it can be very efficient and cost-effective because it nudges parties ahead to reach an early settlement and so avoid drawn-out hearings and the hefty legal fees they entail. “I’ve seen it work really well in Europe, for example, where the process resulted in the settlement of a complex dispute relatively early on in the proceedings, and saved clients an absolute fortune,” says D’Agostino. Also, arbitrators or mediators will already be very

31

“I am certainly personally open to it if the ground rules are set right.

We have seen it work in China; a lot of cases get settled through arb-med, so I don’t see why it can’t happen out here in Hong Kong.”

Friven Yeoh, O’Melveny & Myers

familiar with the case, its parties and counsel, and should be in a favourable position to settle the dispute. Any settlement reached during arb-med can be recorded as a final award by the tribunal, which is enforced under the New York Convention.

China and Japan You do not need to extol the virtues of arb-med to the dispute resolution community in China. In fact, data from CIETAC (China International Economic and Trade Arbitration Commission), the country’s main arbitration body, reveals that 20 to 30 percent of its cases were resolved using arb-med. Yeoh explains that it is quite common in CIETAC arbitrations to have the tribunal suggest in the middle of the proceedings that the parties take a break and then offer to become mediators, after the parties have submitted their position and evidence. “This involves putting aside all the legal differences and the formal aspects of the party’s case, and seeing whether the parties can come up with a compromise with the tribunal acting as facilitator of this process,” he says. The Keeneye arb-med was conducted in this flexible and pro-conciliation environment.

Under CIETAC’s new arbitration rules, particularly in Article 45, an arbitral tribunal is able to conciliate a case during arbitration proceedings in the situation where the parties consent to that procedure. “In this context, ‘conciliation’ is used to describe what we would typically refer to as ‘mediation’,” says Ula Cartwright-Finch, an associate based in Herbert Smith’s Hong Kong office. “In an arb-med procedure of this type, the arbitral tribunal has a wide discretion under the CIETAC Arbitration Rules to conduct the mediation in the manner it considers appropriate.” She points out that the CIETAC rules also contain provisions, which would assist any arb-med procedure in the PRC on a practical level. For example, the provisions allow the arbitral tribunal to make an arbitral award reflecting the terms of any settlement agreement the parties sign as a result of the process. The CIETAC rules also expressly prohibit the parties from invoking anything that is said during the mediation by way of claim or defence in any subsequent proceedings – whether arbitral, court or otherwise. “Our understanding is that, in practice, an arbitral tribunal in the PRC tends to offer to act as mediator to the parties of its own accord and as a matter of course in most, if not all, cases,” says Cartwright-Finch. “It would then be up to the parties to give their consent to that process, or to look for an alternative, or, of course, to proceed with the arbitration without any formal mediation process.”

China is not the only Asian jurisdiction that is warm to arbmed. Japan’s arbitration law (in Article 38.4) as well as the Japan Commercial Arbitration Association’s (JCAA) arbitration rules allow arbitrators to attempt and settle the disputes, subject to the parties’ consent. The JCAA’s mediation rules also allow a mediator in a dispute to act as an arbitrator in any subsequent arbitral proceedings from

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Arb-med the same dispute, and any mediation settlement may be incorporated into an arbitration award. A 2009 JCAA newsletter revealed that 25 cases out of 48 JCAA arbitrations between 1999 and 2008 reached successful outcomes, with arbitrators helping the parties in reaching a settlement.

Will it work in Hong Kong?

The Keeneye case judgment cast a spotlight onto the question: Will arb-med ever work in Hong Kong? Some lawyers have a tempered outlook, citing low awareness of the procedure - the relative novelty of mediation in the Hong Kong market - and the inexperience of mediators and arbitrators there. “Whether it can take off and grow; I think never say never,” says Jiwaji of Simmons & Simmons. “I wouldn’t rule it out because I can see the scope for it being useful for disputes.

You always have to look at the future, and just because something is new and unfamiliar, doesn’t mean it can’t be effective.” Yeoh of O’Melvey and Myers is similarly cautiously optimistic when he says: “I am certainly personally open to it if the ground rules are set right.

We have seen it work in China; a lot of cases get settled through arbmed. So, I don’t see why it can’t happen out here in Hong Kong.” He says it is crucial, though, that parties enter the process with open eyes and reasonable expectations, and that an “experienced and astute” arbitrator or mediator be involved.

However, there is at least one passionate supporter of the approach in Hong Kong. “I’m a proponent of it in principle, and I think com-

“Lawyers shouldn’t wait until they’ve experienced it for themselves. We should be educating ourselves and our clients on the different styles of arb-med, and suggest it for the right case at the right time.”

Justin D’Agostinoo, Herbert Smith

mon law lawyers especially need to be more open-minded to the process,” says D’Agostino. He champions raising awareness through more arbitrator training, educating about the benefits of the process, promotion of the arb-med provision by counsel to clients, and the willingness of lawyers themselves to undergo a mentality shift.

“Lawyers shouldn’t wait until they’ve experienced it for themselves.

We should be educating ourselves and our clients on the different styles of arb-med, and suggest it for the right case at the right time,” he says. Yeoh believes the common law lawyer culture explains, in part, why counsel are hesitant to embrace arb-med. “I think a lot of the times, the resistance comes from common law lawyers putting on very parochial, cultural lenses to this whole arb-med issue. It’s in our blood because that’s how we’re trained to look at things. If we are crossing into the unknown, there is a concern or uneasiness that we might be overstepping the boundaries.”

Role of evaluative mediation D’Agostino particularly believes that arb-med can successfully develop through an evaluative mediation. There are two main types of mediation - facilitative and evaluative.

In a facilitative mediation, a mediator goes back and forth between

ASIAN LEGAL BUSINESS April 2012

parties’ rooms, hearing from both sides, and aiming to bring parties together in a neutral setting to reach a settlement. The evaluative approach also includes a mediator holding separate meetings with the parties.

However, the mediator will make known the strengths and weaknesses of each party’s position in this case. He will indicate how he or she thinks the judge will decide, and make suggestions on suitable settlement options. “In evaluative mediation, arb-med could work in a plenary session when the mediator isn’t hearing anything in private,” says D’Agostino. The Herbert Smith lawyers believe facilitative mediation is unlikely to be an effective model within arb-med. This is largely because the Hong Kong arbitration ordinance (which addresses arb-med) requires an arbitrator-mediator to disclose confidential information learned about during the mediation, in the event that the mediation fails and the arbitration recommences.“I’m personally skeptical of arb-med where the arbitrator acts as a traditional facilitative mediator, but I think practitioners need to be more open-minded about using arbitrators in evaluative mediations.”

Jiwaji agrees that evaluative mediation is an easier step to take than diving into arbmed, but it has its pitfalls. “It is a much easier step, but you will see many clients still being uncomfortable taking that risk as they may get an adverse opinion,” he says. “It may help the cultural shift to start with an evaluative mediation, but the fact remains that you are still dealing with a separate person who is a mediator. But in arb-med, you are mixing the two roles which is where the danger comes in.” Robert Lewington, a Hong Kong-based dispute resolution partner at Simmons & Simmons, feels that evaluative mediation and arb-med take away from the attraction of mediation, which is the ability to enter a room with a mediator and speak freely with the knowledge that he or she will not divulge that information to the other side. “In an evaluative mediation or arb-med, you’ve always got one eye on the fact that this person is actually going to make a judgment on your case; and that’s risky,” he says.

Because the culture of mediation is still so young in Hong Kong, one Hong Kong mediator (who is also a barrister) queried whether or not Hong Kong was even at the stage of conducting evaluative mediations yet. “All the training I’ve been through was for facilitative mediation,” she says. “I’m more of an evaluative mediator in practice. But mediation in Hong Kong is almost exclusively known to be facilitative.” When considering mediation as

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OON & BAZUL

ASIAN EXPERTISE. GLOBAL REACH. PARTNERS

Bazul Ashhab, Managing Partner

O

on & Bazul LLP, which began as a two-man practice in 2002, is now one of the leading commercial law firms in Asia. The Firm is especially highly regarded for its dispute resolution practice and cross border work through its associated office in Kuala Lumpur and networks throughout Asia. The Firm and its Partners are frequently recommended by respected legal industry publications such as Asian Legal Business, the Asia Pacific Legal 500, Chambers Asia Pacific and Asialaw Profiles. Managing Partner Bazul Ashhab and Head of Commercial Arbitration Suresh Divyanathan share the secrets to the Firm’s success and their plans going forward.

Bazul, what are the main factors that have contributed to the Firm’s success?

I think the 2 key factors are our approach towards our clients and our values regarding our lawyers.

Suresh Divyanathan, Head of Arbitration

With respect to our clients, we approach every case with the intention of achieving the following objectives: • A commercial and practical solution to our clients’ legal issues.

• Responsive case handling through fast turn-around times for all cases.

• Reasonable legal fees without an excess of lawyers or overheads on any case.

We believe that by articulating these objectives and making them integral to the way we do business, we better serve our clients and they can certainly see the difference in results. An important part of this process is our insistence that all Partners of the Firm be “working partners”. In some places, the client only ever sees the partner at the first meeting. After that, all communication is with the associates and the partner hardly knows what’s going on in the case. We don’t do that. At this Firm, when you hire a Partner to work on your case, you get a working Partner. That’s how we maintain quality in our work and adherence to the objectives listed above.

We are very proud of the fact that our clients keep coming back to us and expanding the scope of legal work they give us.

As regards our lawyers, our value system is founded on the following principles: • We are a People Organisation. We are only as good as our people.

• This means we hire only the best lawyers we can find, give them the best training and exposure we can and pay what it takes to retain them.

A: 36 Robinson Road, #08-01/06 City House Singapore 068877 T: (65) 6223 3893 F: (65) 6223 6491 E: general@oonbazul.com W: www.oonbazul.com

We view every Associate and Trainee we have as a potential Partner. If the Associate or Trainee never becomes good enough to join the partnership, that is

a failure of leadership on our part as Partners. In many places, the partners have an “us versus them” attitude towards their own associates. When associates leave or don’t become good enough to join the partnership, the partners blame the associates themselves. We don’t do that. If Associates leave us for another firm, we see that as a failure of leadership on our part because it means we didn’t get the associate to buy in to our philosophy and take an emotional stake in the Firm. If our Associates don’t become good enough to join the partnership someday, we also see that as a failure of leadership on our part because it means we didn’t train the Associates properly.

A recent newspaper article quoted some smaller law firms as saying they can’t hire young lawyers because everyone wants to go to a big firm. I am proud to say we don’t have that problem because law students know that our Firm is different. We currently have 10 Trainees in the Firm and we are retaining the majority of them. We have already secured another 10 Trainees for next year and we are looking to add similar or larger numbers in the following years.

Following these 10 years of success, what are the Firm’s plans going forward?

Our focus is on strengthening our corporate practice and expanding our international disputes work. Our clients want us to take on more work involving complex corporate transactions. We are looking for dynamic young partners to join us and push our corporate department to greater heights. We will also be doing more international work as clients are increasingly realising that we can handle complex international disputes as effectively as the large foreign firms but at a fraction of the cost.

My new partner, Suresh, has a wealth of experience and contacts internationally and is precisely the kind of dynamic individual we are always looking to take on board.

Suresh, what attracted you to join Oon & Bazul LLP at the start of 2012?

I was looking for an up and coming firm in which I could play a leadership role – to come in near the top and help the firm grow in new dimensions. I was also looking for partners who share the same vision and values as I do. Oon & Bazul was the perfect fit for me in all those respects. Bazul and his Partners are extremely supportive of all my initiatives whether in the realm of business development or training and nurturing our young lawyers.

This Firm is already a great platform but we are now poised for some major expansion. If you think this Firm’s first 10 years have been impressive, wait till you see what we do in the next 10!

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Arb-med

ASIAN LEGAL BUSINESS April 2012

a standalone procedure, Hong Kong dispute resolution practitioners tend to think of the facilitative approach only. However, the arbitration ordinance is likely to lead parties away from utilising the facilitative style due to the disclosure requirement, should the mediation fail.

“People are concerned with the disclosure provisions of the Arbitration Ordinance, which would clearly impact facilitative mediations. But nobody’s considering evaluative styles,” says D’Agostino.

Baby steps Another shift that is required before the practice of arb-med takes off in Hong Kong is for the dispute resolution practitioner to be comfortable with switching between arbitrator and mediator roles.

Cartwright-Finch points this out when she says: “It’s not just parties in Hong Kong that are wary of the process; arbitrators are not necessarily prepared to do it either because of the potential repercussions on their appointment, or on the arbitral award.”

“I think we’re a long way off still,” says D’Agostino. “We are not really appreciating the benefits of evaluative mediation.” Even though he is enthusiastic about moving towards more evaluative mediations, which in turn could lead to more arb-meds, D’Agostino emphasises that arb-med would only work in specific scenarios and if the timing is right. Another key pre requisite for an arb-med’s success is having the arbitrator or tribunal very informed and updated on the specifics of the case. “In the case I saw where the arb-med worked effectively, the tribunal was totally on top of the facts and law. This gave the mediation credibility and was critical to the success of the process,” says D’Agostino.

In this context, Jiwaji says that if the HKIAC could release a set of guidelines or rules for how arb-med should be conducted, then some of

the stigma would dissipate. “It would be good to see more arbitral institutions incorporating a framework for arb-med in their rules,” he says. “That would create a culture where it is more accepted. It would give authenticity to the process.” The HKIAC’s secretary-general, Chiann Bao, provides some encouragement that these guidelines may be in the works. She notes the arbitration body is in the process of amending its arbitration administration rules, and that the issue of arb-med had been raised at one of the consultation sessions. “There has been some conversation about the option of including some sort of arb-med provision in our amended rules,” says Bao. “We are only in the consultation stage right now, so it is difficult to say for sure that this is the actual path we will go down.”

Arb-med can be a useful tool for the settlement of disputes and with increased education, training and open-mindedness – plus guidance from the HKIAC – it could take root in the mid term. The recent exposure of the Keeneye case and subsequent discussions of the judgment within the Hong Kong dispute resolution community seem to have been the first steps in raising awareness of the arb-med facility.

Gao Haiyan and Xie Heping v Keeneye Holdings A dispute over the validity of a contract for the sale and purchase of shares between Gao Haiyan and Xie Heping (the applicant) and Keeneye Holdings (the respondent), which sparked the nowinfamous arbitration, was administered by the Xian Arbitration Commission (XAC). The arbitration complied with the Xian Commission Arbitration Rules, which allows arbitrators to act as mediators during an arbitration. During the arbitration, the parties agreed to mediate.

One of the arbitrators and the secretary general of the XAC were appointed by the tribunal to conduct the mediation. The controversy began because instead of approaching the parties directly, the mediators approached a third party, Zeng Wei, who was friendly with and connected to one of the respondents, namely Keeneye. Wei and the two mediators met for a “mediation” over dinner at the Xian Shangri-La hotel. At the dinner, the mediators suggested Keeneye pay 250 million yuan to Gao Haiyan to settle the case, and asked Zeng to persuade Keeneye to accept this outcome as a mediated settlement. Both parties rejected the proposal, and the arbitration continued.

The tribunal ultimately published its award, ruling that the contract between the parties was void, and made a non-binding recommendation that Gao Haiyan pay Keeneye 50 million yuan as compensation.

Keeneye appealed to the Xian Intermediate Court (XIC), alleging the process was conducted improperly and that there

was bias on the part of the arbitration tribunal. The XIC dismissed the appeal, finding no bias, and Gao Haiyan subsequently applied to the Hong Kong courts for enforcement of the award. The Hong Kong Court of First Instance (HKCFI) ruled that the award was unenforceable on grounds of public policy. It held that various aspects of the way the mediation was conducted were lacking in transparency, independence, and propriety. But on Dec. 11, 2011, the Hong Kong Court of Appeal (HKCA) reversed this HKCFI decision. It stated in unequivocal terms that “there is nothing wrong in principle with med-arb.” The HKCA allowed the appeal, and approved the enforcement of the award in Hong Kong on the grounds that (i) Keeneye had waived its right to object (ii) There was no apparent bias. As the respondent did not raise any objection to the arb-med procedure during the arbitration, it waived its right to do so in the enforcement proceedings also.

Lawyers say that based on this, the case serves as a powerful reminder to parties about the importance of raising objections to the adopted procedure in an arbitration promptly.

“I call this the ‘when in Rome’ case,” says Herbert Smith arbitration partner and council member of the Hong Kong International Arbitration Centre, Justin D’Agostino. “When I first read the judgment, I thought it was a strange decision – it was an unusual mediation after all. But on reflection, I do think the HKCA has got it right; if you agree to arbitrate in a country like China, then you have to accept the way things are done there.”

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spotlight: vietnam

ASIAN LEGAL BUSINESS APRIL 2012

VIETNAM:

PROJECTS ON THE HORIZON

TAKING THE TEMPERATURE OF THE VIETNAMESE MARKET RIGHT NOW WILL YIELD ONLY ONE RESULT; THAT PROJECTS ARE HEATING UP. WHETHER IT IS ROAD, RAIL, ELECTRICITY, OR EVEN NUCLEAR, LAWYERS IN THE MARKET ARE BUSY HANDLING A CONSTANT STREAM OF PROJECTS. AS THE GOVERNMENT TRIES TO KEEP PACE WITH THE INCREASING AMOUNT OF WORK, SEHER HUSSAIN INVESTIGATES WHAT THIS WILL MEAN FOR THE LEGAL MARKETPLACE IN 2012

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lthough the last year was a shaky one for Vietnam with high inflation, project delays, and an extremely high-profile default by stateowned shipbuilder Vinashin, the outlook for infrastructure work is bright this year. With a dynamic middle class that continues to grow, the need for road, rail and power projects has never been higher. The Vietnamese government has also taken note, and has been issuing PPP regulations to help stimulate the market as well as taking measures to bring inflation under control. As such, lawyers remain optimistic that more reforms are on the way and that opportunities remain plentiful.

STATUS REPORT “2011 was a difficult year to do business in Vietnam for law firms because the economic crisis has affected clients’ ability to implement and expand their projects in Vietnam, as well as constrained their budget for legal services,”

says Oliver Massmann, partner at Duane Morris Vietnam. However, the prospects for 2012 seem a little brighter. “In terms of the market, we are still seeing an increase in infrastructure work, a definite trend,” says Martin Desautels, regional managing partner at DFDL Mekong.

Some of those projects include the headline grabbing construction of the country’s first nuclear reactor, set to be operational in 2020.

Reuters reports that Vietnam intends to follow that up with another 14 reactors by 2030, and that the government has signed deals with Japan and Russia to supply the Ninh Thuân 1 and 2 reactors, although it has not decided which type to buy.

Other high-profile projects include the $1.9 billion 1240 MW Mong Duong II coal-fired power project in Northern Vietnam, the development of which was handled by Freshfields duo Tony Foster (managing partner of the Vietnam offices) and Robert Longeran (counsel in Hong Kong), which had earned the Thomson Reuters Asia-Pacific Deal of the Year for the firm at the PFI Awards.

Market sources note an emerging trend of renewable energy projects, many of which are in the pipeline. But questions surround their implementation and completion. Tran Tuan Phong, VILAF’s Hanoi partner, elaborates: “For example, the IFC has entered into a joint venture with SN power (a global hydro firm) for a clean energy investment (of one GW of hydro power capacity). Some foreign funds also

A worker walks at the construction site for the Mong Duong 2 power plant in Quang Ninh province. REUTERS/Nguyen Huy Kham

have their own green energy investment funds like Indochina Capital.

We have also gotten involved with wind farm projects involving joint ventures with foreign investors. But it’s become difficult because the negotiations have become very long.”

Exemplifying the trend is a recent government report which says that in late 2011, the Saigon Industrial Corporation, the Ho Chi Minh City Power Corp, Neptech, and YnS-OCBM (Russia) worked with each other to pilot the production of three wind turbines worth $4.8 million using Russian YnS technology.

At the time of writing, the latest news as reported by Reuters was that Siam Cement, one of Thailand’s top industrial conglomerates, had signed a deal with partners under which it would take a 46 percent stake in a $4.5 billion petrochemical complex in Vietnam.

DAWN OF THE PUBLIC-PRIVATE PARTNERSHIP (PPP) The Vietnamese government has released PPP regulations with an eye to stimulate the sector. “The Vietnamese government is trying to encourage other types of infrastructure projects,” affirms Dao Nguyen, partner at Mayer Brown JSM. “In addition to the more traditional forms of investment, such as BOT, BT, and BTO for example, Vietnam is also considering the PPP form of investment, currently implemented in neighboring countries such as Singapore,” she says.

“A LOT OF PEOPLE ARE REALLY SERIOUS ABOUT EXPLORING CLEAN ENERGY ALTERNATIVES SUCH AS BIO-ENERGY, WIND, POWER AND TIDAL. BUT HOW CAN YOU MOBILISE THESE RESOURCES? THE ISSUE IS THE VERY STRONG INFLUENCE OF THE TRADITIONAL ENERGY COMPANIES IN VIETNAM, WHICH ARE MONOPOLY POWER DISTRIBUTORS.“ FREDERICK BURKE, Baker & McKenzie

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spotlight: vietnam

ASIAN LEGAL BUSINESS APRIL 2012

The construction site of Son La hydro power plant in Muong La district. REUTERS/Nguyen Huy Kham

Desautels elaborates, saying: “Like anything in Vietnam, it will be a long road! There are already some pilot projects that have started, and a number of PPPs that have been approved recently in the water and transport sectors. We are seeing interest from foreign investors, but it’s probably too early to see the real effect.”

Foster also urges caution when he says: “It will take a substantial period of time before these regulations are relevant for private investors. The infrastructure isn’t in place yet. There’s a lot of work left to be done to make it meaningful.”

Massmann is even more conservative, stating that: “The mere provision of (a) general legal framework for PPP projects cannot bring out immediate investment increase. Especially as before Decision 71 (issuing PPP regulations), the government had already issued Decree 108 on investments in the form of BOT, BT and BT contracts in 2009.

Although Decision 71 has clarified some important points with regard to PPP regulations, it is unfair to say that it contains significant reforms compared with Decree 108.”

“PPPs are just another form of the investment, but it doesn’t matter what the form is. At the end of the day, the investor has to be satisfied by the commercial viability of the project in terms of generating return,” details Hop Dang, Hanoi partner at Allens Arthur Robinson.

“It’s a difficult question as investors often demand a very high level of comfort from the Vietnamese government before they can invest or lend the money. While the government wants the projects to happen, they find it hard to over commit themselves. They have to strike the right balance in order to promote these projects.”

Overall though, the regulations are generally perceived as a positive step forward, albeit one that could take considerable time to bring more capital to the infrastructure sector. “It’s a good signal. Now the government will help investors participate,” confirms Phong of VILAF. FOLLOW THE MONEY Where is most of the foreign investment coming from? Market sources reveal that the trend identified earlier by ALB (January 2012) of

Japanese and Korean investment, remains strong. Singapore and China have also increased their interest in Vietnam by investing more heavily in infrastructure projects.

Nguyen Gia Huy Chuong, managing partner at P&P Law Firm, reveals this when he says: “For infrastructure, the private investors I have seen, most of them come from Singapore or Hong Kong. For example, Temasek has done a lot of work here and I’ve seen several Vietnam-Singapore joint venture companies investing.”

Phong also affirms this when he says: “In my practice, the key financing is from Japan and also looking a bit towards China. It’s very difficult for the Western world right now to invest in Asia.”

Frederick Burke, Ho Chi Minh City partner at Baker & McKenzie, elaborates on the Japanese aspect of investment, saying: “Especially in northern Vietnam, the highway network has been largely supported by Japan’s Official Development Assistance. It’s for strategic reasons; they don’t want to be dependent on China for low-end manufacturing production.”

One trend worth keeping an eye on is the marked increase of investment from India into Vietnam. For instance, DFDL Mekong has recently started an India desk in order to capitalise on this development. Vinay Ahuja, head of the India desk at DFDL Mekong says: “A lot of these big Indian conglomerates, such as the Aditya Birla Group and the Tata Group,

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spotlight: vietnam

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“THE VIETNAMESE GOVERNMENT IS TRYING TO ENCOURAGE OTHER TYPES OF INFRASTRUCTURE PROJECTS. IN ADDITION TO THE MORE TRADITIONAL FORMS OF INVESTMENT, SUCH AS BOT, BT, AND BTO FOR EXAMPLE, VIETNAM IS ALSO CONSIDERING THE PPP FORM OF INVESTMENT, CURRENTLY IMPLEMENTED IN NEIGHBOURING COUNTRIES SUCH AS SINGAPORE.“ DAO NGUYEN, Mayer Brown JSM are expanding their footprints in the region both in terms of business portfolios and geography, going into expansion mode. We also have a lot of other Indian clients that are very interested in the hydro and mining sector.”

ROADBLOCKS As the steady stream of projects work appears set to continue, legal practitioners have several salient concerns about undertaking infrastructure work in Vietnam. The one repeated most by market sources is the monopoly and inefficiency of state-owned enterprises. A recently published McKinsey report puts stateowned enterprises at producing 40 percent of the country’s output, which effectively means that their importance to the economy cannot be understated.

Massmann explains this when he says: “In order to boost investment in infrastructure, the government should consider restructuring sectoral regulations to enable a competitive market. For example, in order to boost investment in the power sector, the government has to remove the monopoly position of EVN (VietNam Electricity), and increase tariff for purchasing electricity from independent power plants.”

His sentiments find general approval as Burke says: “A lot of people are really serious about exploring clean energy alternatives such as bio-energy, wind, power and tidal.

But how can you mobilise these resources?

The issue is the very strong influence of the traditional energy companies in Vietnam, PetroVietnam, Vinacoal and EVN (the monopoly power distributor). They are very invested in carbon based energy and not keen on promoting alternate energy sources. So incentives have been hard to come by here.

It’s a policy obstacle.”

Michael Lee, partner and head of the corporate/commercial team at Tilleke & Gibbins Vietnam, further notes that: “The biggest problem besides high inflation, the trade deficit, and the devaluation of the dong, is that state-owned enterprises control a big chunk of the economy and that creates inefficiency.

They need to privatise, and are trying to do it. But currently, the situation is slowing down

the economy and the development here.”

Leaving aside state-owned enterprises, another fundamental issue, according to Foster, “is the ability of the utility to pay the price for power that result from these projects.” Currently, the Vietnamese government has a power policy that mandates low electricity prices to ensure industrial activity. As a result, gas sales to power plants are also priced well below market value. Commentators hope that the government will implement a policy allowing foreign investors to sell their gas on the market for a fair price; a move that would provide huge incentives and open up investment. At the moment, the situation is risky for foreign companies that plan to invest in supplying gas, as they might end up supplying their gas for a very low price or may have to abandon the project altogether at great cost.

Hand in hand with this stumbling block is another issue regarding government guarantees for foreign conversions. Dang elaborates: “A key area of concern is how to get foreign currency assurances. How can they (foreign investors) convert and remit them? Can the government guarantee these things to investors in a contractual document? ” The situation remains murky, but is one of great importance for infrastructure investors.

FUTURE OUTLOOK Many practitioners hope that legislative measures are on the way.

“Economic reforms would help boost foreign investments in Vietnam.

Economic reforms, which help attract more investors to Vietnam, will accelerate legal reforms and help build up a more transparent and fair legal environment,” says Massmann.

Desautels agrees, saying: “There are a lot of overlapping regulations and a lot of government procedures. The government knows this and there are different programs aimed at improving the procedures related to investment. It has improved since the late 90s but still a lot of improvements to be implemented in the processes before the administrative burden on the foreign investor lessen even more.” Burke details this when he says: “Infrastructure projects involve a lot of land issues that include the relocation of people and state liabilities. It’s appropriate that they have a deliberate process for that. It’s fair to say Vietnam is not unusual; it’s just a learning curve for foreign investors.”

Nguyen concludes by saying that: “There is a strong demand for, and interest in, infrastructure projects in Vietnam. However, with a limited track record and often ambiguous guidelines, the implementation process may be delayed in practice.”

At the time of writing, Reuters’ most recent reporting indicated that Vietnam’s only crude refinery, the Dung Quat facility, seeks to sell a 49 percent stake to foreign investors to raise funds and boost its capacity by more than half. Three foreign firms, including Japan’s Nippon Oil & Energy Corp, Petróleos de Venezuela and another from South Korea, have been in talks to buy the stake.

Clearly, activity in this sector is not going to let up anytime soon.

As demand in Vietnam for infrastructure continues to increase, the market and government can only try and keep pace.

40

PE funds

ASIAN LEGAL BUSINESS April 2012

Flight to REUTERS/Joe Chan

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PE funds

quality

Chinese private equity funds are facing a shake-up with the boom times ending for many, as fund raising dries up and new tougher rules are expected to be introduced later this year. The time is approaching when the wheat will be separated from the chaff.

What will funds need to do to survive in this tough climate, and where are China’s most prominent sponsors headed? Candice Mak reports

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PE funds

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ccording to a Zero2IPO Research Centre report, Chinese private equity (PE) firms are likely to encounter difficulties in fundraising and tougher regulations this year. The report also noted that the expected extension of regulations nationwide will force some firms to start cleaning up their operations to avoid breaching the new rules (please see box on page 48: Regulatory update).

Chinese PE funds are expected to undergo a period of reshuffling in the coming eight months owing to several market factors. These include the decrease in domestic initial public offering (IPO) valuations, the increased sophistication of companies seeking financing, and the resulting increased emphasis on value-add that PE funds are able to provide, says Han Kun Law Offices partner James Wang. “As a result, many domestic PE funds will be getting more pressure finding good investments with an attractive price-to-earnings ratio; have a harder time trying to exit their investments through IPOs; and will have to explore other ways to exit such as trade sales or secondary sales to other PE funds,” he says.

The funds will need to diversify their investment strategy from growth capital and pre-IPO to other strategies like earlier-stage investment, consolidation or special situations play. Unlike in mature markets, most Chinese fund managers, including venture capitalists, have until now only focused on pre-IPO deals, betting on listings that would typically boost the value of their investments. Currently, 90 percent of exits are made through IPOs. Wang says Chinese PE funds should also become more specialised in terms of industry focus, and equip themselves with specialised professionals. “PE funds that cannot meet such challenges will find it hard to survive,” he says.

The year 2011 saw China’s PE market experiencing a boom. According to Zero2IPO data, 323 new funds were launched in the mainland from January to November; a growth of 204 percent from the total in 2010. The total amount of funds

“The variations make our work more interesting as fund lawyers because not only is international experience highly relevant in this field, but we also become part of the force that is shaping the PE fund industry in China with unique China characteristics.”

James Wang, Han Kun Law Offices

ASIAN LEGAL BUSINESS April 2012

raised in the Chinese mainland in 11 months was $26.4 billion, a surging increase of 237 percent from the total in 2010. Zero2IPO estimated that new PE funds raised in 2011 may have reached $30 billion. However, the report cautioned that fund raising by PE firms will become more difficult in 2012 with tightened liquidity in the market.

Boom times are over The Zero2IPO report coincides with a Reuters analysis from December, 2011 that said the boom of thousands of PE funds in China appears to have come to an abrupt end. The proliferation of domestic fund launches since 2008 was sparked by the prospect of quick and easy money, and returns as high as 400 times on a cash investment. But domestic market weakness, a tight monetary policy, and growing economic uncertainty made both fundraisings and exits for PE firms increasingly difficult.

As a result, many speculative funds which invest in companies just before an IPO, only to sell out soon after their listings, could be wiped out.”China has about 3,500 PE funds and that’s an awful lot,” said Gao Jianbin, a Shanghai-based partner at PricewaterhouseCoopers, to Reuters.”At the end of the day, only those with management expertise and the ability to grow invested companies can survive,” he said, adding that many funds would be forced to focus on venture capital and mergers and acquisitions businesses.

China’s PE boom started immediately after the 2008 global financial

PE funds

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crisis spurred by two things: a flurry of IPOs following the launch of the Nasdaq-style ChiNext board on the Shenzhen exchange, and the $586 billion economic stimulus package Beijing put in place to ward off financial contagion.

According to fund consultancy ChinaVenture, 1,084 yuan-denominated PE and venture capital funds, including those of global buyout giants Carlyle Group, Blackstone Group and TPG Capital, were launched in China over the past three years, raising a combined $68.7 billion. Comparing this figure with Thomson Reuters data revealed that 925 funds were launched in the United States during the same period, raising $236 billion.

However, fund raising has become difficult as local governments, which typically provide seed capital for new funds, are now struggling to manage debts worth more than 10 trillion yuan ($1.57 trillion) that have accumulated over the past few years. Private entrepreneurs, another important investor base for Chinese PE firms, are also feeling squeezed by slowing business conditions and tightening credit. As such, there is no official data on the sector and latest available industry figures are outdated because they do not reflect the current fundraising environment. But fund managers say the sharp downturn in the sector has been evident.

Natural selection Industry analysts told Reuters that for survival, PE managers will need to do more than just bet on IPOs to win investors. “Investors would

REUTERS/Siu Chiu

require that fund managers have a profound understanding of the businesses they invest in,” said Vincent Huang, partner of global PE fund-of-funds manager Pantheon, at a financial conference in Shanghai in December 2011.”This is what made TPG, Bain and KKR global giants. But 90 percent of Chinese fund managers are not equipped with that ability.”

Juan Delgado-Moreira, the Asia managing director of PE management firm Hamilton Lane, says the inexperience and missteps of some new Chinese fund managers will benefit those more established and mature Chinese PE players. “The good news for those funds with a full complement of skills is that those without are likely to fade from the competitive set as market tides turn, as it currently seems to be happening,” he says.

The looming shake-up is seen by many as a natural and necessary step in developing China’s nascent PE market, and not necessarily a death knell.”There’s so much wealth in China that this industry will not die out as many commentators predict. But it needs to be managed,” says one senior executive at a Western PE firm. “Developing core disciplines found in the most successful and time-tested Western and Chinese groups — rigorous investment diligence, responsible capital deployment, sophisticated management and operational improvement strategies — will become critical success factors for RMB PE players as well,” says Moreira.

Shanghai-based Boss & Young partner Hubert Tse, who has worked with PRC and global private equity funds, views the development of the PE funds market as beneficial to the legal space. “As Chinese PE participants mature, they will need to become more professional and sophisticated to get funds from LPs to make good investments and get good returns,” he says. “That means lawyers will be more involved, and relied upon more, to assist them on closing deals.”

Strong get stronger Despite a dulled outlook for PE funds as a whole, the growing group of sophisticated and prominent Chinese sponsors which includes CDH Investments (a spin-off of China Investment Corp), Hony Capital, Citic PE, FountainVest Partners, Fosun International, Legend Capital and New Horizon Capital, continues to flourish.“A few offshore funds of high-profile PRC players don’t use placement agents,” says Hong Kong-based Debevoise & Plimpton partner Andrew Ostrognai. “My guess is that they have developed this product on their own over time, and have done so

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PE funds

ASIAN LEGAL BUSINESS April 2012

“A potential medium to long-term opportunity for law firms could come from increased outbound investment activity from China; probably in more varied industries than the natural resources focus we’ve seen until now, and with some of the outbound capital being channeled through the PE industry” John Fadely, Weil, Gotshal & Manges

well they don’t need doors opened anymore; they have done it themselves already.” In fact, these high-profile funds continue to raise record amounts for their onshore and offshore funds, and to announce new launches in the coming months.

This is big business for fund formation law firms in Hong Kong. Ostrognai regularly represents CDH Investments and Hony Capital on offshore fund formations. Simpson Thacher & Bartlett’s Hong Kong-based partner Philip Culhane says that the key drivers of his business are local indigenous GPs with Asia-based investment committees and Asian investment professionals. “Clearly, there are going to be homegrown competitors. We see this as our key market,” he says. His team counts New Horizon and NewQuest Capital as clients.

On Feb. 16, according to Reuters, government-backed Sailing Capital International launched a 50 billion yuan ($7.93 billion) fund in Shanghai to aid overseas acquisitions by Chinese companies, and build the commercial hub into a global financial centre. The fund will back Chinese companies’ overseas expansions through loans and equity investment, with the yuan as the preferred currency for pricing, transaction and settlement in cross border investments. Investors in the newly-launched Sailing Capital International fund include both state and non-state owned enterprises, listed firms and financial institutions, the Shanghai government said without disclosing details.

Shanghai vice-mayor Tu Guangshao says that launching the fund “meets Chinese companies’ strategic needs to venture out, and would also play an important role in building Shanghai into a center for asset management and cross border investment denominated in yuan.”

Reuters reported on Feb. 27 that Chinafocused PE firm HAO Capital planned to launch its third U.S. dollar fund this year, as it eyes more exit opportunities in China for its portfolio companies amid sluggish markets overseas. Founder and partner Elaine Wong, who previously worked at the Carlyle Group,

gave no timetable for the fund launch, but said two-thirds of HAO Capital’s second dollar fund had been invested, adding that she expects two portfolio companies to conduct IPOs in China this year.

Earlier in January, Hony Capital said in a statement that it had raised nearly $4 billion from investors, defying the increasingly tight fundraising climate. It raised close to $2.4 billion for its fifth dollar fund, and 10 billion yuan ($1.6 billion) for its second local currency fund. These numbers are almost double the sizes of previous dollar and yuan funds for Hony Capital, which is backed by Legend Holdings Ltd. “Changes that were not found in foreign markets over the past two or three decades are taking place in China,” said John Zhao, the CEO of Hony. “The emergence of China provides rare opportunities for China’s PE insiders to explore a new way with Chinese characteristics, based on our experience in the Chinese market.” The speed of Hony’s fundraising - which began in September 2011 for the dollar fund with a target of $2 billion - underlines the appetite of international investors for investing in China through funds like Hony, which have an established track record.

With its dollar fund, Hony said it will continue to focus on reform of China’s state-owned enterprises, as well as growth capital investments.

In the aftermath of the 2007 and 2008 global financial crisis, China stepped up efforts to promote international use of the yuan in a bid to reduce reliance on the U.S. dollar, and it encouraged domestic companies to acquire crisis-hit foreign companies. It has also been aiding acquisitions through government-backed funds and commercial banks.

For example, state-owned policy banks have invested in PE funds such as Mandarin Capital Partners and Infinity Group to aid outbound investment.

Looking outward As China’s top tier PE funds search for new ways to deploy capital, industry analysts have recognised a growing outbound trend. “A potential medium to long-term opportunity for law firms could come from increased outbound investment activity from China,” says John Fadely, a Hong Kong-based funds partner at Weil, Gotshal & Manges. “Probably in more varied industries than the natural resources focus we’ve seen until now, and with some of the outbound capital being channeled through the PE industry,” he says. One way a Chinese PE fund may get involved is by looking at investing in a domestic company that has plans to expand to a foreign country, making the fund’s asset offshore.

According to a Reuters analysis, after years of focusing on their home turf, Hony Capital and other China funds are also beginning to expand abroad. A small portion of the Hony fund may be used for overseas investment, sources said. Zhao previously told Reuters that technology companies in the United States, Europe and Japan could improve their value significantly if they could get their products into China.

“The outbound aspirations of China’s biggest sponsors are a terrific development for our practice area,” says Culhane. “It is one more piece of

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PE funds

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CULTURAL DIFFERENCES Chinese characteristics of RMB funds Prior to the 2008 financial crisis, industry experts estimated the total size of the entire global industry to be around 3,000 to 4,000 funds. But the definition of a PE fund in China compared to the rest of the world can be quite different. PE deals normally involve a firm putting a small amount of cash down for a takeover, and borrowing the rest. After streamlining the company, the firm sells it at a premium and pockets the money, keeping part of the profit and handing the rest back to institutional investors.

In China, ownership restrictions are widespread and leveraged finance markets are still in their infancy. As a result, the vast majority of deals are done in cash and for a minority stake. In that sense, it is often hard to tell the difference between a PE, venture capital, and hedge fund deal in China. Chinese funds generally lack the kind of institutional backing that their Western peers have. “True PE funds make investments in private companies; it is equity. But private funds can mean a lot of things – it could just be people pooling together funds and investing in everything which can reap profits,” says Shanghaibased Boss & Young partner Hubert Tse, who describes his experience with hybrid funds – which are private, but not focused on PE – as an example of the lack of a clear definition of what exactly constitutes a PE fund onshore.

Apart from a blurry understanding of how Chinese PE funds are delineated, there are also peculiarities – “Chinese characteristics” – of these onshore funds.

“RMB funds can have features that diverge from the PE model as generally understood outside China, and the variations can be major because they affect the typical PE incentive structures,” says Hong Kongbased Weil, Gotshal & Manges partner, John Fadely. One distinction between western PE funds and Chinese ones are the time horizons: the life terms, investment periods, and post investment periods are generally shorter due to the quick exits through domestic IPOs and shorter investment outlooks of limited

REUTERS/Aly Song

partners (LPs). Partner James Wang of Han Kun Law Offices explains another chief variant when he says: “The capital call mechanism typical for international funds is significantly twisted in the China context, with most funds requiring capital commitments to be contributed in one lump sum or at predetermined time intervals.” Fadely says that due to the different mentality of Chinese investors, many sponsors have decided to call all the capital down at the very beginning of the fund in order to eliminate default risk later on. As the blind pool fund remains a novel concept to Chinese investors, sponsors have been identifying the portfolio assets early on and marketing these, giving investors security and compacting the investment period.

Why Chinese funds ask for a lot more capital up front could be a result of several things. One is that they tend to have a lot more high net worth individuals as investors as opposed to institutions. It would likely be burdensome for individuals to receive constant capital calls and so it is likely that they prefer to provide their money in just a few tranches. “Chinese investors may find it operationally easier to fund less frequently in larger chunks,” says Hong Kong Debevoise & Plimpton partner Andrew Ostrognai. Another reason is that

because the default rate on these funds can be quite high, sponsors are keen to get their money upfront. “It is a little bit of protection on the manager and GP (general partner) side, to precall some capital and have a cushion against default,” he says.

For Chinese investors, it is a significant philosophical step to relinquish control over their investment decisions to someone else and many are not yet comfortable with this. “Most Chinese LPs and high net worth individuals are still getting accustomed to giving money to others to manage or invest, and they have yet to go through the volatility of certain investments,” says Tse. “They may not fully comprehend and understand the possible downside risks involved, but only think of the upside as they have not really experienced the kind of downside risks associated with more sophisticated investments. So, it will take time for them to get used to this, and become more mature in their investment philosophy.”

Wang says the variations of Chinese PE funds make his team’s work more interesting because “not only is international experience highly relevant in this field, but also we become part of the force that is shaping the PE fund industry in China with unique China characteristics.”

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PE funds the puzzle that will lead to global best practices being the benchmark for significant market participants.” The aim of the funds is high, with managers stating their hopes to compete for investment dollars as well as deal opportunities with Western giants like Blackstone, TPG and the Carlyle Group. The barriers are high as well, as expanding overseas is always difficult, and the acceptance level of Western executives and fund of fund investors for Chinese players is still fairly untested. Intense competition for deals at home in addition to international ambitions of Chinese companies like consumer goods group Bright Food, is fuelling the move to send China PE businesses across borders.

“As China continues to climb up the value chain over time, it wouldn’t be surprising at all for China’s outbound investment activity to diversify into other industries,” says Fadely.

PE executives in China stress the move is gradual, though whatever the speed, it’s happening. “As the world’s most vibrant economy, China has attracted the world’s best companies, resources and wealth,” said Zhao at a Shanghai ceremony in September 2011 that was attended by local government officials, as well as scores of overseas institutional investors. “Chinese companies have also started sailing abroad. This is Hony’s opportunity,” he had said.

The venerable Chinese sponsor is not alone in its international plans. Citic Capital, owned by China sovereign wealth fund China Investment Corp (CIC) and the state-backed conglomerate Citic Group, has a Japan fund and an international co-investment fund. The firm has done five deals in Japan and is closing in on a seventh deal in the United States. In addition to seeking deals that they and Chinese corporations can take part in, the cross border push of Chinese firms such as Hony, Citic and CDH Investments has another motive: attracting overseas investors into their funds.

“I think the most likely outcome is that eventually there is a market with multiple product types and similar standards for those products, whether they are RMB funds or offshore funds.”

Philip Culhane, Simpson Thacher & Bartlett

ASIAN LEGAL BUSINESS April 2012

“What we are really waiting for is the convergence of offshore and onshore, where domestic and foreign investors commit to a common vehicle that receives domestic treatment.”

Andrew Ostrognai, Debevoise & Plimpton

Home advantage In luring money from Western institutions such as pension funds and banks, analysts say some Chinese firms have an advantage over their much larger global rivals. This is because of their strength in the China market - an area the Western institutions want exposure to. Some Chinese firms now have both a dollar and a yuan fund at their disposal, which gives them an advantage over firms with only a U.S. dollar fund.

During the past two years, at least six homegrown Chinese firms, including Fortune Venture Capital and Jiuding Capital, have launched or plan to launch their first dollar funds, according to Zero2IPO data.

Highlighting the fundraising ability of Chinese firms, Citic PE Funds Management Co raised $1 billion in May 2011 in its first dollar fund after attracting foreign demand. The fund, which was heavily oversubscribed, obtained investment from 39 overseas institutions including sovereign wealth funds, pension funds, endowments, family offices and insurers.

PE research group Preqin estimates that there are 538 Asia and global funds on the road looking for a total $177 billion in capital. That broad array allows investors to be choosy about who they fund. Some are expected to still be cautious about the fast growing, heavily regulated and unpredictable China market.

By launching dollar funds, many Chinese PE and venture capital firms hope to win more deals from foreign rivals, as many Chinese companies seeking an overseas listing prefer hard currencies funding. For example, many Chinese internet companies, including Baidu and Sina, used offshore structures to obtain foreign venture capital investments ahead of their Nasdaq IPOs to avoid rigid Chinese regulations. Foreign currency funding is also preferred by a growing number of Chinese companies seeking acquisitions abroad. Hony, for example, helped Chinese construction and mining equipment maker Zoomlion in its acquisition of Italy’s Compagnia Italiana Forme Acciaio SPA. The future of funds “Convergence will happen, and to some extent, is happening,” says Culhane. When speaking to ALB, lawyers consistently bring up the term “convergence” to describe their funds market forecast for China. “What we are really waiting for is the convergence of offshore and onshore, where domestic and foreign investors commit to a common vehicle that receives domestic treatment,” says Ostrognai. “Right now, we have two types of funds - onshore and offshore - on two parallel tracks, trying to find a way to operate in harmony.” The combined product would be a fund that can have up to 25 percent of the right type of offshore investors, and still be considered domestic. Culhane offers another direction the market could take when he says: “I think the most likely outcome is that eventually there is a market with multiple product types and

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PE funds

47

REUTERS/Petar Kujundzic

similar standards for those products, whether they are RMB funds or offshore funds.”

Whether it is one common vehicle or multiple product types with similar standards, this is where the top offshore fund formation law firms will find a niche to market their international experience and familiarity with global standards. But market insiders agree that a common vehicle convergence – if possible – will take a number of years to reach, and would wholly depend on the promulgation of a regulation that allows funds to remain domestic by definition but have up to a certain percentage of foreign limited partnership. “Convergence of offshore and RMB funds has been a gradual process with the occasional partial breakthrough here and there, and full convergence doesn’t appear to be around the corner, in part because it would probably have to unfold together with the opening of China’s capital account,” says Fadely. Currently, foreign exchange controls and foreign investment restrictions are roadblocks for a converged fund model. “It may take five to ten years, no one can say,” says Ostrognai. “But when the (regulatory) switch flips, this is when the market will revolutionise.”

Optimism of this convergence becoming a reality buoys on the maturation of China’s PE market, and the government’s security in regulating

it. One theory floated by a lawyer is that regulators will learn to trust foreign managers as they prove over time that they are not bringing in hot money. Right now, a foreign player can set up a domestic fund, provided it does not put in more than 5 percent of the capital. If the offshore sponsors continue to manage the funds prudently, the regulators will recognise this and raise the capital contribution bar for the right type of foreign investors.

Tse predicts a similar time frame of five to ten years before the market liberalises. “But it will change because market forces will bring more experienced and talented people into the market, and they’re going to raise the bar and drive convergence,” he says. “More importantly, new laws and rules will provide more clarity and transparency, bringing them in line with international standards. It’s going to take time, but I do believe that we’ll get there.”

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PE funds

China REGULATORY UPDATE Circular 2864 On Nov. 23, 2011, the National Development and Reform Commission (NDRC) issued the Circular on Promoting the Standardised Development of Equity Investment Enterprises – commonly known in the industry as Circular 2864.

This was released after the Circular on Further Regulating the Development, and the Administration on Filings, of Equity Investment Enterprises in Pilot Areas from Jan. 31, 2011 (Circular 253) and supersedes it as the first nationwide set of administrative rules on PE funds in China.

The new regulation was hailed by many in the industry as a step forward in the standardisation of PE funds, as it aims to provide clearer guidance on their establishment and operation. Its key features are: (i) The expanded scope of the filing procedure to include equity investment enterprises (EIEs) with a fund size of at least 500 milion yuan; (ii) Application to foreign-invested funds and fund managers; (iii) Foreign-invested EIEs are not extended national treatment; and (iv) The number and qualifications of investors will be verified to conform with China’s Company Law and Partnership Law. The circular also requires mandatory registration of all PE funds in China and imposes stringent requirements on fund

REUTERS/Jason Lee

ASIAN LEGAL BUSINESS April 2012

formation and registration. There is a 10 million yuan minimum investment requirement for any single investor, which, according to James Wang of Han Kun Law Offices, is very high compared to U.S. standards. Additionally, if funds wish to raise money from the national social securities fund, they must register or else they will not t be able to qualify for funding.

Despite the circular, industry insiders say registration numbers are still quite low. Only the larger and more prominent onshore and offshore funds have registered. A key reason funds (over 500 million yuan in size) refuse to register, as Hubert Tse of Shanghai firm Boss & Young points out, is because they would be required to disclose information to the NDRC. “Some investors may not want to be disclosed, and this may be one of the disincentives because when you file with the NDRC, the records are public,” he says. An additional reason, he believes, is due to the fact that enforcement of nonregistration is non-existent. “Unless there is a strong enforcement mechanism in place or substantial penalties are imposed, it’s more just a policy guideline than law,” he says. John Fadely, a partner at Weil, Gotshal & Manges, agrees that it is not clear whether China has the regulatory resources required to enforce registration, which would be the first line of defence against fraudulent funds. However, he is optimistic. “China’s PE industry has come a long way over the past few years through regulatory and tax competition at the local

level. But now, the NDRC appears to be emerging as the key central government regulator of the industry, which might mark the beginning of a new regulatory phase,” he says.

New securities fund law The PE sector in China has been very loosely regulated amid a power struggle between the securities regulator and the top economic planning agency, both of which are both eyeing control over what was once a fast-growing sector.

China’s current funds law came into effect in 2004, and though it did not list PE funds as a legal product, it did not ban them outright either. The law also bars individuals working in the securities mutual fund industry from trading stocks themselves. Particularly after the 2009 launch of China’s second board for start up companies, typically the target of investments by PE funds, various circles in China’s financial system have called for the quick promulgation of an amended law.

On Feb. 26, Reuters reported that China may promulgate a revised securities fund law this year. A draft of a revised Securities Investment Fund Law has been completed and has been submitted to the State Council, or the cabinet, for deliberations.

The draft law had been in existence for more than a year now. But legal practitioners are optimistic that it will come to fruition later this year, after the National Congress in the autumn. “The CSRC has been pushing through new reforms with the new chairman on board. He has issued many new policies including IPO reform, and is trying to build confidence and stability into the local stock markets, and promulgating the revised funds law is expected to be an item on the agenda,” says Tse. As the current PE legal framework is inconsistent, leaving many PE players operating in a grey zone, the amended law would provide clearer provisions on the definition, set up, and operation of their funds. PE funds are not officially under any authority’s supervision, even though the NDRC moved forward to bring them under its wing with its promulgation of Circulars 253 and 6824. So, a key revelation of the new securities law would be if it will bring PE funds into its jurisdiction, making the CSRC their main regulator rather than the NDRC.

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Private Equity

49

private equity fund. Secondary firms assume that commitment and the ups and downs that can come with it, such as eventual profits from the sale of various holdings.

A strong run in the first half of last year saw private equity-backed Asia Pacific M&A hit its best figures since 2006 on volume of $33.2

By STEPHEN ALDRED and MICHAEL FLAHERTY billion, according to Thomson Reuters data.

But fourth-quarter volume plunged 67 percent to $3.9 bilAs hundreds thronged a financial conference lion, the data shows, as equity in Hong Kong last year to hear an executive and debt availability dried up in of U.S. private equity firm Bain Capital, Doug the second half amid global ecoCoulter took a seat in a nearly empty room nomic turbulence fed by Europe’s next door at a separate session on the secdebt crisis. ondary part of the buyout industry in Asia.

In that economic turmoil, the Coulter, Asia head of private equity for struggles of private equity manLGT Capital Partners, was encouraged by agers in the region grew, with what he saw. sources pointing to India’s private “I just thought, ‘Wow, nobody is covering equity sector as a brewing trouble this. This is a great opportunity,’” Coulter respot, where a lot of money was called, reminiscing about the 2011 Asia VenREUTERS/Jo Yong-Hak raised, with very little coming out. ture Capital Journal event.

And even though LPs are still pouring Five years after global buyout giants first NEWQUEST money into Asia, that money is going mainly flocked to the region to tap its growth, Asia’s Tucked away behind the bustling central to top-performing funds. Many of Asia’s firstprivate equity market has reached a tipping business district of Hong Kong is a new time funds are expected to go out of business. point. Maturing funds, a crop of inexperibuilding with no name, the number “8” beThat is another area opening up for secenced managers and global market instaing the only identifying sign. ondary firms in Asia. Primary private equity bility are all opening the door for so called On the 26th floor, in a freshly painted offunds avoid the practice of taking over the secondary players to come in. fice, NewQuest Capital Partners looks and struggling portfolio of a peer, but certain Lexington Partners, Pantheon and Green feels like a startup, even though it is made up secondary firms are happy to do so.

Capital have launched in Hong Kong in the of a team of veteran industry professionals.

Another secondary area opening up in last year alone, joining LGT and others al“Not many people know about this buildAsia is investing alongside leveraged buyready here. ing,” said Darren Massara, an American of outs.

NewQuest, which spun off from Bank Italian heritage and the former Asia head of When Bain Capital acquired Japan’s Skyof America’s private equity arm, recently private equity at Merrill Lynch, now the manlark restaurant chain from Nomura last year, opened in Hong Kong as well. Most of the aging partner of NewQuest. the equity cheque needed for the deal was major secondary firms are now set up in Asia, Not many people know the private equity a massive $1.3 billion. Bain signed for $1 biltaking a crack at what is a relatively small market Massara plays in, either. Secondlion and its limited partners, including Harfield compared to the traditional buyout inary market activity tends to grow when the bourVest, came in to provide the other $300 dustry. primary private equity sector stalls, and remillion.

These firms face a budding opportunity quires new investors and managers to supand a major challenge, as they too are susport the industry.

ASIA BECKONS ceptible to the region’s volatility and will be NewQuest, with backing from HarThe challenges secondary players face can playing in a smaller market than in other bourVest, Paul Capital, LGT and Axiom Asia, be daunting. These include investing in a parts of the world. was formed when Bank of America dumped poorly run private equity fund, co-investing Secondary investors operate in several Merrill Lynch’s private equity arm after resin a buyout deal that fails, and failing to reways. They can buy stakes in private equity cuing the brokerage in 2008. NewQuest now vive a struggling portfolio of companies. funds from investors seeking an exit, take manages Merrill’s former private equity portAsia’s secondary market role has been over managing a company or a portfolio of folio. small until now, largely because the region’s companies held by a private equity firm, or Newquest estimates that $200 billion of private equity boom only kicked off in 2005. they can team up with a private equity firm private equity capital invested in Asia since Fund and deal sizes tend to still be smaller doing a leveraged buyout by offering cash to 2005 has yet to exit. With IPO markets shut than in the United States and Europe. support a bid. and many Asia private equity funds fully inThat is changing, as the early wave of inSecondary players in Asia have performed vested and seeking new funds, the pressure vestments are coming due for exits now. all three of these functions in the last year. is on both buyout firms and their committed While the market here is just getting started, investors -- known as limited partners (LPs) around the world, industry analysts expect -- to show investment returns. there to be $30 billion in secondary transacThat is where the secondary firms come The rest of this report can be found on tions this year, more than triple the amount in. The firms specialise in buying these comreuters.com two years ago. mitments from LPs that want to cash out of a

REUTERS

AS ASIA PRIVATE EQUITY STALLS, SECONDARY FIRMS MARCH IN

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Sponsored REGIONAL UPDATES

ASIAN LEGAL BUSINESS April 2012

SPONSORED UPDATE: CHINA A Balancing Act: Latest Amendment to Foreign Investment Catalog

CHINA

PHILIPPINES

Malaysia

SINGAPORE

SPONSORED REGIONAL UPDATES

On January 30, 2012, the fifth amendment to the Catalog for the Guidance of Foreign Investment Industries (“Catalog”) went into effect. For Chinese policymakers, the Catalog has been a means to align foreign investments with the country’s economic and social policy goals. However, as China continues to ascend as a major player in the global economy, its industrial policy is coming under greater scrutiny. The Catalog then reflects a balance between China’s state planning priorities and the international community’s pressure to hold China accountable to its WTO commitments.

One example of this tension at play in the latest amendment to the Catalog is the importation and distribution of books, newspaper and periodical and importation of audiovisual products (including sound recordings and films for theatric release) and electronic publications (collectively, the “Relevant Media”). The express prohibition of foreign investments in these activities have been in place since the second amendment to the Catalog in 2002. The change in the latest amendment was largely driven by external forces, i.e. a WTO ruling against China in 2009.

In August 2009, a WTO panel established to consider a complaint by the U.S. against China found that (1) the measures enacted

by China through its foreign investment regulations (including the Catalog) prohibiting foreign-invested companies from importing and/or distributing the Relevant Media are inconsistent with China’s WTO trading rights commitments and its obligations under GATS and (2) China has not demonstrated that such measures are “necessary” to protect public morals in China and therefore, are justified under Article XX(a) of GATT 1994. China appealed the panel’s decisions on September 2009 but both findings were upheld by the WTO Appellate Body on December 2009. In response, China removed the importation and/or distribution of the Relevant Media from the “prohibited” category in the latest amendment. These activities are now “permitted” and may take the form of a wholly-owned foreign enterprise.

The latest amendment to the Catalog indicates that China is on an internally-driven

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path to gradually open more industries to foreign investors. Nevertheless, external forces will continue to be required to liberalize activities deemed by Chinese policymakers to be core values in the “prohibited” category.

Written by Jeanette Chan, partner Marianne Chow, associate Paul, Weiss, Rifkind, Wharton & Garrison Hong Kong Club Building, 12th Floor 3A Chater Road, Central Hong Kong E: jchan@paulweiss.com T: +852 2846 0300

Sponsored REGIONAL UPDATES

SPONSORED UPDATE: SINGAPORE

NEW GROUP-WIDE REGULATORY SUPERVISION FOR BANKS AND INSURANCE COMPANIES Banking and insurance groups in Singapore are mainly held by a parent bank or an insurance company. Internationally, it is usual for financial groups to be organised under a non-operating financial holding company (“FHC”). As a parent company of the financial group, FHC is in a position to influence and control the direction of the group. In many financial groups, the FHC also shares certain board members with its material financial subsidiaries. Growing international recognition of the role of the FHC has prompted regulators in many jurisdictions to extend direct or indirect regulation to the FHC as an integral part of financial group supervision.

In line with international standards, the Monetary Authority of Singapore (“MAS”) plans to develop a regulatory framework to strengthen effective oversight of FHC groups. A formal FHC regulatory framework comprising a Financial Holding Companies Act and subsidiary regulations will provide greater clarity to the industry and other stakeholders on the prudential standards and expectations applicable to FHCs. Group-wide supervision allows MAS to assess the impact a financial institution’s affiliation with related group entities may have on its safety and soundness.

The regulatory proposal shall apply only to FHC groups that are designated by MAS based on certain conditions. Generally speaking, an FHC is a non-operating entity that holds as its subsidiary, a bank or an insurance company.

By non-operating, the FHC will not be engaged in any financial or commercial activity, except for certain ancillary services in support of its financial group.

Several proposed requirements for the designated FHC introduced by MAS are the shareholding and control thresholds, the restriction of cyclical shareholdings, corporate governance requirements and fit and proper criteria. FHC will also be subjected to prudential measures such as minimum paidup capital and capital fund, predominance test, group-wide concentration limits, capital adequacy framework and other capital management policies and plans.

A number of activities conducted at the FHC level will also be regulated by MAS. One of

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the regulated activities is the name sharing and other representations of association with a bank or an insurance company by FHC. Besides, non-financial or commercial business activities and investment in immovable property except for those used to conduct the financial group’s business are also prohibited.

There will be a draft of FHC Bill and several related regulations for further public consultation at a later stage. For readers who are interested to learn more on the above, you may wish to access the relevant website (http://www.mas.gov.sg/publications/ consult_papers/Reports_and_Consultation_ Papers.html).

Written by Mr Nicholas Chang Ms Amy Han Mr Nicholas Chang Senior Corporate Finance Executive Tel: (65) 6322 2236 Fax: (65) 6534 0833 E-mail: Ms Amy Han Corporate Finance Executive Tel: (65) 6322 2285 Fax: (65) 6534 0833 E-mail: Loo & Partners LLP 16 Gemmill Lane Singapore 069254 www.loopartners.com.sg

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SPONSORED UPDATE: MALAYSIA

ONEROUS IMPLICATIONS FOR LATE SUBMISSIONS

Section 112(3) of the Malaysian Income Tax Act 1967 has always been controversial amongst tax practitioners and taxpayers alike.

The punitive provision allows the DirectorGeneral of the Inland Revenue Board (“IRB”) to impose, in lieu of prosecution, a penalty equivalent to treble the amount of tax payable for the relevant year of assessment for the late submission of tax returns.

In this context, a submission is considered late when it is not submitted within 7 months from the close of a company’s relevant accounting period. The actual penalty rates with effect from 30 September 2011 are: (a) 20% if the return is submitted later than 7 months but within 12 months from the due date of the tax return (“Due Date”), (b) 25% if submission is more than 12 months but less than 24 months from the Due Date, (c) 30% for submissions between 24 to 36 months from the Due Date, and (d) 35% for all submissions beyond 36 months of the Due Date.

Many have questioned as to whether such hefty penalties are justifiable considering that under the self assessment system, taxpayers pay taxes via the tax instalment scheme even before returns are submitted. The imposition of such penalties may lead to a situation where taxes have been paid (or even overpaid) to the IRB, but returns are filed late due to administrative oversights. This may result in an outcome where a refund is owed but the taxpayer is penalised to make payment of the penalty. In addition, the taxpayer is also at risk of further penalties arising from a tax audit or investigation. When these factors are viewed collectively, the outcome is an escalating cost to the taxpayer.

This provision arguably increases risks and compliance costs as well as results in undue tax burden, and is counter-intuitive to promoting Malaysia as an attractive destination for foreign investment. Many multinationals will be deterred by the reality that the administrative oversights of their local counterparts may result in significant losses.

On one hand the tax incentives offered by the Malaysian Industrial Development Authority

attracts foreign investors into Malaysia whilst on the other hand, the penalties imposed by the IRB will repel the investors from Malaysia.

The consequences of this provision are considerable and may ultimately affect the profit margins of the taxpayer. It is therefore imperative for the Malaysian Government to make it a top priority to ensure that they do not welcome the investors with a small gate, only to drive them away through a bigger one.

This article is for information purposes only.

The contents do not constitute legal advice and should not be regarded as a substitute for detailed advice in individual cases. No decision to act or not to act in a particular way should be taken merely on the basis of this article, and detailed legal advice should always be sought at the earliest possible moment.

Written by Chong Mun Yew / Tan Mei Chel E-mail: mun.yew.chong@wongpartners.com mei.chel.tan@wongpartners.com Wong & Partners Level 21 The Gardens South Tower Mid Valley City, Lingkaran Syed Putra 59200 Kuala Lumpur, Malaysia Tel: (603) 2298 7888 Fax: (603) 2282 2669

ASIAN LEGAL BUSINESS April 2012

SPONSORED UPDATE: PHILIPPINES TERM LIMITS FOR INDEPENDENT DIRECTORS

Philippine corporations that are required to have independent directors such as listed corporations and mutual fund companies1 can elect a person as an independent director for five consecutive years only.2 The limit on the number of years that a person can serve as independent director was imposed

by Philippine Securities and Exchange Commission (SEC) Memorandum Circular No. 9, Series of 2011. It was issued on December 5, 2011 and was intended to be effective as of January 2, 2012.

Under Rule 38 of the rules implementing the Securities Regulation Code of the Philippines, an independent director is “a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any covered company.”

A person who had been elected for five consecutive years as independent director will be eligible again with respect to the same company after a two-year “cooling-off” period.3 However, he can never be re-elected after having been an independent director of the same entity for an aggregate period of 10 years.4 Another restriction set out in the circular relates to the holding of the position of independent director in corporations within the same group. If a person were an independent director in several companies that belong to one business conglomerate (i.e., parent company, subsidiaries, affiliates), he can be elected to a maximum of five corporations within the conglomerate.5 According to the SEC, the circular was promulgated “to enhance the effectiveness of independent directors and encourage the infusion of fresh ideas in the board of directors.”

Securities Regulation Code Implementing Rules, Rule 38, Section 1.

2 SEC Memorandum Circular No. 9, Series of 2011, Section 2.

3 SEC Memorandum Circular No. 9, Series of 1

INDEX

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2011, Section 3.

SEC Memorandum Circular No. 9, Series of 2011, Section 5.

5 SEC Memorandum Circular No. 9, Series of 2011, Section 1.

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4

CHINA

Written by Hiyasmin H. Lapitan Hiyasmin H. Lapitan Email: hhlapitan@syciplaw.com SyCip Salazar Hernandez & Gatmaitan 3rd Floor SyCipLaw Center 105 Paseo de Roxas Makati City 1226 Philippines Tel: (632) 982-3500; (632) 982-3600; (632) 982-3700 Fax: (632) 817-3567; (632) 817-3145; (632) 818-7562 http://www.syciplaw.com

PHILIPPINES Malaysia

SINGAPORE

A-H Allens Arthur Robinson Anderson Mori & Tomotsune Baker & McKenzie Boss & Young Cleary Gottlieb Steen & Hamilton Clyde & Co Conyers Dill & Pearman Covington & Burling Debevoise & Plimpton DFDL Mekong Duane Morris Fangda Partners Freshfields Goodwin Procter Haiwen & Partners Han Kun Law Offices Herbert Smith

Q-Z 38 05 12, 14, 16, 37, 38 43, 45 05, 07, 12 06 05, 12 06, 07 44, 45, 46 36, 38 36 05, 12 12, 14, 20, 36 05, 12 05 42, 45, 48 30, 31, 32, 34

I-P Kim & Chang King & Wood Mallesons Kirkland & Ellis Legal Consulting Linklaters Maples and Calder Mayer Brown JSM Norton Rose O’Melveny & Myers Orrick, Herrington & Sutcliffe P&P Law Firm Paul Hastings

03, 05, 12, 14, 18 05, 12, 14, 18 05 05 05, 12 05 14, 18, 37, 39 05, 14, 22, 27, 28 31 05 38 05, 06, 12

Shin & Kim Sidley Austin Simmons & Simmons Simpson Thacher & Bartlett Skadden, Arps, Slate, Meagher & Flom Squire Sanders Stephenson Harwood Sullivan & Cromwell Tanner De Witt Tilleke & Gibbins TransAsia Lawyers VILAF Walkers Watson Farley Williams Weil Gotshal & Manges Yulchon Zhong Lun Law Firm

07 06 06, 31, 32 05, 44, 46 05, 12 06 24, 27 05, 12 06 14, 22, 39 05 36, 38 05 28 01, 44, 45 03, 07, 14, 20 05

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SPONSORED UPDATES

ASIAN LEGAL BUSINESS aPRIL 2012 Sponsored Update

SPONSORED UPDATE

EMERGING MARKETS

International tax

INDONESIA UPDATE: THE LAND ACQUISITION LAW – A NEW HOPE FOR INFRASTRUCTURE DEVELOPMENT

UK Budget 2012 - UK Residential Property Implications

D

eveloping strong infrastructure will greatly increase Indonesia’s ability to achieve higher and more sustainable economic growth. In 2005, Indonesia declared the mega infrastructure program which offered 111 projects, with a total value of more than US$16 billion. Since then, only a handful of those projects have been completed due to various issues concerning acquisitions of land to be used for the projects.

To address such issues, Indonesia recently passed Law No. 2 of 2012 on land acquisitions for public interest (“Land Acquisition Law”), which strives to improve and expedite the process for land acquisitions.

The Land Acquisition Law has the following notable features: 1. The law accords the implementation of land acquisitions greater legal standing in that it is issued in the form of a statute/law.

Previously, only presidential or ministerial decrees had been issued to regulate and implement land acquisitions since 2005.

Further, the Land Acquisition Law streamlines and consolidates the major items of such previous regulations (i.e., fair pricing, compensation process and mechanisms for transfer of ownership rights) into one law.

2. The new law provides a time schedule for land acquisitions. For example, if a land owner desires to contest a valuation made by way of an independent appraisal, he/she can file an objection with the district court but the land acquisition process still continues. Stricter regulations would also apply to land owned by government institutions. As such, administrative sanctions will be imposed on governing institutions that fail to release land within 60 days from the announcement of a project’s location. With this imposed timeline, investors and bankers are expected to have increased confidence when executing infrastructure projects.

3. Lastly, the Indonesian government will undertake any acquisitions of land for public interest. Under the new law, the National Land Authority (Badan Pertanahan Nasional) will grant the acquired land to the relevant institution upon the completion of the acquisition. The funding for land acquisitions will come from either the national or regional budgets. This is seen as a positive step by the government to shoulder more responsibility vis-à-vis investors to ensure that infrastructure projects are completed.

The new law is expected to further improve the current investment climate in Indonesia, and comes timely at the heels of the country’s recent investment rating upgrade. With the new law in place, it is anticipated that land acquisitions will be conducted more efficiently, thus contributing to infrastructure development and sustainable economic growth in Indonesia.

MARTIANINGRUM T: +628129598602

E: martia.ningrum@kcpartnership.com

ANTONIA AYU ANGGRAINI T: +62816635784 E: ayuanggraini@kcpartnership.com

Kelvin Chia Partnership in association with Martia & Anggraini Partnership

T

he UK Budget on 21st March 2012 made significant changes to the UK Stamp Duty Land Tax (‘SDLT’) regime and, in particular, concentrated on ownership of UK residential property through “non natural” ie corporate or partnership vehicles.

The changes Currently the top rate of SDLT is 5% payable on residential property purchases above £1 million. This will now change: • From 22 March 2012 purchases of residential property above £2 million by individuals will attract SDLT at 7%.

• From 21 March 2012 purchases of residential properties above £2 million by ‘non-natural persons’ will attract a penal rate of SDLT at 15%.

• From 6 April 2013, non-natural person owners of residential properties worth above £2 million will attract an annual charge at rates between 0.3% and 0.7% per annum depending on the property value.

• From 6 April 2013, non-resident non-natural person owners of residential properties worth above £2 million will be subject to capital gains tax on a sale of the property.

The term ‘non-natural person’ is not yet defined, but will certainly include companies and unit trusts. However, it may also extend to certain partnerships and trusts.

These changes will significantly alter the planning landscape for individuals looking to purchase high value residential property in the UK. Prospective purchasers of shares in property owning companies There does not appear to be any proposal to introduce a charge on the purchase of shares in property holding companies and therefore there may be no reason why such a transaction should not proceed. However, beneficial owners should consider: • The possibility of a charge on such transactions being introduced in future with retrospective effect; • Whether they will be willing to bear the annual charge and the potential capital gains tax charge on a future sale of the property; or • Whether they will be able to restructure the company before 2013 to avoid the annual charge and CGT charge on sale, without incurring any substantial costs as a result of that restructuring.

Current owners of shares in property owning companies Existing owners of property owning companies will need to undertake an urgent review of their existing arrangements to determine how and if they should be restructured before the April 2013 deadline, or alternatively if provision should be made for the future payment of the annual charge.

As above, the detailed legislation has not yet been released and while there is only a limited period in which to restructure, time should be taken to reflect on the rules once they are published.

UK property developers and UK property owning trusts The Budget Notes promise that there will be exclusions from the charge for property developers and corporate trustees “in certain circumstances”.

Such persons will need to wait until the legislation in released on 29 March 2012 to see if they are caught by the annual charge.

AzureTax celebrating our 10th anniversary on 12/12/12.

Debbie Annells, CTA (Fellow) Managing Director A: AzureTax Ltd – Suite 1010, 10/F Lippo Centre, Tower Two, 89 Queensway, Hong Kong T: +852 2123 9339 (direct line), +852 2123 9370 (main line) F: +852 2122 9209 W: www.azuretax.com, a member of AzureTax Group Supervised by the UK Chartered Institute of Taxation for purposes of anti money laundering legislation.

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55

Country / Regional editors

The Country / Regional Updates section of ALB is sponsored by the following firms:

China

Malaysia

Paul, Weiss, Rifkind, Wharton & Garrison LLP is a globally oriented, full-service law firm employing over 700 lawyers worldwide. Paul, Weiss is headquartered in New York and has offices in Tokyo, Washington, D.C., Wilmington, Beijing, Hong Kong, Toronto and London.

Wong & Partners is a Malaysian law firm dedicated to providing a quality and solution-oriented legal services to its clients. Wong & Partners has grown steadily with international standards of quality and experience and the Firm has a solid commitment to training its lawyers, and invests in training, professional development and quality management programs with the aim of producing lawyers of global standard.

The Philippines

Singapore

Established in 1945, SyCipLaw is the largest law firm in the Philippines, with its principal office in Makati City, the country’s financial and business center, and branches in Cebu, Davao and Subic Bay. SyCipLaw combines its tradition of professional integrity and excellence with a time-tested ability to break new ground. The broad range of the firm’s expertise is reflected in its client base, which includes top corporations, international organizations and governments.

Loo & Partners was founded in 1985 as a niche practice, handling mainly banking, corporate, securities and commercial work. With the support of a comprehensive network of correspondent law firms, the firm serves its clients in their regional needs.

Loo & Partners has been regularly noted for its IPO, M&A and general corporate work.

Vietnam

Shanghai

Indochine Counsel is a commercial law firm focusing on business law practice in the Indochina region. Our areas of practice include: Foreign Investment, Corporate & Commercial, M&A, Securities & Capital Markets, Banking & Finance, Property & Construction, Taxation, Intellectual Property, Information Technology & Internet, International Trade, Outward Investment & Offshore Incorporation, and Dispute Resolution.

Victory Legal is a boutique legal practice in Shanghai, focusing on general corporate, corporate finance and capital markets matters. Its clients include governmental authorities, State-linked enterprises, banking and financial institutions, MNCs, SMEs and foreign law firms. The firm has extensive network across the region. It serves clients’ domestic and regional needs.

fUIJIAN Sphere Logic Partners is a mid-sized business law firm known for its offering of value, sophisticated legal solutions in a leaner approach across a range of practice areas, critical to the success of clients. We maintain an established global network with numerous law firms and relevant service providers. Our seasoned and culture-ready professionals assist clients in cross-border investment, M&A and financing, governance and daily operations, identification of business opportunities and solving of complex legal disputes.

Outbound Investment Update

The Outbound investment Updates section of ALB is sponsored by the following firms:

Europe For many decades, SZA Schilling, Zutt & Anschütz has been one of the most reputable German corporate law firms. It advises clients in nearly all areas of corporate and commercial law. The main focus of practice is on corporate law, M&A, capital markets, labor law, antitrust law, intellectual property, competition law and trust law. Clients included nine of the 30 enterprises listed on the DAX.

PRACTICE AREA AND INDUSTRY EDITORS

tHE iNDUSTRY uPDATES section of ALB is sponsored by the following firms:

Emerging Markets Kelvin Chia Partnership is a commercial law firm headquartered in Singapore with strong regional capabilities. With offices in Hanoi, Ho Chi Minh City, Yangon, Bangkok and Phnom Penh, and extensive experience all throughout Asia, we provide localized legal solutions consistent with international standards in emerging markets in Asia.

Intellectual property / Energy & Resources / Employment ATMD Bird & Bird is a dynamic and progressive firm with an established IP, corporate & commercial, competition and dispute resolution practice. The firm also has extensive regional experience advising both domestic and foreign clients on cross-border transactions. ATMD Bird & Bird has been voted Singapore’s Intellectual Property Firm of the Year at the 2005 and 2006 ALB Awards and the 2005 AsiaLaw (IP) Awards.

International tax AzureTax Ltd provides transparent strategic and ethical tax advice. Through our professional corporate and International, tax advisory and trustee services your tax plan is comprehensively implemented. Our advice provides you with independent innovative and rigorous solutions which deliver results and long-term accountability.

We are qualified UK, U.S., Hong Kong and PRC tax advisors and complete tax filings for UK, U.S. and Hong Kong tax returns.

Alliances

ALB enjoys alliances with the following organisations:

ACCJ

CCCJ

Established in 1948 by representatives of 40 American firms, the ACCJ, a fully independent chamber of commerce, has grown into one of the most influential business organizations in Japan, with more than 2,700 members representing more than forty countries and 1,000 companies.

Promoting the development of commerce between Canada and Japan since 1975, the Canadian Chamber of Commerce in Japan (CCCJ) is a private sector, not-for-profit business organization serving its members through communications, networking and advocacy. Representing some 33 business sectors, the CCCJ is a member-driven, member-focused organization and is the longest serving Canadian Chamber in Asia with over 300 members.

JICN

HKCCA

The Japan In-house Counsel Network (JICN) is a professional association for in-house counsel working in, or having other affiliations with, Japan. JICN offers a forum for communication between members, social and networking opportunities, legal seminars, roundtable member discussions and other activities, as well as events with other lawyer and in-house groups. Visit www.jicn.jp for more details.

The Hong Kong Corporate Counsel Association is the pioneer association run for in-house counsel by in-house counsel in Hong Kong. It provides an efficient and effective range of benefits and services for its members’ professional development, including continuing legal education, a platform for networking and the exchange of ideas, information and experiences that are unique to the in-house role.

ssca The Singapore Corporate Counsel Association or SCCA was set up in 2002. It is the pioneer association representing in-house lawyers in Singapore. http://www. scca.org.sg

56

SUNDRIES

ASIAN LEGAL BUSINESS April 2012 Compiled by SEHER HUSSAIN

“Linsanity” IN NUMBERS

$170

MILLION The amount of business that Jeremy Lin has created, according to Forbes, since he was pulled off the bench.

$800,000 Lin’s reported salary at the NBA for 2012

$710

The amount that Wuxi Risheng Sports Utility, a Chinese basketball manufacturer, spent to trademark Lin’s name back in 2010 prior to his meteoric rise ONE THAT GOT AWAY

REUTERS/Adam Hunger

4

MILLION

From contracts to crime (fiction) Best-selling author Shamini Flint left Linklaters and ended up with a successful writing career, producing a series of crime fiction novels that span Malaysia, Singapore, Bali, Cambodia and most recently, India. Here, she chats to ALB about her accidental start in writing, being a better mother, and why a war crimes tribunal in Cambodia interests her.

The minimum amount former K&L Gates partner Navin Kumar Aggarwal allegedly transferred from client accounts to a Macau casino to fund his gambling habit, according to a suit filed by the firm against Melco Crown Entertainment.

What inspired you to become a writer, and leave the profession of law?

I didn’t leave the legal profession to become a writer; I left it to be at home with my children and discovered within three months that it was the worst decision of my life. So, I started to write as a means of escaping. I’m not a failed lawyer; I’m a failed stay-at-home mom.

Lawyers run amok

Do you miss anything about being a lawyer?

I miss quite a lot about it. I enjoyed law as a subject, and so I miss the company because writing is a solitary pursuit compared to law.

Writing is also less lucrative than it used to be, and so I miss the remuneration as well.

The streets of Bangalore saw a ferocious clash in March, as reports poured in of lawyers hurling stones and bottles at journalists, alleging that local media had depicted them unfairly. Filled with a sense of righteous rage, lawyers barred the door to the Civil Court Complex, resulting in an unseemly scuffle on the very steps of the courts. The panic was eventually quelled by tear gas shells that were fired into the crowd. Law, a noble and honourable profession? Perhaps not for this lot.

What do you enjoy most about your career now?

It gives me a chance to talk about issues that I care about, and reach a wider audience! I do have complete flexibility in terms of my time and the freedom to go and watch my kids play football in the afternoon. So, I can pretend

to be a slightly better mother than if I was working 24/7 in a corporate firm.

Does your experience in the legal world inform your writing at all?

I’ve always been interested in legal issues, human rights issues, and issues affecting relationships between people that are governed by the law. It’s a natural change in my career and a natural change in my writing as now I don’t have to write about corporate law issues. Instead, I can write about far more interesting sorts of family law, criminal law or constitutional law issues that I didn’t get a chance to practice before.

So in Malaysia, I write about the civil courts and the shariah courts that are set up; in Singapore, I look at the laws on drugs and homosexuality; in Cambodia, I write about the war crimes tribunal while Bali is all about terrorism. So, I have incorporated the law quite a lot into my writing.

Local expertise.

International reputation.

Mourant Ozannes is one of the leading offshore law firms, advising on the laws of the BVI, Cayman Islands, Guernsey and Jersey. We have a substantial presence in the Cayman Islands and the Channel Islands as well as offices in Hong Kong and London.

We have more top tier legal directory rankings across these locations than any other law firm.

Find out more at mourantozannes.com/hongkong or contact Paul Christopher, Managing Partner, Hong Kong, paul.christopher@mourantozannes.com

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